776/CBDT. - Income Tax - 776/CBDT

INSTRUCTION NO. 776/CBDT Dated : October 28, 1974 Section(s) Referred: 80I Statute: Income - Tax Act, 1961 Finance Acts 1964 and 1965 provided for a special rebate of super-tax in the cases of profits attributable to priority industries as a measure for providing a selective support to the development and expansion of basic industries which are capital intensive and have relatively low profitability and longer periods of gestation. The industries mentioned in a list of articles in Part IV of the First Schedule to the Finance Act. Subsequently, provision for allowing the relief was provided for in the Income-tax Act itself by inserting Section 80E to the IT Act, itself by inserting Section 80E to the IT Act, 1961. Schedule VI to the IT Act was also introduced listing the articles, the manufacture of which would be covered by section 80E. Section 80E allowed a straight deduction of 8 per cent of profits from priority industries. Section 80E was replaced by Section 80 I by the Finance Act(No.2) of 1967. The percentage of deduction was reduced to 5 per cent with effect from 1.4.72 and by the Finance Act of 1972, section 80I itself was deleted with effect from 1.4.73. 2. At the time when the provision was first introduced, Board had in the instructions on the Finance Act, 1964 desired that "if any doubt arises regarding the interpretation of the scope of any entries in the list, the matter may be referred to the Commissioner of Income-tax who will make a reference to the Board, if necessary". Instances have, however, come to the notice to the Board where items have been treated by ITOs as covered by Scheduled VI although such items were not covered within the scope of the said Schedule, without any reference to the higher authorities. 3. The Board, therefore, wish to reiterate the instructions referred to above and desire that in future whenever any doubt arises as to the eligibility of a particular industry to the relief discussed above, reference must invariably be made to the higher authorities. 4. These instructions may kindly be brought to the notice of all the ITOs working in your charge for strict compliance. Completed cases may also be reviewed wherever necessary with a view to withdraw such reliefs if incorrectly granted while framing the assessments. A report indicating the number of cases reviewed, number of mistakes detected, tax effect and action taken may kindly be sent to Board by 10th December, 1974.