COMMISSIONER OF INCOME-TAX Vs. KANSAL HOSIERY WORKS

JUDGEMENT

(1.) THE matter here concerns deduction under Section 80j of the Income-tax Act, 1961, with reference to the capital employed by the assessee in the branch industrial undertaking.

(2.) THE assessee, Messrs. Kansal Hosiery Works, is engaged in an industrial activity in its branch unit. The accounts at its head office showed a credit balance of Rs. 15,60,987, and there was also development rebate reserve of Rs. 75,750, the total of these amounts being Rs. 16,36,737. The claim of the assesses was for deduction under Section 80j of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), with reference to this amount as capital in the branch unit. The Income-tax Officer, taking into account the capital of the partners including reserve surplus at the head office and the debit balance in their current account, worked out the net capital of the partners including reserve at Rs. 13,87,875, He eventually allowed deduction under Section 80j of the Act at the rate of 6 per cent. on only Rs. 2,59,619 as against Rs. 16,36,737 as claimed by the assessee.

(3.) ON appeal, the Commissioner of Income-tax (Appeals) held that, the assessee was entitled to deduction under Section 80j of the Act with reference to the capital of Rs. 13,87,875. This order was later confirmed in appeal by the Tribunal. This is what constitutes the factual background leading to the following question being referred for the opinion of this court: "whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the Commissioner of Income-tax (Appeals) that the assessee was entitled to deduction under Section 80j of the Act on the capital employed in the branch industrial undertaking as computed at Rs. 13,87,875 and not taking the partners' capital and borrowed capital at the head office proportionately ?"