1990 (3) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of "assessment year" under Section 80J(2) of the Income-tax Act, 1961.
2. Eligibility for relief under Section 80J for the assessment year 1973-74.
3. Impact of change in accounting year on the calculation of the four assessment years immediately succeeding the initial assessment year.

Issue-wise Detailed Analysis:

1. Interpretation of "assessment year" under Section 80J(2) of the Income-tax Act, 1961:

The primary issue revolves around the interpretation of the term "assessment year" as defined under Section 2(9) of the Income-tax Act, 1961, which states: "`assessment year' means the period of twelve months commencing on the first day of April every year." The court emphasized that the concept of "assessment year" must be understood in the manner prescribed under the provisions of the Act and not with reference to a particular assessee's circumstances. The court cited Section 4 of the Act, which is the charging section, to reinforce that income-tax is charged for any assessment year in respect of the total income of the previous year or years of a person.

2. Eligibility for relief under Section 80J for the assessment year 1973-74:

The assessee claimed relief under Section 80J for the assessment year 1973-74, arguing that due to a change in the accounting year, there was no assessment for the assessment year 1970-71. The assessee contended that the assessment year 1971-72 should be considered as the year immediately succeeding the initial assessment year 1968-69. The Income-tax Officer, Appellate Assistant Commissioner, and the Tribunal all rejected this contention, holding that the relief period of four assessment years immediately succeeding the initial assessment year 1968-69 included the years 1969-70, 1970-71, 1971-72, and 1972-73. Therefore, the relief under Section 80J(2) ended with the assessment year 1972-73, and the assessee was not entitled to relief for the assessment year 1973-74.

3. Impact of change in accounting year on the calculation of the four assessment years immediately succeeding the initial assessment year:

The court examined the impact of the change in the accounting year from December 31, 1969, to May 31, 1970. The Income-tax Officer allowed the change, resulting in no taxable income for the assessment year 1970-71. However, the court held that this change did not alter the sequence of assessment years for the purpose of Section 80J(2). The court referred to previous judgments, including CIT v. Simpson and Co. and Ashok Motors Ltd. v. CIT, to emphasize that the assessment years should be taken in their natural sequence, regardless of whether there was taxable income or an assessment in any particular year.

The court also cited decisions from other jurisdictions, such as the Gujarat High Court in CIT v. Satellite Engineering Ltd. and the Bombay High Court in Capsulation Services Pvt. Ltd. v. CIT, which supported the interpretation that the specified number of consecutive assessment years should be taken in natural sequence.

Conclusion:

The court concluded that the initial assessment year was 1968-69, and the four assessment years immediately succeeding it were 1969-70, 1970-71, 1971-72, and 1972-73. Therefore, the relief under Section 80J(2) ended with the assessment year 1972-73, and the assessee was not entitled to relief for the assessment year 1973-74. The Tribunal's decision was upheld, and the question referred to the court was answered in the affirmative and against the assessee. The assessee was directed to pay the costs to the Revenue, with counsel's fee fixed at Rs. 500.