2002 (7) TMI 63 - HC - Income Tax

1. Whether the Tribunal was right in holding that in computing the relief under section 80J of the Income-tax Act 1961 for purpose of arriving at the capital employed in various units the liabilities of head office mainly sales tax loan and fixed deposits should be deducted? - 2. Whether the Tribunal was right in holding that the commission is a part of remuneration and confirming the disallowance under section 40(c) of the Income-tax Act of Rs. 48, 000 paid to general manager of the company?

Summary

Issues:
1. Computation of relief under section 80J of the Income-tax Act, 1961 regarding deduction for capital employed in various units.
2. Disallowance under section 40(c) of the Income-tax Act of commission paid to the general manager.

Issue 1: Computation of relief under section 80J:
The case involved a public limited company engaged in manufacturing various metal powders seeking a deduction under section 80J of the Income-tax Act for the assessment year 1982-83. The company claimed a deduction of Rs. 12,29,040 for its five units, but the Inspecting Assistant Commissioner allowed only Rs. 5,59,637 as the entitlement. The dispute arose regarding the exclusion of liabilities of the head office, including sales tax loan and fixed deposits, while computing the relief under section 80J. The company argued that these amounts were not specifically allocated to the units and, therefore, should not be excluded from the allowable deductions. However, the Tribunal, after considering the arguments, held that the company failed to prove that these amounts did not come to the units from the head office. The Tribunal emphasized that it was the company's responsibility to establish clearly whether the borrowings and loan monies from the head office were utilized in the capital employed in the units. Since the company did not provide sufficient evidence to support its claim, the Tribunal rejected the deductions under section 80J, leading to the judgment against the assessee and in favor of the Revenue.

Issue 2: Disallowance under section 40(c) of the Income-tax Act:
The second question in the case pertained to the disallowance under section 40(c) of the Income-tax Act of Rs. 48,000 paid as commission to the general manager of the company. The counsel for the assessee acknowledged that this issue was already decided against them in a previous case, Metal Powder Co. Ltd. v. CIT [1999] 238 ITR 756 (Mad). As a result, this question was answered against the assessee and in favor of the Revenue based on the precedent set by the earlier judgment. The court upheld the disallowance of the commission as part of the general manager's remuneration, in accordance with the provisions of section 40(c) of the Income-tax Act.

In conclusion, the judgment addressed the issues related to the computation of relief under section 80J and the disallowance of commission under section 40(c) of the Income-tax Act. The court ruled in favor of the Revenue regarding the deduction under section 80J due to the lack of sufficient evidence provided by the assessee to support their claim, while the disallowance of commission to the general manager was upheld based on a previous judgment.