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TMI Blog1986 (3) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... nner: "Claim under section 80J The assessee claimed relief under section 80J of the Income-tax Act, 1961 for Unit No. 2 which has commenced production in this year. A separate balance sheet has also been filed in respect of Unit No. 2 which reveals the figure of sale at Rs. 18,429 and closing stock of initial product at Rs. 22,82,633. The assessee has also given separate balance sheet and separate set of accounts for this unit in support of the claim. But as the claim for Rs. 2,58,729 in the return and as per revised return dated 1-12-1975 at Rs. 3,22,893 is not in conformity with rule 19A of the Income-tax Rules, 1962, the claim is restricted to Rs. 1,35,000 as per computation in terms of rule 19A vide Schedule 'A' Rs. 1,35,000. Unab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng it forward does not arise. I, therefore, hold that the ITO - erred in allowing straight deduction in the assessment years 1976-77, 1978-79 and 1979-80; and - erred in computing the deficiency for the assessment year 1977-78 and in allowing it to be carried forward to the subsequent assessment years. I accordingly annul the relevant portion of each of the four impugned assessment orders." Being aggrieved the assessee-company preferred appeals against the said order. It may be mentioned that we are not concerned with the appeals relating to the assessment years 1977-78 to 1979-80. 3. As can be seen from the above the Commissioner (Appeals) assumed that the ITO had allowed straight deduction under section 80J(1) for the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction itself, in cases where the new unit has incurred a loss. And the deficiency will be carried forward and set off against the new unit's profits of the subsequent years. (The sub-section also lays down certain riders in this regard, but it is unnecessary for the purpose on hand to notice them)." 4. It seems to us that the Commissioner (Appeals) was not correct in summing up the provision of section 80J(3) inasmuch as he stated the deficiency to be the amount of deduction in cases where the new unit has incurred loss. As we were of the opinion that sub-section (3) does not contemplate carry forward of the deficiency in case the industrial undertaking suffers loss, we invited the authorised representatives for the parties to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f no profit or profit less than the 'relevant amount of capital employed during the previous year'. These contentions were opposed by the departmental representative. 6. We have given our anxious and careful consideration to the respective contentions put forth by the authorised representatives for the parties. We agree with the authorised representative for the assessee that when a provision is capable of two interpretations, the interpretation favourable to the assessee should be accepted. We also agree with him that when two interpretations of a provision of law are possible, the interpretation translating the intention of the Legislature should be preferred to that which negatives the intention of the Legislature. Keeping this as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deficiency, as the case may be, shall be set off against such profits and gains for the next following assessment year and if and so far as such deficiency cannot be wholly so set off, it shall be set off against such profits and gains assessable for the next following assessment year and so on:" 8. Thus, it is clear that section 80J(3) permits carry forward of the deficiency in the following cases: (a) where the profits and gains derived from the industrial undertaking (we are not concerned with the income from ship or business of the hotel) is a positive figure but falls short of 'the relevant amount of capital employed during the previous year' ; and (b) where there are no such profits and gains. 9. It does not mention anywh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that carry forward of the deficiency is permissible under section 80J(3) only (a) where profits and gains are derived from industrial undertaking and (b) where there are no such profits and gains. But carry forward of the deficiency is not permissible when there is loss in the industrial undertaking. 10. Admittedly, in the case under appeal, the assessee-company suffered loss in the industrial undertaking (as well as in its total 'business'). As such, in our opinion, it was not entitled to carry forward of the deficiency under section 80J(3). We, therefore, decline to interfere with the order of the Commissioner (Appeals) though for different reasons. 11 to 13. [These paras are not reproduced here as they involve minor issues.] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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