2000 (12) TMI 42 - HC - Income Tax

Summary

Issues:
1. Interpretation of relief under section 80J based on working months of a new unit.
2. Deduction of borrowing and current liabilities in computing capital for relief under section 80J.

Issue 1:
The court referred to a previous judgment in CIT v. Simpson and Co. [1980] 122 ITR 283, emphasizing liberal construction of provisions for exemption or relief. The court applied this principle and allowed the exemption in favor of the assessee, who had a new unit operating for only 8 months during the relevant assessment year. The court ruled in favor of the assessee against the Revenue based on the precedent set by the earlier judgment.

Issue 2:
Regarding the deduction of borrowing and current liabilities in computing capital for relief under section 80J, the court cited the judgment in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308. The apex court in that case clarified the rule-making authority under section 80J(1) of the Income-tax Act, 1961, stating that excluding borrowed monies from the computation of 'capital employed' was in line with Parliament's intention. The court explained the legislative history and amendments related to the treatment of borrowed monies in computing capital employed. Following the apex court's ruling, the court disallowed the inclusion of capital borrowed in the computation of 'capital employed,' ruling in favor of the Revenue and against the assessee based on the precedent set by the apex court judgment.

This detailed analysis of the judgment covers the interpretation of relief under section 80J and the deduction of borrowing and current liabilities in computing capital for the relief, providing a comprehensive understanding of the court's decision on each issue involved.