2005 (7) TMI 79 - HC - Income Tax

Computation of capital employed - relief under section 80J - Whether the question regarding computation of capital employed for granting relief under section 80J was rightly decided by the Income-tax Appellate Tribunal? - Held that it is not possible to find any infirmity in the concurrent findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal that only liabilities pertaining to the new industrial undertaking are to be deducted from the aggregate of the value of the assets of the new industrial undertaking. The question referred is therefore answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

Summary

Issues:
Computation of capital employed for relief under section 80J of the Income-tax Act, 1961.

Analysis:
The judgment of the High Court of Gujarat involved a question referred by the Income-tax Appellate Tribunal regarding the computation of capital employed for granting relief under section 80J of the Income-tax Act, 1961. The case pertained to the assessment year 1982-83, where the assessee, a limited company, claimed relief under section 80J based on the total capital employed. The Assessing Officer reduced the total capital employed in the new unit by deducting liabilities of the old unit transferred to the new unit, resulting in a lower relief amount. The Commissioner of Income-tax (Appeals) accepted the assessee's contention that the aggregate of assets could not be reduced by the transferred liabilities, citing a decision by the Bombay High Court and a circular issued by the Central Board of Direct Taxes.

The Revenue appealed to the Tribunal, which upheld the Commissioner's decision. The Revenue did not contest the Tribunal's decision due to the circular issued by the Central Board of Direct Taxes. Section 80J of the Act provides for deduction in respect of profits and gains from newly established industrial undertakings, requiring computation of capital employed. The High Court clarified that only liabilities pertaining to the new industrial undertaking should be deducted from the aggregate value of assets. The Court referred to the Bombay High Court's decision and the circular by the Central Board of Direct Taxes, affirming that only liabilities of the new unit should be considered for deduction.

In conclusion, the High Court found no fault in the concurrent decisions of the Commissioner of Income-tax (Appeals) and the Tribunal, ruling in favor of the assessee and against the Revenue. The judgment resolved the issue regarding the computation of capital employed for relief under section 80J of the Income-tax Act, 1961, in favor of the assessee. The reference was disposed of with no costs awarded.