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1997 Supreme(P&H) 1065
PUNJAB & HARYANA HIGH COURT
Ashok Bhan and N.K.Agrawal JJ.
Commissioner Of Income Tax
Versus
Atlas Auto Cycles Ltd.
Income tax Reference No. 86 of 1983,
Decided On : JULY 15, 1997
The assessee is entitled to deduction under section 80J for the whole of the year and not on a pro rata basis for nine months.
Headnote:
INCOME TAX ACT, 1961 - SECTION 80J - DEDUCTION FOR NEW INDUSTRIAL UNDERTAKING - ENTITLEMENT TO DEDUCTION FOR WHOLE YEAR OR PRO RATA BASIS - INTERPRETATION OF PHRASE "PER ANNUM" - HELD, ASSESSEE ENTITLED TO DEDUCTION FOR WHOLE YEAR.
Fact of the Case:
The assessee-company claimed relief under section 80J of the Income Tax Act, 1961 for the whole of the year on the capital employed during the year. The assessing officer allowed relief for nine months on a pro rata basis. The Commissioner (Appeals) allowed deduction for the full year. The Tribunal upheld the order of the Commissioner (Appeals).
Finding of the Court:
The court held that the assessee was entitled to deduction under section 80J for the whole of the year and not on a pro rata basis for nine months.
Issues: Whether the assessee was entitled to deduction under section 80J for the whole of the year or on a pro rata basis for nine months.
Ratio Decidendi: The court held that the relief under section 80J is admissible for the entire year irrespective of the period of operation of the new industrial undertaking in that year. The phrase "per annum" in section 80J does not imply pro-rating.
Final Decision: The court answered the question referred to it in the affirmative, i.e., in favor of the assessee and against the revenue.
Ashok Bhan, J.
1. The Tribunal, Delhi Bench B, has referred the following question of law to this court for opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in affirming the order of the Commissioner (Appeals) allowing deduction under section 80J of the Income Tax Act, 1961 for whole of the year even though the capital employed in the industrial undertaking remained only for nine months during the year relevant to the assessment year 1978- 79."
2. Facts, relevant to the aforesaid question, are :
The assessee-company is carrying on business of manufacturing and sale of powered moped (Atlasolex). The previous year of the assessment year 1978-79 of the assessee-company ended on 30-6- 1977. The return of income declaring loss of Rs. 11,63,052 was filed by the assessee on 27-7-1978. Accounting period for the year under consideration is the period from 27-9-1976 to 30-6-1977. The assessee claimed relief under section 80J of the Income Tax Act, 1961 for whole of the year on the capital employed during the year. The Inspecting Assistant Commissioner (Assessment) computed the capital employed in the undertaking as on the first day of the account year, i.e., 26-9-1976 at Rs. 33,60,305 and allowed relief under section 80J at the rate of 7 per cent of Rs. 33,60,305 on pro rata basis for nine months and not for twelve months, i.e., for whole of the year. Under the provisions of section 80J, relief is allowed at the rate of 7 per cent per annum on the capital employed in the industrial undertaking as computed in the prescribed manner.
3. Aggrieved by the order of the assessing officer, the assessee filed an appeal before the Commissioner (Appeals), which was accepted. It was held by the first appellate authority that the assessee was entitled to deduction under section 80J for the full year and not for nine months. In doing so, the Commissioner (Appeals) followed the decision of the Madras High Court in CIT V/s. Simpson & Co. (1980) 122 ITR 283 (Mad). Against the order of the Commissioner (Appeals), the revenue filed an appeal before the Tribunal. The Tribunal upheld the order of the Commissioner (Appeals) and dismissed the appeal filed by the revenue. It was held that the assessee would be entitled to the relief for the whole of the year and not for nine months on pro rata basis as was held by the assessing officer. On the above facts, the question of law as sought by the Commissioner and reproduced in the earlier part of the judgment has been referred to us for our opinion.
4. Subsequent to the decision in Simpson & Co.s case (supra) by the Madras High Court, the Karnataka High Court in CIT V/s. Mysore Petro Chemical Ltd. (1984) 145 ITR 416 (Karn), has taken the same view. In both these judgments, it has been held that the assessee would be entitled to the relief under section 80J for the whole of the year and not on pro rata basis for the period of productive operation.
5. In Mysore Petro-Chemical Ltd.s case (supra), the assessee- company claimed relief under section 80J for the full assessment year 1977-78 although the assessee started production on 16-5- 1976 and the assessees accounting period ended on 30-6-1976. The Income Tax Officer allowed the relief pro rata for 1 months. The Commissioner (Appeals) upset the decision of the Income Tax Officer and held that the assessee would be entitled to full tax rebate for the whole of the year. Order of the Commissioner (Appeals) was upheld by the Tribunal against which the revenue had gone in reference to the High Court. On these facts, it was held by their Lordships as under :
"The terms per diem, per mensem and per annum usually indicate the period for which the rate is prescribed and do not necessarily imply that there shall be pro-rating. Pro-rating depends upon the context in which these terms are used. The relief at the rate of 6 or 7 per cent per annum provided under section 80J of the Income Tax Act, 1961 , is an incentive e
