The development rebate deducted under Section 33 of the Income-tax Act, 1961, cannot be adjusted again against the profit from a newly established industrial undertaking while calculating the deduction under Section 80J(1) of the Act.

B.S.Dhillon, J.

1. The following questions of law have been referred to this court for its opinion on a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), by the Income-tax Appellate Tribunal, Chandigarh Bench :

" (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the deduction under Section 80J of the Income-tax Act, 1961 ?

(2) If the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs. 41,174, being the development rebate deducted in terms of Section 33 by the Income-tax Officer while determining the " gross total income " could not again be deducted from the sum of Rs. 47,027 which was claimed as a deduction from the " gross total income " under Section 80J(1) of the Income-tax Act, 1961 ? "

2. The brief facts giving rise to the case are that the assessee owns two flour mills and derives income mainly from grinding of wheat. During the previous year relevant to the assessment year 1967-68, the assessee-company had also set up a cold storage. The previous year relevant to the assessment year 1971-72 ended on March 31, 1971. The assessee returned its total income of Rs. 9,84,560. The gross total income of the assessee included the profit of Rs. 47,027 made from the industrial undertaking of the cold storage. It is common ground that the cold storage from which this income was derived satisfied the conditions laid down under Section 80J(4) of the Act. The loss, depreciation, development rebate, profit and deficiency under Section 80J of the cold storage, being newly established industrial undertaking in different years, are as under : Assessme Loss Depreciation Development Profit Deficiency year rebate u/s. 80 J ______________________________________________________________________________ Rs. Rs. Rs. Rs. Rs. 1967-68 29,444 68,615 1,98,623 ___ 11,155 1968-69 ___ 57,460 187 ___ 1,14,153 1968-70 ___ 1,32,871 37,143 ___ 90,228 1968-71 ___ ___ 711 1,51,011 83,391 1968-72 ___ ___ 41,174 47,027 1,09,342 ______________________________________________________________________________ 29,444 2,58,946 2,77,838 1,98,038 4,08,269 ______________________________________________________________________________

3. The loss, depreciation, development rebate, indicated above, were adjusted while computing the total income for the assessment years 1967-68, 1968-69 and 1969-70. For the previous year ending March 31, 1970, relevant to the assessment year 1970-71, the assessee claimed that the deficiency under Section 80J for the years prior to the assessment year 1970-71 should be adjusted against the profit of Rs. 1,51,011 of that year but the ITO did not agree with that contention. Being aggrieved, the assessee filed an appeal before the AAC, but failed. The assessee then filed an appeal before the Tribunal and the Tribunal held that the assessee was entitled to a deduction under Section 80J(1) first and the deduction of Rs. 83,391 was, therefore, held to be allowable from the profit of Rs. 1,51,011. In other words, it was held that this deduction had to be allowed even before any deficiency of the earlier years could be considered. The Tribunal also allowed the deficiency pertaining to the assessment year 1967-68 to be adjusted as provided under Section 80J(3) and thus the total deficiency to be carried forward was held to be as under : Assessment year Deficiency u/s 80J(3) Rs. 1968-69 57,688 1969-70 90,228 _________ 1,47,916" _________

4. The revenue being aggrieved against the said order of the Tribunal in I.T.A. Reference No. 1244 of 1971-72 dated July 31, 1973, got the questions of law arising out of the order of the Tribunal referred to this court. This court, vide its order dated October 28, 1976, in CIT v. Patiala Flour Mills Co. (P.) Ltd. [1978] 113 ITR 55, [1978] 115 ITR 640 (SC) held that there is nothi