2001 (4) TMI 29 - HC - Income Tax

Summary

Issues involved:
1. Taxability of unclaimed sundry credit balances written back to profit and loss account.
2. Eligibility for relief under sections 32A, 80J, and 80HH for income from tyre retreading unit.
3. Deduction under section 80HH for miscellaneous income and interest on deposits.
4. Inclusion of the cost of building under construction for working out capital employed under section 80J.

Taxability of unclaimed sundry credit balances:
The Tribunal referred four questions concerning a company engaged in retreading tyres for the assessment years 1982-83 and 1983-84. The first issue was whether unclaimed sundry credit balances written back to the profit and loss account were taxable as income. The court, following the Supreme Court's decision in a similar case, held that when the assessee treated the money as its own and no longer belonged to the customers, it should be treated as income, ruling in favor of the Revenue.

Eligibility for relief under sections 32A, 80J, and 80HH:
The second question was whether the Tribunal correctly allowed relief under sections 32A, 80J, and 80HH for income from the tyre retreading unit. The court, based on previous decisions, held that retreading did not qualify as the production of a new article for entitlement to these reliefs, ruling in favor of the Revenue.

Deduction under section 80HH for miscellaneous income and interest on deposits:
The third issue was whether the assessee was entitled to a deduction under section 80HH for miscellaneous income and interest on deposits. The court held that income from the sale of scrap materials had a direct nexus with the industrial undertaking and qualified for the deduction, but interest on deposits did not qualify as income derived from the industrial undertaking.

Inclusion of building cost under construction for working out capital employed:
The final question was whether the cost of the building under construction should be included in determining the deduction under section 80J. Citing a previous case involving the same assessee, the court ruled in favor of the assessee, stating that the cost of the building should be included for working out the capital employed.