1983 (8) TMI 123 - AT - Income Tax

Issues Involved:
1. Applicability and quantification of Section 80J relief in loss years.
2. Binding nature of prior quantifications of Section 80J relief.
3. Jurisdiction of the Appellate Assistant Commissioner (AAC) in directing quantification of Section 80J relief.
4. Impact of retrospective amendments to Section 80J on quantification of relief.

Detailed Analysis:

1. Applicability and Quantification of Section 80J Relief in Loss Years:
The primary issue was whether Section 80J relief could be quantified and carried forward in years where the assessee incurred losses. The Tribunal noted that the assessee commenced manufacturing in the assessment year 1968-69 and incurred losses until 1972-73. It was highlighted that the relief under Section 80J was intended to provide an incentive to industry by means of tax relief, which could be carried forward for seven years. The Tribunal referenced several judicial precedents, including decisions from the Allahabad High Court, Calcutta High Court, and Madras High Court, which established that there was no requirement for the assessee to claim or quantify Section 80J relief in loss years. The quantification could be validly done in the first year of profit, which, in this case, was the assessment year 1975-76.

2. Binding Nature of Prior Quantifications of Section 80J Relief:
The assessee argued that the quantification of unadjusted Section 80J relief by the Income Tax Officer (ITO) in a loss year (1973-74) was not binding and could be ignored. The Tribunal supported this view, stating that the quantification in a loss year served no useful purpose and could not bind the assessee in the year of profit. The Tribunal cited the Supreme Court's decision in CIT v. Manmohan Das, which held that a finding in an assessment year regarding the carry forward of loss was not binding in the year when set-off was to be considered.

3. Jurisdiction of the Appellate Assistant Commissioner (AAC):
The Tribunal examined the jurisdiction of the AAC, who had directed the ITO to quantify the Section 80J relief for the years 1968-69 to 1972-73 in the assessment year 1973-74. It was concluded that since 1973-74 was a loss year, the AAC's direction was beyond his jurisdiction and non est in law. Consequently, the ITO's follow-up order dated 27-2-1978, which quantified the relief based on the AAC's direction, was also non est. Therefore, the assessee was not precluded from seeking a correct computation of relief in the first year of profit (1975-76).

4. Impact of Retrospective Amendments to Section 80J on Quantification of Relief:
The Tribunal addressed the retrospective amendment to Section 80J by the Finance (No. 2) Act, 1980, which inserted sub-section (1A) with effect from 1-4-1972. The amendment required liabilities and debts to be considered while computing the capital base. The assessee argued for fresh quantification in light of favorable judicial decisions, while the department contended that the amended provisions should be applied. The Tribunal noted that the retrospective amendment was under challenge before the Supreme Court, which had granted stays in several cases. Following the Gujarat High Court's approach, the Tribunal set aside the order of the first appellate authority and restored the matter for a fresh decision in accordance with the Supreme Court's forthcoming pronouncement.

Conclusion:
The appeal was partly allowed, with the Tribunal holding that the assessee was not bound by the prior quantification of Section 80J relief made in a loss year. The matter was remanded for fresh quantification of relief for the years 1968-69 to 1972-73 in the light of the Supreme Court's pending decision on the retrospective amendment to Section 80J.

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