COMMISSIONER OF INCOME TAX v. GUJARAT AGRO INDUSTRIES CORPORATION LTD
[Citation -1986-LL-0410-4]

Citation 1986-LL-0410-4
Appellant Name COMMISSIONER OF INCOME TAX
Respondent Name GUJARAT AGRO INDUSTRIES CORPORATION LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 10/04/1986
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags industrial undertaking • reference application • state government • capital employed • credit balance • written off • head office • civil suit • new unit
Bot Summary: The credit balance in the head office amount was Rs. 76,46,882 on which applying the percentage of 58 per cent relief at 7.5 per cent was worked out on Rs. 44,35,189. Before the ITO the assessee claimed allowance in respect of misappropriation amounting to Rs. 71,124 by an employee of the company. The balance amount was written off in the profit and loss account of the company. These amounts would be straight way correlated with the amount lying in H.O. account in the books of industrial undertaking for the purpose of computing the capital employed in the new unit of pesticides eligible for relief under s. 80J. With regard to point regarding misappropriation the Tribunal considered the material led before it, such as inquiry report and the charged sheet against the employee, Civil Suit filed in the Court of Civil Judge at Bharuch, etc. Regarding charge of misappropriation required to be proved against the employee and gave a finding in page 16 of the order that there was nothing on record to show that even if the employees admitted the misappropriations the amounts could not be recovered from the employees and the loss could be held pertaining to earlier year. In these circumstances, writing off or the amount by the assessee was correct on the basis that no chances of recovery in respect of the amounts existed. Question No. 2 and question No. 3 do not survive because the Tribunal has given a clear finding regarding amounts received by the company by way of application for issue of fresh capital which was directly related to the amount lying in the Head Office account in the books of new unit.


P.J. GORADIA, A.M. By this reference application Revenue requires Tribunal to refer following questions said to be questions of law arising out of Tribunal's order in ITA No. 1343/Ahd/1985- dt. 2nd May, 1985 to Hon'ble High Court of Gujarat: Whether, Tribunal has not erred in law and on facts in holding that assessee was entitled to relief under s. 80J worked out at Rs. 5,73,516 being 7.5 per cent on Rs. 76,46,882? Whether, finding of Tribunal that in absence of clear case of diversion of borrowing to new unit it would not be proper to deny claim of assessee establishing when funds of head office were sufficient enough to make investments in new unit is correct in law and sustainable from material on record? Whether Tribunal has been right in law in setting aside decision taken by CIT (A) and directing ITO to grant relief to assessee which is worked out Rs. 5,73,516 being 7.5 per cent on Rs. 76,46,882? Whether, Tribunal has not in law and on facts in holding that amount of Rs. 71,124 being amount of mis-appropriation by employee of company was allowable by way of loss in course of business under s. 28 of IT Act, 1961? facts briefly stated are as follows: assessee is company where in investment is made by State Government as also by Central Government. company is engaged in various activities comprising trading and manufacturing activities and is also having various subsidies. company claimed relief under s. 80J in respect of pesticides unit for which separate books of accounts were maintained. ITO on going through details furnished noticed that head office did have borrowed funds and own funds. Since assessee had both borrowed as well as own funds, capital employed in pesticide unit was taken at proportion of own capital to total assets of all units taken together. ITO calculated percentage of own capital at 58 per cent and granted relief accordingly. credit balance in head office amount was Rs. 76,46,882 on which applying percentage of 58 per cent relief at 7.5 per cent was worked out on Rs. 44,35,189. Before ITO assessee claimed allowance in respect of misappropriation amounting to Rs. 71,124 by employee of company. It was claimed that one Mr. B.R. Raj was in charge of Agro Services Centre of corporation at Bharuch. During his service he had done some misappropriation in connection with stock of fertilizers which were in his charge, value of which come to Rs. 76,936-67. Investigation was carried out against him, police complaint was lodged and amount of Rs. 5,853 was recovered from concerned employee. balance amount was written off in profit and loss account of company. On appeal insofar as first point is concerned, CIT (A) directed ITO to apply ratio of 5.51/7.92 to net capital of pesticides unit represented by funds of head office utilised by that unit and worked out eligible capital at Rs. 52,23,438. Inspite of fact that assessee itself pointed out that if proportion is to be worked out then this would work out to 84 per cent of own funds employed. Otherwise order of ITO was confirmed by him. Insofar as allowance of claim on account of misappropriation, CIT confirmed view taken by ITO on several grounds stated in his order. On further appeal with regard to first point Tribunal observed in para 8 of order that in this particular year there were certain factual aspects which required consideration. There was internal accrual of cash reserve to extent of Rs. 63 lakhs as also amount of Rs. 98 lakhs was received from Government in respect of shares to be issued in future. Therefore, these amounts would be straight way correlated with amount lying in H.O. account in books of industrial undertaking for purpose of computing capital employed in new unit of pesticides eligible for relief under s. 80J. With regard to point regarding misappropriation Tribunal considered material led before it, such as inquiry report and charged sheet against employee, Civil Suit filed in Court of Civil Judge at Bharuch, etc., regarding charge of misappropriation required to be proved against employee and gave finding in page 16 of order that there was nothing on record to show that even if employees admitted misappropriations amounts could not be recovered from employees and, therefore, loss could be held pertaining to earlier year. In these circumstances, writing off or amount by assessee was correct on basis that no chances of recovery in respect of amounts existed. It was also as admitted position that no amount was received in subsequent years after date of hearing of appeal by Tribunal and whatever amount was recovered same had been credited to account of employee and only balance amount was claimed. Tribunal also considered aspect that accounts of company are audited by Comptroller and Auditor General of India. It held that loss was allowable under s. 28 of IT Act itself. At time of hearing, ld. counsel for assessee objected to present reference. In our opinion, no referable question of law arises and, therefore, we decline to draw up statement of case. Question No. 1 does not arise because eligibility to relief under s. 80J was never ground before Tribunal. appeal was agitated only with regard to quantification of relief. Question No. 2 and question No. 3 do not survive because Tribunal has given clear finding regarding amounts received by company by way of application for issue of fresh capital which was directly related to amount lying in Head Office account in books of new unit. Question No. 4 also does not arise out of order of Tribunal because as rightly stated by ld. departmental representative year in which loss was allowable was question of law point but question as framed before us is with regard to allowability of loss under s. 28 itself and question of year is not at all raised in question as framed. Even during course of submissions as made out in para 15 of order it was agreed position that assessee was entitled to loss but what was required was to fix year in which loss was allowable. For this aspect Tribunal has considered various evidence led before it and came to correct conclusion. In result, application is dismissed. *** COMMISSIONER OF INCOME TAX v. GUJARAT AGRO INDUSTRIES CORPORATION LTD.
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