CALCUTTA HIGH COURT
Commissioner of Income Tax
Vs
Union Carbide India Ltd
(Dipak Kumar Sen, J.)
03.06.1986
JUDGEMENT
Dipak Kumar Sen, J.
( 1. ) THIS consolidated reference arises out of the assessment of Union Carbide India Ltd., the assessee, to income-tax in the assessment years 1973-74 to 1975-76. On an application of the Revenue under Section 256(1) of the Income-tax Act, 1961 (" the Act"), the following question has been referred as a question of law arising out of the order of the Tribunal in the assessment year 1975-76 for the opinion of this court: " 1. Whether the Tribunal was justified in holding that capital work-in-progress in the industrial undertaking Electrolytic Manganese Company, should be included in the computation of 'capital employed' for the purpose of the relief under Section 80J of the Income-tax Act, 1961 ? "
( 2. ) ON an application of the assessee under Section 256(1), the following
questions have been referred as questions of law arising out of the orders of
the Tribunal for the opinion of this court: For the assessment year 1974-75 : "2.
Whether, on the facts and in the circumstances of the case, the Tribunal erred
in holding that while computing the capital for the purpose of relief under
Section 80J, the accrued proportionate interest on borrowed capital has to be
excluded in view of the fact that the retrospective nature of the amendment of
the Finance Act, 1980, has been challenged before the. Hon'ble Supreme Court ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was
right in confirming the Income-tax Officer's action to deduct 'proportionate
interest accrued in respect of borrowed funds' while computing the capital
employed for the purposes of Section 80J, vide his order dated October 31,
1977, giving effect to the orders of the Commissioner of Income-tax under
Section 263, dated January 20, 1976, and of the Appellate Tribunal, dated May
13, 1977, when no such direction was given by the Commissioner of Income-tax or
the Tribunal in their aforesaid orders ?" For the assessment year
1975-76: " 4. Whether, on the facts and in the circumstances of the
case, the Tribunal erred in holding that while computing the capital for the
purpose of relief under Section 80J, the accrued proportionate interest on
borrowed capital has to be excluded in view of the fact that the retrospective
nature of the amendment of the Finance Act, 1980, has been challenged before
the Hon'ble Supreme Court ? 5. Whether, on the facts and in the circumstances
of the case, the Tribunal was right in confirming the Income-tax Officer's
action to deduct 'proportionate interest accrued in respect of borrowed funds'
while computing the capital employed for the purposes of Section 80J, vide his
order dated October 31, 1977, giving effect to the order of the Appellate
Assistant Commissioner, dated June 27, 1977, when no such direction was given
by the Appellate Assistant Commissioner ?" For the assessment years
1973-74 and 1974-75 : " 6. Whether, on the facts and in the
circumstances of the case, the Tribunal erred in not admitting the grounds
relating to the computation of capital employed in several industrial
undertakings taken before the Tribunal in cross-objections as an aspect of the
computation of capital employed in the matter of allowing relief under Section
80J already considered by the Commissioner of Income-tax (Appeals) in his order
dated October 28, 1978, and the plea raised in this behalf was purely one of
law involving no further investigation ? " On the question referred
at the instance of the Revenue for the assessment year 1975-76, it has been
found that the assessee set up a new industrial undertaking called "
Electrolytic Manganese Company " in the relevant assessment year. The
Income-tax Officer excluded the value of the capital work-in-progress in
respect of the said undertaking in the relevant assessment year on the ground
that on the basis of average, capital work-in-progress prior to its
installation had to be excluded from the value of the assets. The Commissioner
(Appeals) accepted the contention of the assessee and the matter thereafter
came up before the Tribunal by way of further appeal by the Revenue. The Tribunal
held that the controversy was covered by a decision of this court in CIT v.
Indian Oxygen Ltd1. and following the said decision upheld the
order of the Commissioner (Appeals). At the hearing before us, it was
submitted by the learned advocate for the Revenue that for the purpose of being
included in the capital employed, the same should be shown to have been
employed on the first day of the accounting year. He drew our attention to the
assessment order where it had been noted by the Income-tax Officer that in
respect of the said Electrolytic Manganese Company, the opening capital
work-in-progress had been installed during the year. The learned advocate
submitted that in the aforesaid facts, following the decision of the Supreme
Court in Lohia Machines Ltd. v. Union of India2, it should be
held that the Tribunal was not justified in holding that the capital
work-in-progress in the new industrial undertaking should be included in the
computation of the capital employed.
( 3. ) THE learned advocate for the assessee contended, on the other hand, that
whether the capital work-in-progress had been employed on the first day of the
accounting period was a question of fact and the same has not been disputed or
agitated by the Revenue up till now. It was submitted that this court sitting
in its advisory jurisdiction should not enquire into facts not on record. It
was submitted that this factual aspect of the question was never raised or
agitated in any of the earlier proceedings. The controversy which was
raised before the Tribunal undoubtedly is covered by the said decision of this
court in Indian Oxygen Ltd,'s case [1978] 113 ITR 109 and, therefore, it could
not be said that the Tribunal was not justified in holding that the capital
work-in-progress had to be taken into account in computing the capital for the
purpose of Section 80J of the Act. It is not established from the facts on
record that such capital had not been employed on the first day of the
accounting period. ;
Cases Referred.
1[1978] 113 ITR 109
2[1985] 152 ITR 308