Law: Income Tax Act, 1961

Section: 80-J,256(2)

Income-tax----Reference---Special deduction---Borrowed capital---Capital borrowed by one unit from another unit of same industry---Whether to be deducted from capital employed in the said unit for purpose of computation of deduction under S.80-J---Is a question of law to be referred---Indian Income Tax Act, 1961, Ss.80-J & 256(2). The assessee was a public limited company. Its rim manufacturing unit had taken a loan from the cycle manufacturing unit. The Income-tax Officer deducted the loan while computing the capital and allowing deduction under section 80-J of the Income Tax Act, 1961. The Tribunal took the view that both units were part and parcel of one identity in law, i.e., the assessee, and held that the loan would go into capital computation for working out the deduction under section 80-J. On a reference application under section 256(2): Held, that the question whether the capital borrowed by one unit from another unit of the company was to be deducted from the capital employed in the said unit for the purpose of computation of deduction under section 80-J, was a question of law to be referred. JUDGMENT ASHOK BRAN, J.---This is a petition filed by the Commissioner of Income-tax, Haryana, Rohtak, under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act), for the assessment year 1978-79 directing the Income-tax Appellate Tribunal, Delhi Bench "B", Delhi (hereinafter referred to as the Tribunal), to refer the following question of law for the opinion of this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that loan of Rs.27,72,796 should be taken into account for working out deduction available under section 80-J?" Reference is being made only to those facts which relate to the controversy raised in this petition. The assessee is a public limited company. The return for the assessment year 1978-79 was filed on July 27, 1978, declaring an income of Rs.93,53,580. The Income-tax Officer, Addl. Coys-cum-Trust Ward, Rohtak, examined the case and framed the assessment under section 143(3) on October 21, 1981, on a total income of Rs.1,04,49,250 after making certain…

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