Srinivasa Iyengar, J.—In this writ petition, the order of the CIT dated October 26, 1974, passed under s. 263 of the I.T. Act, 1961, directing withdrawal of the development rebate set off that had been allowed in the assessment for 1973-74, relating to the development rebate carried forward for the assessment year 1968-69, is challenged. The ground on which the CIT interfered with the order of the ITO was that no development rebate reserve had been created in the year in which the new machinery was installed. It is contended for the assessee that this view of the Commissioner is erroneous and opposed to the circulars issued by the department.

2. The income computed for the assessment year 1968-69, was a loss before any allowance of development rebate. As there was no positive profit the assessee was unable and did not create a reserve. It transpires that for certain subsequent assessment years also development rebate allowable was computed, but was not actually allowed as there was no sufficient profit out of which it could be set off. Only in the assessment year 1973-74, there was sufficient profit out of which a portion of the development rebate that had been carried forw