Nissan Springs (P.) Ltd. vs Commissioner of Income Tax

G.G. Sohani, Actg. CJ.

The order in this case will also govern the disposal of Miscellaneous Civil Case Nos. 147 and 152 of 1984. There are applications u/s 256(2) of the income tax Act, 1961 (''the Act'') . The material facts giving rise to these applications briefly, are as follows: In the return filed by the applicant for the assessment year in question, the applicant claimed deduction u/s 80J of the Act. The ITO disallowed that claim holding that it was not admissible in view of rule 19A(3) of the income tax Rules, 1962 (''the Rules'') . Aggrieved by the order passed by the ITO, the assessee preferred an appeal before the Commissioner (Appeals) . This appeal was, however, dismissed. The assessee thereupon preferred a second appeal before the Tribunal. The Tribunal also dismissed the appeal. The assessee, therefore, sought reference u/s 256(1) but as that application was rejected, the assessee has filed this application.

According to the assessee, the following questions of law arise out of the order passed by the Tribunal:

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the borrowed capital could not be included for the purpose of computing the capital employed u/s 80J of the income tax Act, 1961?

Whether rule 19A of the income tax Rules, 1962, is ultra vires of the provisions of section 80J of the income tax Act, 1961?

3.Whether the amendment made in section 80J of the income tax Act, 1961, retrospectively, was within the legislative competence of the Parliament?

In Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, it has been held by the Supreme Court that sub-rule (3) of rule 19A, insofar as it provided for the exclusion of borrowed moneys and debts in the computation of the capital employed by new industrial undertaking for the purpose of tax exemption, could not be said to be outside the rule making authority conferred on the Central Board u/s 80J(1) and was a perfectly valid piece of subordinate legislation. It was also held that since rule 19A did not suffer from any infirmity and was valid in its entirety, the Finance Act, 1980, insofar as it amended section 80J with retrospective effect from 1-4-1972, was merely clarificatory in nature and was accordingly valid.

The learned counsel for the assessee conceded that in view of the fact the questions sought to be referred by it has substance are now concluded by the decision of the aforesaid decision of the Supreme Court, the reference would be merely academic and the applications are, therefore, liable to be rejected. Consequently, this application fails and is accordingly dismissed. No order as to costs in the circumstances of the case.