Delhi H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct inholding that under s. 80J(3), the assessee was authorised to claim deduction under s. 80J at any time within a period of seven years from the initial assessment year ?

Counsel Appeared

R.C. Pandey with Mrs. Prem Lata Bansal & Ajay Jha, for the Revenue : None, for the Assessee

JUDGMENT

ARIJIT PASAYAT, C.J.:

At the instance of the Revenue, the following question has been referred by the Income-tax Appellate Tribunal, Delhi, Bench “B” (for short “the Tribunal”), under s. 256(1) of the IT Act, 1961 (in short the “Act”), for opinion of this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct inholding that under s. 80J(3), the assessee was authorised to claim deduction under s. 80J at any time within a period of seven years from the initial assessment year ?” Since the question depends upon the interpretation of s. 80J(3), reference to the factual aspects in detail is unnecessary. The reference relates to the asst. yr. 1971-72. The assessee, a private limited company, filed a return showing income of Rs. 8,164. In the original return no claim under s. 80J of the Act was made. Subsequently, a revised return was filed on 29th July, 1972, in which a claim was made. In the revised return the assessee claimed carry forward and set off of relief under s. 80J in respect of the asst. yrs. 1965-66 to 1969-70 against the income for the asst. yr. 1971-72. The AO did not pass any order on the revised income. In appeal before the Appellate Assistant Commissioner (in short “the AAC”), it wascontended that the assessee-company had set up an industrial undertaking to commence production in the previous year ending on 30th June, 1965, and, as such, it was entitled to deduction under s. 80J for the asst. yr. 1966-67 and four succeeding assessment years. It was the assessee’s stand that claim for deduction could be made for six years from the start of the previous year relevant to the assessment year commencing on 1st April, 1967. The AAC did not accept this stand. He was of the view that if a person failed to make such claim in the initial assessment year or even in respect of the aforesaid preceding assessment years no claim of deduction under s. 80J of the Act could be made for earlier years. The matter was carried in appeal before the Tribunal. It was held by the Tribunal that the provisions of s. 80J should be construed liberally and, therefore, there was no bar for the assessee to make deduction within seven years from the end of the initial assessment year. At the instance of the Revenue, the aforesaid reference was called for and has been made.

Learned counsel for the Revenue submitted that the true import of s. 80J(3) has not been considered by the Tribunal. There was no appearance on behalf of the assessee when the matter was called. The question came up for consideration of the Karnataka High Court in CIT vs. Sree Valliappa Textiles Ltd. (1986) 57 CTR (Kar) 65 : (1987) 166 ITR 548 (Kar) : TC 25R.1168. The following observation was made by the said High Court : “We are in respectful agreement with the view taken in all these cases that the right of an assessee to carry forward and set off under s. 80J(3) of the Act arises where there is profit in the subsequent year. But to carry forward and set off, the loss is to be computed in the previous year. If loss is not computed for the previous year, there is nothing for the assessee to carry forward and set off against the income for the subsequent year. The ITO, computing the loss for the previous year cannot determine whether the loss so computed can or cannot be set off .against the income of the subsequent year. It necessarily follows that the ITO who deals with the assessment for the subsequent year and who is competent to carry forward the loss cannot compute the loss in the previous year. It is only when the loss in the previous year is computed, the ITO dealing with the assessment for the subsequent year can decide whether that loss may be carried forward and set off against the income of the subsequent year. As rightly pointed out by Sri Srinivasan, s. 80J(1) and (3) have to be read together and not in isolation. We have first to ascertain the scope and ambit of s. 80J(1) and it is only thereafter to consider the scope and ambit of s. 80J(3). It, therefore, follows that there has to be computation of loss under s. 80J(1) and it is only the deficiency that can be carried forward and set off under s. 80J(3).” In our considered opinion the position in law has been correctly stated by the Karnataka High Court and we are in agreement with the view expressed. Our answer to the question referred, therefore, is in the negative, in favour of the Revenue and against the assessee. The reference is accordingly disposed of.

[Citation : 246 ITR 624]