Commissioner Of Income Tax vs Asian Cables Corporation Ltd.
2002 Latest Caselaw 1301 Bom

JUDGMENT

J.P. Devadhar, J.

1. In this reference relating to asst. yr. 1979-80 and 1980-84, Tribunal at the instance of the Revenue has referred the following questions for opinion under Section 256(1) of the IT Act, 1961.

Common question for both the asst yrs. 1979-80 and 1980-81

(1) Whether, on the facts and in the circumstances of the case, the, Tribunal was justified in law in holding that the value of the work-in-progress has to be treated as part of the capital employed for the purpose of relief under Section 80J of IT Act, 1961 ?

For asst. yr. 1979-80

(2) Whether, on the facts and in the circumstances of: the case, the Tribunal was justified in law in holding that the deduction under Section 80-O of the Act should be calculated on the gross fees received by the assessee-company ?

2. The facts relevant for the purpose herein are as follows :

In the assessment year in question the assessee claimed relief under Section 80J of the IT Act, 1961, by reference to the capital employed in the new business undertaking inclusive of the amount of the value of work in progress. The AO rejected the contention of the assessee and computed the deduction under Section 80J by excluding the value of the work-in-process in the capital employed.

3. Being aggrieved by the aforesaid order the assessee filed an appeal before CIT(A) who accepted the claim of the assessee. The Tribunal following the judgment of this Court in the case of CIT v. Alcock Ashdown & Co. Ltd. (1979) 119 ITR 164 (Bom) upheld the order of CIT(A) and directed that the value of work in progress is to be treated as a part of capital employed in working out the relief under Section 80J, Hence this, reference at the instance of the Revenue.

4. When the reference was taken up for final hearing, counsel on both sides agreed that the decision of this Court in the case of CIT v. Alcock Ashdown & Co. Ltd. has been affirmed by the apex Court in CIT v. Alcock Ashdown & Co. Ltd. . In this view of the matter, question No. 1 is answered in affirmative, and in favour of the assessee i.e., the cost of work-in-progress is to be treated as part of the capital employed for the purpose of relief under Section 80J of the IT Act, 1961.

5. The question No. 2 relates to asst. yr. 1979-80 only. In this assessment year the assessee sought deduction under Section 80-O on the gross earning instead of net income. The ITO did not accept the claim of the assessee and allowed deduction only on the net earning. On appeal, CIT(A) accepted the claim of the assessee by following the decision of the Madras High Court in the case of Addl. CIT v. Isthmian India Maritime (P) Ltd. (1978) 113 JTR 570 (Mad) and held that the deduction under Section 80-O should be calculated on the gross fees received by the assessee-company. The Tribunal confirmed the order of CIT(A). Hence, this reference at the instance of the Revenue.

6. At the final hearing of this reference; Mr. Desai, learned counsel-appearing on behalf of the Revenue, fairly stated that the bare reading of Section 80-O of the IT Act makes it clear that gross income is to be taken into account and not the net income for the purpose of calculation of deduction under Section 80-O of the IT Act. In this view of the matter, the question No. 2 is answered in affirmative and in favour of the assessee.

The reference is accordingly disposed of by answering both the questions in the affirmative that is in favour of the assessee and against the Revenue with no order as to costs.