Law:

Section:

Section 80J of the Income-tax Act, 1961, read with rule 19A of Income-tax Rules, 1962 - Deductions - Profits and gains from new industrial undertakings, ships or hotels, etc. - Tribunal held that provisions of rule 19A(3) could not be applied in computing deduction allowable under section 80J - Tribunal rejected application for reference under section 256(1) on ground that Calcutta and Madras High Courts had held rule 19A(3) to be ultra vires and said determinations amounted to final decisions so far as Tribunal was concerned - Whether substantial question of law arose out of Tribunal's order notwithstanding determinations by other High Courts, until validity of rule 19A finally determined by High Court having jurisdiction over concerned bench of Tribunal - Whether, therefore, Tribunal was to be directed to state case and refer question of law - Held, yes FACTS The Tribunal held that the provisions of rule 19A(3) could not be applied in computing the deduction allowable under section 80J, and directed the ITO to recompute the deduction without reference to rule 19A(3). The Tribunal also refused to make a reference under section 256(1) on the ground that the Calcutta High Court Century Enka Ltd. v. ITO [1977] 107 ITR 709 and the Madras High Court in Madras Industrial Linings Ltd. v. ITO [1977] 110 ITR 256 had held that rule 19A(3) to be ultra vires and the said determinations amounted to final decisions so far as the Tribunal was concerned as it held that the decisions rendered by the two High Courts 'is the law of the land'. On application under section 256(2): HELD The question as to whether Tribunal was justified in holding that the provisions of rule 19A(3) could not be applied in computing the deduction allowable under section 80J, contained a substantial question of law arising out of the order of Tribunal notwithstanding the determination of the question by the two High Courts, until the validity of the sub-rule was finally determined by the instant High Court in so far as the Tribunal was concerned. Therefore, the Tribunal was to be directed to state the case and to refer the said question of law to the instant High Court. Note : The decision is in…

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