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C.I.T. v. M/S Mohan Gold Water Breweries Ltd. - INCOME TAX REFERENCE No. 85 of 1989 [2004] RD-AH 1666 (10 December 2004)


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Court No.37

Income Tax Reference No.85 of 1989

Commissioner of Income Tax (Central), Kanpur

v. M/s Mohan Gold Water Breweries Ltd., Lucknow

Hon'ble R.K.Agrawal, J.

Hon'ble Prakash Krishna, J.

(Delivered by R.K.Agrawal, J.)

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-

"Whether on the facts and in the circumstances of the case, the learned Tribunal was legally justified in confirming the order of the Commissioner of Income Tax (Appeals) in holding that there was an apparent mistake in working out deduction under Section 80J without including borrowed capital for the purposes of capital base in view of the Allahabad High Court decision in Kota Box Mfg. Co. even though the assessee itself while filing rent (sic) of income did not include borrowed capital in the capital base for purposes of deduction under Section 80J?"

The reference relates to the Assessment Year 1971-72.

Briefly stated, the facts giving rise to the present reference are that the Income Tax Officer while making the assessment on 26.12.1973, had rejected the claim made by the respondent assessee under Section 80J of the Act on the ground that it was not a newly established undertaking, which order was set aside in appeal by the Appellate Assistant Commissioner. The Tribunal has affirmed the order passed by the Appellate Assistant Commissioner.  Pursuant thereto, the Income Tax Officer computed the relief admissible to the respondent assessee under Section 80J of the Act and while doing so he computed the capital on the first day of accounting year and has excluded the borrowings. Thereafter, it appears that the Income Tax Officer wanted to carry on some rectification, which was resisted by the respondent vide letter dated 2.2.1977 on the ground that there was no mistake apparent from the record. Subsequently, the assessee itself filed an application on 25.1.1978 seeking rectification of the assessment order on the ground that the average capital employed during the year ought to be taken into consideration and further borrowings should also be included while computing the capital employed, in terms of the two decisions of the Calcutta High Court in the case of Century Enka Ltd. v. Income Tax Officer, (1977) 107 ITR 123 and Century Enka Ltd. v. Income Tax Officer, (1977) 107 ITR 909. The claim was rejected by the Income Tax Officer. However, in the appeal, the Commissioner of Income Tax had allowed the claim by following the judgment of this Court in the case of Kota Box Mfg. Co. v. Income Tax Officer, (1980) 123 ITR 638, and directed the Income Tax Officer to rectify the order accordingly. The order passed by the Commissioner of Income Tax (Appeals) has been upheld by the Tribunal.

We have heard Sri A.N.Mahajan, learned Standing Counsel for the Revenue. No body has appeared on behalf of the respondent assessee.

We find that the Apex Court in the case of Lohia Mechanics Ltd. and another v. Union of India and others, (1985) 152 ITR 308, has held that the borrowed capital has to be excluded while computing the capital employed for the purposes of Section 80J of the Act and further the capital as employed on the first day of the accounting year is to be taken into consideration.

In this view of the matter, there does not appear to be any error in the order of the Income Tax Officer which require correction.

We accordingly answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.




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