Commissioner of Income Tax vs Indian Organic Chemicals Ltd.

Ranjana Desai, J.—By this reference u/s 256(1) of the income tax Act, 1961 (''the Act''), the Tribunal has referred three questions of law to this Court for opinion at the instance of the revenue. Question Nos. 1 and 2 pertain to three assessment years, viz., 1973-74, 1974-75 and 1975-76. Question No. 3 pertains only to the assessment years 1973-74 and 1974-75. The questions are as under : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the amount advanced by the head office to the Fibre division should not be excluded from the ''capital employed'' while computing the deduction u/s 80J for the said division, even though the head office has made the advance out of borrowed funds ?

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the cost of capital work-in-progress, which had not yet become an asset of the business within the meaning of such clause (iii) of clause (ii) of sub-section (1A) of section 80J of the income tax Act, 1961, can be included in the computation of ''capital employed'' for the purpose of determining the quantum of relief u/s 80J ?

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the provisions of section 40(c) are applicable in respect of payments to employee directors and not the provisions of section 40A(5) ?

Heard Mr. R.V. Desai, the learned counsel for the revenue. None appeared for the assessee.

Mr. Desai submitted that question No. 1 is covered by the decision of the Supreme Court in Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, in favour of the revenue. In view of the above, question No. 1 is answered in the negative, i.e., in favour of the revenue and against the assessee.

Mr. Desai fairly stated that the controversy in question No. 2 stands concluded in favour of the assessee by the decision of the Supreme Court in Commissioner of Income Tax Vs. Alcock Ashdown and Co. Ltd. and Filtrone India Ltd., . In view of the above, question No. 2 is answered in the affirmative, i.e., in favour of the assessee and against the revenue.

Mr. Desai further stated that the controversy in question No. 3 also stands concluded in favour of the assessee by the decision of this Court in Commissioner of Income Tax Vs. Hico Products (P.) Ltd., . Following the above decision, we answer question No. 3 in the affirmative, i.e., in favour of the assessee and against the revenue. The reference stands disposed of, accordingly, with no order as to costs.