Commissioner of Income Tax vs Premier Breweries Ltd.

K.S. Paripoornan, J.—At the instance of the Revenue, the Income Tax Appellate Tribunal has referred the following question of law for the decision of this court :

" Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the Income Tax Officer is not justified in cutting down the relief u/s 80J of the Income Tax Act, proportionate to the number of days worked in the accounting year ?"

The respondent is an assessee to Income Tax. We are concerned with the assessment year 1974-75 for which the accounting period ended on December 31, 1973. The assessee claimed deduction of Rs. 2,97,341 u/s 80J of the Income Tax Act. The Income Tax Officer held that the production commenced only on June 2, 1973, during the middle of the year, and deduction u/s 80J of the Act could be granted only proportionatee to the period for which the industrial undertaking had worked. Accordingly, the Income Tax Officer determined the net unabsorbed depreciation to be carried forward as Rs. 21,86,406, the development rebate to be carried forward as Rs. 13,27,208 and the deduction u/s 80J of the Act was determined at Rs. 1,72,622. In appeal, the Appellate Assistant Commissioner held that the Income Tax Officer was not justified in computing the deduction allowable u/s 80J proportionate to the period for which the industrial undertaking had worked. The plea of the assessee was accepted. In the further appeal filed by the Revenue before the Appellate Tribunal, the Appellate Tribunal, following the decision of the Madras High Court in Commissioner of Income Tax, Tamil Nadu-I Vs. Simpson and Company, , held that the decision of the Appellate Assistant Commissioner is valid and justified in law. The plea of the Revenue that only 6 per cent. of the capital employed should be allowed proportionate to the period for which the industrial undertaking had worked during the relevant previous year was negatived. It is thereafter at the instance of the Revenue that the question of law formulated hereinabove has been referred for the decision of this court.

We heard counsel. The decision of the Madras High Court in Commissioner of Income Tax, Tamil Nadu-I Vs. Simpson and Company, was followed by a Bench of this court in Commissioner of Income Tax Vs. English Indian Clays Ltd., . The Bench decision aforesaid was followed by another Bench in CIT v. Kerala Solvent Extractions Ltd. [1987] 165 ITR 174. What is more, the decision rendered in Commissioner of Income Tax, Tamil Nadu-I Vs. Simpson and Company, has been accepted by the Central Board of Direct Taxes in Circular No. 378, dated March 3, 1984 ( see Additional Commissioner of Income Tax, Delhi-II Vs. Rattan Chand Kapoor, ).

In the light of the above, we are of the view that the Appellate Tribunal was justified in holding that the Income Tax Officer was in error in cutting down the relief u/s 80J of the Income Tax Act proportionate to the number of days worked in the accounting year. We answer the question referred to this court in the affirmative -- against the Revenue and in favour of the assessee.

A copy of this judgment, under the seal of the court and the signature of the Registrar, shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.

The reference is answered as above.