1986 JTR(Cal) 256
1986 56 CTR 231 ; 1987 165 ITR 678 ; 1986 28 Taxman 442
High Court Of Calcutta
Dipak Kumar Sen, Monjula Bose
UNION CARBIDE INDIA LTD. - Appellant
Versus
COMMISSIONER OF INCOME TAX - Respondent
Income Tax Reference 176 Of 1981
Decided On : 06/24/1986
The central legal point established in the judgment is the interpretation and application of various provisions of the Income-tax Act, 1961, and the Companies (Profits) Surtax Act, 1964, in determining the allowability of revenue loss, capital employed, depreciation for scientific research assets, treatment of fees paid to the Registrar of Companies, and the deductibility of surtax.
Act
Referred
:COMPANIES PROFITS SUR-TAX ACT : .
FINANCE ACT : .
INCOME TAX ACT : S.80(j), S.43(a), S.37, S.35(2)
INCOME TAX RULES : R.19(a)(2)
Income-tax Act - Interpretation of Provisions
Fact of the Case:
The court addressed several questions of law arising from the order of the Tribunal, including the allowability of revenue loss, determination of capital employed, allowance of depreciation for scientific research assets, treatment of fees paid to the Registrar of Companies, and the deductibility of surtax paid under the Companies (Profits) Surtax Act, 1964.
Finding of the Court:
The court provided answers to each question based on relevant legal provisions and precedents, ultimately disposing of the reference without costs. Additionally, the court granted the assessee's request for a certificate to appeal to the Supreme Court on specific questions.
Issues: The issues involved the interpretation and application of various provisions of the Income-tax Act, 1961, including Section 43a, Section 80j, Section 35(2)(iv), and Section 37, as well as the Companies (Profits) Surtax Act, 1964.
Ratio Decidendi: The court's decisions were influenced by previous judgments and specific provisions of the Income-tax Act, 1961, and the Companies (Profits) Surtax Act, 1964, providing clear interpretations and applications of the relevant legal provisions.
Final Decision: The reference was disposed of without costs, and the court granted the assessee's request for a certificate to appeal to the Supreme Court on specific questions.
Income-tax Act - Interpretation of Provisions
Fact of the Case:
The court addressed several questions of law arising from the order of the Tribunal, including the allowability of revenue loss, determination of capital employed, allowance of depreciation for scientific research assets, treatment of fees paid to the Registrar of Companies, and the deductibility of surtax paid under the Companies (Profits) Surtax Act, 1964.
Finding of the Court:
The court provided answers to each question based on relevant legal provisions and precedents, ultimately disposing of the reference without costs. Additionally, the court granted the assessee's request for a certificate to appeal to the Supreme Court on specific questions.
Issues: The issues involved the interpretation and application of various provisions of the Income-tax Act, 1961, including Section 43a, Section 80j, Section 35(2)(iv), and Section 37, as well as the Companies (Profits) Surtax Act, 1964.
Ratio Decidendi: The court's decisions were influenced by previous judgments and specific provisions of the Income-tax Act, 1961, and the Companies (Profits) Surtax Act, 1964, providing clear interpretations and applications of the relevant legal provisions.
Final Decision: The reference was disposed of without costs, and the court granted the assessee's request for a certificate to appeal to the Supreme Court on specific questions.
D.PAL, M.L.Bhattacharya, MANISHA SEAL, P.K.PAL
DIPAK KUMAR SEN, J.
( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, the following questions have been referred as questions of law arising out of the order of the Tribunal for the opinion of this court:" (1) Whether, on the facts and in the circumstances of the case, the sum of Rs. 5,57,251 was allowable as a revenue loss having regard to the provisions of Section 43a of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the capital employed should mean the cost of acquisition (not written down value) of the assets and also the liabilities and the borrowed moneys for the purpose of relief under Section 80j in respect of the assessee's Deep Sea Fishing Division ? (3) Whether, on the facts and in the circumstances of the case, depreciation should be allowed in respect of assets used by the assessee for scientific research ? (4) Whether, on the facts and in the circumstances of the case, fees of Rs. 2,25,000 paid to the Registrar of Companies in connection with the increase of the authorised capital of the company is capital expenditure and, therefore, not allowable under Section 37 of the Income-tax Act? (5) Whether, on the facts and in the circumstances of the case, surtax paid by the assessee under the Companies (Profits) Surtax Act, 1964, is an allowable deduction from the total income of the assessee ?"
( 2 ) OF the above questions, question No. 3 has been referred at the instance of the Revenue. The other questions are referred at the instance of the assessee.
( 3 ) THE controversy sought to be raised in question No. 1 is covered by a decision of this court in CIT v. Bharat General and Textile Industries Ltd. . Following the same, we answer the question in the negative and in favour of the Revenue. We hold that the loss caused by additional expenditure incurred by reason of exchange fluctuation is capital in nature.
( 4 ) THE controversy raised in question No. 2 is covered by a decision of this court in Income-tax Reference No. 9 of 1981, titled Indian Aluminium Co. Ltd. v. CIT. The judgment in that case was delivered on April 8, 1986. Following the said decision, we answer question No. 2 by stating that under Rule 19a (2) (i) of the Income-tax Rules, 1962, in determining the value of the assets for computation of the capital employed, if the assets are entitled to depreciation, their written down value would be taken into account. The written down value of the assets has to be determined in accordance with the Income-tax Act, 1961. In the case of assets acquired during the accounting year, written down value means the actual cost to the assessee. In the case of assets acquired before the accounting year, written down value means the actual cost of acquisition less the aggregate of all deductions of depreciation actually allowed to the assessee in the past years. To the extent as above, depreciation already allowed would have to be considered.
( 5 ) THE controversy raised in question No. 3 referred at the instance of the Revenue is covered by the amended Section 35 (2) (iv ). The relevant amendment was effected by the Finance (No. 2) Act, 1980--[1984] 124 ITR (Statutes) 69, with retrospective effect from April 1, 1962. In view of the provisions of the said section, the question is answered in the negative and in favour of the Revenue.
( 6 ) THE controversy raised in question No. 4 is covered by a decision of this court in Brooke Bond India Ltd. v. CIT. Following the said decision, we answer the question by stating that the fees paid to the Registrar in connection with the increase of the authorised capital of the company is capital expenditure and deduction thereof is not allowable under Section 37 of the Income-tax Act, 1961.
( 7 ) THE controversy raised in question No. 5 is also covered by a decision of this court in Molins of India Ltd. v. CIT. Following the said decision, we answer the question by stating that the surtax paid under the Companies (Profits) Surtax Act, 1964, is not an allowable deduction in computing the taxable income of the assessee.
( 8 ) THE reference is disposed of accordingly. In the facts and circumstances, there will be no order as to costs.
( 9 ) THE learned advocate for the assessee submitted at the conclusion of the judgment that on the points raised in questions Nos. 4 and 5, leave has been given to the assessees concerned in Brooke Bond India Ltd. and Molins of India Ltd. to appeal to the Supreme Court, respectively, on January 11, 1983, and June 4, 1984. The learned advocate invited us to issue a certificate in this case also to the effect that so far as the said/questions are concerned, this was a case fit for appeal to the Supreme Court. We allow the prayer of the assessee. Let a certificate be issued as prayed for. Let the order directing the issue of the certificate be drawn up separately. .