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Issues involved: The judgment addresses five questions raised by the Revenue and the assessee regarding tax deductions and liabilities.
Question 1: The issue was whether the deduction of borrowed monies and debts due by the assessee should be made only in respect of the liability of the new unit without considering the overall liability of the assessee. The court referred to a previous decision and ruled in favor of the assessee based on the precedent. Question 2: The question was whether a specific sum received on the transfer of import entitlements was a casual and non-recurring receipt exempt from tax under section 10(3) of the Income-tax Act, 1961. The court answered in the negative and in favor of the Revenue based on the facts presented. Question 3: Alternatively, the issue was whether the same sum could be considered capital gains and hence liable to be taxed as such. This question did not arise due to the answer given to the second question. Question 4: The court considered whether an amount paid as interest to the Income-tax Department for late filing of returns of income was allowable as a deduction from the assessee's total income. The court rejected the claim, stating that such interest payment cannot be considered an expenditure incurred in the course of running the business. Question 5: Alternatively, the issue was whether the same interest payment could be allowed as a loss on commercial principles of computing profits. The court ruled against this claim, stating that there was insufficient evidence to support the contention that the late payment of tax resulted in reflected profits. The judgment granted leave to appeal to the Supreme Court for the second and third questions based on the relevance of a previous case.
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