1. Two questions stand referred to us by the Income-tax Appellate Tribunal in this reference, viz. :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amount of Rs. 41,29,543 representing the non-refundable deposits received by the assessee-society from its members was not liable to be deducted from the value of its assets in the computation of its capital for the purpose of deduction under section 80J of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the furnishing of particulars was a condition precedent to the exercise of jurisdiction on the part of the Department to grant the depreciation allowance ?'
2. A few facts may be stated. The assessee is a co-operative society deriving income from, manufacture and sale of sugar. We are concerned with the assessment year 1968-69. The assessee claimed relief under s. 80J of the I.T. Act, 1961. The ITO excluded from the computation of capital employed an amount of Rs. 41,29,543 which represented deposits received by the assessee from its members. The assessee carried the matter in appeal before the AAC, and it was contended before the AAC that certain non-refundable deposits were collected by the assessee from its members which were used for repayment of a loan to the Industrial Financial Corporation. The said deposits were subsequently to be converted into share capital. It was submitted, therefore, that the ITO was in error in treating the amount as borrowed moneys or debt due by the appellant and excluding the same. The AAC accepted the submission made on behalf of the assessee and directed that the capital computation should be redone by the ITO. The Department thereafter took the matter before the Tribunal. The Tribunal considered the provisions of sub-r. (3) of r. 19A and upheld the conclusion of the AAC. One additional argument was raised before the Tribunal. The Tribunal has set out the said argument in the words of the Department representative in its appellate order, and the said argument may be reproduced in his very words :
'The AAC erred in granting relief under section 80J which is not admissible in view of the clam for depreciation for the assessment year concerned which must be allowed in view of the Allahabad High Court decision in Ascharjlal Ram Parkash v. CIT : 90ITR477(All) .'
Sub-rule (3) of r. 19A of the rules has been extracted by the Tribunal in its appellate order and the same in force at the relevant time reads as under :
'(3) From the aggregate of the amounts as ascertained under sub-rule (2) shall be deducted the aggregate of the amounts, as on the first day of the computation period, of borrowed moneys and debts due by the assessee (including amounts due towards any liability in respect of tax), not being.... (a) in the case of an assessee being a company, the amount of its debentures, if any, and
(b) in the case of any assessee (including a company) any moneys borrowed from an approved source for the creation of a capital asset in India, if the agreement under which such moneys are borrowed provides for the repayment there of during a period of not less than seven years.'
3. Mr. Dastur on behalf of the assessee has pointed out that the aggregate amount of deposits in the instant case could not be considered either as borrowed moneys or a debt and that in any event it could never be regarded as a debt due by the assessee. It is now well settled that the words 'debt due' have a much narrower connotation than the expression 'debt owed' [see CIT v. National organic chemical Industries Ltd. : 115ITR56(Bom) . Bearing in mind the two-fold characteristic of these deposits, namely, that they were non-refundable and at a particular stage were to be converted into share capital of the assessee, we have to uphold both the submissions of Mr. Dastur. If that be so, the computation done by the ITO was not correct, and the directions given by the AAC which were subsequently confirmed by the Tribunal appear to be proper.
4. Question No. 2 obviously pertains to the arguments raised by Mr. Ajinkya, the departmental representative, for the first time before the Tribunal. That argument was based on the language employed by s. 32 of the I.T. Act, 1961.
5. However, question No. 2 as it is framed does not reflect in any manner that the claim of depreciation or lack of such claim by the assessee is in any way connected with the computation of allowance under s. 80J or the entitlement to allowance under s. 80J. As framed, we feel that this question does not arise from the order of the Tribunal and is not relevant to the point under discussion before it in appeal. The argument was understandable if it was connected with the claim of the assessee to allowance under s. 80J or computation of the said claim. We will not speculate on what argument was actually advanced and how the argument was developed before the Tribunal, but having read the discussion in the appellate order, we find that it is not concerned directly with the claim or computation of deduction under s. 80J and in that view of the matter we think we should not answer question No. 2. It may be made clear that any such question directly connected with an assessee's claim for deduction under s. 80J is expressly left open for future consideration if occasion arises. In the view that we have taken, it is unnecessary t answer question No. 2 or to consider whether any such argument ought to have been allowed to be taken for the first time before the Tribunal.
6. In the result, the questions referred to us are answered as under : question No. 1 : In the affirmative and in favour of the assessee.
Question No. 2. : Not answered in accordance with out views expressed above
7. The Department to pay the costs of the reference to the assessee.