1995 (6) TMI 53 - AT - Income Tax

Summary

Issues:
- Appeal against direction to allow deduction under section 80J for assessment year 1986-87.

Analysis:
1. The primary issue in this appeal was the direction by the learned CIT(A) to the Assessing Officer to allow deduction under section 80J of the Income-tax Act for assessment year 1986-87. The assessee had claimed deduction under section 80J for the initial assessment year and the four assessment years succeeding the initial year. However, the Assessing Officer, in a rectification order, disallowed the deduction for assessment year 1986-87 due to a change in the accounting period.

2. The dispute revolved around the interpretation of section 80J(2) of the Act. The learned D.R. contended that the relief under section 80J was admissible for the initial year and the four assessment years immediately succeeding the initial one, regardless of whether an assessment was made for a specific year. On the other hand, the assessee's counsel argued that the assessment year in section 80J(2) should be understood in the context of the assessee's case, excluding any year without an assessment order due to a change in the accounting period.

3. The Tribunal, after considering the arguments, agreed with the interpretation presented by the learned D.R. The Tribunal referenced the definition of the assessment year under the Income-tax Act and emphasized that the assessment years should be taken in a natural sequence when a specific number of consecutive assessment years are considered for relief. The Tribunal also cited a precedent from the Madras High Court to support its decision, where a similar situation led to the exclusion of a year without an assessment for the purpose of claiming relief under section 80J.

4. Based on the interpretation of the law and the precedent cited, the Tribunal concluded that the assessee was not entitled to deduction under section 80J for assessment year 1986-87, as it would be the fifth year succeeding the initial year for which relief was allowed. Consequently, the Tribunal reversed the decision of the learned CIT(A) and upheld the Assessing Officer's order, disallowing the deduction for assessment year 1986-87.

5. In conclusion, the appeal by the Revenue was allowed, and the direction to allow deduction under section 80J for assessment year 1986-87 was reversed in favor of the Assessing Officer's decision.