COMMISSIONER OF INCOME TAX Vs. SYNTHETICS LIMITED

JUDGEMENT

(1.) THE Tribunal, Indore Bench, Indore, at the instance of the CIT, Bhopal, has made this reference under s. 256(1) of the IT Act, 1961, for the opinion of this Court on the following questions of law :

(2.) SO far question No. (3) is concerned, learned counsel for the parties submitted that in view of the decision of the Supreme Court relating to s. 80J of the IT Act, 1961, in Lohia Machines Ltd. vs. Union of India (1985) 44 CTR (SC) 328 : (1985) 152 ITR 308 (SC), this question has to be decided in favour of the Department and against the assessee. Accordingly, this question is answered in favour of the Department and against the assessee.

(3.) SIMILARLY, the assessee-company claimed the total expenditure of Rs. 14,35,224 on the issue of its shares. The break-up of these expenses is as follows : The assessee's contention was that since the aforesaid amount was less than the amount calculated at 2-1/2 per cent of the capital employed, it was entitled to deduct from its profits 1/10th of the entire amount as laid down under s. 35D(1) of the Act. The ITO examined the assessee's claim and accepted the same in respect of items Nos. (1) to (4). As regards the amount of Rs. 3,22,558 included in item No. (5), the ITO found on a scrutiny of the details that it included a sum Of Rs. 76,947 incurred on advertising, printing, etc., of the prospectus. He, therefore, admitted the assessee's claim to this sum of Rs. 76,947 also. As regards the remaining amount of Rs. 2,45,611 (Rs. 3,22,558 minus Rs. 76,947), included in item No. (5) and a sum of Rs. 3,57,799 included in item No. (6), the ITO found that these expenses were incurred in connection with the refund of Rs. 18.82 crores which was the amount over-subscribed. According to the ITO, the above expenditure of RS. 6,03,410 did not fall within the provisions of s. 35(D)(2)(C)(iv) of the Act. He, therefore, restricted the assessee's claim under s. 35D(1) of the Act to the extent of Rs. 8,31,814 and disallowed the balance claim to the extent of Rs. 6,03,410.