1988 (9) TMI 16 - HC - Income Tax

Summary

Issues:
- Interpretation of deduction under section 80J of the Income-tax Act for earlier years
- Validity of allowing deduction for assessment years 1978-79 and 1979-80
- Jurisdiction of Commissioner of Income-tax (Appeals) to entertain additional claims

Analysis:

The High Court of Madhya Pradesh was presented with a reference under section 256(1) of the Income-tax Act, 1961 regarding the interpretation of deduction under section 80J for earlier years. The issue arose from the Income-tax Appellate Tribunal's decision to uphold the Commissioner of Income-tax (Appeals)'s order directing the Income-tax Officer to calculate the deduction under section 80J for previous years and set off any deficiency against profits for the assessment years 1978-79 and 1979-80. The assessee, a private limited company, had not claimed this deduction in previous years due to sustained losses but raised it during the assessment for 1978-79 when the company turned profitable. The Commissioner of Income-tax (Appeals) allowed the claim, citing the availability of necessary material and the provisions of sub-section (3) of section 80J. The Revenue challenged this decision, leading to the reference before the High Court.

The Revenue contended that since the assessee had not previously claimed the deduction under section 80J, it should not have been allowed in the assessment for 1978-79. However, the Court relied on precedent, including the decision in CIT v. Ganga Engineering Works, to establish that if there was material on record, the deduction could be granted even without a formal claim. The Court also referred to the Andhra Pradesh High Court's ruling in CIT v. Veljan Hydrair (P.) Ltd., emphasizing that the assessee is entitled to the deduction for all assessment years, regardless of profit in previous years, as per the provisions of sub-section (3) of section 80J. The Court concurred with this interpretation, dismissing the Revenue's argument against allowing the deduction for the assessment years in question.

Moreover, the Court addressed the jurisdiction of the Commissioner of Income-tax (Appeals) to entertain additional claims, highlighting that the Tribunal was justified in upholding the claim made by the assessee. The Court distinguished previous decisions such as Anchor Pressings (P.) Ltd. v. CIT and Sharda Prasad v. CIT, emphasizing that in this case, the Commissioner had the authority to consider the claim and the Tribunal's decision was valid. Consequently, the Court answered the reference question in the affirmative, ruling in favor of the assessee and determining that each party would bear their own costs in this matter.