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Commissioner of Income-tax Vs. Kamani Engineering Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 126 of 1975
Judge
Reported in(1986)50CTR(Bom)113; [1986]161ITR473(Bom)
ActsIncome Tax Act, 1961 - Sections 80J and 80J(4); Income Tax Act, 1922 - Sections 15C
AppellantCommissioner of Income-tax
RespondentKamani Engineering Corporation Ltd.
Excerpt:
.....gave relief to the assessee to the extent he considered..........scope of section 80j(4) of the income-tax act, 1961, and in thus holding that the profits of the unit at jaipur were entitled to relief under section 80j of the said act ?(2) whether, on the facts and in the circumstances of the case and in law, the appellate tribunal was justified in holding that the deduction of borrowed moneys and debts due by the assessee as provided for in rule l9a(3) should be made only in respect of the liabilities of the unit at jaipur and in thus directing the income-tax officer to recompute the capital employed in the unit after deduction of only such liabilities as are relatable to the unit at jaipur ?'6. the revenue's questions arise on the following facts :they relate to the assessment years 1968-69 and 1969-70, the corresponding previous years having.....
Judgment:

Bharucha, J.

1. This reference under section 256(1) of the Income-tax Act, 1961, raises two questions at the instance of the assessee and two questions at the instance of the Revenue.

2. The questions raised by the assessee read thus :

'l. Whether, on the facts and in the circumstances of the case, the loans and the current liabilities relating to the undertaking at Jaipur should be deducted from the assets for both the assessment years for the purpose of arriving at the capital employed for determining the relief under section 80J of the Income-tax Act, 1961 ?

2. Whether, on the facts and in the circumstances of the case, the sums of Rs. 1,22,371 and Rs. 7,125, respectively, received for the two assessment years on the sale of import entitlement were the taxable income of the assessee ?'

3. It is common ground that the first question must be answered in the affirmative and in favour of the Revenue, in view of the judgment of the Supreme Court in Lohia Machines Ltd. v. Union of India : [1985]152ITR308(SC) .

4. It is also common ground that the second question must be answered in the affirmative and in favour of the Revenue, in view of this court's judgment in Kamani Engineering Corporation Ltd. v. CIT : [1984]150ITR586(Bom) . Since, in that matter, special leave to appeal to the Supreme Court was given, we give to the assessee before us, on counsel's application, special leave to appeal to the Supreme Court in respect of its second question.

5. The questions raised at the instance of the Revenue read thus :

'(1) Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in holding that the factory at Jaipur was a separate and independent unit and that it did not involve any splitting up or reconstruction of a business already in existence with-in the scope of section 80J(4) of the Income-tax Act, 1961, and in thus holding that the profits of the unit at Jaipur were entitled to relief under section 80J of the said Act ?

(2) Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in holding that the deduction of borrowed moneys and debts due by the assessee as provided for in rule l9A(3) should be made only in respect of the liabilities of the unit at Jaipur and in thus directing the Income-tax Officer to recompute the capital employed in the unit after deduction of only such liabilities as are relatable to the unit at Jaipur ?'

6. The Revenue's questions arise on the following facts :

They relate to the assessment years 1968-69 and 1969-70, the corresponding previous years having ended on September 30, 1967, and September 30, 1968 The assessee is a manufacturer of transmission towers used for the supply of electricity. It had a licence for such manufacture in excess of its actual capacity in its Bombay factory. On October 31, 1962, it applied to the Government of India to shift a part of its capacity to the State of Rajasthan It was accorded sanction on October 22, 1963. It located the plant at Jaipur in Rajasthan in a new building and acquired new plant and machinery. The new unit started on June 1, 1967. The assessee claimed the benefit of section 80J of the Income-tax Act, 1961.

7. The Income-tax Officer declined to give to the assessee the benefit of section 80J of the Income-tax Act, 1961, in respect of the plant at Jaipur on the grounds that it was a continuation of the same business of the assessee though with increase in activity, that there was no new industrial undertaking and that this was a case of splitting up or reconstruction of an existing business.

8. On appeal, the Appellate Assistant Commissioner held that all the conditions of section 80J(4) of the Income-tax Act, 1961, were satisfied and gave relief to the assessee to the extent he considered admissible.

9. In appeal before the Income-tax Appellate Tribunal, the Revenue contended that the business started at Jaipur was merely an extension of the existing business of the assessee and that it had only shifted a part of its capacity there and so the provisions of section 80J of the Income-tax Act, 1961, were not attracted. The Tribunal held that the new unit at Jaipur was intended to utilise a part of the capacity for which the assessee had a licence and that there was no shifting of machinery or plant already in existence or splitting up or reconstruction of the business already in existence. Following the decision of the Calcutta High Court in CIT v. Indian Aluminium Co. Ltd. : [1973]88ITR257(Cal) , in preference to the earlier decision of the Calcutta High Court in CIT v. Textile Machinery Corporation : [1971]80ITR428(Cal) , the Tribunal granted to the assessee the benefit of the provisions of section 80J.

10. Mr. Jetly, learned counsel for the Revenue, submitted that inasmuch as there was unity of control in regard to the Jaipur plant and inasmuch as there was a shifting of a part of the capacity to Rajasthan, the provisions of section 80J of the Income-tax Act, 1961, were not attracted.

11. There is not a word to show that there was, in fact, unity of control. The shifting of a part of the capacity would seem to us to make no difference where, as here, new plant and machinery was set up in a new building constructed for the purpose. We see no merit whatever in the Revenue's contention.

12. The second question raised on behalf of the Revenue has to be answered in the affirmative and in favour of the assessee having regard to our conclusion on the first question and the judgment of this court in Indian Oil Corporation Ltd. v. S. Rajagopalan, ITO : [1973]92ITR241(Bom) .

13. The assessee's questions are answered in the affirmative and in favour of the Revenue.

14. The Revenue's questions are answered in the affirmative and in favour of the assessee.

15. On the application of Mr. Khatri, learned counsel for the assessee, a certificate of fitness to appeal to the Supreme Court is granted in respect of the second question raised by the assessee.

16. There shall be no order as to costs.


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