1994 (1) TMI 70 - HC - Income Tax

Actual User, Capital Asset, Capital For Purposes, Computation Of Capital, Industrial Undertaking, Special Deduction

Summary

Issues:
1. Jurisdiction of Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.
2. Exclusion of amount for capital employed under rule 19A of the Income-tax Rules for deduction under section 80J of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Jurisdiction of Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.
The case involved a dispute regarding the jurisdiction of the Commissioner of Income-tax to revise an order under section 263 of the Income-tax Act. The Commissioner sought to recomputed the relief granted under section 80J of the Act, arguing that the relief was wrongly allowed without proper assessment. The assessee contended that the Commissioner had no jurisdiction to interfere with the order of the Income-tax Officer after it had merged into the appellate orders of the Commissioner (Appeals) and the Tribunal. The Commissioner disagreed and set aside the assessment, directing a de novo assessment. The Tribunal held that once an issue had been decided by the appellate authorities, the Commissioner had no jurisdiction under section 263 to revise the assessment. The Tribunal referred to various High Court decisions supporting the view that once capital is utilized for acquiring assets for a business, it remains employed in the business, regardless of whether the asset is actually used in the business. The Tribunal concluded that the Commissioner had no jurisdiction to revise the assessment already framed.

Issue 2: Exclusion of amount for capital employed under rule 19A of the Income-tax Rules for deduction under section 80J of the Income-tax Act, 1961.
The second issue revolved around whether the value of assets under installation or work-in-progress should be included in the capital employed for the purpose of deduction under section 80J of the Act. The Tribunal, supported by various High Court decisions, held that the value of assets in question should not be excluded for computing the capital employed under rule 19A for the purposes of the deduction under section 80J of the Act. The Tribunal found no compelling reason to depart from the consistent view taken by the High Courts on this matter. The Tribunal endorsed the view that the actual use or non-use of the acquired asset is not material for computing the relief under section 80J of the Act.

In conclusion, the High Court answered question No. 1 in the negative, in favor of the Revenue, and against the assessee. Question No. 2 was answered in the affirmative, in favor of the assessee, and against the Revenue. The court did not award any costs in this matter, leaving the detailed examination of the issue for future cases.