TaxTMI 
TaxTMI 
1992 (10) TMI 44
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessment year 1967-68 and section 80J for the remaining assessment years. One of the contentions which was urged by the assessee before the Tribunal by way of an additional ground was to the effect that no part of borrowed moneys and deposits taken from distributors ought to have been deducted from the capital for the purposes of the above sections as these were not "debts" which were "due" for payment on the relevant dates. A major part of the borrowings of the assessee consisted of loans received from banks by way of overdrafts against hypothecation of stock-in-trade. The Tribunal has upheld the contention of the assessee that, under these sections read with the rules in force at the relevant time, borrowed moneys and debts due by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplicable was section 84 read with rule 19(3) of the Income-tax Rules as then in force. The relevant provisions of rule 19 were as follows : " 19. (1) For the purpose of section 84, the capital employed. . . . shall be taken to be - . . . . (3) Any borrowed money and debt due by the person carrying on the business shall be deducted . . . ..." For the assessment years 1968-69 to 1970-71, section 84 was replaced by section 80J of the Income-tax Act, 1961, and rule 19(3) was replaced by rule 19A(3). The relevant portions of rule 19A as in force during these assessment years were as follows : "19A. Computation of capital employed in an industrial undertaking or a ship or the business of a hotel for the purposes of section 80J.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g capital for the purposes of these sections. Only for a short period from April 1, 1968, to April 1, 1972, when rule 19A(3) was in operation as set out earlier, borrowed moneys of the kind specified in sub-rules (a) and (b) of that rule were included in the computation of capital employed. The Supreme Court has analysed these sections on the basis that, while computing the capital employed for the purposes of sections 84 and 80j, all borrowed moneys have to be deducted irrespective of when they fall due for repayment-save and except for the limited period from April 1, 1968, to April 1, 1972, when rule 19A(3) was in force where certain kinds of borrowed moneys which would fall under rule 19A(3)(a) and (b) would be included in the computati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect of "borrowed money", the Supreme Court, in the case of Lohia Machines Ltd. [1985] 152 ITR 308, has clearly held that all borrowings-whether long-term or short-term, will have to be deducted from the capital of a company for the purposes of section 84 and section 80J, with certain exceptions for the period April 1, 1968, to April 1, 1972. Therefore, the contention of the assessee that only such borrowed moneys as are due and payable on the first day of the computation period should be deducted cannot be accepted. All borrowed moneys, irrespective of whether they have become due and payable on the first day of the computation period, are required to be deducted under rule 19(3) as well as rule 19A(3). In the case of rule 19A(3), however, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which is payable at a future date is a debt owing while the debt which is now due and payable is debt due. The Division Bench relied upon a decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767, while making the distinction between the concept of a debt owed and a debt due. The Division Bench in the case of National Organic Chemicals Industries Ltd. [1978] 115 ITR 56 (Bom) considered the question of computation of capital for the purposes of section 80J. The Division Bench in that case, however, did not consider the question of borrowed moneys in the context of section 80J. It was only concerned with the second part of the rule dealing with "debts due". The decision of the Division Be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th borrowed moneys as well as other debts. As we have stated earlier, the decision in National Organic Chemical Industries Ltd. [1978] 115 ITR 56 (Bom), was only confined to the term "debts due". The case of National Organic Chemical Industries Ltd. [1978] 115 ITR 56 (Bom) did not deal with the question of borrowed moneys. Therefore, the decision of the Division Bench in Gynamij India Ltd. [1990] 181 ITR 265 (Bom) also does not throw any light on the controversy before us, namely, whether, in the case of "borrowed moneys", only those borrowed moneys which are due and payable on the first day of the computation period should be deducted or borrowed moneys which may be payable at a future date should also be deducted. In view of the decision ....