C I T vs. SARANG SPG. MFG. CO.

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ITR/187/1985HC GujaratGJHC24012319198513 March 2001Author: HONOURABLE MR. JUSTICE B.C.PATEL,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the ITAT's previous order, which was sought to be rectified, was influenced by the stay granted against the operation of the retrospective amendment to Section 80J. However, in light of the Supreme Court's decision in Lohia Machines v. Union of India, which confirmed the retrospective applicability of the amended Section 80J, the ITAT was required to decide the matter in accordance with the Apex Court's ruling. Therefore, the High Court, without answering the specific question referred, remanded the matter back to the ITAT for a fresh decision in consonance with the Supreme Court's judgment. The reference was disposed of accordingly.

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, referred a question of law to the High Court of Gujarat concerning assessment years 1974-75 and 1975-76. The dispute arose from the ITAT's order dated 7/5/1980, which rejected the revenue's application for rectification. The revenue sought to rectify the ITAT's earlier order concerning the computation of capital employed for the purpose of Section 80J of the Income Tax Act, 1961. The ITAT had held that loans and liabilities should be excluded from capital employed. The revenue contended that this needed reconsideration in light of retrospective amendments to Section 80J by the Finance (No. 2) Act, 1980, which were then under challenge before the Supreme Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that its earlier order, holding that capital employed for Section 80J should exclude loans and liabilities, could not be rectified despite retrospective amendments to Section 80J by the Finance (No. 2) Act, 1980, because these amendments were under challenge before the Supreme Court? (Question of law) Assessee's Contention: The judgment does not record any specific contentions made by the assessee. The ITAT's order, which was the subject of the rectification application, was based on the premise that it was difficult to hold that the order contained a mistake of law apparent from the record, especially when the validity of the retrospective amendment was in doubt and under challenge. Revenue's Contention: The revenue argued that the ITAT should have considered the retrospective amendments to Section 80J made by the Finance (No. 2) Act, 1980. They relied on the Supreme Court's decision in Lohia Machines v. Union of India (reported in 152 ITR 308), which upheld the retrospective applicability of the amended Section 80J.

Which sections of the Income-tax Act were involved?

Section 80J

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 187 of 1985

For Approval and Signature:

Hon'ble MR.JUSTICE B.C.PATEL and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- C I T Versus SARANG SPG. MFG. CO. -------------------------------------------------------------- Appearance: MR BB NAIK FOR MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE B.C.PATEL and MR.JUSTICE D.A.MEHTA

Date of decision: 13/03/2001

ORAL JUDGEMENT [ (Per : MR.JUSTICE B.C.PATEL)

1 The Income Tax Appellate Tribunal, Ahmedabad Bench, 'A' on 8/7/1985, at the instance of revenue has referred to this Court the question arising in Reference Application Nos. 833 & 834/Ahd/1984 for assessment years 1974-75 & 1975-76. The question referred for our opinion is as under :

"Whether, on the facts and in the circumstances of the case the Tribunal was right in coming to the conclusion that though by the Finance (No.2) Act 1980, the provisions of sec. 80J of the I.T.Act, were amended with retrospective effect but the order of the Tribunal holding that capital employed for the purposes of section 80J of the I.T.Act should be without taking into account its loans and liabilities etc. could not be rectified because the retrospective amendments were under challenge before the Supreme Court ?"

2.

On 7/5/1980 the Tribunal by an order held that "it is difficult to hold that the order of the Appellate Tribunal contains a mistake of law apparent from the record. In the circumstances, we are not able to entertain this application which is hereby rejected". Our attention is drawn to the facts of the case and it is submitted by learned Counsel for the Union of India that the question of applicability of section 80J of Income Tax Act amended by the Finance (No.2) Act,1980 was required to be considered. At the relevant time the amendment was not acceptable to one Lohia Machines, and therefore, the Apex Court was moved in the matter. However, by decision reported in 152 ITR 308 in case of Lohia Machines V. Union of India the contention raised by the assessee has been rejected and it is held that section 80J as amended is applicable with retrospective effect. Before the Tribunal a prayer was made that the Tribunal is required to consider the provisions, however, the Tribunal was of the opinion that when the validity of the amendment has been challenged and is in doubt it is difficult to hold that, that part of the order of the Appellate Tribunal contains mistake of law.

3.

It seems that the stay which was granted against the operation of the amendment has weighed with the Tribunal and hence the aforesaid order came to be passed. In view of the decision of the Apex Court we are of the opinion that the Tribunal is required to decide the matter in accordance with the decision of the Apex Court. Hence, without answering the question we are remanding the matter to the Tribunal. Reference stands disposed of accordingly with no order as to costs.

(B.C.Patel, J) (D.A.Mehta,J)

m.m.bhatt

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