J.J. Foams (P.) Ltd. vs Commissioner of Income Tax

At the instance of the assessee, in respect of the assessment year 1978-79, the questions referred for the opinion of this court are as follows :

"1. Whether, on the facts and in the circumstances of the case, the sums of moneys received from persons for allotment of shares but which continued to remain with the company without shares being allotted, would amount to deposit as envisaged by section 40A(8) of the Income Tax Act, 1961, and, Therefore, 15 per cent. of interest payable on such sums of moneys is disallowable u/s 40A(8) ?"

Whether, on the facts and in the circumstances of the case, the actual cost of all depreciable assets is includible, instead of written down values, in the capital employed in the industrial undertaking, u/s 80J of the Income Tax Act, 1961 ?"

From the statement of the case, it appears that the assessed itself treated the amounts retained by it as deposits and paid interest to the applicants who had made payment for allotment of shares. In this view, the approach adopted by the Tribunal treating the amounts as deposits and disallowing 15 per cent. of expenditure u/s 40A(8) cannot be faulted on the facts and circumstances of the case. Question No. 1 is, Therefore, answered in the affirmative, in favor of the Revenue, and against the assessee.

In view of the decision of the Supreme Court in Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, , reversing the view of the Calcutta High Court in the cases of Century Enka Ltd. Vs. Income Tax Officer and Others, and Century Enka Ltd. Vs. Income Tax Officer, "D" Ward and Others, , question No. 2 is answered in the negative, in favor of the Revenue and against the assessee. No costs.