9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
1999 (12) TMI 4 - HC - Income TaxBusiness Expenditure, New Industrial Undertaking, Special Deduction, Computation Of Capital, Actual Cost, Subsidy From Government - (i) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the contribution paid as per the provisions of section 69 of the Gujarat Rajya Co-operative Societies Act, 1961, is not deductible in the computation of the total income? - (ii) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that depreciation was not admissible on 30 percent value of the plant and machinery received from Indian Dairy Corporation? - (iii) Whether, on the facts, the Appellate Tribunal was right in law in holding that 30 percent of value of the plant and machinery received from Indian Dairy Corporation was not to be included in the computation of the capital employed for the purpose of granting relief under section 80J?
Issues:
1. Deductibility of contribution under section 69 of the Gujarat Rajya Co-operative Societies Act, 1961 in the computation of total income. 2. Admissibility of depreciation on 30 percent value of plant and machinery received from Indian Dairy Corporation. 3. Inclusion of 30 percent value of plant and machinery received from Indian Dairy Corporation in the computation of capital employed for granting relief under section 80J. Issue 1: Deductibility of Contribution under Section 69: The case involved the Mehsana District Co-operative Milk Producers' Union Limited, assessed for the years 1976-77 and 1978-79. The Tribunal had disallowed the deduction of the contribution made under section 69 of the Gujarat Co-operative Societies Act, 1961. The Division Bench referred to a similar case and held that the contribution to the Co-operative Education Fund was allowable as a business expenditure under section 37 of the Act. The court emphasized that the contribution was statutory and made out of net profits, thus forming a legitimate business outgoing. The court disagreed with the Tribunal's view that the contribution was not deductible, ultimately ruling in favor of the assessee. Issue 2: Admissibility of Depreciation on Plant and Machinery: The second issue revolved around the admissibility of depreciation on 30 percent value of plant and machinery received from the Indian Dairy Corporation. The Tribunal's order lacked a reasoned explanation on this matter. Referring to a Supreme Court decision, it was clarified that the subsidy received was not to be deducted from the "actual cost" for the purpose of depreciation calculation. The court held that the subsidy did not meet the conditions for deductibility from the "actual cost," leading to a ruling in favor of the assessee against the Revenue on this issue. Issue 3: Inclusion of Plant and Machinery Value in Capital Employed Calculation: Regarding the inclusion of 30 percent value of plant and machinery received from the Indian Dairy Corporation in the computation of capital employed for section 80J relief, the court relied on a previous Division Bench decision. It was held that the grant amount received should not be considered in computing the capital employed, while the loan amount was to be included. Based on the resolution by the Government of Gujarat, which specified a portion as a grant, the court ruled in favor of the Revenue and against the assessee on this issue. In conclusion, the court answered the referred questions accordingly, emphasizing the statutory nature of contributions, the treatment of subsidies for depreciation purposes, and the distinction between grant and loan amounts in calculating capital employed for tax relief.
|
