Commissioner of Income Tax vs Godrej Soaps Private Ltd.

Bharucha, J.—This reference u/s 256(1) of the Income Tax Act, 1961, is made at the instance of the Revenue and raises the following question :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to have deficiency u/s 80J(3) of the Income Tax Act, 1961, worked out at the rate of 6% on the capital employed without regard to the period for which the industrial undertaking had worke ?"

The assessee and its advocate did not appear when the matter was called out yesterday. They have not appeared even today. They would appear to have relied upon Mr. Jetly, learned counsel for the Revenue, to fairly point out the position in law. Their reliance has not been misplaced.

The Madras High Court has held in Commissioner of Income Tax, Tamil Nadu-I Vs. Simpson and Company, , that the words "per annum" used in section 84 of the Income Tax Act, 1961, corresponding to section 80J referred to in the question, cannot be understood as contrasted with any broken period. The court held that where during the two years relevant to the reference before it, the assessee had worked its machinery only for a period of nine months and the Department sought to reduce the deduction at 6% of the capital further in proportion to the period during which it worked the machinery, the assessee was entitled to the relief of six per cent. of the capital employed for each of the two years without any limitation on any proportionate time basis.

This view has also been taken by the Calcutta High Court in Commissioner of Income Tax Vs. Oyster Packagers (P.) Ltd., . Mr. Jetly has also fairly pointed out to a circular dated March 3, 1984, issued by the Additional Commissioner of Income Tax, Delhi-II Vs. Rattan Chand Kapoor, . Accepting the interpretation place by the Madras High Court in the aforementioned case of Commissioner of Income Tax, Tamil Nadu-I Vs. Simpson and Company, , the circular directs that the deduction u/s 80J of the Income Tax Act, 1961, should not be reduced proportionately with reference to the period for which the business of the undertaking was not carried on during the relevant previous year.

Accordingly, the question is answered in the affirmative and in favour of the assessee. No order as to costs.