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TMI Blog2000 (8) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... d two reference applications, the following questions of law are referred for our answer : "Reference Application No. 338/Ahd. of 1984 : 1. Whether the Appellate Tribunal has been right in law in holding that the assessee was entitled to claim development rebate on the expenditure incurred on the factory compound wall as claimed ? 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction under section 80J of the Income-tax Act, 1961, in respect of the building rented out to the outsiders ? Reference Application No. 339/Ahd. of 1984 : 1. Whether, the Appellate Tribunal has been right in law in holding that in computing the capital employed for granting deduction under section 80J of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shopping facilities to the inhabitants of the township. Some of the quarters in the township have been given on rent for the residence of the shopkeepers as the township of the assessee-company is far away from the city and other towns. The question raised before us is whether the accommodation provided for residence of the shopkeepers can be treated to be "capital employed" to qualify for deduction at the rate of 6 per cent. from the gross income from its business in accordance with section 80J of the Act read with rule 19A of the Income-tax Rules, as the provisions stood at the relevant time. The relevant part of section 80J for the purpose of this reference and as it existed in the relevant assessment year reads as under : "80J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with sub-rule (5). (2) The aggregate of the amounts representing the values of the Assets as on the first day of the computation period, of the undertaking or of the business of the hotel to which the said section 80J applies shall first be ascertained in the following manner : (i) in the case of assets, entitled to depreciation, their written down value ; (ii) in the case of assets acquired by purchase and not entitled to depreciation, their actual Cost to the assessee (iii) in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business ; (iv) in the case of assets being debts due to the person carrying on the business, the nominal amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the benefit of deduction under section 80J of the Act. The second ground urged on behalf of the assessee is that such residential accommodation provided to the shopkeepers in the township of the premises of the assessee was necessary for its industrial or business activities and it cannot be said that such accommodation had no direct nexus with the industrial activity of the assessee. Reliance is placed on the decision of the Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188. Taking assistance from the observations of the Supreme Court in the case of Bajaj Tempo [1992] 196 ITR 188, it is submitted that similar provisions contained in section 15C of the repealed Indian Income-tax Act, 1922, were liberally construed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to shopkeepers who are not employees of the assessee can be termed as "capital employed" as to qualify for deduction under section 80J of the Act. As has been stated on the facts mentioned above, the assessee is an industry engaged in manufacture of fertilizers, which is a highly polluting industry, located away from the city and town, For the purpose of carrying on business activities, it was required to develop a township for its employees. For employees living in its township it is necessary to provide them shopping facilities. The shopkeepers having shops in the township have been provided with residential accommodation in the township. Such residential accommodation provided to shopkeepers is, therefore, in the course of the industr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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