Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the following question of law has been referred to this court for the assessment year 1976-77 : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that carry forward of deficiency is not permissible under Section 80J(3) of the Income-tax Act, 1961, when the assessee-company suffered loss in the new industrial undertaking and consequently in disallowing the assessee's claim for carry forward of the deficiency for the assessment year 1976-77 ?"
(2.) Shortly stated, the facts are that the assessee claimed relief under Section 80J for Unit No. 2 which had commenced production in the year under reference. The Income-tax Officer allowed the said deduction under Section 80J although the industrial undertaking suffered loss.
(3.) The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) against the several determinations made by the Income-tax Officer in the order of assessment. The Commissioner of Income-tax (Appeals) was of the view that since deduction under Section 80J(1) of the Act could not exceed the gross total income as defined in Section 80B(5) of the Act, the assessee was not entitled to deficiency being computed or being carried forward. He thought it fit to rectify the said error in law and to withdraw the benefit wrongly allowed by the Income-tax Officer. He gave an opportunity to the authorised representative of the assessee to make a submission on the matter. After hearing the submission of the authorised representative of the assessee, the Commissioner of Income-tax (Appeals) held that the Income-tax Officer erred in computing the deficiency for the assessment year 1977-78 and in allowing it to be carried forward to the subsequent assessment years. The aggrieved assessee filed an appeal to the Tribunal and the Tribunal was of the view that the carry forward of deficiency is not permissible in case of loss in the industrial undertaking.;