Borrowed capital excluded from section 80J capital base after Supreme Court disapproval of earlier contrary view.

Borrowed capital cannot be included in the capital base for recomputation of relief under section 80J of the Income-tax Act, 1961. The Tribunal had relied on an earlier High Court view allowing such inclusion, but that view was later disapproved by the Supreme Court, which held that borrowed capital does not form part of the capital base for section 80J purposes. The assessee accepted that position, and the question was answered in the negative in favour of the Revenue.

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Issues: Whether borrowed capital could be included in the capital base for recomputation of relief under section 80J of the Income-tax Act, 1961 for the relevant assessment years.

Analysis: The Tribunal had proceeded on the basis of an earlier High Court view that supported inclusion of borrowed capital. That view, however, was later disapproved by the Supreme Court, which held that borrowed capital cannot form part of the capital base for the purpose of section 80J. The assessee accepted that position before the Court.

Conclusion: Borrowed capital could not be included in the capital base, and the question was answered in the negative, in favour of the Revenue.

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