COMMISSIONER OF INCOME-TAX vs. NEEKA TUBES PVT LTD

ITR/212/1993HC GujaratGJHC24021258199328 June 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI4 pages
AI SummaryAllowed

What were the facts?

The Commissioner of Income Tax (Revenue) has referred two questions of law to the High Court of Gujarat at Ahmedabad concerning the assessment year 1983-84. The assessee, Neeka Tubes Pvt Ltd, a manufacturing company, claimed a deduction under Section 80J of the Income Tax Act, 1961. The Assessing Officer (AO) excluded Rs. 2,00,036 representing plant and machinery under erection from the capital employed. The AO also excluded Rs. 46,90,341, a loan from the old unit (Machinery Division) to the new unit (Tube Division), from the capital employed. The CIT(Appeals) allowed both amounts to be included. The Tribunal dismissed the Revenue's appeal. The High Court is now considering the reference.

What did the High Court hold?

The High Court answered the first question in the affirmative, in favour of the assessee and against the revenue. This was based on the concession made by the revenue, acknowledging that the issue was concluded by the Supreme Court's decision in Commissioner of Income Tax v. Alcock Ashdown and Co. Ltd., which upheld this Court's decision in C.I.T. v. Cibatul Ltd. The Tribunal had followed this precedent. Regarding the second question, the Court found the revenue's contention to be based on a misconception of the facts. The Tribunal had held that if the company's surplus, reserve, and existing capital are employed for acquiring assets in a new industrial undertaking, such capital utilized will be considered as employed capital. The Court implicitly agreed with the Tribunal's reasoning, stating the revenue's cited decisions were irrelevant to the controversy. The operative direction was to answer the reference in favour of the assessee.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing the ITO to take into account the amount of Rs. 2,00,036 representing the value of plant and machinery under erection for computing the capital employed for the purpose of relief under Section 80J of the Income Tax Act? 2. Whether the Appellate Tribunal is right in law and on facts in directing the ITO to take into account the amount of Rs. 46,90,341 being the amount of loan from the old unit for computing the capital employed for the purposes of relief under Section 80J of the Act? Assessee's arguments: Not recorded. Revenue's arguments: For question 1, the Revenue conceded that the issue was concluded against them by the Supreme Court decision in CIT v. Alcock Ashdown and Co. Ltd. For question 2, the Revenue argued that since the balance sheet of the old unit reflected the amount as a loan, it should be excluded as a liability. They relied on CIT v. Gujarat State Fertilizer Co. Ltd. and Lohia Machines Ltd. v. Union of India, contending that borrowings for outstanding liabilities are not includible in capital for Section 80J.

Which sections of the Income-tax Act were involved?

Section 80J,Section 256(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 212 of 1993 For Approval and Signature: THE HON'BLE MR.JUSTICE D.A.MEHTA HON'BLE MS.JUSTICE H.N.DEVANI ============================================================== ============================================================== COMMISSIONER OF INCOME-TAX - Petitioner(s) Versus NEEKA TUBES PVT LTD - Respondent(s) ============================================================== Appearance : MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No(s).: 1. ============================================================== CORAM :THE HON'BLE MR.JUSTICE D.A.MEHTA HON'BLE MS.JUSTICE H.N.DEVANI Date : 13/06/2005

ORAL JUDGMENT 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ?

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(Per : THE HON'BLE MR.JUSTICE D.A.MEHTA) Income Tax Appellate

The order continues below.

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