1986 (6) TMI 6 - HC - Income Tax

Summary

Issues:
1. Inclusion of capital work-in-progress for relief under section 80J of the Income-tax Act, 1961.
2. Exclusion of accrued proportionate interest on borrowed capital for computing capital under section 80J.
3. Admissibility of grounds relating to the computation of capital employed in industrial undertakings for section 80J relief.

Analysis:
1. The first issue revolves around the inclusion of capital work-in-progress in the computation of 'capital employed' for the purpose of relief under section 80J of the Income-tax Act, 1961. The case involved the assessment of Union Carbide India Ltd. The Tribunal held that the capital work-in-progress in the new industrial undertaking should be included, following a precedent set by a previous decision of the court. The Revenue contended that the capital work-in-progress should only be included if employed on the first day of the accounting year. However, the court upheld the Tribunal's decision, stating that the factual aspect of the employment of capital work-in-progress on the first day of the accounting period was not disputed by the Revenue and should not be enquired into at this stage. Therefore, the court answered this question in favor of the assessee.

2. The second issue concerns the exclusion of accrued proportionate interest on borrowed capital for computing capital under section 80J. The Supreme Court's decision in Lohia Machines Ltd.'s case established that borrowed capital and interest accruing on it must be excluded from the computation of capital employed for section 80J relief. Consequently, the court answered questions related to this issue in favor of the Revenue, as the controversy was settled by the Supreme Court's ruling.

3. The final issue involves the admissibility of grounds related to the computation of capital employed in industrial undertakings for section 80J relief. The Tribunal had rejected certain grounds raised by the assessee regarding the computation of capital employed. However, the assessee did not press for an answer on this issue during the hearing, leading the court to decline to answer question No. 6. As a result, this issue was not further addressed in the judgment.

In conclusion, the judgment addressed various issues related to the computation of capital employed for section 80J relief under the Income-tax Act, 1961. The court's decisions were based on established legal principles and precedents, ultimately providing clarity on the treatment of capital work-in-progress and borrowed capital in such assessments.