Law: Income Tax Act, 1961

Section: 154,80j

Income-tax-----Rectification of mistakes---Special deduction---Newly established industrial undertaking---Computation of capital base---Preliminary expenses and share issue expenses not included in first two years of relief---Included in third year--.Rectification to exclude sums from computation of capital--¬Proper---No long drawn out reasoning required---Sums in question not includible in capital base---Indian Income Tax Act, 1961, Ss.80J & 154--¬Indian Income Tax Rules, 1962, R. 19A. The assessee-company was incorporated in 1964 and was granted relief under section 80J of the Income Tax Act, 1961, commencing from the assessment year 1968-69. For the assessment year 1970-71, which was the third year of relief under section 80J of the Income Tax Act, 1961, the Income-tax Officer made an assessment including, inter alia, two sums representing preliminary expenses and share issue expenses, appearing in the balance-sheet as miscellaneous expenditure, as part of the capital employed for purposes of working out the relief, though these expenses were excluded from the capital base in the first two years. Subsequently, by an order of rectification Under section 154 of the Act, the income-tax Officer modified the relief under section 80J excluding these expenses from the computation of the capital base. The assessee filed an appeal questioning the jurisdiction of the Income-tax Officer under section 154 and the exclusion of the expenditure in question from the capital base. The Appellate Assistant Commissioner decided the question on the merits against the assessee. On further appeal, the Tribunal found after a detailed discussion on the merits that the preliminary expenses and the share issue expenses were not represented by any assets and did not form part of the capital base within the meaning of rule 19A(3) of the Income Tax Rules, 1962, but held that since the disallowance relating to these amounts could be made only after consideration of several arguments, the withdrawal of relief with reference to these amounts would not be within the scope of section 154. On a reference: Held, that the assessment year under consideration was the third year in the matter…

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