Law:

Section:

section 80k of the income-tax act, 1961-deductions-in respect of dividends attributable to profits from new industrial undertaking-assessee-company made an application to ito for the requisite certificate under section 80k read with section 197(3) claiming 100 per cent exemption instead of a lower percentage-ito declined to grant certificate for 100 per cent exemption on the ground that there was a loss in industrial under taking-ito whether justified-held, yes, since entitlement to relief under section 80k is available only if there are assessable profits and gains from the new industrial undertaking included in the total income of the assessee-company Facts The petitioner-company had established a new industrial undertaking by installing two separate plants, e.g., a polyester fibre plant and a sulzer plant. For the assessment year 1978-79, ITO, the respondent, worked out relief under section 80J at Rs. 77,42,921 for the polyester fibre plant and Rs. 18,07,968 for the sulzer plant. As the working of the sulzer plant showed a business loss of Rs. 7,20,260 as computed under the Income-tax Act, the said relief in respect of this plant could not be given effect to. The company declared dividends of Rs. 1,11,86,231 and asked for, under section 197(3), a certificate indicating 100 per cent exemption of tax on the said dividends under the provisions of section 80K. The ITO declined to grant a certificate for 100 per cent exemption on the ground that the relief that could otherwise have been available with sulzer plant was not available in view of loss worked out in this case. A provisional certificate indicating a lower percentage of exemption under section 80K was issued by the ITO, to which the company objected by filing a Special Civil Application under article 226 of the Constitution. On behalf of the company, the principal argument offered was that section 80K uses the expression "or in respect of which the company is entitled to a deduction under section 80J". This introduces an independent concept in section 80K. There is no legal requirement of a de facto deduction of the amount in question in the particular assessment year. As against actual deduction, the…

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