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Commissioner of Income Tax, Bombay City-i, Bombay Vs. Hoechst Pharmaceutical Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Application No. 60 of 1983
Judge
Reported in[1984]149ITR94(Bom)
ActsIncome Tax Act, 1961 - Sections 256(2); Income Tax Act, 1922 - Sections 15C; Income Tax Rules, 1962 - Rule19
AppellantCommissioner of Income Tax, Bombay City-i, Bombay
RespondentHoechst Pharmaceutical Ltd.
Excerpt:
- .....of tax are to be deducted.3. the petitioner company has shown in its balance-sheet advance tax paid as an asset. as against this, on the liabilities side, the full amount of liability for payment of tax has been shown without reducing it by the amount of advance tax already paid. it is the contention of the department that advance tax paid is not an asset. the assessee has submitted that advance tax payment is in the nature of a deposit. the assessee has also submitted that the capital has been correctly computed in any view of the matter in the present case.4. mr. r. j. joshi, learned counsel for the department, drew our attention to a decision in the case of cwt v. arivindbhai chinubhai : [1982]133itr800(guj) , to the effect that for the purpose of wealth-tax the amount of advance.....
Judgment:

Sujata V. Manohar, J.

1. This is an application under s. 256(2) of the I. T. Act, 1961, for asking the Tribunal to state a case and raise the following question of law :

'Whether, on the facts and in the circumstances of the case, the Tribunals was right in law in holding that the amount of the advance tax paid on account of the profits of the new industrial undertaking constitutes an asset the value of which should be considered in the computation of capital of the new industrial undertaking for purposes of section 80J of the Income-tax Act, 1961 ?'

2. The question relates to the calculation of capital employed in an industrial undertaking for the purpose of s. 80J of the I.T. Act, 1961. This calculation has to be made in accordance with the provisions of rule 19A of the I.T. Rules, 1962. Under sub-rule (3) of rule 19A, in computing the value of capital employed, amounts due towards any liability in respect of tax are to be deducted.

3. The petitioner company has shown in its balance-sheet advance tax paid as an asset. As against this, on the liabilities side, the full amount of liability for payment of tax has been shown without reducing it by the amount of advance tax already paid. It is the contention of the Department that advance tax paid is not an asset. The assessee has submitted that advance tax payment is in the nature of a deposit. The assessee has also submitted that the capital has been correctly computed in any view of the matter in the present case.

4. Mr. R. J. Joshi, learned counsel for the Department, drew our attention to a decision in the case of CWT v. Arivindbhai Chinubhai : [1982]133ITR800(Guj) , to the effect that for the purpose of wealth-tax the amount of advance tax paid cannot be considered as an asset. It is true that advance tax paid is not an asset for the purpose of wealth-tax. And it is also possible that advance tax paid may not be counted as an asset for the purpose of rule 19A of the I.T. Rules, 1962. In the present case, however, the entry on the 'assets' side when read with the corresponding entry on the 'liabilities ' side correctly shows that the total liability to pay tax stands reduced by the stands reduced by the amount of advance tax paid. Instead of these entries, it would have been legitimate for the assessee to have shown on the 'liabilities' side the tax liability as reduced by the advance tax paid. In the present case, instead of showing the reduced liability for payment of tax in this manner, the full liability has been shown; and on the 'assets' side the amount of advance tax paid has been shown. This, however, makes no difference to the net result. In our view, therefore, the capital employed in the present undertaking for the purpose of s. 80J of the I.T. Act, 1961, has been correctly calculated.

5. The rule is, therefore, discharged.

6. No order as to costs.


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