9911796707
TMI Blog1985 (1) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts leading to the said reference are as stated hereinafter. The assessee is a company. The claim of the assessee for the assessment year 1974-75 for relief under section 80J of the I.T. Act, 1961, was rejected by the ITO on the ground that the benefit could not be allowed as the capital computed came to nil for the relevant period. On appeal, the AAC directed the ITO to allow the relief under s. 80J. While giving effect to the order of the AAC, the ITO restricted the relief under s. 80J to the extent of 1/12th only on the ground that the new industrial unit worked only for one month during the relevant accounting year, which is the calendar year in this case. According to the ITO, the new industrial unit started production only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 80J should be allowed on a full Year basis at the rate of 6% on the capital employed in the industrial undertaking. The profits of new industrial undertakings, ships and hotels which fulfil the conditions prescribed by s. 80J are entitled to exemption from income-tax to the extent of 6% per annum on the capital employed. The question is, if the undertaking has functioned for only a part of an accounting year, the deduction should be allowed to the full extent of 6% or the percentage is to be reduced in proportion to the part of the year during which the undertaking was in production and operation. This question has to be decided in the light of the relevant provision of the Act and the objects thereof. The relevant provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel starts functioning (such assessment year being hereafter, in this section, referred to as the initial assessment year) and each of the four assessment years immediately succeeding the initial assessment year : " The tax holiday concession would be available for five successive assessment years commencing from the assessment year relevant to the previous year in which the undertaking goes into production. The provisions have been enacted with a view to encouragement of establishment of new industrial undertakings. This object has been sought to be achieved by granting exemption or concession from tax at, a certain portion of profits earned for the first five years of such undertaking. The legislature has intended to provide an incentiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate is prescribed and does not imply that there shall be pro-rating. Pro-rating depends upon the context in which such term is used. However, the Delhi High Court in the case of Addl. CIT v. Gedore Tools (India) Pvt. Ltd. [1982] 134 ITR 592, in construing the proviso to rule 19(1) of the I.T. Rules, 1962, regarding the averaging of the value of an asset in the process of computation of capital employed in an undertaking observed that s. 84 contemplates the percentage of relief being toned down or reduced proportionately to the period of working of the undertaking. There, the court was concerned with the computation of the capital employed under rule 19 of the I.T. Rules, 1962, and not with the question of proportionate reduction of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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