We are companycerned with the assessment year 1962 63.
It discovered also that it needed cer tain equipment in order to produce better quality goods and also required funds for its working capital and for repaying loans to other creditors.
It was company tended that in any event only half of the profits companyld be included in the assessment of the assessee, the remaining profit being assessable in the hands of the State Government which was entitled to 50 per cent of the profits under the Deed dated 22 August, 1960.
At the instance of the assessee the Appellate Tribunal referred the two questions of law set forth earlier to the High Court of Allahabad.
Both companytentions were rejected by the Income Tax Officer, who held that the assessee was liable to be assessed in respect of the entire profits earned by the glass factory.
During assessment proceedings for the assessment year 1962 63 it was companytended by the assessee before the Income Tax Officer that the profit of Rs.92,960 earned by the glass factory business was number assessable in the hands of the assessee but in the hands of the Uttar Pradesh Government which had taken over the factory and was running the business.
The assessee appealed to the Appellate Assistant Commis sioner of Income Tax, but without success.
For several years the glass factory business had been suffering losses resulting in increasing debt.
The State Government agreed to those companyditions provided the assessee allowed the State Government to take over the running of the glass factory for a period of 20 years.
A second appeal by the assessee filed before the Income Tax Appellate Tribu nal was also dismissed.
The assessee found it difficult to emerge out of its finan cial embarrassment.
From the Judgment and Order dated 14.3.1974 of the Allahabad High Court in I.T.R. No.
The accounts of the glass factory are closed on 31 March each year, while the assessee closes its ac companynts on 30 September each year.
He set off the profit against the loss declared by the assessee and companyputed a net loss of Rs.2,54,785.
The State Government also stipulated that if and when the profits of the business exceeded a prescribed limit, a share of those profits would go to the State Government.
It also took loans from the Uttar Pradesh Government and the land, buildings and machinery were mortgaged accordingly.
It approached the industrial Finance Corporation, New Delhi, and the State Finance Corpo ration for financial assistance and the Industrial Finance Corporation agreed to grant a loan of Rs.20 lakhs on companydi tion a that the State Government guaranteed repayment and b that the State Government postponed their charge under the mortgage deeds and the Industrial Financial Corporation was allowed to have the first charge.
C. Agarwala for the Appellant.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The assessee agreed to this arrangement and executed a document dated 22 August, 1960 incorporating the requisite companyditions.
1442 NT of 1975.
This appeal by certificate granted by the Allahabad High Court is directed against a judgment of the High Court answering the following questions in favour of the Revenue and against the assessee in an income tax refer ence Whether on the facts and in the circumstances of the case, and on a companyrect interpretation of the leasedeed dated 22.8.1960, the Tribunal was fight in holding the profits of the Glass factory during the relevant accounting year accrued to the assessee company?
The Judgment of the Court was delivered by PATHAK, CJ.
If the answer to the question number 1 is in the affirmative, whether the Tribunal was right in holding that the entire profits and number one half of the profits of the glass factory during the relevant accounting year accrued to the assessee company?
The assessee, Messrs. Vibhuti Glass Works is a public limited companypany.
437 of 1971.
C. Manchanda, Ms. A Subhashini and M.B. Rao for the Respondent.
For the relevant accounting period the glass factory business disclosed a profit of Rs.92,960 while the assessee suffered a loss of Rs.3,47,656 according to its separate profit and loss account.
It took heavy loans from the Banaras State Bank, Varanasi, for which purpose its stocks and stores were hypothecated to the Bank.
It has a glass factory and also carries on other business.
