M.M.KUMAR, J. - (1.) ON the basis of an application filed by the Revenue under Section 256(1) of the IT Act, 1961, the Revenue had requested the Tribunal to make a reference to this Court for its opinion on two questions of law which were claimed to have arisen from the order of the Tribunal dt. 1st Nov., 1987 passed in ITA No. 1196/Chd/ 1986 in respect of the assessee respondent for the asst. yr. 1983 -84. The questions which have been claimed are as under: 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the assessee's claim for Rs. 22,60,375 on account of undisclosed liability towards sales -tax/Central sales -tax and education tax in asst. yr. 1983 -84 ?
(2.) WHETHER on the facts and in the circumstances of the case, and on a proper interpretation of ExpIn. 2 to Section 80J(4), the Tribunal was right in law in holding that second -hand machinery worth Rs. 1,08,568 should be taken as part of the capital employed for allowing the assessee's claim for deduction under Section 80J ? 2. It remains undisputed that the controversy raised by the first question is covered against the Revenue in view of the Division Bench judgment of this Court in the case of Sirsa Industries v. CIT laying down that wherever an assessee follows the mercantile system of accounting, then deduction could be claimed only in the year in which the liability is finalised or the amount is actually paid. Accordingly, the question has to be answered against the Revenue. On the second question, the Tribunal has allowed deduction under Section 80J on the second -hand machinery worth Rs. 1,08,568 by treating the same as part of the capital employed on the reasoning that in the present case, the secondhand machinery was purchased from a third person and it was not brought in as an asset by mere transfer. The Tribunal has placed reliance on the view taken by the Andhra Pradesh High Court in the case of Electronic Corporation of India v. CIT : [1985]151ITR381(AP) (AP) holding that the only amount ineligible for deduction under Section 80J is where the old machinery has been transferred by the assessee from his earlier business but where the machinery was purchased from a third person and was not brought in as an asset by mere transfer from one undertaking to another by the same assessee then the deduction under Section 80J was allowable even on the second -hand machinery. Raising the issue of interpretation of provisions of Expln. 2 to Section 80J, the Tribunal in para 8 has observed as under: 8. Coming to the last dispute, the matter in dispute is squarely covered by the decision of the Andhra Pradesh High Court in the case of Electronic Corporation of India v. CIT : [1985]151ITR381(AP) . There being no contrary decision of any other High Court and the question being one of pure interpretation of the provision of the Expln. 2 to Section 80J, we are not inclined to interfere with the decision of the CIT(A) taken in this behalf.
(3.) A Division Bench of the Andhra Pradesh High Court in Electronic Corporation of India's case (supra) has placed reliance on various Division Bench judgments of Calcutta and Bombay High Courts, namely, CIT v. Indian Oxygen Ltd. : [1978]113ITR109(Cal) , CIT v. Satellite Engineering Ltd. : [1978]113ITR208(Guj) , CIT v. Suessin Textile Bearing Ltd. : [1982]135ITR443(Guj) and CIT v. N. Guru Investment (P) Ltd. : [1979]117ITR522(Cal) .;