Case: Ahmedabad Manufacturing and Calico Printing Company Limited and Another Vs. A. V. Joshi

Both the aforesaid plants fulfilled all the conditions for the grant of necessary relief under section 80J of the Act. Accordingly, in the course of assessment of the company for the assessment years commencing from the assessment yearthe relief to which the appellant was entitled under section 80J of the Act, was worked out and, to the extent that the profit in respect of the said plant was not sufficient to absorb the said relief, the amounts of the said relief were carried forward to the subsequent years as provided by section 80J(3) of the Act. For the said assessment years commencing fromthe company applied for the requisite certificate under section 80K read with section 197(3) of the Act for the purpose of enabling its shareholders to claim exemption out of the dividends received by them because the company was entitled to relief under section 80J for those years. TheOfficer, in respect of the assessment years8, issued a certificate under section 80K of the Act and in this certificate, for the purpose of determining the exempted portion of the dividend out of the total dividend amount declared by thethe relief allowable to the appellant under section 80J of the Act was taken as the total relief allowable under the said provision being six per cent. of the capital employed in the said new undertakingDuring the accounting year relevant to the assessment yearny declared a total dividend of Rs. 1, 11, 86, 231 to its shareholders. An application was made to theOfficer under section 197(3) read with section 80K of the Act requesting for a certificate under the said section 80K. According to the appellant, the relief claimed was Rs. 1, 00, 35, 434 for the Baroda plant and Rs. 24, 07, 556 for the Sulzer plant. The respondent, thereupon called for certain information from the appellant with regard to the total income of the appellant for the assessment yearas well as the profits of the polyester fibre plant and the Sulzer plant for the accounting year relevant to the assessment years9. Thereplied that the total income of the company for the assessment yearwas nil and there were carried forward losses, depreciation, etc., in respect of the preceding years. It also stated that the profits of the polyester fibre plant for the assessment yearwere Rs. 4, 66, 73, 159. In respect of the Sulzer plant, it was pointed out that there was no profit

Reasoning: In our opinion, there is no justification for the High Court not to have followed the decision of this court in Coromandel Fertilizers case. It is not in dispute that there was an entitlement to the appellant in the present case under section 80J and this being so the decision in Coromandel Fertilizers case (SC) was clearly applicable. Patiala Flour Mills case 1970 (115) ITR 640 (SC) was concerned with section 80J of the Act and Rajapalayam Mills case (SC) was essentially concerned with section 15C of the Act of 1922, and section 84 of the Act of 1961. In neither of these two cases was any reference made to Coromandel Fertilizers case (SC) for the simple reason that it was not necessary. When the assessee is entitled to the benefit under section 80K on the plain reading of the said section as interpreted by this court, there should have been no occasion for the High Court to have referred to or applied the ratio of the decisions of Patiala Flour Mills case (SC) and Rajapalayam Mills case (SC) which related to the interpretation of different sections of the Act. The latter decisions are essential only for determining whether the company was entitled to the benefit under section 80J or not. On this aspect, there is no dispute in the present case. The entitlement was there. Once this is not disputed, then automatically as per the decision in Coromandel Fertilizers case (SC), the appellant would be entitled to the benefit of section 80K and, therefore, the High Court was clearly in error in dismissing the writ petition