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TMI Blog1983 (8) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... interested. It manufactures leaf springs. We are concerned with the assessment year 1975-76 for which the previous year is the financial year ending with 31-3-1975. It may be mentioned that it is the first year, after the assessee started its business, in which profits were earned. The original income-tax return was filed on 5-8-1975 returning an income of Rs. 31,83,270 out of which claim for set off for carried forward losses was made. However, a revised return dated 22-9-1976, disclosed an income of Rs. 31,16,255 out of which similar claim for set off and carry forward losses was made. 3. The following facts are undisputed and are admitted by both the sides. The assessee started production or manufacture from the previous year relevant to the assessment year 1968-69. During the assessment years 1968-69 to 1972-73, 80J relief was never quantified as they were all the years in which the assessee incurred losses. However, during the assessment year 1973-74, which also was a year in which losses were incurred by the assessee, in the first instance, the assessment was finalised without 80J relief relating to the assessment years 1968-69 to 1972-73 being quantified. The assessee went ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de during the assessment year under consideration, viz., 1975-76 which is the first year of profit. So the learned counsel requested to ignore the quantification done under the orders of the ITO dated 27-2-1978 and direct fresh quantification in view of the ratio of the decision reported in Century Enka Ltd. v. ITO [1977] 107 ITR 909 (Cal.), etc. The very same contention was raised before the Commissioner (Appeals). Repelling the contention he held as follows : "In pursuance of this direction given by the Appellate Assistant Commissioner of Income-tax, the Income-tax Officer passed a modification order on 27-2-1978 and computed the relief allowable to the appellant under section 80J for the assessment years 1968-69, 1969-70 and 1970-71 at Rs. 73,012, Rs. 7,734 and Rs. 2,561. For the next two years the relief allowable to the appellant was computed at nil. Without objecting to the Appellate Assistant Commissioner's order for 1973-74 or to the modification order dated 27-2-1978, by which quantification of 80J was made and carried forward, the appellant cannot agitate in this appeal the quantum of 80J relief to be adjusted with the current year's profits. In the circumstances, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the relevant assessment year in which, admittedly, loss had been sustained and there was no profit or gain against which the deduction could be adjusted. . ." 6. From the above, it would be clear that in the assessment year in which the loss was incurred by an assessee-company, there is no necessity of either claiming 80J relief or getting it quantified for purposes of carrying forward and adjustment. The second decision laying down the law to the same effect is rendered by the Calcutta High Court in the case of Indian Aluminium Co. Ltd. v. CIT [1980] 122 ITR 660. The brief facts of the case and the decision rendered thereon as can be seen from part of head note of that decision are as follows : "The assessee had completed erecting its aluminium foil plant at Kalwa in 1965 and as it did not earn any profit up to 1968, the assessee did not make any claim for relief under section 80J but details of the earning of this unit in those years were filed before the ITO for the purpose of exemption under section 197(3). For the assessment year 1970-71 (which was its fifth year of operation), the assessee claimed relief under section 80J and also claimed carry forward of deficiency of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then even if such a quantification was made by the ITO in a year of loss, it is a futile exercise. Such determination cannot be said to be essential for purposes of finalising the assessment for that year and, hence, the finding relating to the quantum of 80J relief in such circumstances cannot bind the assessee in the year of profit. In order to buttress this argument, the learned counsel invited our attention to the decision of the Hon'ble Supreme Court in CIT v. Manmohan Das [1966] 59 ITR 699. In that case, while determining the loss incurred by the assessee for the assessment year 1950-51, the ITO who framed the assessment, observed that the loss of that year cannot be carried forward to the subsequent year of profit and it cannot be set off against the profits of that year. Despite the said observation, the assessee put forward the claim to carry forward and set off loss, in a year of profit, namely, 1951-52. The question was whether the observation of the ITO relating to the assessment year 1950-51 can bind the assessee. The pointed question referred to the High Court is as follows : "Whether the assessee could claim a set-off of the loss suffered by him in the preceding ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessee did not assail the orders of the ITO dated 27-2-1978 in appeal and did not get them cancelled and inasmuch as it allowed them to become final, the assessee must be held to be fully bound by those orders and, hence, the orders of the lower authorities are perfectly justified and the assessee should not be given any chance to enhance the relief under section 80J. 7. Thus, we heard the arguments advanced on both the sides fully and completely. We are inclined to agree with all the submissions made on behalf of the assessee by its learned counsel, Shri M. Swaminathan, as each one of his contentions are supported by the authorities already noted in this order. 8. The order of modification passed by the ITO dated 27-2-1978 purported to give effect to the directions of the AAC in relation to the assessment year 1973-74. The assessment year 1973-74 was admittedly a loss year. The question of set off of any unabsorbed relief under section 80J relating to the assessment years 1968-69 to 1972-73 in the assessment year 1973-74 could not, therefore, arise. In the majority judgment in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335, the Supreme Court has observed as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the carry forward of loss is not finding on the assessee in the year when set off of loss is to be considered. Whether such finding is given when the ITO makes the assessment originally or he gives a finding in the assessment pursuant to the order of the AAC (where the AAC has himself not fixed the quantum), the finding is the one in assessment by the ITO. The finding by the ITO in the order of 27-2-1978 for the 1973-74 assessment year regarding 80J relief for earlier years, being a finding in the assessment for that year, will not be binding on the assessee in the assessment year 1975-76 where alone the question of set off arises for the first time. Under the circumstances, we hold that the assessee is not bound by the orders of quantification of 80J relief made by the ITO under his orders dated 27-2-1978 passed in the assessment for the year 1973-74. We further hold that from the end of the initial assessment year of 1968-69, the assessment year 1975-76 is the 7th assessment year and, hence, the unadjusted 80J relief can be quantified and adjusted from the profits of that year. 10. Now regarding quantification of 80J relief for the assessment years 1968-69 to 1972-73, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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