ORDER
D.N. Sharma, Judicial Member
1. This appeal filed by the assessee is directed against the order dated 11-3-87 passed by the CIT(A) for the assessment year 1972-73. The assessee has moved an application dated 29-5-89 praying that the following additional ground may be admitted and adjudicated upon:
On the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and also in law while disposing Gr. No. 2 before him, in not directing the ITO to verify and include the value of capital work in progress and machinery in transit also in the computation of capital employed for the purpose of Section 80J relief.
2. We have heard the learned authorised representatives of the parties at length on the assessee’s application for admission of the additional ground. For the purpose of disposal of this application it will be necessary to state a few facts.
3. For the assessment year 1972-73 original return was filed by the assessee on 30th September, 1972 wherein the deduction of Rs. 43.50 lakhs was claimed under Section 80J by excluding borrowed capital from the capital employed. A revised return was filed on 16-4-74 claiming deduction under Section 80-J at Rs. 68.94 lakhs by including borrowed capital in the capital employed. Earlier, the accounting year of the assessee company ended on 30th June each year. The company wanted to change its accounting year to end on 31st December each year instead of 30th June. The company thus wanted to adopt the calendar year as its previous year. The company accordingly applied to the ITO for permission to change the previous year. In the return filed by the company income was shown for a period of 18 months from 1-7-70 to 31st December, 1971. The ITO, however, did not accept the change of the previous year and he determined the income of the assessee for 12 months ending on 30th June, 1971 and completed the assessment accordingly on 14-4-75. Against this order the assessee filed a Writ petition under Article 226 of the Constitution before the Hon’ble Allahabad High Court. The Writ petition was allowed by the Hon’ble High Court vide its judgmentdated 17-7-75 reported in J.K. Synthetics Ltd. v. O.S. Bajpai, ITO [1976] 105 ITR 864 (All.). The original assessment was quashed and the ITO was directed to make fresh assessment. Pursuant to the directions of the Hon’ble Court, the ITO passed a fresh assessment on 8-9-83. Against this assessment the assessee appealed to the CIT(A) who disposed of the appeal vide his order dated 14-2-84. Ground no. 20 raised before the CIT(A) related to the claim under Section 80J. On this ground the CIT(A) passed the following order:
The claim relates to Nylon Units-II for which this is the 4th year. The entitlement issue has already been decided in the assessee’s favour for earlier years. With regard to the computation of the relief the same should be done in accordance with the Supreme Court’s verdict on this issue and the position of law as emerges thereafter.
The order of the CIT (A) dated 14-2-84 was given effect to by the ITO vide his order dated 22-4-85. Against the order of the ITO dated 22-4-85 the assessee again appeale 1 to the CIT(A) who disposed of the appeal vide his order dated 11-3-87. The present appeal is directed against the order of the CIT(A) dated 11-3-87.
4. It will also be pertinent to point out that in the second round before the CIT(A) ground no. 2 related to the assessee’s claim for deduction under Section 80J. The CIT(A)has mentioned in his impugned order that it was stated that the ITO has not included the value of land while computing relief under Section 80J. It was further mentioned that this was also a factual position and the ITO was directed to verify and take necessary corrective action. This order of the CIT(A) was given effect to by the ITO on 15-9-87. Against this order of the ITO also the assessee appealed to the CIT(A) who disposed of the appeal vide his order dated 26-5-89.
5. Shri P.N. Monga, learned counsel for the assessee submitted before us that vide letter dated 18-4-85 a copy whereof is at pages 17 and 19 of the paper book filed by the assessee, it was claimed by the assessee that value of the work-in-progress/machinery-in-transit should be taken into consideration for the purpose of computing capital employed under Section 80J. In this connection it was pointed out that the Balance Sheet of the assessee as at 30th June, 1970 was made Annexure ‘D’ to the said letter and in this balance sheet the value of capital work-in-progress/machine-in-transit was shown at Rs. 14,72,791 and that the ITO while passing the order dated 22-4-85 ignored this letter and did not consider the assessee’s claim that the value of the work-in-progress/machine-in-transit should be considered for computing the capital employed for the purpose of granting relief under Section 80J. It was further contended that before the CIT(A) the assessee raised ground no. 2 to the effect that the ITO erred in not including the value of assets not entitled to depreciation for the purpose of Section 80J relief. Thus, according to Shri Monga, the claim that the value of the work-in-progress/machine-in-transit should be taken into consideration for computing the capital employed under Section 80J was made before the authorities below but the same was not considered by them and that the CIT(A) in his impugned order merely considered the value of land for the purpose of computing the relief under Section 80J while disposing of ground no. 2 raised before him. It was submitted that in order to do substantial justice, additional ground should be allowed to be raised. According to Shri Monga, the claim was bonafide. Reliance has been placed on the decision of the Special Bench of the Tribunal in Indo Java & Co. v. IAC [1989] 30 ITD 161, decision of the Supreme Court in CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 and of the Madras High Court in CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705 in support of the contention that the additional ground may be entertained. Reliance has also been placed on the decision of the Punjab and Haryana High Court in CIT v. Amrit Lal [1989] 180 ITR 251. Shri Subhash Kumar, learned senior Departmental Representative, on the other hand, vehemently opposed the assessee’s prayer for admitting the additional ground. It was contended that before the authorities below the assessee did not make a claim that the value of work-in-progress/machine-in-transit should be included in the capital employed for the purpose of granting relief under Section 80J. It was further submitted that the assessee has failed to show that there was any good or sufficient reason for nor raising such a claim earlier before the authorities below or even in the original ground raised before the Tribunal. It was contended that such a claim was made by the assessee for the first time before the ITO when he was giving effect to the impugned order of the CIT(A) dated 11-3-87.
6. We have considered the submissions made on behalf of the parties and have gone through the records of the case as also the paper book filed by the assessee. The relevant facts have already been stated above. According to the assessee, the claim under Section 80J was revised to Rs. 79.32 lakhs before the CIT(A) vide paper no. 55 of the paper book. A perusal of this paper does not show as to when and before whom this claim was made. Much emphasis has been laid on behalf of the assessee on the assessee’s letter dated 18-4-1985 filed before the ITO. Along with this letter the assessee also filed a copy of the balance sheet as at 30th June, 1970 which is at page 19 of the paper book. No doubt, in this balance sheet capital work-in-progress/machine-in-transit has been shown at Rs. 14,72,791. In this letter the assessee referred to Annexure ‘B’ to its letter dated 14-2-1985. A copy of this letter is at pages 5 and 6 of the paper book and be annexed as Annexure ‘B’ to this letter is at page 8. In Annexure B the assessee gave computation of capital employed for the purpose of exemption under Section 80J. This computation does not include the amount of Rs. 14,72,791 being the value of the work-in-progress/machine-in-transit. It is, therefore evident that before the ITO the assessee did not make a claim that the value of the work-in-progress/machine-in-transit should be included for the purpose of computation of capital employed.
7. In this connection it will be useful to refer the assessee’s letter dated 18-5-1987 filed before the ITO. A copy of this letter is at pages 23 to 26 of the paper book. This letter was filed by the assessee after the CIT(A) had passed impugned order on 11-3-1987 as in para no. 5 of this letter it is clearly stated that by mistake the assessee has not taken into account capital work-in-progress as at 30th June, 1970 amounting to Rs. 14,72,791 while calculating the capital employed for the purpose of Section 80J relief. In this letter the assessee gave computation of capital employed and the relief allowable under Section 80J by taking into account the value of the work-in-progress at Rs. 14,72,791. So, it was for the first time vide letter dated 18-5 -1987 that the assessee claimed that the amount of Rs. 14,72,791 being the value of work-in-progress/machine-in-transit should taken into consideration for computing the capital employed for the purpose of granting relief under Section 80J. It is thus clear that during the proceedings before the ITO and the CIT(A) giving rise to the present appeal the assessee never claimed that the value of work-in-progress/machine-in-transit should be included in capital employed for the purpose of computing relief under Section 80J.
8. Copies of the grounds on appeal and statement of facts filed before the CIT(A) are at pages 29 and 30 of the paper book. They do not show that the claim regarding work-in-progress/machine-in-transit was made before the CIT(A). Ground No. 2 raised before the CIT(A) was to the effect that the ITO erred in including the value of assets not entitled to depreciation for the purpose of Section 80J relief. This ground was dealt with by the CIT(A). In para 2 of his impugned order in the following manner:
2. Regarding Ground No. 2, it is stated that the ITO has not included the value of land while computing relief under Section 80J. This also a factual position which should be verified by the ITO and necessary corrective action taken. The ITO is directed accordingly.
9. It is quite clear that according to the assessee’s understanding of the expression ‘value of assets not entitled to depreciation’ such assets included only land and, therefore, before the CIT(A) it was stated on its behalf that the ITO did not include the value of land while computing the relief under Section 80J. It is thus clear that even before the CIT(A) the assessee did not set up a ground to the effect that the value of work-in-progress/machine-in-transit should be included in the capital employed for the purpose of computing relief under Section 80J. In the original grounds raised before the Tribunal no such claim has been made.
10. According to the contents of the application dated 29-5-1989 the assessee had to take up the additional ground as while giving effect to the CIT(A)’s direction, the ITO declined to include the value of work-in-progress/machine-in-transit in the computation. It cannot be said that the additional ground became available to the assessee on account of any change in circumstances or of law. The Calcutta High Court had held in CIT v. Indian Oxygen Ltd. [1978] 113 ITR 109 that the amount representing the value of capital shown under the head ‘work-in-progress’ at the beginning of the previous year should be included in the computation of ‘capital employed’ for the purpose of working out relief under Section 84(1) [now Section 80J(1)]. The assessee did not make a claim regarding work-in-progress/machine-in-transit even during the course of proceedings before the ITO and the CIT(A) during the second ground. As pointed above, pursuant to the directions of the Hon’ble High Court the ITO passed a fresh assessment order on 8-9-1983. The assessee has not been able to show that there was good reason for not making such a claim earlier before the authorities below. In fact, there was no valid reason for not making the claim at an earlier stage. On the facts of the case, therefore, we are of the opinion that the additional ground should not be admitted at this stage.
11. In the case of lndo Java &. Co. (supra) it has been held by the Special Bench that any grounds which can be taken originally before the Tribunal can also be taken with the permission of the Tribunal as an additional ground before hearing the appeal. It was, however, made clear that leave to take an additional ground is not to be granted to the appellant on mere asking but particular reasons or justification has to be established. In that case it was found by the Tribunal that the assessee was not guilty of any latches. Reasons for not urging the additional ground at an earlier stage were found to be germane and reasonable. On a consideration of all the facts and circumstances of the case, the additional ground sought to be raised in that case was admitted by the Tribunal.
12. The case of Mahalakshmi Textiles Mills Ltd. (supra) relied on by the assessee is of no help. In that case the assessee claimed development rebate. It was held that whether the allowance was admissible under one head or another of Sub-section (2) of Section 10 of the Indian Income-tax Act, 1922, the subject matter for the appeal remained the same. It was further held that the Tribunal having held that the expenditure incurred fell within the terms of Section 10(2)(v) though not under Section10(2)(vib), it had jurisdiction to admit that the expenditure was a permissible allowance in the computation of taxable income of the assessee. In the case of Indian Express (Madurai) (P.) Ltd. (supra) it has been held that the assessee was not precluded from raising a new contention and the Tribunal was not precluded from examining and determining that contention, merely on the score that it had not been put forward at the earlier stages of the proceedings in assessment and in the first appeal. The proposition laid down in this authority is not in dispute. In the instant case the assessee has not been able to show that there was any good reason for not raising the ground at the earlier stages either before the ITO or before the CIT(A). The claim was made by the assessee after a lapse of several years. It cannot, therefore, be said that the assessee is not guilty of latches.
13. For the foregoing reasons we decline to admit the additional ground.
14. In the original grounds the assessee has claimed that relief under Section 80J(1) should be allowed for a period of 18 months comprised in the previous year relevant to the assessment year 1972-73. Learned counsel for the assessee submitted before us that under Section 80J(1) deduction at the rate of 6% per annum on the capital employed has to be allowed in respect of the previous year relevant to the assessment year. According to the learned counsel, use of the words ‘at the rate of 6% per annum’ signified that if the previous year consisted of more than 12months, the deduction under Section 80J would be allowable in respect of the entire period at the rate prescribed under Section 80J(1). It was further submitted that the provisions of Section 80J(1) should be liberally construed. Reliance has been placed on the decision of the Tribunal in the case of Escorts Ltd. v. ITO [1989] 30 ITD 349 (at page 370). Thus, according to the assessee, entitlement has to be for a period of 18 months. In that Section 80J itself prescribed a scale for calculating deduction at a certain rate.
15. Shri Subhash Kumar, learned senior Departmental Representative, on the other hand, submitted that deduction under Section 80J(1) has to be allowed for a period of 5 years and it was for this reason that expression at the rate of 6% per annum’ has been used in Section 80J(1). The relief under Section 80J(1) has to be computed for 5 assessment years irrespective of the period comprised in any previous year. Reliance has been placed on the decision of the Karnataka High Court in CIT v. Mysore Petro-Chemicals Ltd. [1984] 145 ITR 416 and of the Calcutta High Court in CIT v. Oyster Packagers (P.) Ltd. [1985] 152 ITR 471 – at page 474.
16. We have considered the submissions made on behalf of the parties and have gone through the records of the case. In the case of Escorts Ltd. (supra) cited on behalf of the assessee one of the questions considered by the Tribunal was whether relief under Section 80J was allowable in respect of diesel engine unit at a full rate-when the same was not operational for the whole year. The Tribunal in that case considered the decision of the Madras High Court in the case of CIT v. Simpson & Co. [1980] 122 ITR 283. The Tribunal extracted the following passage from the aforesaid case:
The words six per cent per annum arc ordinarily applied to calculation of interest and in similar contexts. But the words ‘per annum’ would be inappropriate in a taxing stature levying tax on the income earned during the previous year which is not necessarily a period of twelve months though it would ordinarily be a period of twelve months. In the instant case, the words ‘per annum’ could even be dispensed with, as Mr. Jayaraman contended and yet the Section would carry the same meaning. We do not, however, consider the expression a surplusage. The words ‘per annum’ appear to have been added only to ensure that the assessee would get, for each of the five years during which the relief under Section 84 is available, the said 6 per cent on the capital employed. The words ‘per annum’ cannot be understood as contrasted, with any broken period. It is also a well settled principle of construction that in construing a provision for exemption or relief, it should be liberally construed. The reason behind this rule of interpretation is that the administrative authorities or the courts should not whittle down the plenitude of the exemption or relief granted by Parliament, by laying stress on any ambiguity here or there. The proportion contended for had already been worked out in taking the assets proportionate to the period of user. It was not, therefore, necessary to carry the same idea even in working out the 6 per cent. If this proportion was intended even in relation to 6 per cent then more appropriate words as those found in the rules would have been employed, especially when the Act was recast in 1961.
The Tribunal considered two more decisions and held that relief under Section 80J was to be allowed on yearly basis and not on proportionate basis. This authority thus supports the view canvassed before us on behalf of the revenue that the relief under Section 80J has to be allowed on yearly basis.
17. The Karnataka High Court in the case of Mysore Petro-Chemicals Ltd. (supra), expressed the view that there shall be no prorating for the period of productive operation. It would be useful to reproduce the following passage from this authority:
It seems to us that the contention urged by Shri Sarangan is well founded and must be accepted as correct. Every one is familiar with the terms per diem, per mensem and per annum. They are indicative of the period for which the rate is prescribed and do not necessarily imply that there shall be prorating. Prorating depends upon the context in which such terms are used. The relief at the rate of 6 per cent or 71/2 per cent per annum provided under Section 80J is in the nature of incentive extended to the assessee who has established a new industrial undertaking. That incentive is available for a full period of 5 years, inclusive of the year in which manufacturing operations started. The relief, no doubt, depends upon the commencement of production. But also on the capital employed. Therefore, there shall be no prorating for the period of productive operation.
18. In the case of Oyster Packagers (P.) Ltd. (supra) the assessee’s claim for deduction under Section 80J was allowed by the ITO to the extent of1/12th only on the ground that the new industrial undertaking worked only for one month during the relevant accounting year. It was held by the High Court that having regard to the scheme of the provision of Section 80J deduction 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. The aforesaid authorities thus supports the view that relief under Section 80J has to be allowed for 5 years at the rate prescribed therein irrespective of the duration of the previous year of the assessee relevant to any assessment year for which relief is allowable. We accordingly uphold the order of the CIT(A) rejecting the assessee’s contention that relief under Section 80J should be allowed for the assessment year for a period of 18 months.
19. In the result, the appeal is dismissed.