Skip to content


Secals Ltd. Vs. Third Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1984)8ITD917(Mad.)
AppellantSecals Ltd.
RespondentThird Income-tax Officer
Excerpt:
.....revenue, being only with a view to save public time and cost. i am of the view that the gujarat high court decision being the only one covering this aspect of the matter, it would be proper to follow it also bearing in mind the bombay high court decision in cit v.smt. godavaridevi saraf [1978] 113 itr 589. having regard to the above position and on balance of convenience, i would set aside the ito's computation of the deduction under section 80j as also the commissioner (appeals)'s findings thereon and restore the matter to the ito for decision afresh after the decision of the supreme court or the madras high court is available.order under section 255(4) of the income-tax act, 1961 - whereas we are unable to agree on the point set out below for the assessment year 1978-79, we refer.....
Judgment:
1. The assessee has made this appeal against the order dated 26-8-1982 of Shri K. Arunachalam, Commissioner (Appeals), who dismissed the appeal against order dated 11-3-1981 of Shri S. Kulandaivelu, ITO.2. At the time of hearing, it was contended before us that no doubt in view of the amendment of Section 80J of the Income-tax Act, 1961 ('the Act'), vide the Finance (No. 2) Act, 1980, the liabilities are to be excluded in the computation of the capital employed for the purpose of relief under Section 80J but in matters of other assessees the question of constitutional validity of the amendment supra is pending for disposal in the Hon'ble Supreme Court and, therefore, the issue be decided in accordance with the decision of the Hon'ble Supreme Court on the issue and as such the matter be sent back to the Commissioner (Appeals) to decide it accordingly. On the other hand, Shri K.Venkataraman, the learned departmental representative, contends that in view of the decision of two Hon'ble High Courts in the cases of Traco Cable Co. Ltd. v. CIT[1982] 138 ITR 385 (Ker.) and CIT v. K.N. Oil Industries [1982] 134 ITR 651 (MP). There is no question to accept the contention of the learned counsel for the assessee as their Lordships of both these High Courts held that the amended section is applicable and held to be followed by the income-tax authorities in providing relief under Section 80J. The pendency of the matters where the constitutionality of the amendment of Section 80J vide the Finance (No.2) Act, 1980, is changed immaterial (sic). In rebuttal the learned counsel for the assessee contends that the Benches of the Tribunal are sending back the matters with the direction that relief is to be computed under Section 80J in accordance with the decision of the Hon'ble Supreme Court on the issue stated above.

3. We have heard the rival contentions and gone through the records before us. We do not see any force in the contention of the learned counsel of the assessee. If these are to be accepted, then we are not taking the amended section on the statute book and in acting likewise we are not vested with jurisdiction. The jurisdiction of the Tribunal is to take the section which is there on the statute book and that is the law for it till it is declared unconstitutional finally by the Hon'ble Supreme Court. There is no such situation over here.

Furthermore, there is neither any writ by the assessee in the High Court or the Supreme Court and none of these has granted any stay to it. Therefore, the disposal of the matter cannot be held in abeyance and it cannot be sent back to the Commissioner (Appeals) to decide it after the decision of the Supreme Court. The Benches of the Tribunal over here, where the Judicial Member is a party, is taking the view to decide the appeals on following the provisions of amended section vide which the liabilities are to be included for the purpose of computation of relief under Section 80J in the computation of the capital employed.

Therefore, we hold that the contention of the learned departmental representative is well founded and must prevail. Thus, following the aforesaid decision of the Hon'ble High Courts and that of the Tribunal, we hold that the authorities below are justified in excluding the liabilities in computing the capital employed for the purpose of providing relief under Section 80J. Hence, we confirm the assessment order. The appeal is dismissed.

1. I have perused the order of my brother, the learned Judicial Member.

With great respect, I am unable to agree. The same issue was considered in the decision of the Tribunal in the case of Sundaram Fasteners Ltd. [IT Appeal Nos. 1608 and 1609 (Mad.) of 1982] and the Tribunal deemed it fit to remit the matter back to the ITO for recomputation of the profit under Section 80J after the decision of the Supreme Court or the Madras High Court is available, whichever is earlier. In coming to the above conclusion, the Tribunal relied on the order of the Gujarat High Court in the case of CIT v. Swat District Co-operative Milk Producers Union Ltd. [Income-tax Application No. 81 of 1982] in which the same procedure adopted by the concerned Bench of the Tribunal to remit the matter back to the Commissioner (Appeals) with a direction to recompute the profit after the pronouncement of the decision of the Supreme Court on the vires of the retrospective amendment was approved by the Gujarat High Court as being only with a view to save public time and cost. The Tribunal in its order also referred to K.N. Oil Industries' case (supra) and Traco Cable Co. Ltd.'s case (supra), relied on by the department cited supra in the Judicial Member's order, and stressed that in these cases the specific question as posed before the Gujarat High Court was not raised.

2. It may also be stressed here that the issue before us relates only to a question of procedure and not of law. The Madras Benches of the Tribunal have generally been following the practice of restoring the matter regarding Section 80J to the ITO to await the decision of the Supreme Court. This procedure is in full accordance with the order of the Gujarat High Court to the effect that it is in the interest of the public and the revenue, being only with a view to save public time and cost. I am of the view that the Gujarat High Court decision being the only one covering this aspect of the matter, it would be proper to follow it also bearing in mind the Bombay High Court decision in CIT v.Smt. Godavaridevi Saraf [1978] 113 ITR 589. Having regard to the above position and on balance of convenience, I would set aside the ITO's computation of the deduction under Section 80J as also the Commissioner (Appeals)'s findings thereon and restore the matter to the ITO for decision afresh after the decision of the Supreme Court or the Madras High Court is available.

Order under Section 255(4) of the income-tax act, 1961 - Whereas we are unable to agree on the point set out below for the assessment year 1978-79, we refer the following point of difference of opinion to the President for reference to Third Member under Section 255(4) of the Act: Whether, on the facts and in the circumstances of the case, and relying on the ratio of the earlier decision of the Tribunal in the case of Sundaram Fasteners Ltd., Madras, the Tribunal would be justified in vacating the findings of the Commissioner (Appeals) and the Income-tax Officer regarding the computation of the deduction under Section 80J of the Income-tax Act, 1961 and restoring the matter to the Income-tax Officer for recompu-tation of the profit after the decision of the Supreme Court or the Madras High Court regarding the retrospectivity of the amended Section 80J (as amended by Section 17 of the Finance (No. 2) Act, 1980) becomes available ?" 1. Owing to difference of opinion between my learned brothers on the point set out below, the President has nominated me as Third Member under Section 255(4): Whether, on the facts and in the circumstances of the case, and relying on the ratio of the earlier decision of the Tribunal in the case of Sundaram Fasteners Ltd., Madras, the Tribunal would be justified in vacating the findings of the Commissioner (Appeals) and the Income-tax Officer regarding the computation of the deduction under Section 80J of the Income-tax Act, 1961, and restoring the matter of the Income-tax Officer for recomputation of the profit after the decision of the Supreme Court or the Madras High Court, regarding the retrospectivity of the amended Section 80J (as amended by Section 17 of the Finance (No. 2) Act, 1980) becomes available ?" 2. The point of difference was very clearly worded and the difference of opinion between my learned brothers is whether the decision of the Tribunal in the case of Sundaram Fasteners Ltd. (supra) should be followed and that the order passed by the Commissioner (Appeals) should be vacated and that the ITO should be directed to recompute the capital base after the decision of the Supreme Court or the Madras High Court regarding the validity of the retrospective amendment to Section 80J, as amended by Section 17 of the Finance (No. 2) Act, 1980.

3. Identical point of difference of opinion has come before me in the case of Sankareswari Process, Sivakasi v. ITO [IT Appeal No. 257 (Mad.) of 1983 dated 17-3-1984] and by my order I came to the conclusion that the view expressed by the learned Accountant Member is more preferable to be adopted on the balance of convenience rather than the view expressed by the learned Judicial Member. For the reasons given therein, which I do not think I need reproduce here, I would hold that the view expressed by the earlier Bench in the case of Sundaram Fasteners Ltd. (supra) is to be followed for vacating the findings of the Commissioner (Appeals) and restoring the matter to the ITO regarding the computation of the deduction under Section 80J, awaiting the final outcome of the decision of the Supreme Court or the Madras High Court, as the case may be, regarding the retrospectivity of the amended Section 80J.4. The learned departmental representative argued that the benefit of the decisions of the High Courts in the cases of Traco Cable Co. Ltd. (supra), K.N. Oil Industries (supra) and CIT v. Toshiba Anand Lamps Ltd. [1984] 145 ITR 563 (Ker.) was not available to the Bench when it decided the case of Sundaram Fasteners Ltd. (supra) and as these High Courts have clearly laid down that the amended provisions should be applied and the borrowed capital should be deducted in arriving at the capital base, those decisions should be followed. This is an argument on merits. The point of difference referred to me is confined to the question whether the order of the Tribunal in the case of Sundaram Fasteners Ltd. (supra) should be relied upon or not. I will not, therefore, be able to go into the merits of the case and apply the rules laid down by these three High Courts. Anyway, since the matter is not finally decided by the Tribunal, I am of the opinion that no prejudice is caused to the interests of the revenue. As soon as the decision of the Supreme Court is available, it is open to the department to immediately apply it and pass orders in accordance therewith. I am, therefore, unable to decide the matter conclusively, one way or the other, on merits.

5. The matter will now go before the regular Bench for the disposal of the appeal in accordance with the opinion of the majority.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //