ADDITIONAL COMMISSIONER OF INCOME TAX Vs. SHEETALAYA

JUDGEMENT

(1.) THE assessee is a registered firm. It carries on business of running a cold storage. For the assessment year 1972-73, it claimed a deduction of Rs. 2,30,754 under Section 80J of the I.T. Act of 1961 against its income for that year. This amount consisted of deficiency relating to the assessment years 1969-70 to 1971-72 and also a sum of Rs. 70,580 which was the claim made under that section for the current year 1972-73. THE deficiency as well as the claim were calculated at the rate of 6% of the capital employed. THE ITO refused the claim for the past years but allowed the same for the year 1972-73, to the extent of Rs. 42,154. On appeal, the view of the ITO was affirmed. THE assessee went up to the Tribunal. In relation to the first three years, namely, 1969-70, 1970-71 and 1971-72, the Tribunal held that it was admitted between both the parties that in all these years the assessee had suffered losses and the assessments had also been completed by computing the losses. In those years, the assessee did not make any specific claim for relief under Section 80J. It observed that Section 80J did not specifically require that a claim must be made under it in the year in question before it could be permitted to be carried forward because of the occurrence of deficiency, namely, cases where gains or profits may not be equal to the claim or in a case where there is total loss. Consequently, the assessee was entitled to claim carry forward deficiencies as against its income in the fourth year. THE assessee's appeal was allowed.

(2.) AT the instance of the Commissioner of Income-tax, the Tribunal has referred the following questions of law for our opinion :

(3.) SUB-section (1) of Section 80J applies only where there are profits and gains included in the total income of the first assessment year. SUB-section (3) contemplates that, even though the undertaking may not have earned profits and gains, yet the claim for the relevant amount (namely 6% of the capital employed) is to be carried forward till it is adjusted against profits and gains of subsequent years up to a limit of seven years. It permits the adjustment of the claimed deduction as against profits and gains of subsequent years in cases of shortfall or deficiency.