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TMI Blog1995 (7) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal is correct in law in holding that credit balance of Rs. 23,32,377 appearing on the liabilities side of the balance-sheet of the distillery unit of the assessee should not be deducted in computing capital for purposes of allowing deduction under section 80J in the case of the assessee for the assessment year 1981-82 ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal ought to have held that the capital employed in the distillery unit of the assessee should be computed after ascertaining the amount of borrowed funds diverted by the head office to the distillery unit of the assessee and deducting such borrowed funds under section 80J(1A) for arriving at the capital employed in the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, then the unit cannot claim any benefit as that would not be an independent unit at all. He further submits that if the head office itself had borrowed the money and given it to the unit, the amount could not have been claimed by the unit as not being a debt, and it is only to ascertain that it comes from the borrowed money or not that the Income-tax Officer referred the question of grant of relief under section 801. Sri A. Satyanarayana, learned counsel for the assessee-company, submits that admittedly the money belonged to the company and that could not be treated as "debt" for, the unit being that of the company it would not amount to taking loan from the company, and that amount cannot be treated as loan, so as to reduce the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80J of the Act. Accepting the above judgment of the Bombay High Court, the Central Board of Direct Taxes issued Circular No. 380 dated April 10, 1984. It was incorporated in that circular that inasmuch as the provisions of rule 19A are incorporated in section 80J(1A), which was inserted by the Finance (No. 2) Act, 1980, the same principle will apply to the provisions of sub-section (1A) of section 80J of the Act. In CIT v. Karnataka Cement Pipe Factory [1985] 151 ITR 247 (Kar), the question before the Karnataka High Court was, where the head office established a new industrial undertaking, how the relief under section 80J of the Act could be computed. In that case, the Income-tax Officer disallowed the claim on the ground that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dras High Court took the view that no question of law arose from that finding. Placing reliance on that judgment, it was contended that for the purposes of showing the borrowing, it must be shown that the amount was borrowed from the third parties, taking money from the head office would not lead to the conclusion that the amount was the borrowed amount. In Mohan Lal Bhagwati Prasad v. CIT [1993] 200 ITR 88 (All) deduction was claimed under section 80J by the distillery unit of the company. It was found as a fact that a loan was obtained by the head office and out of that loan, a certain sum was transferred to the distillery unit. The Tribunal recorded a finding of fact that the transferred amount came out of the loan obtained by the h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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