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Issues Involved:
1. Depreciation entitlement u/s 32(1)(ii). 2. Computation of capital employed and deduction u/s 80J. 3. Deduction of current year depreciation for relief u/s 80-I. 4. Appeal against interest charge u/s 217. 5. Validity of assessment made u/s 143(3). 6. Additional ground for surtax deduction. Summary: Issue 1: Depreciation Entitlement u/s 32(1)(ii) The court addressed whether the assessee was entitled to depreciation for blocks and toolings valued at Rs. 22,750 acquired and used in the previous year. The Income-tax Officer, Appellate Assistant Commissioner, and Tribunal denied the claim, stating depreciation could only be claimed in the year of first use. The court concluded that the proviso to section 32(1)(ii) does not exclude the right to claim depreciation in subsequent years if not claimed initially, thus ruling in favor of the assessee. Issue 2: Computation of Capital Employed and Deduction u/s 80J The Tribunal held that grounds regarding the computation of capital employed and deduction u/s 80J could not be agitated under sections 253 and 254. The court found the matter academic as the Supreme Court had already ruled that borrowed money does not form part of "capital employed," making it unnecessary to answer the question. Issue 3: Deduction of Current Year Depreciation for Relief u/s 80-I The court upheld the Tribunal's decision that current year depreciation must be deducted when computing profits and gains for relief u/s 80-I, in line with the Supreme Court's decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT. Issue 4: Appeal Against Interest Charge u/s 217 The Tribunal ruled that an appeal against the charge of interest u/s 217 was not maintainable. The court, referencing the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, stated that an assessee could challenge the liability to interest but not the quantum. The court allowed the assessee to challenge the liability to interest. Issue 5: Validity of Assessment Made u/s 143(3) The court agreed with the Tribunal that the assessment made on January 29, 1973, u/s 143(3) was valid. The original assessment under section 144 was set aside upon the assessee's application, and a fresh assessment was made, providing the assessee with a full opportunity to represent itself. Issue 6: Additional Ground for Surtax Deduction The Tribunal denied the assessee's claim to raise an additional ground for surtax deduction for the first time before it. The court ruled that the Tribunal should have allowed the additional ground, citing rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, which permits the Tribunal to entertain new grounds. For the Assessment Year 1969-70: Issues 1, 3, 4, and 5 were identical to those in 1968-69 and resolved similarly. Issue 2 concerned whether the assessee was entitled to deduction u/s 80-I for Rs. 1,25,602 received as commission. The court ruled against the assessee, stating the commission was not directly attributable to the priority industry activities. Conclusion: For 1968-69, questions 1 and 6 were answered in favor of the assessee, questions 2 and 3 in favor of the Revenue, and question 4 was partially in favor of the assessee. For 1969-70, questions 2, 3, and 1 were answered in favor of the Revenue, while questions 4 and 5 were in favor of the assessee. No order as to costs was made.
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