1986 (3) TMI 62 - HC - Income Tax

Issues Involved:
1. Approval under section 84(3)/80J of the Income-tax Act, 1961.
2. Rejection of approval by the Central Board of Direct Taxes (CBDT).
3. Entitlement to tax holiday benefits for the assessment year 1967-68.
4. Comparison and applicability of sections 84 and 80J of the Income-tax Act.
5. Procedural fairness and opportunity to be heard.

Detailed Analysis:

1. Approval under section 84(3)/80J of the Income-tax Act, 1961:
The petitioner, owner of Oberoi Inter-Continental Hotel, applied for approval under section 84(3)/80J of the Income-tax Act on October 11/15, 1969. The Central Government granted approval under section 80J(6)(d) on June 10, 1970. The petitioner argued that the approval under section 80J(6)(d) should also be considered as approval under section 84(3)(d) since both provisions are essentially the same.

2. Rejection of approval by the Central Board of Direct Taxes (CBDT):
On October 18, 1977, the Under Secretary of CBDT informed the petitioner that the Board could not accede to the request for approval under section 84(3)(d). The petitioner made a representation to the Chairman of CBDT on November 26, 1977, arguing that the conditions under both sections 80J and 84(3) were met and there was no logical ground for rejection. No reply was received, prompting the petitioner to challenge the decision.

3. Entitlement to tax holiday benefits for the assessment year 1967-68:
The Income-tax Officer initially assessed that the petitioner fulfilled the conditions under section 84 for the assessment year 1967-68, granting tax holiday benefits. However, during the reassessment, the Income-tax Officer disallowed the claim under section 84 and the carry forward of deficiency under section 80J(3). The petitioner appealed this decision, which was still pending.

4. Comparison and applicability of sections 84 and 80J of the Income-tax Act:
The court noted that the provisions of section 80J are virtually the same as those of section 84, except that section 80J provides an additional benefit to carry forward the deficiency in profits. Since the assessment year involved was 1967-68, section 84(3) as it stood at the material time was applicable. The conditions for approval under both sections were identical, and the petitioner had fulfilled these conditions.

5. Procedural fairness and opportunity to be heard:
The court observed that the Board rejected the application without providing reasons or giving the petitioner an opportunity to be heard. The court emphasized that when there is no change in the substance or wording of the provisions of sections 84(3) and 80J(6), the rejection of the application was illogical. The respondents did not file any affidavit to deny the petitioner's claims.

Judgment:
The court concluded that the petitioner was entitled to succeed. The order dated October 18, 1977, by the CBDT was set aside. The Central Government was directed to grant the necessary approval under section 84(3)(d) for the assessment year 1967-68 within eight weeks. The Appellate Assistant Commissioner was directed to dispose of the appeal after the approval was granted.

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