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TMI Blog1985 (11) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income-tax Act, 1961 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that for the purpose of relief under section 80J of the Income-tax Act, 1961, borrowed capital should also be taken into account in order to arrive at the capital employed in the industrial undertaking ? " So far question No. (3) is concerned, learned counsel for the parties submitted that in view of the decision of the Supreme Court relating to section 80J of the Income-tax Act, 1961, in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, this question had to be decided in favour of the Department and against the assessee. Accordingly, this question is answered in favour of the Department and against the assessee. Facts giving rise to this reference as per the statement of the case received may be stated, in brief, thus: The assessee is a public limited company carrying on business in the manufacture of nylon-6 filament yarn. In respect of the assessment year 1974-75 relevant to the accounting period ending June 30, 1973, the assessee claimed Rs. 1,39,163 under the head " Miscellaneous expenses ". The Income-tax Officer required the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's claim and accepted the same in respect of items Nos. (1) to (4). As regards the amount of Rs. 3,22,558 included in item No. (5), the Income-tax Officer found on a scrutiny of the details that it included a sum of Rs. 76,947 incurred on advertising, printing, etc., of the prospectus. He, therefore, admitted the assessee's claim to this sum of Rs. 76,947 also. As regards the remaining amount of Rs. 2,45,611 (Rs. 3,22,558 minus Rs. 76,947), included in item No. (5) and a sum of Rs. 3,57,799 included in item No. (6), the Income-tax Officer found that these expenses were incurred in connection with the refund of Rs. 18.82 crores which was the amount over-subscribed. According to the Income-tax Officer, the above expenditure of Rs. 6,03,410 did not fall within the provisions of section 35(D)(2)(c)(iv) of the Act. He, therefore, restricted the assessee's claim under section 35D(1) of the Act to the extent of Rs. 8,31,814 and disallowed the balance claim to the extent of Rs. 6,03,410. Against the decision of the Income-tax Officer, the assessee went up in appeal and before the Appellate Assistant Commissioner, it was contended that all the above items of expenses were clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hmichand Muchhal [1982] 134 ITR 234 (MP), CIT v. Navalmal Punamchand [1982] 135 ITR 801 (NIP), CIT v. Shyam Lal Ramcharan [1984] 147 ITR 52 (MP), Central Paints Ltd. v. CIT [1984] 146 ITR 212 (MP) and CIT v. Lalu Bhai B. Patel & Co. [1983] 139 ITR 832 (MP), which are decisions of this court, such expenses have been treated as business expenditure and not entertainment expenditure and, consequently, in our opinion, the view taken by the Tribunal appears to be correct. As regards question No. (2), learned counsel for the Revenue, Shri R. C. Mukati, submitted that fiscal statutes like taxing statutes have to be interpreted according to the words mentioned therein and not beyond and, therefore, no extraneous inference can be drawn by taking resort to the general provisions of law and, in support of his submission, he placed reliance on the decisions in CIT v. Kunji Lal Dhanpat Rai [1979] 116 ITR 608 (All), CST v. Modi Sugar Mills Ltd., AIR 1961 SC 1047; [1961] 12 STC 182 (SC) and on Interpretation of Statutes by Hon'ble justice G. P. Singh (third edition) at page 533. Learned counsel further submitted that the word " being " used in section 35D(2)(c)(iv) is restricted to the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee; (iv) engineering services relating to the business of the assessee: Provided that the work in connection with the preparation of the feasibility report or the project report or the conducting of market survey or of any other survey or the engineering services referred to in this clause is carried out by the assessee himself or by a concern which is for the time being approved in this behalf by the Board ; (b) legal charges for drafting any agreement between the assessee and any other person for any purpose relating to the setting up or conduct of the business of the assessee ; (c) where the assessee is a company, also expenditure (i) by way of legal charges for drafting the memorandum and articles of association of the company; (ii) or printing of the memorandum and articles of Association; (iii) by way of fees for registering the company under the provisions of the Companies Act, 1956 (1 of 1956) ; (iv) in connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus; (d) such other items of expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with the issue, for public subscription, of shares, in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus" would indicate that the word "being" used here is " illustrative and not restrictive ". On the contrary, if after the words " also expenditure ", sub-clause (iv) would have started with the words " being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus, in connection with the issue, for public subscription, of shares in or debentures of the company ", the submission of learned counsel for the Revenue would have some force because this word " being " as it stands today in the section cannot be read backwards, but has to be read as a whole. Therefore, we are of the opinion that the word " being " has been used here by way of illustration and is not restricted only to the words " underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus. Thus questions Nos. (1) and (2) have to be answered in favour of the assessee and against the Department. In the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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