TaxTMI 
TaxTMI 
1978 (10) TMI 3
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.... development rebate in respect of the cold storage plant remained unabsorbed so as to be available for carry forward and set-off in the assessment year 1970-71. The business of cold storage plant turned the corner after the initial teething trouble and it made a profit of Rs. 1,51,011 in the assessment year 1970-71, after taking into account the current year's depreciation allowance and development rebate. The assessee claimed in its assessment to tax for the assessment year 1970-71, that the amounts of deficiency under s. 80J for the current as well as past assessment years were liable to be adjusted against the profit of Rs. 1,51,011 for that assessment year. Since the claim was based on s. 80J, it would be convenient at this stage to refer to the relevant provisions of that section. S. 80J was introduced in the Act in place of s. 84 by Finance Act, 1967, with effect from 1st April, 1968. The material portions of that section read as under : " 80J. (1) Where the gross total income of an assesse includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to....
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....and the said sub-section (1)] in respect of the previous year relevant to the next following assessment year, and, if there are no such profits and gains for that assessment year, or where the deficiency exceeds such profits and gains, the whole or balance of 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 : Provided that--- (i) 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 ; (ii) where there is more than one deficiency and each such deficiency relates to a different assessment year, the deficiency which relates to an earlier assessment year shall be set off under this sub-section before setting off the deficiency in relation to a later assessment year :... (4) This section applies to any industrial undertaking which fulfils all the following conditions, namely :--- (i) it is not formed by the splitting up....
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....s no profit from the business of cold storage plant in the assessment year 1970-71 against which any part of the relevant amount of capital employed during the assessment year 1970-71 could be adjusted under sub-s. (1) of s. 80J or any part of the carried forward amounts of deficiency for the past assessment years, deducted under sub-s. (3) of s. 80J. It was not possible to disagree with the assessee that the business of the cold storage plant had resulted in a profit of Rs. 1,51,011 in the assessment year 1970-71 and in fact it was conceded that this was the amount of profit liable to be taken into account in computing the total income of the assessee chargeable to tax, but the ITO took the view that in computing the profit of the cold storage business for the purpose of applying the provision contained in sub-ss. (1) and (3) of s. 80J, the losses as well as the depreciation allowance and development rebate in respect of that business for the past assessment years should be adjusted against the profit of Rs. 1,51,011, since there was no profit at all from that business in the past assessment years against which any part of such losses, depreciation allowance or development rebate ....
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....igh Court : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the deduction under s. 80-J of the I.T. Act, 1961 ? " The High Court agreed with the view taken by the Tribunal and answered the question in favour of the assessee and against the revenue. The revenue thereupon preferred the present appeal with special leave obtained from this court. Now, it is clear from the language of sub-s. (1) of s. 80-J that the profits or gains of a new industrial undertaking from which deduction of the relevant amount of capital employed during a particular assessment year is allowable under that provision, are the profits or gains includible in the computation of the total income chargeable to tax. Therefore, whatever be the profits or gains of the new industrial undertaking computed for the purpose of arriving at the total income chargeable to tax, would have to be taken to be the profits or gains for applying the provision contained in sub- s. (1) of s. 80-J. There are no two modes of computation of the profits or gains of the new industrial undertaking contemplated by sub-s. (1) of s. 80-J, one for determining the total ....
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....t years have been fully set off against the profit of the assessee from other businesses or for the matter of that, against the income of the assessee under any other head by reason of ss. 70 and 71 read with sub-s. (2) of s. 32 and sub-s. (2) of s. 32A, no part of such losses, depreciation allowance or development rebate would be liable to be adjusted over again in computing the profits or gains of the new industrial undertaking for applying the provision contained in sub-s. (1) of s. 80-J. The same mode of computation must prevail also in applying the provision contained in sub-s.(3) of s. 80-J, because that sub-section provides for setting off the carried forward amount of deficiency of the past assessment years against " the profits and gains referred to in sub-s. (1) " of s. 80-J, as computed after allowing, inter alia, the deduction admissible under that sub-section and, therefore, if, for the purpose of sub-s. (1) of s. 80-J, the profits or gains of the new industrial undertaking are to be computed in accordance with the provisions of the Act and no part of the losses, depreciation allowance or development rebate for the past assessment years which has been fully set off aga....