9911796707
TMI Blog1990 (12) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... original return was filed by the assessee on30th September, 1972wherein the deduction of Rs. 43.50 lakhs was claimed under section 80J by excluding borrowed capital from the capital employed. A revised return was filed on16-4-74claiming deduction under section 80-J at Rs. 68.94 lakhs by including borrowed capital in the capital employed. Earlier, the accounting year of the assessee company ended on 30th June each year. The company wanted to change its accounting year to end on 31st December each year instead of 30th June. The company thus wanted to adopt the calendar year as its previous year. The company accordingly applied to the ITO for permission to change the previous year. In the return filed by the company income was shown for a period of 18 months from1-7-70to31st December, 1971. The ITO, however, did not accept the change of the previous year and he determined the income of the assessee for 12 months on14-4-75. Against this order the assessee filed a Writ petition under Artrcle 226 of the Constitution before the Hon'ble Allahabad High Court. The Writ petition was allowed by the Hon'ble High Court vide its judgmen dated 17-7-75 reported in J.K Synthetics Ltd. v. O.S. Bajpai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO while passing the order dated 22-4-85 ignored this letter and did not consider the assessee's claim that the value of the work-in-progress/machine-in-transit should be considered for computing the capital employed for the purpose of granting relief under section 80J. It was further contended that before the CIT(A) the assessee raised ground no. 2 to the effect that the ITO erred in not including the value of assets not entitled to depreciation for the purpose of section 80J relief. Thus, according to Shri Monga, the claim that the value of the work-in-progress/machine-in-transit should be taken into consideration for computing the capital employed under section 80J was made before the authorities below but the same was not considered by them and that the CIT(A) in his impugned order merely considered the value of land for the purpose of computing the relief under section 80J while disposing of ground no. 2 raised before him. It was submitted that in order to do substantial justice, additional ground should be allowed to be raised. According to Shri Monga, the claim was bona fide. Reliance has been placed on the decision of the Special Bench of the Tribunal in Indo Java Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e work-in-progress/machine-in-transit. It is, therefore evident that before the ITO the assessee did not make a claim that the value of the work-in-progress/machine-in-transit should be included for the purpose of computation of capital employed. 7. In this connection it will be useful to refer the assessee's letter dated18-5-1987filed before the ITO. A copy of this letter is at pages 23 to 26 of the paper book. This letter was filed by the assessee after the CIT(A) had passed impugned order on 11-3-1987 as in para no. 5 of this letter it is clearly stated that by mistake the assessee has not taken into account capital work-in-progress as at 30th June, 1970 amounting to Rs. 14,72,791 while calculating the capital employed for the purpose of section 80J relief. In this letter the assessee gave computation of capital employed and the relief allowable under section 80J by taking into account the value of the work-in-progress at Rs. 14,72,791. So, it was for the first time vide letter dated 18-5-1987 that the assessee claimed that the amount of Rs. 14,72,791 being the value of work-in-progress/machine-in-transit should be taken into consideration for computing the capital employed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of 'capital employed' for the purpose of working out relief under section 84(1) [now section 80J(1)]. The assessee did not make a claim regarding work-in-progress/machine-intransit even during the course of proceedings before the ITO and the CIT(A) during the second ground. As pointed above, pursuant to the directions of the Hon'ble High Court the ITO passed a fresh assessment order on8-9-1983. The assessee has not been able to show that there was good reason for not making such a claim earlier before the authorities below. In fact, there was no valid reason for not making the claim at an earlier stage. On the facts of the case, therefore, we are of the opinion that the additional ground should not be admitted at this stage. 11. In the case of Indo Java Co. it has been held by the Special Bench that any grounds which can be taken originally before the Tribunal can also be taken with the permission of the Tribunal as an additional ground before hearing the appeal. It was, however, made clear that leave to take an additional ground is not to be granted to the appellant on mere asking but particular reasons or justification has to be established. In that case it was found b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the entire period at the rate prescribed under section 80J(1). It was further submitted that the provisions of section 80J(1) should be liberally construed. Reliance has been placed on the decision of the Tribunal in the case of Escorts Ltd. v. ITO [1989] 30 ITD 349 (at page 370). Thus, according to the assessee, entitlement has to be for a period of 18 months. In that section 80J itself prescribed a scale for calculating deduction at a certain rate. 15. Shri Subhash Kumar, learned senior Departmental Representative, on the other hand, submitted that deduction under section 80J(1) has to be allowed for a period of 5 years and it was for this reason that expression 'at the rate of 6% per annum has been used in section 80J(1). The relief under section 80J(1) has to be computed for 5 assessment years irrespective of the period comprised in any previous year. Reliance has been placed on the decision of the Karnataka High Court in CIT v. Mysore Petro-Chemicals Ltd. [1984] 145 ITR 416 and of the Calcutta High Court in CIT v. Oyster Packagers (P.) Ltd. [1985] 152 ITR 471 at page 474. 16. We have considered the submissions made on behalf of the parties and have gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed on yearly basis. 17. The Karnataka High Court in the case of Mysore Petro-Chemicals Ltd., expressed the view that there shall be no prorating for the period of productive operation. It would be useful to reproduce the following passage from this authority : "It seems to us that the contention urged by Shri Sarangan is well founded and must be accepted as correct. Every one is familiar with the terms per diem, per mensem and per annum. They are indicative of the period for which the rate is prescribed and do not necessarily imply that there shall be prorating. Prorating depends upon the context in which such terms are used. The relief at the rate of 6 per cent or 71/2 per cent per annum provided under section 80J is in the nature of incentive extended to the assessee who has established a new industrial undertaking. That incentive is available for a full period of 5 years, inclusive of the year in which manufacturing operations started. The relief, no doubt, depends upon the commencement of production. But also on the capital employed. Therefore, there shall be no prorating for the period of productive operation." 18. In the case of Oyster Packagers (P.) Ltd. the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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