TMI Blog1988 (9) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account of the new manufacturing division reflected a loss of Rs. 2,72,633, According to him, the deduction under s. 80J could be allowed only if there was a profit in the new industrial undertaking Being of the opinion that the order passed by the ITO was erroneous and prejudicial to the interests of revenue, he issued a show cause notice to the assessee. There were no written submissions made in response thereto but the proceedings were attended by the assessee's counsel. The CIT, after hearing the assessee, opined that the deduction under s. 80J was not allowable. The CIT also directed the ITO to work out the capital employed by taking into account the funds borrowed by the assessee and invested in the new industrial undertaking, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng" and not profits of the entire business In respect of the decision of the Tribunal relied upon by the assessee, the learned deptl. Representative submitted that the decision of the Supreme Court referred to in that order namely, Rajapalyam Mills ltd. vs. CIT (1978) CTR (SC) 167 (1978) 115 ITR 777 (SC) and CIT vs. Patiala Flour Mills Co. P. Ltd. (1978) CTR (SC) 144; (1978) 115 ITR 640 (SC) were distinguishable and did not apply to the facts of the present case. He accordingly made an impassioned plea for the confirmation of the order of the CIT. 6. We have examined the rival submissions and have also perused the order of the CIT which is presently in appeal before us The paper book furnished by the assessee s counsel has also been take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount which the assessee had claimed and which in fact the ITO had allowed while completing the assessment. In the light of these facts we strike down the following observation in the order of the CIT in so far as they constitute directions to the ITO to re-compute. The assessee's claim: "The computation of capital has to take into account funds borrowed by and debts contracted by the assessee and investments in the new undertaking, although not shown in the balance sheet of the new unit." This shall not be implemented by the ITO while giving effect to the order of the CIT under s. 263 Before we part with this aspect of the matter, we would like to mention that there was no reply to the show cause notice by the assessee but the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant provisions of the section itself and which would assist in deciding in the matter at hand Sec. 80J(1) states as under; "80J(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel to which this section applies, there shall in accordance with and subject to the provisions of this section be allowed in computing the total income of the assessee a deduction from profits and gains." Sec. 80J(3) states as under: "80J(3). — Where the amount of the profits and gains derived from the industrial undertaking or ship or business of the hotel, as the case may be, included in the total income." 9. It is absolutely clear that it is the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to a recent decision of the Supreme Court in the case of CIT vs. Canara Workshop P. Ltd. (1986) 58 CTR (SC) 108 : (1986) 161 ITR 320 (SC). The issue being considered was the one pertaining to s. 80-E of the IT Act, 1961. It was held that the profits and gains earned by one priority industry could not be reduced by the loss suffered by any other industry or industries owned by the assessee. It was held that each industry must be considered on its own working when adjudging its title to the deduction under s. 80-E. Their Lordships were of the view that it would make no difference even when the other industry was a priority industry. It would be worthwhile reproducing the following observations of their Lordships: "(i) The object in enac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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