1996 (7) TMI 56 - HC - Income Tax

Accounting Year, Assessment Year, Computation Period, Industrial Undertaking, Special Deduction

Summary

Issues:
- Interpretation of section 80J of the Income-tax Act, 1961 for deduction eligibility.
- Entitlement to relief under section 80J for assessment years 1980-81 and 1981-82.
- Carry forward of deficiency under section 80J from 1980-81 to 1981-82.

Analysis:
The case involved the assessee, Kar Mobiles Limited, challenging the denial of deduction under section 80J of the Income-tax Act for the assessment years 1980-81 and 1981-82. The assessee commenced a new industrial unit for manufacturing valves in 1975. The issue arose due to changes in the accounting year, leading to complexities in determining the eligibility for deductions under section 80J. The Tribunal ruled against the assessee, denying both the deduction for 1980-81 and the carry forward of deficiency to 1981-82.

The court referred to section 80J(2) of the Income-tax Act, which allows deductions for the initial assessment year and the following four assessment years after the commencement of production. The court emphasized that the section does not grant a blanket exemption for five years but specifies deductions for the initial year and the subsequent four years. The court cited a previous case, Premier Cable Co. Ltd. v. CIT, to establish the interpretation of the provisions regarding the number of assessment years eligible for deductions.

Based on the principles laid down in the Premier Cable Co.'s case, the court concluded that the assessee was not entitled to relief under section 80J for the assessment year 1980-81. The court reasoned that the change in the previous year and the absence of a previous year for 1977-78 did not support the assessee's claim for deduction in 1980-81. The court found the Tribunal's decision to be in line with legal precedents and upheld the denial of deduction for the said assessment year.

Consequently, the court answered the question in I. T. R. No. 86 of 1991, related to the year 1980-81, in favor of the Revenue and against the assessee. As a result of this decision, the question raised in I. T. R. No. 87 of 1991 concerning the year 1981-82 was deemed unnecessary for consideration. The court declined to provide an answer to the latter question, affirming the Tribunal's decision. The judgment will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench for further action.