Decided on March 20,1982



T.R. Thiruvengadam, Accountant Member - (1.) THIS appeal is by the assessee against the order of the Commissioner, Cochin, passed under Section 263 of the Income-tax Act, 1961 ("the Act"). The assessment year is 1976-77. For this assessment year, the ITO completed the assessment on 22-9-1979. Up to the assessment year 1974-75, the assessee had been following the financial year as its previous year. After 31-3-1974, the assessee changed the previous year to the year ending 30th September. The ITO, while allowing the change in the previous year asked for by the assessee, laid down the condition that the first previous year after the change should be the period of 18 months, i.e., from 1-4-1974 to 30-9-1975. THIS previous year of 18 months became the previous year for the assessment year 1976-77. THIS previous year is for the income of the assessee under the head "Profits and gains of business or profession". The assessee manufactures cables.
(2.) For this assessment year, in the assessment made by the ITO, the total income was computed at the figure of Rs. 1,12,23,424. The ITO adjusted against this income the losses and depreciaation carried forward from the earlier years. He also adjusted the outstanding development rebate. There was a further adjustment by way of a deduction under Section 80J of the Act. The bone of contention between the department and the assessee in this appeal is regarding the entitlement of the assessee to a part of the development rebate and the relief under Section 80J. The dispute arises in this manner. The development rebate that was adjusted by the ITO in the assessment order was a sum of Rs. 35,67,073. This was described in the assessment order as development rebate carried forward from 1967-68 to 1971-72. The records of the assessee with the ITO indicated that the figure of Rs. 35,67,073 included a sum of Rs. 33,16,297 representing the development rebate relating to the assessment year 1967-68 which had not been allowed as a deduction for that assessment year because that assessment had resulted in a loss. In fact, there is no dispute that the assessee had been incurring losses in all the subsequent assessment years and only in the assessment year under appeal, the assessee had made profits.
(3.) THE relief under Section 80J allowed by the ITO for this assessment year was in respect of a new winding wire and strip unit. It was considered by the ITO as a new industrial undertaking. It was so mentioned by him in the assessment order, but because the details of the liabilities and the profits from the unit were not furnished by the assessee, the ITO stated that the question of granting deduction under Section 80J would be considered on the assessee furnishing the details. THE assessment was modified by an order dated 7-1-1980 granting deduction under Section 80J in respect of this unit. THE relief so granted was Rs. 99,102. This figure was modified by another order dated 23-10-1980 whereby it was raised to Rs. 1,48,653. This particular undertaking started manufacturing during the previous year relevant to the assessment year 1971-72. THE assessment year 1971-72 was the initial assessment year for the purpose of Section 80J(2).;

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