Delhi H.C : Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 9,068 incurred by the assessee on the foreign tour of Dr. Bharat Ram to attend the meetings of the International Chamber of Commerce was deductible in computing its business income for the asst. yr. 1970-71 ?

Counsel Appeared : Ajay Jha, for the Applicant : Ms. Monica Singal, for the Respondent

ORDER

Arun Kumar, J. :

In respect of the asst. yr. 1970-71, the Tribunal has referred the following questions for the opinion of this Court, at the instance of the Revenue :

“1. Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 9,068 incurred by the assessee on the foreign tour of Dr. Bharat Ram to attend the meetings of the International Chamber of Commerce was deductible in computing its business income for the asst. yr. 1970-71 ?

Whether, on the facts and in the circumstances of the case, the Tribunal was legally right in holding that the expenditure of Rs. 65,746 incurred by the assessee for running the D.C.M. Football Tournament was an admissible deduction for arriving at its profits from business ?

Whether, on the facts and in the circumstances of the case, was the Tribunal right in confirming the AAC’s order in which relief under s. 80J was ordered for the full accounting period even though the industrial undertaking M/s Shri Ram Fertilizers worked only for a period of 5 months ?

The first question is to be answered in favour of the assessee in view of the decision of this Court in the case of the assessee itself, relating to the asst. yr. 1969-70, Delhi Cloth & General Mills Co. Ltd. vs. CIT (1985) 48 CTR (Del) 216 : (1986) 158 ITR 64 (SC) : TC 16R.1219. The question is accordingly answered in the affirmative i.e., in favour of the assessee and against the Revenue. Similarly, in view of the decision of this Court in the case of the assessee itself in respect of the asst. yr. 1965-66, Delhi Cloth & General Mills Co. Ltd. vs. CIT (1992) 198 ITR 500 (Del) : TC 17R.1113, question No. 2 is also required to be answered in favour of the assessee. The question is accordingly answered in the affirmative i.e., in favour of the assessee and against the Revenue.

As regards question No. 3, the assessee-company claimed relief under s. 80J of the IT Act, 1961 (for short ‘the Act’), at 6 per cent of the capital employed for the full asst. yr. 1970-71, for the period ended on 30th June, 1969, although it had commenced production on 1st Feb., 1969. The ITO, however, computed the relief under the said section on pro rata basis for the actual period of five months in which the industrial undertaking had worked during the year. The AAC and the Tribunal did not agree with the view taken by the ITO and thus, allowed the relief as claimed by the assessee for the whole year. On these facts, the aforenoted question has been referred for the opinion of this Court.

The short question for consideration is as to what meaning is to be ascribed to the phrase “6 per cent per annum” as appearing in s. 80J of the Act. In other words, whether the relief under the said section has to be worked out on pro rata basis for the period of actual working of the undertaking or should it be allowed for the full year in which the capital was employed, though the actual production in the new industrial undertaking was only for a part of the year.

A similar question came up for consideration before the Madras High Court in CIT vs. Simpson & Co. (1980) 122 ITR 283 (Mad) : TC 25R.856 the Madhya Pradesh High Court in CIT vs. Sanghi Bewerages (P) Ltd. (1982) 26 CTR (Bom) 265 : (1982) 134 ITR 623 (MP) : TC 25R.860 and the Karnataka High Court in CIT vs. Mysore Petrochemical Ltd. (1984) 39 CTR (Kar) 177 : (1984) 145 ITR 416 (Kar) : TC 25R.816 and all the three Courts, while observing that the provisions of s. 80J of the Act, which were intended to encourage the setting up of new industrial enterprises have to be construed liberally, opined that the deduction under the said section has to be allowed in full without reducing the same in proportion to the part of the year during which the undertaking was not in productive operation. Besides, it has also been brought to our notice by learned counsel for the assessee that the CBDT has accepted the interpretation placed on the phrase “per annum” by the Madras and Karnataka High Courts and vide its Circular No. F. No. 178/227/83-IT(AI), dt. 3rd March, 1984 [Circular No. 378—Ed.], has issued instructions that deduction under s. 80J 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.

Following the views expressed in the aforenoted decisions, with which we are in respectful agreement and in the light of the circular issued by the Board, we also hold that the assessee was entitled to relief under s. 80J of the Act for the whole year ended on 30th June, 1969, irrespective of the fact that it had commenced production only on 1st Feb., 1969. Accordingly the third question is also answered in the affirmative i.e., in favour of the assessee and against the Revenue.

There will be no order as to costs.

[Citation : 240 ITR 9]