1986 (11) TMI 87 - AT - Income Tax

Tribunal Upholds Denial of Relief for New Industrial Unit, Allows Investment Allowance Claim

HIND WIRE INDUSTIRES LTD. Versus INCOME TAX OFFICERS.

HIND WIRE INDUSTIRES LTD. Versus INCOME TAX OFFICERS. - TTJ 028, 041, Issues:1. Entitlement to relief under section 80J of the Income Tax Act for a new industrial unit.2. Interpretation of circular No. 5-P dated 9th Oct., 1967 of the CBDT regarding relief under section 80J.3. Applicability of judicial interpretations and circulars issued by CBDT in income tax matters.4. Claim for initial depreciation and investment allowance under amended law.Analysis:Issue 1: Entitlement to relief under section 80JThe appeal was filed by the assessee against the CIT(A)'s order denying relief under section 80J for the new industrial unit. The CIT(A) withdrew the relief given by the ITO, stating that since the new unit did not have taxable profit, the assessee was not entitled to any relief. The assessee argued that relief should be allowed even in a year with a loss, citing circular No. 5-P dated 9th Oct., 1967 of the CBDT. The Tribunal upheld the CIT(A)'s decision, emphasizing that conditions for relief under section 80J must be strictly fulfilled, and no reference was made in the legislation for granting relief in case of a loss.Issue 2: Interpretation of CBDT CircularThe assessee relied on the CBDT circular to support their claim for relief under section 80J despite a loss in the new unit. However, the Tribunal held that the circular exceeded the CBDT's jurisdiction by granting relief when there was no gross total income in the new unit. The Tribunal emphasized that legislative concessions must be strictly adhered to, and the circular's provisions could not override the Act's requirements.Issue 3: Applicability of Judicial Interpretations and CircularsThe parties cited various judicial decisions and circulars to support their arguments. The assessee argued that the circular supported their claim, while the Revenue contended that judicial interpretations took precedence over circulars. The Tribunal noted that previous decisions did not directly support the assessee's interpretation and upheld the CIT(A)'s decision based on legislative requirements rather than circular provisions.Issue 4: Claim for Initial Depreciation and Investment AllowanceThe assessee claimed investment allowance under the amended law for additions to machinery, which was disallowed by the ITO. The CIT(A) rejected the claim as the assessee did not make the claim before the ITO. The Tribunal, considering the change in law during the previous year, allowed the assessee's claim for investment allowance and directed the ITO to examine the claim in accordance with law.In conclusion, the appeal was partly allowed for statistical purposes, with the Tribunal upholding the CIT(A)'s decision regarding relief under section 80J while allowing the claim for investment allowance under the amended law. The judgment emphasized strict adherence to legislative requirements in granting tax relief and the primacy of judicial interpretations over circular provisions in income tax matters.