9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
1995 (10) TMI 28 - HC - Income TaxAccounting Year Assessment Year Computation Of Capital Increase In Capital New Industrial Undertaking Office Appliance Special Deduction
Issues Involved:
1. Computation of capital employed for relief under section 80J. 2. Eligibility for development rebate under section 33 for various assets. 3. Calculation of relief under section 80J based on assets as on the first day of the accounting year. 4. Deduction of liabilities and debts while computing capital employed for relief under section 80J. Detailed Analysis: Issue 1: Computation of Capital Employed for Relief under Section 80J The first issue concerns whether an amount of Rs. 8,22,913 representing uninstalled machinery should be included in computing the capital employed for the purpose of relief under section 80J of the Income-tax Act, 1961. The Assessing Officer excluded this amount, but the Appellate Assistant Commissioner and the Tribunal included it. The court referenced the case of CIT v. Cibatul Ltd. [1978] 115 ITR 879, stating, "The concept of use of the plant does not arise under rule 19A(2)(ii)." The court held that the amount should be included in computing the capital employed, thus answering the question in favor of the assessee. Issue 2: Eligibility for Development Rebate under Section 33 This issue involves multiple sub-issues regarding different assets: 1. Roads, Culverts, and Compound Walls: - The court held that these are integral parts of the factory building and not machinery or plant. Citing CIT v. Gwalior Rayon Silk Mfg. Co. Ltd. [1992] 196 ITR 149, the court stated, "The roads laid within the factory premises as links or providing approach to the buildings are necessary adjuncts to the factory buildings." Thus, these assets are classified as buildings and not eligible for development rebate. 2. Pumps and Drainage Pipes for Effluent Disposal: - The court found that pumps are machinery and drainage pipes are part of the plant. The court referenced CIT v. Taj Mahal Hotel [1971] 82 ITR 44, which held that sanitary fittings in a hotel are plant. The court concluded, "The pumps and drainage pipes are necessary adjuncts of plant itself and therefore plant within the meaning of section 33 of the Act." 3. Medical Equipment: - The court held that medical equipment installed in a hospital for labor welfare qualifies as machinery or plant and is not installed in office premises or residential accommodation. The court stated, "The hospital run by the assessee for the purpose of labor welfare... cannot be considered as office building." 4. Assets of Training Centre: - The court found that the assets in the training center, including machinery like pumps and transformers, are eligible for development rebate. The court stated, "The machinery and plant kept in the workshop cannot be considered to be an office building." The court concluded that roads, culverts, and compound walls are not eligible for development rebate, but pumps, drainage pipes, medical equipment, and assets of the training center are eligible. Issue 3: Calculation of Relief under Section 80J Based on Assets as on the First Day of the Accounting Year The court referenced CIT v. Elecon Engineering Co. Ltd. [1987] 167 ITR 639 (SC) and held that relief under section 80J should be calculated based on the assets as on the first day of the accounting year. The court answered this question in favor of the assessee. Issue 4: Deduction of Liabilities and Debts while Computing Capital Employed for Relief under Section 80J The court referenced Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, which upheld the validity of rule 19A. The court held that liabilities and debts should be excluded while computing the capital employed. The court answered this question in favor of the Revenue. Conclusion: - Issue 1: The amount of Rs. 8,22,913 representing uninstalled machinery should be included in computing the capital employed for the purpose of relief under section 80J. - Issue 2: Roads, culverts, and compound walls are not eligible for development rebate, but pumps, drainage pipes, medical equipment, and assets of the training center are eligible. - Issue 3: Relief under section 80J should be calculated based on the assets as on the first day of the accounting year. - Issue 4: Liabilities and debts should be excluded while computing the capital employed for relief under section 80J.
|
