TMI Blog1991 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... stillery for the assessment year 1974-75. The books of the distillery showed a credit balance of Rs. 7,16,672 in the accounts of the head office. The assessee claimed that this amount should be held to be capital of the distillery for computing relief under section 80J of the Act. The Income-tax Officer, however, rejected the claim of the assessee and held that there was no capital whatsoever of the partnership and the entire business was being done with the help of loans and, in view of rule 19A of the Income-tax Rules, the loans could not be included in the capital for the purpose of deduction under section 80J of the Act. The assessee appealed to the Appellate Assistant Commissioner who agreed with the contention of the assessee and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended that the amount of Rs. 7,16,672 should be treated as capital of the distillery as it was not borrowed by the distillery but by the head office. We cannot agree with this contention. The amount transferred by the head office to the distillery was part of the loan borrowed by the head office. This is a specific finding of the Tribunal in paragraph 6 of its order dated June 18, 1976. It may be mentioned that a branch is not a separate legal entity unlike say registered subsidiary company. In the present case, the legal entity is the assessee-firm and the branch is only a part of it. As held by the Hon'ble Supreme Court in Agencia Commercial International Ltd. v. Custodian of the Branches of Banco Nacional Ultramarino, AIR 1982 SC 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and indeed that is what has been specifically provided for in rule 19A(3) of the Rules. Sri Gulati, however, relied upon CIT v. South India Viscose Ltd. [1983] 140 ITR 58 (Mad). That authority is, however, distinguishable because, in that case, the Tribunal found that no amount was borrowed by the assessee-company from any outsider. Thus, it appears that, in that case, the amount transferred by the head office to the branch was not a borrowed amount but the capital of the assessee. Hence, this case does not help the assessee. Shri Gulati then relied upon CIT v. Karnataka Cement Pipe Factory [1985] 151 ITR 247 (Kar). This ruling is also distinguishable because here the Tribunal found that there was no nexus between the money borrowed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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