TaxTMI 
TaxTMI 
1981 (3) TMI 6
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....this provision was made in respect of the non-journalist employees of the company to whom the company had to pay gratuity in accordance with certain awards of the Industrial Tribunal, w.e.f. July 1, 1967. It is again common ground that the provision was made on the basis of an actuarial valuation, i.e., for the present value of the future liability in respect of the gratuity which the assessee would have bad to meet as per the awards. The ITO disallowed the assessee's claim for deducting this amount by distinguishing the judgment of this court in the case of Delhi Flour Mills Co. Ltd. v. CIT [1974] 95 ITR 151 and relying upon the decision of the Supreme Court in the case of Bombay Dyeing & Mfg. Co. Ltd. v. CWT [1974] 93 ITR 603. However, on appeal, both the AAC and the Tribunal allowed the assessee's claim. The Tribunal referred to the decisions of the Bombay High Court in the case of Tata Iron & Steel Co. Ltd. v. D. V. Bapat, ITO [1975] 101 ITR 292, of the Allahabad High Court in the case of Madho Mahesh Sugar Mills (P.) Ltd. v. CIT [1973] 92 ITR 503 and of this court in the case of Delhi Flour Mills Co. Ltd. [1974] 95 ITR 151, and allowed the assessee's claim. The Commissioner ch....
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....al Textile Mills Pvt. Ltd. v. CIT [1966] 62 ITR 274 (MP). These decisions were rendered prior to the decision of the Supreme Court in the Metal Box case [1969] 73 ITR 53 (SC). He also referred to the decision of the Calcutta High Court in the case of Radheshyam Ladia v. ITO [1971] 82 ITR 247 (Cal) and Official Liquidator of the Sakseria Colton Mills Ltd. v. CIT [1971] 81 ITR 528 (Bom). But these were cases in which there was no scientific ascertainment of the present value of the liability sought to be deducted. These decisions do not run counter to, nor do they in any way seek to restrict the principle of, the decision in the Metal Box case. On the other hand, several High Courts have followed Metal Box case. We are, therefore, of opinion that the question raised by the Commissioner is directly and squarely covered by the decision of the Supreme Court in the case of Metal Box and numerous other decisions and decline to direct the Tribunal to refer the first of the two questions raised in the application. The second question arises in the following circumstances. The assessee, which is publishing a newspaper in Delhi, was previously occupying a premises belonging to the Life Ins....
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....ted. It may be mentioned here that the total covered area of the building was 3,95,339 sq. feet. Out of this the assessee-company occupied 2,14,239 sq. feet, for its office and press and kept in reserve two floors measuring 27,400 sq. ft. for the further expansion of the company. The remaining portion of the building when completed was let out. It appears from the assessment order that the assessee had let out the entire area covered by the fourth to the sixteenth floor and was itself occupying only the basement and the first three floors. The building occupied by the assessee for its business purposes was 61% of the total floor area while the balance of 39% was eventually let out. One important fact to be mentioned about which there is no dispute is that by the end of the previous year relevant to the assessment year 1972-73, with which we are concerned, the assessee had completed the construction only of the basement and the first three floors and was occupying the whole of it for the purposes of its business. In other words, during the previous year there was no portion of the building which was not occupied by the assessee for the purposes of its own business and no portion of ....
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....LIC could be said to have been utilised for the construction of the premises, it was only used for business purposes. For these reasons he allowed the assessee's claim. The Appellate Tribunal endorsed the conclusion of the AAC. In the first place, the Tribunal agreed with the AAC that the primary purpose of the construction was to use the premises for housing the office and press of the assessee. Secondly, the Tribunal pointed out that the built up area of the basement and the first three floors was 2,14,239 sq. ft. This had been constructed according to a certificate given by the architects at a cost of Rs. 115'47 lakhs whereas the loan was only Rs. 45 lakhs. This showed that not only the sum of Rs. 45 lakhs but the assessee's own further funds to a substantial extent had also been mobilised to complete the construction of this portion of the building. Since this portion of the building was used only for the business purposes, no portion of the loan taken could be said to have been used for other than business purposes. Thirdly, it pointed out that the funds borrowed by the assessee were mixed up with the other funds of the assessee and it could not be said that any portion the....
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.... the construction. Even if such correlation could be assumed, he urged, the loan taken should be treated only as for business purpose, having regard to the fact found by the authorities that during the previous year in question the entire building in existence bad been used for business purposes only. From what has been stated above, it is clear that so far as the present assessment year is concerned, the question sought to be raised by the Commissioner is concluded by the findings of fact arrived at by the Tribunal. Under s. 36(1)(iii) of the I.T. Act, the assessee is entitled to deduction of the amount of interest paid in respect of capital borrowed for the purpose of the business. In the present case the capital had been borrowed for the purpose of putting up the business premises of the assessee. It is not necessary for the purpose of this assessment year to consider whether any part of the funds borrowed can be said to have been utilised for the putting up of that part of the structure which was also utilised for being let out. The most important fact found by the Tribunal (and, indeed, there is no dispute about that fact) is that, by the end of the accounting year with whi....