TMI Blog1982 (6) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned that the assessment order in the case of the limited company had been passed on 12-9-1978. On the basis of the above letter of the IAC, the ITO proceeded to re-open the assessment of the assessee and other shareholders similarly situated. The ITO recorded reasons for such reopening on 19-3-1980 and issued notice for reassessment for the assessment year 1975-76, under section 147(b) of the Act. 3. The ITO then proceeded to make the assessment, in which he made reference to the assessment order in the case of the company. He found that though an amount of Rs. 4,07,828 had been determined as the amount which could have been deducted under section 80J of the Act, no profit in fact was deducted as the net result of the new industrial undertaking, after deducting depreciation and development rebate, was a minus figure. He also mentioned that the deduction admissible under section 80J had been carried forward to be adjusted in later years. On the basis of this, he concluded that the assessee could not get any benefits of deduction under section 80K. The ITO repelled the contention of the assessee regarding the re-opening of the assessment. He pointed out that at the time of ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowable under section 80J at 6 per cent came to Rs. 4,07,828. It was further stated that the deduction would, however, be limited to the extent of profit from this new industrial undertaking, which was Rs. 3,88,166. The ITO, therefore, certified that an amount of Rs. 3,88,166 could be exempt under section 80K in the hands of the shareholders. Tax was to be deducted accordingly. The certificate was issued provisionally and could be revised later. 7. The learned counsel for the assessee has submitted before us that there was no information in the possession of the ITO for initiating the proceedings under section 147(b) and the letter of the IAC, drawing the attention of the ITO to the assessment order in the case of the company, was not an information for the purposes of section 147(b). According to the learned counsel there was no nexus between the information and the ITO's reason to believe that the income had escaped assessment. It was further contended that a similar question had been declared by the AAC earlier and the decision was in favour of the assessee and no appeal had been filed against the order of the AAC. It was, therefore, contended that the ITO could not re-open t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The proceedings have been reopened under section 147(b), on the basis of the information received from the IAC, who has drawn the attention of the ITO to the assessment order passed in the hands of the company which according to him disentitled the shareholders for deduction under section 80K. The assessment order in the case of the company was passed almost three years after the original assessment in the hands of the shareholders and it is at the time of the assessment of the company that it has to be determined whether under section 80J relief has to be allowed to the assessee, and, if so, to what extent. It is certainly a fresh information which has come to the ITO after the original assessment. We also find that the certificate which had earlier been issued by the ITO was on the basis that the industrial undertaking had earned a profit of Rs. 3,88,166. A perusal of the assessment order of the company would, however, show that the industrial undertaking in the form of the furnace division had resulted in a loss of Rs. 26,933, after deduction of depreciation and development rebate. It is also true that at that point of time the decision of the Gujarat High Court in Ahmedabad M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 80J. 12. Now this question came up for consideration before the Supreme Court in the case of Coromandel Fertilizers Ltd. In this case, the company was assessed as a new industrial undertaking and the assessment for the assessment year 1969-70 resulted in a carried forward of loss and unabsorbed depreciation. As no profit was made in the assessment year 1969-70, the ITO worked out, under section 80J, relief available to the assessee and carried forward the deficiency under section 80J(3) to the succeeding year. Similar was the position in the next year 1970-71 when the deficiency was carried forward to the next year. Like this there were losses and unabsorbed depreciation and after setting off of brought forward allowance, the company was not assessable to any income-tax up to the assessment year 1973-74. However, on the basis of the book profits, the company declared a dividend for the year ending 1972. The company approached the ITO to give a certificate under section 197(3), so that tax may not be deducted at source from the dividends payable to the shareholders. This request was rejected and on a writ being filed, the matter ultimately came before the Supreme Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a negative figure, it cannot be said that it does not include the profits and gains derived from an industrial undertaking. It was further held by the High Court that only because a company is found entitled to relief under section 80J the deficiency is allowed to be carried forward and set off, against the income of the subsequent years. 14. In view of the Supreme Court decision referred to above, the matter would have been beyond any doubt and dispute that, for the purpose of allowing relief under section 80K to the shareholders, what was necessary was that the company should be entitled to relief under section 80J though, due to there being no profit from the industrial undertaking, the relief might not have been allowed in that year but might have been allowed to be carried forward for being deducted in later years. However, the matter was again considered by the Gujarat High Court in the case of Ahmedabad Manufacturing Calico Printing Co. Ltd. In this case, the company had approached the High Court for a writ to the ITO to issue certificate for not deducting tax in respect of the dividends to be paid, in so far as they related to the Sulzer plant of the company. The workin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80K could not be granted in respect of the relevant amount of capital employed in the Sulzer plant during this previous year. 16. While the learned counsel for the assessee has relied on the decision of the Supreme Court and the Madras High Court, the departmental representative has relied on the decision of the Gujarat High Court and submitted that section 80K would not be workable unless there is a profit in the new industrial undertaking out of which dividends could be declared by the company. Had there been no Supreme Court decision on the point, we would have proceeded to consider the different interpretations regarding sections 80K and 80J to find out whether the relief under sec tion 80K could be available to the assessee. It is however, clear from the order of the Supreme Court, referred to above, that the matter has been decided by their Lordships under no uncertain terms. That judgment was pronounced in December 1975 and in the course of more than six years there had been no occasion for revising the stand taken by the Supreme Court in that case. Once it is found that there is a decision of the Supreme Court on the matter, we need not enter into argument about the corre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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