1982 (4) TMI 172 - AT - Income Tax

Rubber Gaskets Manufacturer Appeals Successful in Tax Relief Case

RUBBER GENERAL INDUSTRIES. Versus INCOME TAX OFFICER.

The appeals were filed by a firm manufacturing Rubber Gaskets against the orders of the AAC of IT, Coimbatore Range, and CIT (Appeals), Coimbatore for the ... - Issues:1. Computation of relief u/s 80J including borrowed capital.2. Chargeability of interest u/s 214 on excess advance-tax paid.Analysis:Issue 1: Computation of relief u/s 80J including borrowed capitalThe appeals were filed by a firm manufacturing Rubber Gaskets against the orders of the AAC of IT, Coimbatore Range, and CIT (Appeals), Coimbatore for the assessment years 1974-75, 1975-76, 1976-77, and 1977-78. The primary issue in these appeals was the computation of relief under section 80J. The assessee contended that borrowed capital should be considered as part of the capital base for calculating the relief and that the capital should not be reckoned based on the capital employed at the beginning of the computation period. The ITO and the first appellate authority did not accept these claims. The first appellate authority upheld the ITO's decision citing the new sub-section (1A) of section 80J introduced by the Finance (No.2) Act, 1980. Due to the unsettled nature of the issues regarding the computation of relief under section 80J, the Tribunal remitted the entire question back to the ITO for reconsideration in accordance with the law. Consequently, the appeals for the assessment years 1974-75, 1975-76, and 1976-77 were treated as allowed for statistical purposes.Issue 2: Chargeability of interest u/s 214 on excess advance-tax paidIn the assessment for the year 1977-78, an additional dispute arose concerning the chargeability of interest under section 214 on excess advance-tax paid by the assessee. The assessee had paid advance-tax exceeding the actual tax due. The authorities denied interest under section 214 on the excess amount, arguing that the estimate of income filed by the assessee was invalid. The Tribunal, after considering relevant case laws, disagreed with the authorities' decision and held that the assessee was entitled to interest under section 214. The Tribunal emphasized that the payment of tax before the due date should be considered for interest calculation, as supported by precedents from the Gujarat and Bombay High Courts. The Tribunal distinguished conflicting decisions from the Kerala and Andhra Pradesh High Courts, noting that the timely payment made by the assessee warranted the allowance of interest under section 214. Consequently, the Tribunal directed the ITO to include the tax paid in advance on time and allow interest under section 214. As a result, the appeal for the assessment year 1977-78 was allowed.In conclusion, all four appeals were allowed in favor of the assessee based on the issues discussed above.