Satish Chandra, C.J.

1. THE assessee is a registered firm. It carries on business of running a cold storage. For the assessment year 1972-73, it claimed a deduction of Rs. 2,30,754 under Section 80J of the I.T. Act of 1961 against its income for that year. This amount consisted of deficiency relating to the assessment years 1969-70 to 1971-72 and also a sum of Rs. 70,580 which was the claim made under that section for the current year 1972-73. THE deficiency as well as the claim were calculated at the rate of 6% of the capital employed. THE ITO refused the claim for the past years but allowed the same for the year 1972-73, to the extent of Rs. 42,154. On appeal, the view of the ITO was affirmed. THE assessee went up to the Tribunal. In relation to the first three years, namely, 1969-70, 1970-71 and 1971-72, the Tribunal held that it was admitted between both the parties that in all these years the assessee had suffered losses and the assessments had also been completed by computing the losses. In those years, the assessee did not make any specific claim for relief under Section 80J. It observed that Section 80J did not specifically require that a claim must be made under it in the year in question before it could be permitted to be carried forward because of the occurrence of deficiency, namely, cases where gains or profits may not be equal to the claim or in a case where there is total loss. Consequently, the assessee was entitled to claim carry forward deficiencies as against its income in the fourth year. THE assessee's appeal was allowed.

2. AT the instance of the Commissioner of Income-tax, the Tribunal has referred the following questions of law for our opinion :

"1. Whether, on the facts and in the circumstances of the case, and in view of the provisions of Sections 80A, 80J(1), (2), Section 2(45), Section 5 and Section 3 of the Income-tax Act, 1961, the assessee's not claiming relief under Section 80J in the assessment years 1969-70 to 1971-72 and the Income-tax Officer's not determining the amount of relief in those years was fatal to the assessee's claim under Section 80J(3) for the assessment year 1972-73?

2. Whether, on the facts and in the circumstances of the case, was the Tribunal legally correct in allowing the assessee's claim under Section 80J(3) of the Income-tax Act, 1961:?

Section 80J is headed "Deductions in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases". It provides relief of an amount computed at 6% of the capital employed in an industrial undertaking of the first year in which the industrial undertaking is established and four subsequent assessment years. Sub-section (3) of Section 80J contemplates a case where the amount of profits and gains in the first assessment year falls short of the claimed deduction. In a case where there are no profits and gains, the entire deduction shall be carried forward and set off against the profits and gains of subsequent assessment years, and where the deficiency cannot be wholly so set off it shall be set off against such profits and gains of the subsequent assessment years and so on. Under the proviso, the carry forward shall not exceed beyond the seventh assessment year reckoned from the end of the initial assessment year. There are certain other conditions mentioned in the subsection with which we are not concerned.

3. THE legislative intent behind Section 80J was to provide incentive for establishment of the mentioned kinds of industries by giving relief in the form of rebate calculated at 6% of the employed capital for five years. THE relief was against profits and gains of such newly established undertakings. THE carry forward was permissible up to seven years though the claim was confined only to five years.

4. SUB-section (1) of Section 80J applies only where there are profits and gains included in the total income of the first assessment year. SUB-section (3) contemplates that, ev