1990 (12) TMI 142 - AT - Income Tax

Accounting Year, Capital Employed, New Industrial Undertaking, Previous Year, Profits And Gains

Summary

Issues Involved:
1. Admission of additional ground regarding the inclusion of the value of capital work-in-progress and machinery-in-transit in the computation of capital employed for section 80J relief.
2. Relief under section 80J for a period of 18 months in the assessment year 1972-73.

Detailed Analysis:

1. Admission of Additional Ground:
The assessee filed an application to admit an additional ground, arguing that the CIT(A) erred in not directing the ITO to include the value of capital work-in-progress and machinery-in-transit in the computation of capital employed for the purpose of section 80J relief.

The Tribunal considered the submissions and reviewed the records. The original return filed by the assessee excluded borrowed capital from the capital employed, but a revised return included it. The assessee's claim under section 80J was revised before the CIT(A), but there was no clear indication of when and before whom this claim was made. The assessee's letter dated 18-4-1985, which included a balance sheet showing the value of capital work-in-progress/machinery-in-transit, was ignored by the ITO. The claim regarding work-in-progress/machinery-in-transit was made for the first time in a letter dated 18-5-1987, after the CIT(A) had passed the impugned order on 11-3-1987.

The Tribunal noted that the assessee did not make this claim during the original proceedings before the ITO or the CIT(A). The grounds on appeal and statement of facts filed before the CIT(A) did not show that the claim regarding work-in-progress/machinery-in-transit was made. The Tribunal found that there was no valid reason for not making the claim at an earlier stage and declined to admit the additional ground at this stage.

2. Relief Under Section 80J for a Period of 18 Months:
The assessee claimed that relief under section 80J(1) should be allowed for a period of 18 months comprised in the previous year relevant to the assessment year 1972-73. The assessee argued that the use of the words "at the rate of 6% per annum" signified that if the previous year consisted of more than 12 months, the deduction under section 80J would be allowable for the entire period at the prescribed rate.

The Tribunal considered the submissions and reviewed the relevant case law. The decision in the case of Escorts Ltd. v. ITO supported the view that relief under section 80J was to be allowed on a yearly basis and not on a proportionate basis. The Karnataka High Court in the case of Mysore Petro-Chemicals Ltd. and the Calcutta High Court in the case of Oyster Packagers (P.) Ltd. also supported the view that relief under section 80J has to be allowed for 5 years at the prescribed rate, irrespective of the duration of the previous year.

The Tribunal upheld the order of the CIT(A) rejecting the assessee's contention that relief under section 80J should be allowed for the assessment year 1972-73 for a period of 18 months.

Conclusion:
The appeal was dismissed. The Tribunal declined to admit the additional ground regarding the inclusion of the value of capital work-in-progress and machinery-in-transit in the computation of capital employed for section 80J relief. Additionally, the Tribunal upheld the order of the CIT(A) rejecting the assessee's contention that relief under section 80J should be allowed for a period of 18 months.