Law:

Section:

Section 80J of the income-tax act, 1961-Deductions-Profits and gains from newly established industrial undertakings-Assessee-company established new undertaking which functioned for only a part of accounting year relevant to assessment year 1974-75-Whether assesses could be allowed deduction to full extent of 6 per cent on capital employed under section 80J despite fact that undertaking was in production and operation for a part of accounting year only-Held, yes Words and phrases-Expression 'per annum' occurring in section 80J of the income-tax act, 1961. Facts The assessee-company established a new industrial unit, which worked only for one month in the accounting year relevant to the assessment year 1974-75 and claimed deduction under section 80J at 6 per cent of the capital employed. The ITO restricted the relief to the extent of 1/12th only on the ground that the new industrial unit had worked only for one month during the relevant accounting year. The ' AAC and the Tribunal, however, allowed the full relief without restricting the same to the period during which the industrial unit had worked. On reference : Held The tax concession under section 80J is available for five successive assessment years commencing from the assessment year relevant to the previous year in which the undertaking goes into production. The relief is only available for the first five years of such undertaking and that is why the words 'per annum' have been used. 'Per annum' means for each year or annually. In other words, such exemption or concession would be available for each year to the extent of 6 per cent of the capital employed. There is no warrant for the proposition that the expression 'per annum' postulates the relief being granted only for the periods during which the assets were actually in use. The relief under section 80J cannot be reduced proportionately with reference to the period for which the business of the undertaking was not carried on during the relevant previous year. If anytime during the relevant previous year, the industrial undertaking starts manufacturing or producing articles, it will be entitled to deduction at six per cent of the capital employed for…

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