MYSORE BREWERIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this petition by the assessee, Mysore Breweries Limited, under section 256(2) of the Income -tax Act, 1961, ('Act' for short), the assessee contents that a question of law does arise out of the appellate order of the Income -tax Appellate Tribunal, Bangalore Bench, Bangalore, in ITA No. 320/Bom/1978 -79 on its file and that accordingly the Tribunal be directed to state a case and refer the following question, said to be one of law, for the opinion of this court : 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in the holding that secured and unsecured loans have to be deducted from the assets in the computation of capital base for the purpose of reckoning the relief due under section 80J of the Income -tax Act, 1961, for 1975 -76 assessment?'

(2.) THE proceedings relate to the assessment year 1975 -76. The point for consideration is whether for purposes of computation of the capital bases under section 80J of the Act, borrowed capital, both secured and unsecured, requires to be deducted from the value of the assets. That the assessee was entitled to the benefit of section 80J of the Act was not in dispute; but its quantification was.

(3.) THOUGH the question as formulated does not make any specific reference to rule 19A (2) (iii) and its effect, in substance, however, the question involved is whether the said rule 19A (2) (iii) is a valid provision. The proposition acquires a further dimension by virtue of the circumstance that pending disposal of these matters before the authorities below, section 80J was itself amended by the Finance (No. 2) Act of 1980 introducing several sub -sections within section 80J. The effect of this amendment is to incorporate the rules of computation contained, inter alia, in rule 19A (2) (iii) in the main section 80J itself. By the amendment of section 80J, the question whether rule 19A(2)(iii) is ultra vires section 80J is rendered merely academic, as in view of the retrospective amendment to the main section 80J, the conclusion of the Tribunal becomes supportable on the language of the amended section, quite independently of any recourse to the impugned rule.