Commissioner of Income Tax vs J.K. Synthetics Ltd.

1.In this reference relevant for the assessment year 1971-72, the following two questions of law have been referred at the instance of the revenue:

Whether the Income Tax Appellate Tribunal (hereinafter referred to as ''Tribunal'') was right in holding that the amount of Rs. 1,02,10,846 (wrongly stated as Rs. 1,02,846) being provision for the excise duty on polymer chips was an allowable deduction for this assessment year?

Whether the Tribunal was right in holding that the assessee was entitled to include borrowed capital in the computation of capital employed for the purpose of relief u/s 80J of the Income Tax Act, 1961?

Insofar as the first question is concerned, learned Counsel for the parties are agreed that in view of the decision of the Supreme Court in The Kedarnath Jute Mfg. Co. Ltd. Vs. The Commissioner of Income Tax, (Central), Calcutta, , the question of law is required to be answered in the affirmative, that is, in favour of the assessee and against the revenue.

Insofar as the second question of law is concerned that too is required to be answered in the affirmative, that is, in favour of the assessee and against the revenue in view of the decision of the Supreme Court in Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, .

There are two questions that have been referred at the instance of the assessee and they are as follows:

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal (hereinafter referred to as the''Tribunal'') was right in rejecting the assessee''s claim for depreciation u/s 32 on the assets used for scientific research?

Whether on the facts and in the circumstances of the case, the Tribunal was correct in disallowing a sum of Rs. 79,003 being the expenditure incurred on lunches, dinners, tea etc. in the course of carrying on its business, as entertainment expenditure within the meaning of Section 37 (2B) of the Income Tax Act, 1961?

As far as the first question is concerned, the question has now become academic in view of the retrospective amendment to Section 35 of the Income Tax Act, 1961,that is, with effect from 1-4-1962. Moreover learned Counsel for the assessee points out that 100 per cent allowance had been given on the scientific equipments purchased by the assessee. Therefore, this question is returned unanswered.

Insofar as the second question is concerned, the assessee had claimed a deduction of Rs. 3,80,631 out of which an amount of Rs. 79,003 has been disallowed. In view of the fact that the assessee has achieved more than considerable success in this regard, the question is not pressed by learned Counsel for the assessee. This question is also returned unanswered.