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Issues: (i) Whether the loan of Rs. 86,50,000 taken by the corporation was liable to be treated as creating a capital asset within the Second Schedule of the Companies (Profits) Surtax Act, 1964. (ii) Whether the assessee's claim was rightly allowed in appeal.
Issue (i): Whether the loan of Rs. 86,50,000 taken by the corporation was liable to be treated as creating a capital asset within the Second Schedule of the Companies (Profits) Surtax Act, 1964.
Analysis: The amount was found, on the Tribunal's appreciation of the record, to have been utilised for creation of capital assets. That factual finding governed the reference and supported inclusion of the amount in the surtax computation.
Conclusion: The question was answered in the affirmative, in favour of the assessee.
Issue (ii): Whether the assessee's claim was rightly allowed in appeal.
Analysis: The allowance of the claim by the appellate authority stood confirmed because the Tribunal's finding that the loan was used for creation of capital assets was accepted.
Conclusion: The question was answered in the affirmative, in favour of the assessee.
Final Conclusion: Both referred questions were resolved against the Revenue and the assessee's treatment of the loan in the surtax computation was upheld.
Ratio Decidendi: Where the Tribunal records a finding of fact that borrowed funds were utilised for creation of capital assets, the reference must be answered accordingly in surtax computation matters.
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