DEEPAK NITRITE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS Reference involves cross References by the assessee and the Revenue. The Income -Tax Appellate Tribunal, Ahmedabad Bench 'A' has drawn up a consolidated statement of case under Section 256(1) of the Income -Tax Act, 1961 ('the Act') and referred the following questions: RA No. 645/Ahd/98 BY ASSESSEE 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the detachable warrants which authorised the holders to obtain the equity shares of the investee company after a period of four years from the date of allotment, had a monetary value ?

(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal has any materials on record to hold that the detachable warrants had a monetary value ?

(3.) WHETHER the Tribunal was justified in law in restoring the question of quantification of loss on the sale of non -convertible portion Part -C of the debentures of Rs. 50/ - each to the Assessing Officer with a direction to take the cost thereof as reduced by the cost of detachable warrants ? RA NO 656/Ahd/98 BY REVENUE Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in allowing the assessee's claim for depreciation on the factory building and office building of the Sahyadri Dyestuff & Chemical Units at Pune although the said factory building and office building were not transferred in favour of the assessee, and the ownership of the said factory building and office building was not vested with the assessee ? RA No. 657/Ahd/98 BY REVENUE 1. Whether, on the facts and in the circumstances of the case, the Income -tax Appellate Tribunal was right in law in upholding the CIT(A)'s order allowing deduction under Section 32AB of the Act claimed by the assessee through a subsequent return of income in lieu of the deduction under Section 32A of the Act claimed by the assessee in the original return of income ? 2. Whether, on the facts and in the circumstances of the case, the Income -Tax Appellate Tribunal was right in law in restoring the matter relating to quantification of loss on the sale of investment to the file of the Assessing Officer for fresh adjudication and in directing the Assessing Officer to take the cost price of the non -convertible portion Part -C of the debenture at Rs. 50/ - minus the cost of detachable warrant which was not transferred and then work out the capital gain/loss on the aforesaid transaction and also in directing the Assessing Officer to restrict the cost of detachable warrant to Rs. 2.175 and to restrict the capital gain/loss on the said transaction at 'NIL' ? 2. The Assessment Year in question is 1989 -90, the relevant Accounting period being Financial Year ended on 31.3.1989. The assessee -company claimed loss on sale of investments amounting to Rs. 24,43,750/ -. The said loss was disallowed by the Assessing Officer for the reasons stated in Paragraph No. 13 of the Assessment Order dated 28.2.1992. The assessee carried the matter in Appeal. The Commissioner (Appeals), for the reasons stated in his Order dated 12.11.1992, allowed the claim of loss. Thereupon Revenue preferred Appeal before the Tribunal and the ground in relation to allowance of loss reads as under: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred:vi. in allowing the claim of loss of Rs. 24,43,750/ - on sale of non -convertible portion of debentures, which was held by the Assessing Officer as a colourable device with the sole purpose of reducing the taxable income. 3. The Tribunal has framed the order in relation to these claims after recording the facts and contentions by issuing following directions: Accordingly we will restore the question of quantification of loss on the sale of investment to the file of the Assessing Officer for fresh adjudication in accordance with law directing him to take the cost price of the non convertible portion PART -C of the debentures at Rs. 50/ - minus the cost of detachable warrants which was not transferred to the Unit Trust of India and then work out the capital gain/loss on the transaction of sale of Part C non -convertible portion of debentures by the assessee to U.T.I. We may point out that in case the cost of detachable warrant determined by the AO is more than Rs. 2,175/ - then the same is to be restricted to Rs. 2.175/ - and the capital gain/loss on this transaction may be determined at NIL because the assessee cannot be worse of having filed appeal against the order of the Assessing Officer and the Tribunal do not have any power of enhancement as held by the Supreme Court in the case of State of Kerala v. Vijaya Stores : [1979]116ITR15(SC) . In the result this issue is set aside to the file of the AO and is deemed to have been allowed for statistical purposes. 4. The aforesaid directions issued by the Tribunal are found to be unacceptable both by the Assessee and the Revenue, as can be seen from the four questions raised by the assessee and the question No. 2 raised by Revenue in Reference Application No. 657/Ahd/98. All the cross questions involve only one issue and, therefore, are taken up together. The learned Advocate for the assessee Shri J.P. Shah and learned Senior Standing Counsel for Revenue Shri M.R. Bhatt have been heard.