Commissioner of Income Tax vs Mahavir Rubber Works

On an application filed u/s 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following question for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that since the relief u/s 80J of the Income Tax Act, 1961, in respect of the new industrial undertaking had been allowed to the assessee in the initial assessment year, the Income Tax Officer was not entitled to refuse the same relief in respect of that undertaking in the subsequent assessment year unless the relief allowed for the initial year is withdrawn by the Income Tax Officer ?"

The assessee derives income from manufacture and sale of plastic and rubber goods. The relevant assessment year is 1979-80. Year ended on December 31, 1978. The income of the assessee was assessed at Rs. 20,411. The benefit of Section 80J of the Income Tax Act, 1961, has been denied to the assessee on the ground that the assessee has not fulfilled the condition for deduction u/s 80J.

In appeal before the Appellate Assistant Commissioner, the Appellate Assistant Commissioner has followed the decision of the Income Tax Tribunal in the case of M. M. Patel and Sons (P.) Ltd., reported in Income Tax Tribunal Decisions May 3, 1982, Volume I, Part II, page 82, and allowed the claim of the assessee.

In appeal before the Tribunal, the Tribunal has considered the decision of the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. Vs. Commissioner of Income Tax, Gujarat-V, wherein the Gujarat High Court has taken the view that the Income Tax Officer was not justified in refusing to continue the benefit of Section 80J in the subsequent year, i.e., in the year 1969-70, unless the relief granted in the year 1968-69 is disturbed.

None appeared for the assessee. Heard learned counsel for the Revenue. Learned counsel for the Revenue submits that for relief u/s 80J, there are conditions enumerated in Sub-section (4) of Section 80J and admittedly in this case the condition laid down in clause (iv) of Sub-section (4) of Section 80J has not been fulfilled. He further submits that in this matter even notice for withdrawing the relief u/s 80J for the earlier year, i.e., 1978-79, has been issued, therefore, the relief in the year under consideration can be refused even though the relief u/s 80J has been allowed in the preceding year.

The relevant provision of Clause (iv) of Sub-section (4) of Section 80J reads as under :

"in a case where the industrial undertaking manufactures or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power."

A plain reading of the provisions of Sub-section (4) of Section 80J reveals that relief u/s 80J can be allowed to the assessee in respect of the industrial undertaking, which fulfils the conditions laid down in Sub-section (4). Learned counsel further submits that the assessee has not employed ten employees as required under Clause (iv) and that has not been disputed by the assessee.

When the condition has not been fulfilled, admittedly, in the year under consideration, in our view, the assessee is not entitled for the deduction u/s 80J of the Income Tax Act.

In the result, we answer in the negative, i.e., in favour of the Revenue and against the assessee.

Reference so made stands disposed of accordingly.