AHMEDABAD MANUFACTURING AND CALICO PRINTING CO. LTD. AND ANR. versus A.V. JOSHI

Citation: [1996] 3 S.C.R. 150 · Decided: 01-03-1996 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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AHMEDABAD MANUFACTURING AND 
CALICO PRINTING CO. LTD. AND ANR. 
v. 
A.V. JOSHI 
MARCH 1, 1996 
(J.S. VERMA, N.P. SINGH AND B.N. KIRPAL. JJ.] 
Income Tax Act, 1961. 
C 
Ss. 80!, SOK, 197(3)-New Industrial Undertakings-Deduction in 
respect of dividends-Losses and depreciation of earlier year carried for-
ward--Company declared dividend during subsequent year in which no tax 
was payable by it-Entitlement of company to certificate under S.SOK--Held, 
even if new industrial undertaking had no profit and gains assessable in 
relevant assessment yeai--Company would be entitled to benefit under S.SOK 
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The assessee-Com pany established new industrial undertakings, 
namely, a Polyster Fibre Plant in the accounting year 1975-76 and a Sulzer 
Plant in the subsequent accounting year 1976-77. The assessee applied for 
and was issued certificates under s.80K of the Income Tax Act, 1961 in 
E respect of the assessment years 1975-76 and 1977-78. During the account· 
ing year relevant to the assessment year 1978-79, the assessee declared a 
total dividend of Rs.1,11,86,231 to its share holders, and made an applica· 
ti on under s. 197 (3) read with s.80K for a certificate under s.80K claiming 
relief to an extent of Rs. 1,00,35,434 for Polyster Fibre Plant and Rs. 
24,07,536 for Sulzer Plant. It was stated that total income of the assessee 
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for the said assessment year was nil and there were carried forward losses, 
depreciation etc. in respect of the preceding year; and that the profits of 
Polyster Fibre Plant were Rs. 4,66,73,159 and in respect of Sulzer Plant 
there was no profit. The Revenue held that only Rs. 77,42,921 referable to 
6% of the capital employed in the Polyster Fibre Plant, was entitled to 
G exemption under s.80K, and issued a certificate aecordingly. However, 
relief in respect of the Sulzer Plant was refused on the ground that it 
showed a business loss. 
The assessee med a writ petition before the High Court contending 
that the Revenue should be directed to issue a certificate for Rs. 95,50,889 
H in respect of the Polyster Fibre Plant and the Sulzer Plant. The High Court 
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AHMED ABAD MFG. AND CALICO v. AV. JOSHI 
151 
though observed that Coromondel Fertilizer's case* did support the conte9-
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tion of the assessee, but relying upon two other decisions of this Court** 
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declined to grant the relief. Aggrieved, the assessee filed the appeal. 
Allowing the appeal, this Court 
HELD : 1.1. The High Court erred in dismissing the writ petition B 
filed by the assessee. It is not disputed that there was an entitlement to 
the assessee under s.SOJ of the Income Tax Act, 1961, and as per the 
decision in Coromondel Fertilizer's case• the assessee would he entitled to 
· the benefit of s.SOK. [155-C; 154-G; 155-A] 
1.2. Even if the new industrial undertaking had no profits or gains C 
assessable to income tax during the relevant assessment year, the assessee 
was entitled to the relief under Section SOK. The High Court was not 
justified in not following the decision in Coromondel Fertilizer's case•, and 
it should not have applied the ratio of the other decisions** which related 
to the interpretation of different sections of the Act. (154-C, G; 155-A-B] 
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*Union of India v. Coromondel Fertilizer Ltd., 102 l.T.R. 533, ex-
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plained and held applicable. 
Rajapalavam Mills Ltd. v. Commissioner of Income Tax Madras, 115 
I.T.R. 777 and Commissioner of Income Tax v. Patiala Flour Mills Co. P. E 
Ltd., 115 I. T.R. 640, held in applicable. 
2. The Revenue is directed to issue a certificate to the appellant in 
accordance with law, showing therein the portion of exempted dividend in 
respect of Polyster Fibre Plant and Sulzer Plant. [155-D] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1044 of 
1979. 
From the Judgment and Oi-d~r dated 29-1-79 of the Gujarat High 
Court in S.C.A. N<;i. 2401 of 1978. 
E.R. Kumar and Ms. Bina ·Madhavan, for P.H. Parekh for the 
appellants. 
B.S. Ahuja for S.N. Terdol, for the Respondents. 
The Judgment of the Court was delivered by 
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152 
SUPREME COURT REPORTS 
[1996] 3 S.C.R. 
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KIRPAL, J. In this appeal the only question which arises for con-
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sideration is with regard to the scope and interpretation of Section BOK of 
the Income Tax Act. 1961 (hereinafter referred to as 'the Act'). 
The appellant is a public limited company and is engaged in 
manufacturing of textiles, chemicals etc. It established a new industrial 
undertaking by installing a Polye
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