JUDGMENT

Bhagwati, J. - The assessee, a private limited company, carried on several businesses amongst which there was a business of cold storage plant. This cold storage plant was put up in the accounting year relevant to the assessment year 1967-68 and it was a new industrial undertaking to which sub-section (4) of Section 80-J of the Income Tax Act, 1961 applied. The assessee did not make any profit in the business of cold storage plant during the assessment years 1967-68, 1968-69 and 1969-70, but there was profit in the other businesses and the losses, depreciation allowance and development rebate in respect of the cold storage plant were adjusted against the profit from the other businesses in computing the total income of the assessee chargeable to tax for those assessment years. No loss and no part of the depreciation allowance or development rebate in respect of the cold storage plant remained unabsorbed so as to be available for carry forward and set off in the assessment year 1970-71. The business of cold storage plant turned the corner after the initial teething trouble and it made a profit of Rs. 1,51,011 in the assessment year 1970-71 after taking into account the current years depreciation allowance and development rebate. The assessee claimed in its assessment to tax for the assessment year 1970-71 that the amounts of deficiency under Section 80-J for the current as well as past assessment years were liable to be adjusted against the profit of Rs. 1,51,011 for that assessment year. Since the claim was based on Section 80-J, it would be convenient at this stage to refer to the relevant provisions of that section. Section 80-J was introduced in the Act in place of Section 84 by Finance Act, 1967 with effect from April 1, 1968. The material portions of that section read as under :

80-J. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction, if any, admissible to the assessee under Section 80-HH) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year) :

(2) the deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning (such assessment year being hereafter, in this section, referred to as the initial assessment year) and each of the four assessment years immediately succeeding the initial assessment year :

(3) Where the amount of the profits and gains derived from the industrial undertaking or ship or business of the hotel, as the case may be, included in the total income (as computed without applying the provisions of Section 64 and before making any deduction under Chapter VI-A or Section 280-O) in respect of the previous year relevant to an assessment year commencing on or after the 1st day of April, 1967, (not being an assessment year or subsequent to the fourth assessment year as reckoned from the end of the initial assessment year) falls short of the relevant amount of capital employed during the previous year, the amount of such shortfall, or, where there are no such profits an