Deduction under section 80J of the Income-tax Act, 1961, in respect of profits and gains from new industrial undertakings - Income Tax - 378/1984

Deduction under section 80J of the Income-tax Act, 1961, in respect of profits and gains from new industrial undertakings Circular No. 378 Dated 3/3/1984 Under section 80J of the Income-tax Act, 1961, a deduction at the rate of 6% per annum of the capital employed is allowed from the profits of new industrial undertakings, ships and hotels which fulfil the prescribed conditions. In the case of companies where the new industrial undertakings begin to manufacture after 31-3-1976 or ships are first brought into use after 31-3-1976 or the business of a hotel starts functioning after that date, the deduction is admissible at the rate of 7-1/2% per annum. The question as to the meaning to be given to the phrase "per annum" has been considered by the Board. 2. The Karnataka High Court in the case of Commissioner of Income-tax, Karnataka-II v. Mysore Petrochemicals Ltd., Bangalore [1984] 145 ITR 416, has held that the relief under section 80J is admissible for the entire year irrespective of the period of operation of the new industrial undertaking in that year. A similar view has been expressed by the Madras High Court in the case of CIT v. Simpson Co. [1980] 122 ITR 283. The Board have accepted the interpretation placed on the phrase "per annum" by the Karnataka High Court. 3. In view of the foregoing, the deduction under section 80J should not be reduced proportionately with reference to the period for which the business of the undertaking, ship or hotel was not carried on during the relevant previous year. (Sd.) V.B. Srinivasan, Director, Central Board of Direct Taxes.