Commissioner of Income Tax vs Sarabhai Sons Pvt. Ltd.

G.T. Nanavati, J.—At the instance of the Revenue, the Tribunal has referred the following three questions to this Court under s. 256(1) of the IT Act, 1961 :

"(1) Whether the Tribunal was right in law in coming to the conclusion that the secured loans and liabilities of Rs. 16,67,988 should not be deducted while computing capital base in accordance with r. 19A for the purpose of determining deduction admissible under s. 80J of the Act ?

(2) Whether the provisions of s. 52(2) of the IT Act, 1961 could not be applied at all in the cases where there is no proof of understatement of consideration declared by the assessee ?

(3) Whether on the facts, circumstances and the evidence on record, the Tribunal erred in law in holding that the disallowance of the assessee''s claim for short-term capital loss of Rs. 13,95,000 was not justified ?"

The point which arises for our consideration as a result of 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, . Question No. 1 is, therefore, answered in the negative that is - in favour of the Revenue and against the assessee. The point which arises for our consideration as a result of question Nos. 2 and 3 is covered by the decision of the Supreme Court in K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, . Following that decision, we answer question No. 2 in the affirmative and question No. 3 in the negative, that is - against the Revenue and in favour of the assessee. Reference is disposed of accordingly with no order as to costs.