Capital employed under section 80J and transfer of import entitlements were both treated under binding precedent, with Revenue prevailing.

For section 80J relief, capital employed had to be computed under rule 19A(3) by deducting borrowed monies, loans and relatable current liabilities, and the Jaipur undertaking was treated consistently with binding precedent on whether it was a separate and independent unit not hit by section 80J(4); these questions were answered in favour of the Revenue. The receipt from transfer of import entitlements under the export promotion scheme was also treated as taxable income, following the controlling view in the assessee's own case, and that issue too was decided in favour of the Revenue. The reference thus resulted in a mixed outcome on the cross-references.

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Issues: (i) Whether, for relief under section 80J, the loans, current liabilities and borrowed monies relatable to the Jaipur undertaking were to be deducted while computing the capital employed, and whether the Jaipur factory qualified as a separate and independent unit not hit by section 80J(4). (ii) Whether the amount received on transfer of import entitlements under the export promotion scheme was taxable income.

Issue (i): Whether, for relief under section 80J, the loans, current liabilities and borrowed monies relatable to the Jaipur undertaking were to be deducted while computing the capital employed, and whether the Jaipur factory qualified as a separate and independent unit not hit by section 80J(4).

Analysis: The computation of capital employed for section 80J relief was governed by rule 19A(3), and the settled position was that borrowed monies and debts had to be deducted in accordance with the rule. The question whether the Jaipur factory was a separate and independent unit and whether the undertaking involved splitting up or reconstruction of an existing business was also answered consistently with the earlier binding decision in the assessee's own case and the governing Supreme Court ruling on section 80J.

Conclusion: The questions on this issue were answered in the affirmative in favour of the Revenue.

Issue (ii): Whether the amount received on transfer of import entitlements under the export promotion scheme was taxable income.

Analysis: The receipt arising from transfer of import entitlements was treated as taxable income, following the binding view already taken in the assessee's own case.

Conclusion: This issue was answered in the affirmative in favour of the Revenue.

Final Conclusion: The reference was disposed of by answering the questions arising from the assessee's reference against the assessee and the questions arising from the Revenue's reference in favour of the assessee, resulting in a mixed outcome on the cross-references.

Ratio Decidendi: For section 80J relief, capital employed must be computed in accordance with the statutory rule by giving effect to the prescribed deductions, and receipts from transfer of import entitlements under the export promotion scheme are taxable where so concluded by the controlling precedent.

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