- (1.) THIS is an income-tax reference under Section 256 of the Income-tax Act, 1961, in which the following two questions have been referred for our opinion : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in its opinion that loan of Rs. 86,50,000 taken by the corporation created capital asset in the hands of the assessee within the Second Schedule of the Surtax Act, 1964 ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that assessee's claim was rightly allowed by the Appellate Assistant Commissioner ?"
(2.) WE have heard Sri Shekhar Srivastava, learned counsel for the Department, and Sri Vinod Swaroop, for the assessee. The assessee is a corporation set up by the U. P. Government with a loan granted by the Government amounting to Rs. 9,93,664 and another loan was granted on March 31, 1970, of Rs. 86,50,000. It was claimed before the Income-tax Officer that in the computation under the Companies (Profits) Surtax Act, 1964, this amount of Rs. 86,50,000 should also be included. The Income-tax Officer, however, decided against the assessee holding that the loan was not utilised for creation of assets belonging to the corporation. The assessee's appeal to the Appellate Assistant Commissioner was allowed and the Revenue's further appeal to the Tribunal was dismissed. Hence, this reference. We have perused the order of the Tribunal in which it has been held that the loan granted by the Government was utilised for the creation of capital assets. In view of this finding of fact we answer the questions referred to us in the affirmative, i.e., in favour of the assessee and against the Department.;