1994 (8) TMI 24 - HC - Income Tax

Summary

Issues:
1. Interpretation of capital computation for relief under section 80J.
2. Inclusion of borrowed capital for relief under section 80J.
3. Determination of borrowed capital utilized in the new industrial undertaking for relief under section 80J.

Analysis:

The judgment pertains to the interpretation of provisions related to relief under section 80J of the Income-tax Act, 1961. The court was tasked with addressing three key issues arising from the assessment years 1972-73 and 1973-74. The first issue involved determining the correctness of the capital computation by the assessee for claiming relief under section 80J for its heavy-duty radiator division. The Income-tax Officer contended that relief cannot be granted on borrowed capital as per rule 19A(3) of the Income-tax Rules, 1962. The Tribunal, however, allowed the relief based on previous decisions, leading to a dispute.

The second issue revolved around whether borrowed capital should be considered as part of the capital for granting relief under section 80J. The Tribunal's decision was based on precedents, but the Department argued against it, citing a later Supreme Court decision and an amendment to the Act. The Supreme Court's ruling clarified that borrowed capital should be excluded for granting relief under section 80J, thereby contradicting the Tribunal's decision.

The final issue focused on determining the borrowed capital utilized in the new industrial undertaking by the assessee. The Tribunal's stance was challenged, emphasizing the need to ascertain the actual borrowed capital applied in the new unit for granting relief under section 80J. Consequently, the court remitted this issue back to the Tribunal for further examination to ensure compliance with the statutory provisions.

In conclusion, the court ruled in favor of the Department on all three issues. It held that relief under section 80J should not be granted on borrowed capital, aligning with the Supreme Court's interpretation. The court emphasized the importance of excluding borrowed capital while granting relief under section 80J and directed a reassessment of the borrowed capital utilized in the new industrial undertaking. The judgment underscores the significance of adhering to statutory provisions and recent legal interpretations in tax matters.