COMMISSIONER OF INCOME TAX Vs. WARNER HINDUSTAN LIMITED

JUDGEMENT

(1.) THE following first two questions at the instance of the revenue and: the third question at the instance of the assessee are referred to us for our decision :

(2.) THE facts necessary for answering the questions referred to us are these: In this reference, we are concerned only with the assessment year 1969-70. THE assessee is a public limited company carrying on business of manufacturing pharmaceuticals in Hyderabad, For purposes of computing the capital under Rule 19A(2) and determining the relief under Section 80J of the I.T. Act, 1961 (hereinafter referred to as "the Act"), the assessee claimed that certain liabilities, which are due but not payable, should be deducted for arriving at the figure of capital employed. Against the figure of total credits of Rs. 26,010, the assessee claimed that the liability to the extent of Rs. 6,28,028 should not be taken as liability, as the same is not due and payable as on December 31, 1967, i.e., at the end of the previous year. THE ITO did not agree with this plea and took the total figure as liability since, in his view, the proper date to be taken into account to determine the question whether the amount is due or not is not the closing date of the previous year but the first day of the computation period according to Rule 19A(2). THE AAC did not agree with the view of the ITO and upheld the assessee's contention that borrowed moneys and debts due by the assessee as contemplated in Sub-rule (3), Rule 19 A, must be moneys and debts due and payable and not merely moneys and debts owed on the first date of the computation period. On appeal by the revenue, the Tribunal, relying upon the decision of the Bench of the Bombay Tribunal, confirmed the order of the AAC.

(3.) QUESTIONS Nos. 2 and 3 go together. Mr. Rama Rao, the learned counsel appearing for the revenue, contended that the Tribunal was in error in holding that the ITO has to take into account only the borrowed moneys and debts, which are due and payable as on January 1, 1968, for making deductions under Sub-rule (3) of Rule 19A, but not all amounts which the assessee owed as per the figures available from the balance-sheet. The Tribunal came to this conclusion on the basis of the decision of the Tribunal, Bombay Bench "E".