1988 (10) TMI 11 - HC - Income Tax

Summary

Issues:
1. Refusal to admit and adjudicate on additional grounds of appeal related to deduction under section 80J for export wing and vanaspati unit.
2. Interpretation of "capital employed" for deduction under section 80J.
3. Tribunal's jurisdiction to consider additional grounds of appeal.

Analysis:
The judgment by the High Court of Punjab and Haryana dealt with a case where the assessee-company, Oswal Woollen Mills Ltd., claimed deduction under section 80J of the Income-tax Act, 1961 for its export wing and vanaspati unit for the assessment year 1972-73. The Income-tax Officer allowed some deduction for the vanaspati unit but none for the export wing. The Appellate Assistant Commissioner affirmed the findings, and the appeal was taken to the Income-tax Appellate Tribunal. During the appeal, the assessee raised additional grounds related to the computation of deduction under section 80J for both units, emphasizing the inclusion of total capital employed, including borrowed money. The Tribunal, while allowing the deduction for the export wing, refused to admit and adjudicate on the additional grounds related to computation, leading to the present reference to the High Court.

The High Court emphasized that the additional grounds raised by the assessee were not fresh but clarification sought on the computation of deduction under section 80J, which was already in contention. The Court highlighted the importance of correctly working out deductions as per the law and criticized the Tribunal for not considering the computation aspect despite allowing the deduction. The Court referred to the retrospective amendment introduced by the Finance (No. 2) Act, 1980, and the varying interpretations of "capital employed" for deduction under section 80J. Citing the case of Lohia Machines Ltd. v. Union of India, the Court noted the changing legislative history regarding the inclusion of borrowed money in computing capital employed, emphasizing the need for the Tribunal to adjudicate on the additional grounds raised by the assessee.

In conclusion, the High Court held that the Tribunal erred in refusing to consider the additional grounds related to the computation of deduction under section 80J for both units. The Court highlighted the necessity of including borrowed money in the computation during the relevant period and ruled in favor of the assessee on both questions referred, without costs.