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TMI Blog1985 (5) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... y claimed relief under section 80J in respect of the pesticides unit for which separate books of account in respect of this unit are maintained. Separate balance sheet was extracted for the purpose of considering the claim for computing relief. The ITO observed in paragraph No. 3 of his order as follows : "On going through the details furnished it is noticed that the head office does have borrowed funds and own funds. All that the assessee has done is that a balance sheet is drawn (extracted) showing the value of fixed and other assets on the asset side and the figure shown on the asset side is counter-balanced by showing an equivalent amount as funds provided by head office. In the absence of the detailed copy of the new unit's account in the books of head office and that of the head office account in the books of the new unit it is not possible to verify how much of the borrowed and of self-generated funds have gone into building up the capital in the new unit. The assessee's plea that self-generated funds alone have gone into building up the capital of the new unit cannot, therefore, be accepted. However, considering the fact that the assessee did have both borrowed as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts was brought to our notice. Reliance was placed on the decision of the Madras High Court in the case of CIT v. South India Viscose Ltd. [1983] 14 Taxman 259 and also the Karnataka High Court in the case of CIT v. Karnataka Cement Pipe Factory [1985] 151 ITR 247. 7. The learned departmental representative, supporting the order of the Commissioner (Appeals), stated that since in the accounts loans were raised by the head office, the same were required to be considered. The decision in the case of South India Viscose Ltd. was distinguishable because element of borrowings by the head office is required to be considered. 8. We have gone through the orders of the authorities below and also materials to which our attention was drawn. There is no dispute regarding the credit balance of Rs. 76 lakhs approximately lying in the head office account in the books of pesticides unit. The only dispute is with regard to the stand of the revenue that this amount of Rs. 76 lakhs does include part of the borrowings raised by the head office. In our opinion, the exercise undertaken by the authorities below is not required to be gone into considering the facts of this particular year as refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding by the authorities below. On this point, the Commissioner (Appeals) has cast the burden on the assessee by stating in paragraph No. 7 that the net assets in respect of the new unit are not proved to have been exclusively financed by the head office from its own funds. We would only state that in the absence of clear case of diversion of borrowings to the new unit it would not be proper to deny the claim of the assessee especially when the funds of the head office are sufficient enough to make investments in the new unit. 11. We, therefore, set aside the decision taken by the Commissioner (Appeals) and direct the ITO to grant relief to the assessee which is worked out at Rs. 5,73,516 being 7.5 per cent on Rs. 76,46,882. 12. The next ground is in respect of confirming the disallowance made by the ITO in connection with provision in respect of misappropriation amounting to Rs. 71,124 by an employee of the company. The relevant facts in brief appearing on page 6 of the paper book are as under : "Shri B.R. Rai was in charge of Agro Service Centre of the Corporation at Bharuch. During his service, he had done some misappropriation in connection with the stocks of the fertiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified the writing off the loss in the current year. 15. The learned departmental representative supporting the decision of the Commissioner (Appeals) stated that the amount writtens off was not finally determined because there could be balance payable under the Provident Funds Act, 1925, Gratuity Act, etc., to which recourse be made. Again company could proceed against private assets when decree is obtained in respect of suit filed in the Court. In any case, fairly agreeing that the assessee was entitled to loss, the question was of fixing the year in which the loss is required to be allowed. 16. We have gone through the relevant material placed before us, especially the inquiry report submitted by Mr. P.D. Desai, manager, vide report dated 22-8-1978 and the charge sheet dated 12-1-1979. In the charge sheet it is specifically mentioned that the employee had admitted the shortage in the stock vide letter dated 25-2-1978, the stock under his control. Again the management division had investigated the ledger kept at Agro Service Centre, Bharuch, and on verifying the same, charges were made in respect of keeping of a large sum with the employee without authority. Thereafter, in Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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