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Section 80J of the Income-tax act, 1961, read with rule 19A(3) of the Income-tax rules, 1962 - Deductions - Profits and gains from newly established industrial undertakings - While computing relief under section 80j, for assessment year 1971-72, capital assets, as on 1-4-1970, included certain share deposits received towards allotment of shares to nonresident shareholders - Reserve bank of India's permission for said allotment taken on 6-4-1970 - Whether impugned share deposits were not borrowed moneys or debts due by assesses within the meaning of rule 19A(3) - Held, yes Facts For the assessment year 1971-72 the assessee-company obtained relief of Rs. 1,32,267 under section 80J read with rule 19A. For this purpose, capital assets, as on 1-4-1970, were taken at Rs. 26,74,862, which included the share deposits of Rs. 6,00,000 received towards allotment of share to nonresident shareholders. The Commissioner opined that, since the statutory permission was taken from Reserve Bank on 6-4-1970, the said amount of Rs. 6,00,000 constituted a liability and, therefore, was a debt excludible from computation under rule 19A. The Commissioner, acting under section 263, negatived the assessee's contentions (i) that the actual allotment of shares could be done only after 6-4-1970 because of some delay in approval by the Reserve Bank; and (ii) that all such moneys, whether called as a deposit or share capital, should be included in the determination of the capital employed for purposes of relief under section 80J. The Commissioner, accordingly, directed the withdrawal of excessive relief and recomputation of capital. The Tribunal, on appeal, reversed Commissioner's order on the grounds, inter alia, (i) that the liability to repay or return the amount was contingent, arising only on Reserve Bank's refusing required permission so that the amount payable could not be termed as a "debt" until the contingency had happened; and (ii) that the amount could not be said to be a borrowing because there was no consensus in this behalf and there was no offer for lending money which had been accepted. On reference: Held Under rule 19A(2 )(v), whatever amount is held by the industrial…

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