1986 (1) TMI 170 - AT - Income Tax

Summary

Issues Involved:

1. Preliminary objection regarding the appeal against the rectified order.
2. Exclusion of capital borrowed for computing capital employed under Section 80J.
3. Taxation of interest on fixed deposits.
4. Inclusion of unclaimed interest under Section 41(1).
5. Disallowance under Section 37(3) read with Rule 6D.
6. Liability for gratuity payment under Section 40A(7).
7. Taxability of amounts received from the National Bank of Pakistan.
8. Taxability of interest received on delayed payment of costs.
9. Charge of interest under Section 215.
10. Liability for sales tax.
11. Claim for weighted deduction under Section 35B.

Detailed Analysis:

1. Preliminary Objection regarding the Appeal Against the Rectified Order:

The department's preliminary objection that the appeal against the order dated 31-10-1984 could not lie as it was rectified under Section 154 was found unsustainable. The Commissioner (Appeals) had merely corrected typographical errors, and the assessee had also filed an appeal against the rectified order.

2. Exclusion of Capital Borrowed for Computing Capital Employed under Section 80J:

The assessee's appeal regarding the exclusion of capital borrowed for computing capital employed under Section 80J was rejected based on the Supreme Court decision in Lohia Machines Ltd. v. Union of India, which upheld the validity of Section 80J(1A) and Rule 19A.

3. Taxation of Interest on Fixed Deposits:

The assessee contended that interest on its fixed deposit with the First National City Bank, Calcutta, was payable only on the maturity date, which fell outside the assessment year in question. The Tribunal found merit in the assessee's contention, referencing a similar case for the assessment year 1977-78, and held that the interest amount could not be taxed in the assessment year 1980-81.

4. Inclusion of Unclaimed Interest under Section 41(1):

The Commissioner (Appeals) held that the liability for unclaimed interest on mortgage bearer debentures did not cease in the assessment year in question. The Tribunal agreed, stating that the amount of Rs. 63,773 could not be taxed in the assessment year 1980-81 and that the assessee could raise defenses for the assessment year 1982-83.

5. Disallowance under Section 37(3) read with Rule 6D:

The ground relating to the disallowance of Rs. 28,820 under Section 37(3) read with Rule 6D was not pressed by the assessee and thus did not survive for consideration.

6. Liability for Gratuity Payment under Section 40A(7):

The Tribunal found no merit in the assessee's appeal regarding the liability for gratuity payment, referencing the Supreme Court decision in Shree Sajjan Mills Ltd., which required compliance with Section 40A(7) for such deductions.

7. Taxability of Amounts Received from the National Bank of Pakistan:

The Tribunal analyzed the taxability of amounts received from the National Bank of Pakistan, considering various dates and legal provisions. It concluded that the income accrued on 20-7-1977, not in the assessment year 1980-81, and thus could not be taxed in the latter year. The Tribunal emphasized that income could not be taxed on a receipt basis if it had already accrued.

8. Taxability of Interest Received on Delayed Payment of Costs:

The ground relating to the amount of pound 5,174 received as interest on delayed payment of costs was not pressed by the assessee and thus did not survive for consideration.

9. Charge of Interest under Section 215:

The Tribunal directed the ITO to examine the chargeability of interest under Section 215, considering the assessee's pending waiver application and after giving the assessee an opportunity to be heard.

10. Liability for Sales Tax:

The Tribunal upheld the Commissioner (Appeals)'s decision to allow the assessee's claim for sales tax liability, noting that the statutory liability arose under the West Bengal Sales Tax Act and that the operation of the statute had not been stayed by the High Court.

11. Claim for Weighted Deduction under Section 35B:

The Tribunal found no justification for interfering with the Commissioner (Appeals)'s direction to the ITO to examine the assessee's claim for weighted deduction under Section 35B, as the ITO had not previously examined the admissibility of the deduction.

Conclusion:

The assessee's appeals were partly allowed, and the department's cross-objection was rejected.