9911796707
TMI Blog1984 (2) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and loss account was Rs. 35,22,595 which includes interest paid on deposits of Rs. 20,11,095. The disallowed interest at 15 per cent thereon under section 40A(8) was Rs. 3,01,665. The assessee put forward the plea that because the assets of the assessee-company were hypothecated on 9-12-1980 as a security to the deposits received and under the terms of the hypothecation deed the hypothecation comes into effect from 1-7-1974, disallowance under section 40A(8) cannot be made. This contention was not accepted by the ITO for both the assessment years under consideration. According to him, the position as on the last date of the previous year relevant to both the assessment years under consideration is to be seen. He held that since the deed of hypothecation was executed only on 9-12-1980 and as it did not come into force on either of the last dates of the accounting years, the provisions of sub-clause (ix) of clause (b) of section 40A(8) will not be available to the assessee. Thus, he had disallowed 15 per cent of interest over the deposits and added Rs. 3,04,904 to the income of the assessee-company for the assessment year 1977-78 and Rs. 3,01,665 for the assessment year 1978- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es whether existing or to be created on fixed assets (other than immovable property), present and future, by the assessee-company and in favour of persons from whom the assessee-company had accepted/may accept deposits for one to three years, within the meaning of the Companies (Acceptance of Deposits) Rules, 1975. The outer limit of the deposits which can be accepted by the assessee-company, was put at Rs. 3,75,86,416 as it was found out to be the permissible amount as per the balance sheet of the assessee-company dated 30-6-1979. The letter further discloses that the authority given to the assessee-company should be used in 18 months period from the date of the letter, 1-11-1980. Condition No. (5) in the said letter shows that the authority conveyed is subject to the Companies (Acceptance of Deposits) Rules. 6. In pursuance of the authority granted, the assessee-company executed what is styled as 'Unattested memorandum of hypothecation' on 9-12-1980 in favour of the Central Bank Executor and Trustee Company Ltd. Copy of the hypothecation deed was furnished at pages 2-10 of the paper compilation. It was executed on Rs. 5 stamp paper. It was not registered. Clauses (4), (5)(i), ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned under the Companies (Acceptance of Deposits) Rules, under rule 2B. The said rule has got an Explanation given. The said Explanation is important for our purposes and it is as follows : " Explanation : For the removal of doubts it is hereby declared that any deposit received or renewed by a company before the commencement of the Companies (Acceptance of Deposits) Amendment Rules, 1978, shall continue to be governed by the rules applicable at the time of such deposit or renewal as the case may be. " It is already known that the accounting years relevant for the two years under consideration closed by 30-6-1976 and 30-6-1977, respectively, which are much before the Companies (Acceptance of Deposits) Amendment Rules, 1978 came into force. The above rules came into force on 21-12-1978. Therefore, according to the clear terms of the Explanation, the terms of the deposits made and renewed by 30-6-1976 and 30-6-1977 should be governed by the terms and conditions agreed upon at the time of deposit or at the time of renewal, as the case may be. Therefore, it is obvious that for such deposits the benefits of the terms of mortgage deed dated 9-12-1980 cannot, under any circumstances, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,35,861 on this land. Subsequent to the purchase, the Maharashtra Private Forests (Acquisition) Act, 1975 'the Forest Act' was passed under the provisions of which all the private forests in Maharashtra automatically vested in the State Government with effect from the notified date. The concerned notification in this case was given on 29-8-1975. Pages 14-24 of the paper book filed on behalf of the assessee-company deal with this aspect of the matter. It can be seen from the record that representations both in writing and oral were made on behalf of the assessee-company to the Maharashtra Government claiming for exemption of the land in their occupation. However, the Maharashtra Government issued orders in its Memorandum No. FLD/1076/124643-F-2, dated 20-4-1977, to the effect that the assessee-company should retain 81 acres of land in S. No. 23 of Lonad village and the remaining 624.14 acres shall vest in the State Government as reserved forest. Accordingly, the forest department had taken possession of the lands measuring 624.14 acres in S. No. 23 in village Lonad on 9-11-1977. Compensation as well as interest both amounting to Rs. 4,952.60 was determined by the State Government f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition) Act, 1975, the learned Commissioner (Appeals) found that apparently it looks as though the assessee-company's land under consideration stood vested with the Government with effect from 29-8-1975 as per the effect of the provisions of section 3(1) of the Forests Act. The learned Commissioner (Appeals), however, felt that the matter is not free from doubt in view of the provisions of section 21 of the said Act under which the Government has power to declare in public interest any tract of land to be a private forest. The Commissioner (Appeals) felt that consequent upon the issue of notification by the State Government, it shall further issue notice to the owner of such tract of land to show cause why such declaration should not be made treating the tract of the land in his possession as private forest. The learned Commissioner (Appeals) found that in this case it is not clear from the record that under what provision the Maharashtra Government released 81 acres of land to the assessee-company. If section 3(1) of the Forests Act is entitled to have its full sway then the whole of the extent, viz., 705 acres, should be deemed to have been vested with the State Government on or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 3(1). Every private forest land after the Forests Act came into force vested in the Government and the right, title and interest of the owner shall be deemed to have been extinguished. Therefore, the date on which the interest in the land in question vested with the State Government is 29-8-1975. So also, the date on which the ownership right of the assessee-company was extinguished over the whole of land of 705 acres is on 29-8-1975. The learned Commissioner (Appeals) seems to have been in a quandary to know under what provision of the Forests Act, the State Government granted or released 81 acres of land. In our opinion, this question would not have worried him inasmuch as after the Maharashtra State Government became the absolute owner of the land, it can grant any extent whatsoever to any person which it considers to be fit for the grant. The order of the Maharashtra Government dated 20-4-1977 should have been considered as an outright grant of land of 81 acres made by the State Government to the assessee-company. That has nothing to do with the abolition of the private forests or the vesting of erstwhile private forests in the State Government. Therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his orders that there was no sufficient material on record to substantiate the claim. When the balance sheet as well as the profit and loss account of the assessee-company reveals all the necessary particulars of the acquisition, no other material is necessary to consider the claim. Therefore, in our opinion, as there is enough material already on record to entertain the claim even in the assessment year 1977-78, we hold that the learned Commissioner (Appeals) went wrong in dismissing the additional ground showing that it is filed at a late stage. According to us, the additional ground ought to have been admitted and ought to have been determined on merits. It is a pure question of law. We are of the view that we can ourselves dispose of the said question especially when there is no dispute with regard to basic facts concerning this question. We hold that the assessee-company lost title to the land (624.14 acres) on 29-8-1975 on the Maharashtra Government passing the Forests Act, and therefore, the assessee is entitled to claim short-term capital loss. As regards the amount of Rs. 1,35,861 spent towards laying of roads, we have to decide whether the roads form part of the plant or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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