Court affirms Revenue's win over assessee on tax issues: surtax deduction, liability for capital employed, relief computation.

The court upheld the Tribunal's decision, ruling in favor of the Revenue against the assessee on all three issues: deduction of surtax payable in arriving at taxable income, deduction of liabilities for computing capital employed under section 80J, and computation of capital for relief under section 80J based on average amounts. The court referred to relevant precedents and interpretations of tax laws, maintaining the decisions in favor of the Revenue without costs awarded to either party.

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Issues:
1. Deduction of surtax payable in arriving at taxable income.
2. Deduction of liabilities for computing capital employed under section 80J.
3. Computation of capital for relief under section 80J based on average amounts.

Analysis:

Issue 1:
The first issue pertains to the deduction of surtax payable by the assessee in arriving at taxable income. The Tribunal disallowed the surtax liabilities claimed as business expenditure by the assessee. The court referred to precedents from Highway Cycle Industries v. CIT, Simon Carves India Ltd. v. CIT, Organon (India) Ltd. v. CIT, and S. L. M. Maneklal Industries Ltd. v. CIT, where similar claims were disallowed. The court upheld the Tribunal's decision, ruling in favor of the Revenue against the assessee on this issue.

Issue 2:
The second issue involves the deduction of liabilities for computing capital employed under section 80J. The Tribunal held that liabilities should not be deducted while computing capital for section 80J purposes. The court cited the decision in Lohia Machines Ltd. v. Union of India, where the majority judgment upheld the validity of rule 19A of the Income-tax Rules, 1962. The court answered this issue in the negative, favoring the Revenue and ruling against the assessee.

Issue 3:
The final issue concerns the computation of capital for relief under section 80J based on average amounts of increase/decrease in assets and liabilities during the relevant previous year. The Tribunal accepted the assessee's additional ground that the original cost of fixed assets should be considered, not their written down value. Citing the decision in Lohia Machines Ltd. v. Union of India, the court answered this issue in the negative, favoring the Revenue and ruling against the assessee.

In conclusion, the court disposed of the references with no order as to costs, maintaining the decisions in favor of the Revenue on all three issues based on the applicable legal precedents and interpretations of relevant tax laws and rules.

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