Exemption from income-tax to the extent of six per cent per annum of the capital employed. - Income Tax - 1155/CBDT

INSTRUCTION NO. 1155/CBDT Dated : March 13, 1978 Section(s) Referred: 80J Statute: Income - Tax Act, 1961 The profits of new industrial undertakings, ships and hotels which fulfil the condition prescribed by section 80-J are entitled to exemption from income-tax to the extent of six per cent per annum of the capital employed. In certain cases the deduction is at the rate of seven and a half percent. A question may arise as to what meaning should be attached to words "per annum". As per Concise Oxford Dictionary, the meaning of the words "per annum" is (so much) by the year, yearly. The Board were earlier advised that it would not be reasonable to ascribe to these words the meaning or (so much) by the year and that the deduction should be allowed to the full extent of six per cent, or seven and a half per cent, as the case may be, without reducing the relief in proportion to the part of the year during which the undertaking was in productive operation. Accordingly the decision of the Tribunal and the order of the High Court rejecting reference application under Section 256(2), of the I.T.Act in the case of M/s United Carbon (India) Ltd., Bombay (F.No.270/236/74-ITJ) were accepted by the Board. The Board have re-considered the matter in consultation with the Ministry of Law and have been advised that it would be permissible to take a view, as contained in the Department's Audit Manual regarding allowance of relief on pro-rata basis. There is no direct decision of any High Court on this point so far and even in the case of Union of India Vs Coromondel Fertilizer Ltd. 102-ITR-533, 542 the assessee though allowed relief under Section 80-J in proportion to the period during which the new industrial undertaking was in operation did not contest it before the Court. Then there are conflicting opinions given by two learned commentators S/Shir Palkhiwala and Sampath Iyengar. The Board, have therefore been advised to contest the adverse decisions of the Tribunals on this point, if any. Instruction should be issued to the officers to allow relief under Section 80-J proportionate to the period of operation of the new industrial undertaking.