COMMISSIONER OF INCOME TAX vs WOOLCOMBERS INDIA LTD.

Suhas Chandra Sen, J. - The Tribunal has referred the following three questions of law u/s 256(1) of the IT Act, 1961 to this court for opinion :

"1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim deduction of Rs. 4,77,974 in respect of the gratuity liability worked out on actuarial basis ?

Whether, on the facts and in the circumstances of the case, the deduction of interest amount of Rs. 6,31,268 was rightly allowed u/s 57(iii) of the IT Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim depreciation allowance on the Fork Lift Trucks at 30% ?"

So far as the first question is concerned, in view of the decision to this court, in the case of Commissioner of Income Tax (Central-I) Vs. Eastern Spinning Mills Ltd., , it has to be answered in the affirmative and in favour of the assessee.

There are two aspects of the second question. The first aspect of the question is whether the assessee company, having purchased the controlling interest in another company, was entitled to the deductions claimed. That question has been answered in favour of the assessee company in the case of Commissioner of Income Tax (Central) Vs. Model Manufacturing Co. (P.) Ltd., . The second aspect of this question is to be whether the interest on money borrowed for investment in shares which had not yielded any dividend was admissible as deduction u/s 57(iii) of the IT Act, 1961, in computing its income from dividend under the head "income from other sources". The Supreme Court in the case of Commissioner of Income Tax, West Bengal-III Vs. Rajendra Prasad Moody, has held that this was a deductible expenditure u/s 57(iii) of the IT Act, 1961. In view of the aforesaid, the second question is also answered in the affirmative and in favour of the assessee.

So far as the third question is concerned, it appears that there is a circular issued by the CBDT dt. 13-9-1973 being Circular No. 202/41/72-ITA II by which it has been clarified that the assessee was entitled to claim depreciation allowance at the rate of 30 per cent. In that view of the matter, the third question is also answered in the affirmative and in favour of the assessee.

In the facts and circumstances of the case, each party will pay and bear its own costs.

Satish Chandra, C.J. - I agree.