CARBORANDUM UNIVERSAL LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner herein is a company by name Carborandum Universal Ltd. and it prays for the issue of a writ of certiorarified mandamus by this court quashing the orders of the 2nd respondent dated September 22, 1978, confirming the order of the 1st respondent dated March 30, 1978, and to direct respondents 1 and 2 herein accord approval to the petitioner as required in their application dated October 27, 1975, under r. 2(1) of Part C of the 4th Schedule to the I.T. Act, 1961.

(2.) THE circumstances under which the petitioner has approached this court with this writ petition may briefly be noted. THE petitioner is a public limited company incorporated in the year 1954 under the Indian Companies Act, 1913, with a paid up capital of Rs. 70 lakhs and it is engaged in the manufacturer of bonded abrasives, coated abrasives, aluminium-oxide grains and refractories all of them being listed in the Fifth and Sixth Schedules to the I.T. Act, 1961. On 26th August, 1970, the petitioner created a fund known as "Cumi Employees Gratuity Fund" by executing an irrevocable trust, the sole purpose of which was the provision of gratuity to their employees then numbering about 1,354. On October, 15, 1970, the petitioner applied under r. 2(1) of Part C of the 4th Schedule to the 1st respondent herein for the grant of approval of the said fund. THE 1st respondent required certain rectifications to be carried out in the deed of trust. Further, the Payment of Gratuity Act, 1972, enacted by Parliament had come into force on September 16, 1972, and as such it became necessary to make several adaptations in the trust deed to bring it in conformity to the provisions of the said Act. Accordingly the petitioner executed a fresh deed of trust dated January 2, 1975, and applied for approval of the fund to the 1st respondent afresh on October 27, 1975.

(3.) IT should be borne in mind that the relevant document evidencing the loan has been executed as a mortgage after paying the stamp duty treating it as a mortgage of immovable property. The document has been registered under the Registration Act, treating it as a document dealing with immovable property. Both the lender as well as the borrower have treated the property secured as an immovable property. In those circumstances we have to consider whether the loan granted is on the security of immovable property or not.