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Issues:
Challenge to Commissioner (Appeals) order regarding carry forward of deficiency under section 80J(3) of the Income-tax Act, 1961. Analysis: 1. The appeal challenged the Commissioner (Appeals) order regarding the carry forward of deficiency under section 80J(3) of the Income-tax Act, 1961. The Commissioner (Appeals) rectified the error made by the ITO in allowing deductions under section 80J in the assessment years 1976-77, 1978-79, and 1979-80. The Commissioner (Appeals) concluded that the ITO erred in allowing the deduction and computing the deficiency, annulling the relevant portion of the assessment orders. The appellant company appealed against this decision. 2. The Commissioner (Appeals) assumed that the ITO allowed straight deductions under section 80J(1) for the assessment year 1976-77, which was incorrect. The Commissioner (Appeals) found that carrying forward the deficiency did not arise in this case. The issue revolved around the interpretation of sub-section (3) of section 80J, specifically regarding the permissibility of carrying forward the deficiency. The Commissioner (Appeals) defined the deficiency as the difference between the deduction and the profit of the new unit, or the amount of the deduction itself in case of a loss. The appellant challenged this finding. 3. The Tribunal analyzed the interpretation of section 80J(3) in detail. The department argued that section 80A(2) of the Act prevented the application of section 80J(3). However, the Tribunal disagreed, stating that while section 80A(2) limits deductions to the gross total income, it does not bar the carry forward of deductions permitted by other provisions like section 80J(3). The Tribunal emphasized the need for a harmonious construction of the relevant sections to conclude that the carry forward of deficiency is allowed under section 80J(3). 4. The Tribunal considered the arguments presented by both parties regarding the permissibility of carrying forward the deficiency in case of loss in the industrial undertaking. The Tribunal agreed with the appellant's representative that when a provision allows for multiple interpretations, the one favorable to the assessee should be accepted. After a thorough examination of the language and legislative intent behind section 80J(3), the Tribunal concluded that the carry forward of deficiency is only permissible when profits and gains are derived from the industrial undertaking or when there are no such profits and gains. Loss in the industrial undertaking does not entitle the assessee to carry forward the deficiency under section 80J(3). 5. In the present case, where the assessee suffered a loss in the industrial undertaking, the Tribunal held that the carry forward of the deficiency under section 80J(3) was not permissible. Consequently, the Tribunal dismissed the appeal, upholding the Commissioner (Appeals) decision, albeit for different reasons.
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