1990 (2) TMI 318 - HC - Income Tax

Summary

Issues:
1. Taxability of provisions for gratuity under s. 41(1) of the IT Act, 1961.
2. Recomputation of capital for a new industrial undertaking.
3. Deduction claim for provision of leave salary.
4. Treatment of exchange fluctuation loss on loan instalments.
5. Entitlement to deduction under s. 80G for donation to a charity trust.

Analysis:

1. Taxability of Gratuity Provisions:
The Tribunal referred the question of law regarding the taxability of provisions for gratuity under s. 41(1) of the IT Act, 1961. The assessee had filed a return under the Amnesty Scheme, conceding to the taxability of gratuity provisions. Consequently, the Court decided in favor of the Revenue, affirming the taxability of the gratuity provisions.

2. Recomputation of Capital for New Industrial Undertaking:
The Tribunal was directed to recompute the capital of a new industrial undertaking, Malkapur Oil Mills, in accordance with the decision in Century Enka Ltd. vs. ITO. The Tribunal was instructed to apply the principles laid down in the case of Lohia Machines Ltd. vs. Union of India for the reexamination and decision of the case.

3. Deduction Claim for Leave Salary Provision:
The Tribunal was guided by the decision in CIT vs. Bharat General & Textile Industries Ltd. to answer the question of deduction claim for the provision of leave salary in the negative and in favor of the Revenue. The Tribunal was directed to verify the claim of the assessee regarding privilege leave in light of the Leave Rules.

4. Treatment of Exchange Fluctuation Loss:
The Tribunal held that the loss arising from exchange fluctuation on loan instalments for the purchase of machineries was a revenue expenditure, not a capital expense. The decision was based on the assessee's own case in earlier years and was answered in the negative and in favor of the Revenue.

5. Deduction under s. 80G for Charity Donation:
The Tribunal was guided by the decision in CIT vs. Upper Ganges Sugar Mills Ltd. to answer the question of entitlement to deduction under s. 80G for a donation to Viswamangal Charity Trust in the negative and in favor of the Revenue. No costs were awarded in the judgment.

This judgment by the Calcutta High Court addressed various complex tax issues, providing detailed analyses and references to previous decisions to support the conclusions reached in each aspect of the case.