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TMI Blog1998 (3) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal was correct in law in holding that the deficiencies in respect of the assessment year 1968-69 amounting to Rs. 31,42,777 and 1969-70 amounting to Rs. 31,39,662 under section 80J of the Income-tax Act, 1961, cannot be set off against the profits of the assessment year 1975-76? 4. Whether, on the facts and circumstances of the case, the Tribunal was correct in law in upholding the application of rule 6B of the Income-tax Rules, 1962, to presentation articles?" Question No. 1 is common for all the three assessment years whereas question No. 2 is common for the assessment years 1975-76 and 1976-77 only. The controversy in questions Nos. 3 and 4 pertains to the assessment year 1975-76. So far as the controversy in question No. 1 is concerned, learned counsel for the parties are agreed that the controversy therein now stands concluded in favour of the Revenue by the decision of the Supreme Court in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585. In view of the above, question No. 1 is answered in the affirmative and in favour of the Revenue. The controversy in question No. 2 now stands concluded in favour of the Revenue by the decision of this court in Lubrizol India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at an approximate cost of rupees five crores. It went into production in calendar year 1964, the relevant assessment year being 1965-66. The controversy pertains to the allowability of set off of the deficiencies of the amount allowable as a deduction under section 80J of the Act for the assessment years 1968-69 and 1969-70 under sub-section (3) of section 80J of the Act against the profits of the assessment year 1975-76. The deficiency of the assessment year 1968-69 was Rs. 31,42,777 and of the assessment year 1969-70, Rs. 31,39,662. The assessee had no profits in the assessment year 1969-70 and thereafter. For the first time in the previous year relevant to the assessment year 1975-76, the assessee earned business profits from the said unit. The assessee wanted to carry forward the above deficiency of the assessment years 1968-69 and 1969-70 to set off the same against the business profits of the assessment year 1975-76. This claim of the assessee was rejected by the Income-tax Officer as being barred by limitation. According to the Income-tax Officer, the deficiency could not be carried forward under sub-section (3) of section 80J of the Act beyond the seventh assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended before us that the expression "initial assessment year" appearing in clause (i) of the proviso to sub-section (3) of section 80J of the Act should not be construed to mean the assessment year in which the industrial undertaking begins to manufacture or produce articles, referred to as the "initial assessment year" in sub-section (2) but it should be construed to mean the assessment year in which the deficiency arose. It was submitted that section 80J being a beneficial provision, it should be construed in a manner beneficial to the assessee. On the other hand, the submission of learned counsel for the Revenue is that the language of sub-section (3) of section 80J and clause (i) of the proviso to sub-section (3) thereof being clear and unambiguous, the definition of "initial assessment year" given in sub-section (2) cannot be given a go-by and a fresh definition substituted in its place to give the benefit of carry forward and set off of deficiency to the assessee for a period beyond the one stipulated by law. We have carefully considered the rival contentions. The controversy is about carry forward and set off of the deficiency under sub-section (3) of section 80J of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words 'four assessment years', the words 'six assessment years' had been substituted. (3) Where the amount of the profits and gains derived from the industrial undertaking or ship or business of the hotel, as the case may be, included in the total income (as computed without applying the provisions of section 64 and before making any deduction under Chapter VI-A or section 280-O) in respect of the previous year relevant to an assessment year commencing on or after the 1st day of April, 1967 (not being an assessment year prior to the initial assessment year or subsequent to the fourth assessment year as reckoned from the end of the initial assessment year) falls short of the relevant amount of capital employed during the previous year, the amount of such shortfall, or, where there are no such profits and gains, an amount equal to the relevant amount of capital employed during the previous year (such amount, in either case, being hereafter, in this section, referred to as deficiency) shall be carried forward and set off against the profits and gains referred to in sub-section (1) [as computed after allowing the deductions, if any, admissible under section 80HH and the said sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciency" is to be computed in relation to any assessment year prior to the assessment year 1967-68. Thus, the earliest assessment year in respect of which any relief on account of the deficiency can be allowed is the assessment year 1967-68. The relief in respect of deficiency relating to any assessment year is granted by way of carrying it forward and setting it off against the assessable profits of the assessee from the industrial undertaking for seven assessment years as reckoned from the end of the "initial assessment year". Clause (ii) of the proviso to sub-section (3) provides that where the assessee is entitled to set off against the assessable profits of an assessment year any deficiency relating to two or more past assessment years, the "deficiency" relating to the earlier one of such assessment years is to be set off first, followed by a set off of "deficiency" in respect of the next assessment year, and so on. In the instant case, the new industrial undertaking of the assessee commenced manufacturing articles in the calendar year 1964, the relevant assessment year being the assessment year 1965-66. The "initial assessment year", within the meaning of sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous. It says in clear terms that in no case shall the "deficiency" or any part thereof be carried forward beyond the seventh assessment year as reckoned from the end of the "initial assessment year". The expression "initial assessment year" has been defined in sub-section (2) of the very same section to mean "the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles". Sub-section (2) clearly provides that such assessment year thereafter in that section (which obviously includes sub-section (3) thereof) shall be referred to as the "initial assessment year". On the face of such clear and unambiguous language of sub-section (2) there is no scope for any doubt about the true meaning of the expression "initial assessment year" appearing in clause (i) of the proviso to sub-section (3) of section 80J of the Act. We do not find any substance in the submission of learned counsel for the assessee that the interpretation suggested by the assessee being beneficial to the assessee, the same should be accepted in view of the principle of beneficial interpretation, because the principle of beneficial interpretation has no appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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