1991 (8) TMI 65 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 80J(3) of the Income-tax Act, 1961 regarding the carry forward and set off of deficiency in an industrial undertaking.
2. Entitlement of the assessee to set off deficiency in the assessment year 1972-73 for an industrial unit in Bangalore.

Detailed Analysis:
The judgment addressed the controversy surrounding the interpretation of section 80J(3) of the Income-tax Act, 1961, specifically focusing on the carry forward and set off of deficiency in an industrial undertaking. The assessee, a public limited company engaged in the manufacture and sale of glassware and glass bottles, had previously been allowed relief under section 80J of the Act. The dispute in the present reference pertained to Unit No. 1 at the Bangalore factory. The assessee claimed set off of deficiency from earlier years in the assessment year 1972-73. The Income-tax Officer initially rejected the claim, but the Appellate Assistant Commissioner allowed it based on a Tribunal decision from prior years. The assessee also sought relief under section 80J based on capital employed, which was not allowed. However, the claim was later restricted to the set off of deficiency for both the years in question.

The primary issue revolved around whether the assessee was entitled to set off the deficiency in the assessment year 1972-73 as per the provisions of section 80J(3) of the Act. The Tribunal held that the assessee could carry forward the deficiency as determined in a previous decision, directing the Income-tax Officer to allow the deficiency if any. The Revenue challenged this decision, leading to the reference to the High Court. The Court examined the relevant provisions of section 80J(3), emphasizing that the deficiency or any part thereof cannot be carried forward beyond the seventh assessment year from the end of the initial assessment year. Since the assessment year in question was the sixth year, the Court concluded that the assessee was indeed entitled to set off the deficiency as per the clear provisions of the law.

In conclusion, the High Court answered both parts of the reference question in the affirmative, ruling in favor of the assessee and against the Revenue. The judgment affirmed the assessee's entitlement to set off the deficiency in the assessment year 1972-73 for Unit No. 1 at the Bangalore factory, in accordance with the provisions of section 80J(3) of the Income-tax Act, 1961.