1979 (5) TMI 66 - AT - Income Tax

Summary

Issues:
Computation of relief under section 80J - Capital employed calculation and relief on a time basis.

Analysis:

1. The appeal pertains to the assessment year 1976-77, concerning a public limited company's computation of relief under section 80J. Two contentions were raised by the assessee. Firstly, challenging the computation of capital employed by ignoring rule 19A(3) and claiming a higher amount. Secondly, disputing the method used by the Income Tax Officer (ITO) to allow relief on a time basis for only 11 months.

2. The Departmental Representative argued that if rule 19A(3) is held ultra vires, the entire rule should be considered invalid, rendering the prescribed manner for relief calculation unavailable. Citing a Bombay Tribunal decision, it was contended that without prescribed rules, no relief should be granted to the assessee under section 80J.

3. The learned counsel for the assessee contended that the impact of a previous decision was limited to disallowing the application of sub-rule 3 of rule 19A, leaving the remaining rules intact for computation. The Tribunal agreed with this interpretation, directing the ITO to calculate the relief without considering rule 19A(3).

4. Addressing the second contention, the counsel referred to a Karnataka High Court decision supporting the assessee's claim for full relief without prorating it based on the period of industry operation. The Departmental Representative highlighted the failure of the Appellate Assistant Commissioner (AAC) to address this claim.

5. The Tribunal held that the failure of the AAC to address the second contention allowed the assessee to raise it again before the Tribunal. Interpreting the term "per annum" in section 80J favorably for the assessee, the Tribunal ruled that relief should be granted yearly for five years without prorating it based on the operational period.

6. Consequently, the appeal was allowed, and the ITO was directed to amend the assessment in line with the Tribunal's rulings on capital employed calculation and relief computation under section 80J for the relevant assessment year 1976-77.