Law:

Section:

Section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from new industrial undertakings, ships or hotels etc. - Assessment year 1968-69 - Whether even if new undertaking has functioned for only a part of an accounting year, deduction under section 80J has to be allowed to full extent and percentage cannot be reduced in proportion to part of year during which undertaking was in productive operation - Held, yes FACTS The assessee started production on 29-2-1968. While computing the deduction admissible to the assessee under section 80J for the assessment year in question, the ITO worked out the deduction according to time basis at 6 per cent of the capital computed in the prescribed manner for a period of only one month. The Tribunal accepted the assessee's contention that the assessee was entitled to the deduction under section 80J for the full 12 months and not for a period of one month only and the allowed the appeal. On reference : HELD Section 80J nowhere provides for reduction of the amount of deduction on time basis, with reference to the working of the industrial undertaking. The provisions of section 80J which are intended to encourage the setting up of a new industrial enterprise have to be construed liberally. Even if a new undertaking has functioned for only a part of an accounting year, the deduction has to be allowed to the full extent and the percentage cannot be reduced in proportion to the part of the year during which the undertaking was in productive operation. The Tribunal, was, therefore, justified in holding that for the purpose of allowing deduction under section 80J the deduction at 6 per cent. per annum was admissible for the full year even though the undertaking of the assessee had actually worked during the year for less than twelve months. Note : The case decided in favour of the assessee. JUDGMENT Sohani, J.-By this reference under s. 256(1) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law…

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