COMMISSIONER OF Income Tax vs SANGHI BROTHERS LTD.

U. N. BHACHAWAT J. - This is a consolidated reference u/s 256(1) of the Income Tax Act, 1961, made by the Income Tax Appellate Tribunal Indore Bench, Indore, at the instance of the Department, whereby it has referred the following two questions of law for our decision :

"1. Whether, on the facts and in the circumstances of the case the tribunal was right in law in holding that borrowed capital should also be taken into account in computing the capital for the purpose of working out the deduction admissible u/s 80J of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that for the purpose of allowing deduction u/s 80J, the rate of 6% per annum cannot be stretched any further to curtail the amount of relief admissible and that the deduction at 6% per annum is admissible for the full year even if the undertaking has actually worked during the year for less than 12 months ?"

It is not necessary to burden this judgment by detailing the facts which are detailed in the statement of the case and dilating on the legal position inasmuch as both the questions are covered by a decision of the Supreme Court in Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, as also a decision of this court in Commissioner of Income Tax Vs. Sanghi Beverages (Pvt.) Ltd., respectively.

According to the decision of the Supreme Court in Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, question No. 1 is answered in the negative, i.e. in favour of the Department and against the assessee. Question No. 2, in view of the decision of this court in Commissioner of Income Tax Vs. Sanghi Beverages (Pvt.) Ltd., is answered in the affirmative, i.e., in favour of the assessee and against the Department.

The reference is disposed of as indicated hereinabove. No order as to costs.