1993 (4) TMI 58 - HC - Income Tax

Summary

Issues:
1. Admission of additional grounds related to section 80J tax relief and capital computation.
2. Depreciation on know-how, fans, construction work-in-progress, and advances against capital purchases.
3. Interpretation of 'capital employed in the industrial undertaking' under section 80J.

Analysis:

1. Admission of Additional Grounds:
The High Court declined to answer the questions raised by the assessee regarding the admission of additional grounds related to section 80J tax relief and capital computation. The counsel for the assessee acknowledged that the issues raised had become academic due to a Supreme Court decision. The court, therefore, returned these questions unanswered.

2. Depreciation Issues:
a. Know-how as Plant: The court ruled in favor of the assessee, following the decision in Scientific Engineering House P. Ltd. v. CIT, allowing depreciation on know-how received under a collaboration agreement.
b. Depreciation on Fans: The Tribunal had classified fans as "plant," entitling the assessee to claim depreciation on them. The court upheld this decision in favor of the assessee.
c. Inclusion of Construction Work-in-Progress: The court referred to CIT v. Alcock Ashdown and Co. Ltd., ruling in favor of the assessee that the sum representing construction work-in-progress and advances against capital purchases should be included as assets for capital computation under rule 19A.

3. Interpretation of 'Capital Employed':
The court addressed the interpretation of 'capital employed in the industrial undertaking' under section 80J. Referring to the decision in Lohia Machines Ltd. v. Union of India, the court ruled in favor of the Revenue that the total value of assets should not deduct borrowed moneys and debts due by the assessee. The question was answered in favor of the Revenue.

In conclusion, the High Court's judgment resolved various issues related to section 80J tax relief, depreciation claims, and the interpretation of 'capital employed' under the Income-tax Act, 1961, providing clarity on each aspect based on relevant legal precedents.