1994 (11) TMI 47 - HC - Income Tax

Advance Tax, Appeal To AAC, Borrowed Capital, Business Expenditure, Computation Of Capital, Industrial Undertaking, Special Deduction

Summary

Issues:
1. Deduction of borrowed capital in computing capital employed for relief under section 80J
2. Entitlement to deduct surtax payable under Companies (Profits) Surtax Act in computing total income
3. Appealability of Income-tax Officer's refusal to grant interest under section 214 of Income-tax Act
4. Availability of development rebate for specific items under section 16(c) of Finance Act, 1974

Analysis:

Issue 1:
The court referred to a Supreme Court decision in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, which concluded against the assessee regarding the deduction of borrowed capital for relief under section 80J.

Issue 2:
The court relied on a Full Bench decision in A. V. Thomas and Co. Ltd. v. CIT [1986] 159 ITR 431 to conclude against the assessee's entitlement to deduct surtax payable under the Companies (Profits) Surtax Act in computing total income.

Issue 3:
The court addressed the appealability of the Income-tax Officer's refusal to grant interest under section 214 of the Income-tax Act. It referred to various decisions, including Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, and held that an appeal is maintainable against such refusal when the assessment itself is under challenge.

Issue 4:
Regarding the availability of development rebate for specific items, the court examined the provisions of section 16(c) of the Finance Act, 1974. It discussed the requirement that machinery or plant should have been manufactured in an undertaking owned by the assessee before a specified date. The court found that the Tribunal's decision to allow development rebate for the specific items did not align with the legislative intent of section 16(c) and ruled in favor of the Revenue.

The court answered Questions 1, 3, and 5 against the assessee and in favor of the Revenue. Question 4 was answered in favor of the assessee. The court declined to answer Question 2. The judgment concluded by stating that there would be no order as to costs.