High Court Of Gujarat
CIT vs. Cadila Chemicals (P) Ltd.
Section 80J
Asst. Year 1982-83
D.A. Mehta & Ms. H.N. Devani, JJ.
IT Ref. No. 259 of 1993
11th July, 2005
Counsel Appeared
Tanvish U. Bhatt, for the Petitioner : M.M. Patel, for the Respondent
JUDGMENT
D.A. Mehta, J. :
The following question has been referred by the Tribunal, Ahmedabad Bench ‘C’ under s. 256(2) of the IT Act, 1961 (the Act) :
“Whether, on the facts and in the circumstances of the case, the question regarding computation of capital employed for granting relief under s. 80J of the IT Act, 1961, was rightly decided by the Tribunal ?”
The assessment year is 1982-83 and the relevant accounting period is calendar year 1981. The assessee, a limited company claimed relief under s. 80J on total capital employed of Rs. 1,08,97,124. At the rate of 7.5 per cent, the relief worked out to Rs. 8,17,134. On going through the balance sheet of the new industrial undertaking of the assessee, namely, Ankleshwar Unit, the AO found that a sum of Rs. 1,08,95,124 was shown as having been transferred from the head office, which was admittedly the old unit. According to the AO, because the old unit had certain borrowings in its separate balance sheet, the total amount available to the new unit had to be proportionately reduced, because the liability of the new unit was shown as liability of old unit. He, therefore, worked out the said figure at a sum of Rs. 59,85,542 and deducted the same from the aggregate of the assets worked out by the assessee. Thus, the figure of total capital employed in the new unit was reduced to Rs. 49,09,577 and accordingly relief under s. 80J @ 7.5 per cent was worked out at Rs. 3,68,218.
Being aggrieved with the aforesaid order, the assessee carried the matter before the CIT(A). The appeal came to be disposed of vide order dt. 30th March, 1988. The CIT(A) accepted the contentions raised on behalf of the assessee that the aggregate of the assets could not be reduced by a sum of Rs. 59,85,547 for working out the capital employed. The CIT(A) in the process followed the decision rendered by Bombay High Court in the case of Indian Oil Corporation Ltd. vs. S. Rajagopalan, ITO (1973) 92 ITR 241 (Bom). He also referred to Circular No. 380 dt. 10th April, 1984 issued by CBDT reported in (1984) 41 CTR (TLT) 78 : (1984) 149 ITR (St) 1. Revenue carried the matter in appeal before the Tribunal against the order of CIT(A). The Tribunal upheld the finding recorded by CIT(A) and dismissed the Revenue’s appeal.
Mr. Tanvish U. Bhatt, learned standing counsel, appearing on behalf of the applicant-Revenue, very fairly submitted that in light of circular issued by CBDT the Revenue was not in a position to assail the order of the Tribunal. Sec. 80J of the Act provides for deduction in respect of profits and gains from newly established industrial undertaking. For the purpose of working out such a deduction at the prescribed rate capital employed in the newly established industrial undertaking is required to be computed. Sub-s. (1A) provides that for the purpose of s. 80J the capital employed in an industrial undertaking shall be computed in accordance with cl. (II) to cl. (IV). As per cl. (II) the aggregate of the amount representing the values of the assets as on the first day of the computation period of the undertaking is to be ascertained in the first instance. From the said figure aggregate of the borrowed moneys and debts owed by the assessee are to be deducted as provided in cl. (III). For the present it is not necessary to refer to cl. (IV). The controversy as to what would constitute the aggregate of borrowed moneys and debts owed is no longer required to be gone into in light of the aforesaid circular issued by CBDT.
In the case of Indian Oil Corporation Ltd. (supra), the Bombay High Court has held that for the purpose of arriving at capital employed by the assessee in a particular industrial undertaking one has to deduct from the assets the liabilities of the assessee in respect of that industrial undertaking only. This view has been accepted by the CBDT as stated in the aforesaid Circular No. 380, dt. 10th April, 1984.
In the circumstances, it is not possible to find any infirmity in the concurrent findings recorded by CIT(A) and Tribunal that only liabilities pertaining to new industrial undertaking are to be deducted from the aggregate of the value of the assets of the new industrial undertaking. The question referred is, therefore, answered in the affirmative i.e., in favour of the assessee and against Revenue.
The reference stands disposed of accordingly. There shall be no order as to costs.
[Citation : 278 ITR 633]
