Ajit K.Sengupta J. - (1.) In his reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1981-82, the following questions of law have been referred to this court : Whether, on the facts and in the circumstances of the case, the Tribunal is right in coming to the conclusion that the conditions laid down in Sub-clause (ix) of Clause (b) of the Explanation to Section 40A(8) were satisfied ? Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the Commissioner of Income-tax was justified in presuming that the order of the Inspecting Assistant Commissioner was erroneous in accepting that the amount of Rs. 58,96,594 was exempt under Sub-clause (ix) of Clause (b) of the Explanation, to Section 40A(8) of the Income-tax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the initial depreciation under Section 32(1)(v) of the Income-tax Act is required to be deducted in determining the written down values of the depreciable assets in the computation of capital employed for the purpose of Section 80J ?"
(2.) The first two questions involve one matter relating to the exemption from operation of the restrictive provisions of Section 40A(8) in respect of payment of interest by a corporate assessee. The assessee in the case claimed exemption from operation of Sub-section (8) of Section 40A under Sub-clause (ix) of Clause (b) of the Explanation to the section. The facts leading to this reference are that, during the previous year relevant to the assessment year 1981-82, the appellant had accepted deposits from the public and the total amount of deposits as at March 31, 1981, was Rs. 1,464 lakhs. With effect from December 1, 1980, these deposits were secured by a charge created on the current assets of the company. The fact that a charge was created and that the deposits were secured by such charge was disclosed in the annual report of the appellant. The annual report was duly filed with the Assessing Officer along with the return of income and was in his possession in the course of assessment. During the course of assessment, the appellant filed details of interest of Rs. 1,82,01,856 paid on public deposits showing Rs. 58,96,594 as the amount which fell under the exemption in Section 40A(8). The Assessing Officer was satisfied with the details filed and did not make any disallowance in respect of Rs. 58,96,594. The Commissioner of Income-tax, in his order dated March 19, 1987, came to a conclusion that there was nothing on record to show that the conditions laid down in Sub-clause (ix) of Section 40A(8) were satisfied. Before the Commissioner of Income-tax, the appellant filed copiesof the annual report disclosing the fact that the deposits were secured by creation of a charge on the current assets of the appellant and also furnished a copy of the consent of the Controller of Capital Issues dated November 21, 1980, for creation of such charge. These documents were not considered by the Commissioner while passing the order under Section 263 and the Commissioner came to the conclusion that, at the point of making the assessment, the Inspecting Assistant Commissioner did not examine the issue and hence presumed that the order of the Inspecting Assistant Commissioner was erroneous on this point. Accordingly, he set aside the order of the Inspecting Assistant Commissioner on this point.
(3.) The matter was considered fully by the Tribunal. The learned Accountant Member agreed with the finding of the Commissioner of Income-tax that there was nothing on record to show that the conditions laid down in Sub-section (ix) of Clause (b) of the Explanation to Section 40A(8) were satisfied. The learned Judicial Member took the view that the Inspecting Assistant Commissioner had examined this issue and, therefore, was of the opinion that there was no justification for asking him to have a second round. He also noted that, from the appellant's letters, it was evident that the Inspecting Assistant Commissioner was fully alive to the issue and had accepted the claim of the appellant after full verification and examination. However, he did not dissent from the order of the learned Accountant Member as, in his opinion, it would not advance the cause of justice and would only result in delaying the finality of the appeal.;