Decided on May 04,1982



S.N.Rotho, - (1.) THIS appeal has been filed by the department against the order dated 10-4-1981 of the Commissioner (Appeals), relating to the assessment year 1976-77 the previous year of which ended on 30-9-1975.
(2.) The assessee is a company established in the year ended 30-9-1968 for the manufacture and sale of knitted clothes. It did not claim relief under Section 80J of the Income Tax Act, 1961 ("the Act"), during the first assessment year, namely, 1969-70, because the capital employed by the assessee out of its own funds during that year was a negative figure. In the second assessment year 1970-71 also, the assessee did not claim relief under Section 80J for the same reason. In the subsequent three assessment years, namely, 1971-72, 1972-73 and 1973-74, the capital employed by it became positive, so that it was entitled to relief under Section 80J at a certain percentage of such capital. Even so, the assessee did not claim relief under Section 80J during these three years, because the gross total income was a negative figure in these three years. The assessee found that the gross total income was a positive figure, for the first time, during the assessment year 1976-77, which is under consideration. A claim was made before the ITO in the course of assessment proceedings for the carry forward and set off of Section 80J relief deficiency of the assessment years 1971-72, 1972-73 and 1973-74, amounting in all to Rs. 10,718. This claim was made under Section 80J(3) before the ITO. The assessment year under consideration was within the permitted period of seven years from the end of the initial assessment year. The ITO did not allow the set off of the deficiency under Section 80J(3) on the ground that the assessee did not make the claim at the time of the assessments of the years in which the deficiency arose, and the said deficiencies were not quantified. He rejected the claim of the assessee summarily on this ground alone. The assessee appealed to the Commissioner (Appeals), and contended that its claim should have been accepted. Reliance was placed on the decision in the case of Addl. CIT v. Sheetalaya [1979] 117 ITR 658 (All.). The Commissioner (Appeals) quoted the following passage from the aforesaid decision : ... There is no requirement in any part of Section 80J that the assessee must make a definite claim and the ITO must determine the amount of deduction before it can be carried forward in a case, where, admittedly, the undertaking had suffered a loss which had been accepted while making the assessment. Since the provision is intended to provide incentive to industry by means of relief from tax and provision is also made for carry forward for seven years, the deduction is permissible even in a case where the formality of making a claim has not been complied with by the assessee in the first or the relevant assessment year in which, admittedly, loss had been sustained and there was no profit or gain against which the deduction could be adjusted.... (p. 658) Following the aforesaid decision, the Commissioner (Appeals) directed the ITO to allow the claim of the assessee.
(3.) THE only ground taken in this appeal filed by the department is that the Commissioner (Appeals) erred in directing the ITO to allow the claim of the assessee to set off deficiencies of the earlier years. Shri L.N. Joy, learned representative for the department, urged before me that the Commissioner (Appeals) was not justified in directing to allow the claim when the said claim was not made in the relevant assessment years before the ITO. He relied on the decision in the case of Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 (SC). He further stated that the decision in the case of Sheetalaya (supra) was confined to the facts of that case, because the assessee in that case claimed the set off of the deficiency in an assessment year which was within the first five years, and in respect of which a claim under Section 80J(1) was also made. He stated that this fact was absent in the instant case.;

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