1986 (4) TMI 37 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of capital employed for deduction under section 80J of the Income-tax Act, 1961.
2. Maintainability of appeal under section 246(1) u/s 144B(2) of the Income-tax Act, 1961.

Interpretation of Capital Employed:
The judgment addressed questions regarding the computation of capital employed for the purpose of deduction under section 80J of the Income-tax Act, 1961. It was determined that the written down value of assets, considering depreciation already allowed, is crucial in this calculation. The written down value is defined as the actual cost to the assessee for assets acquired in the accounting year, and for assets acquired before the accounting year, it is the actual cost of acquisition less the aggregate of all deductions of depreciation actually allowed in past years. The judgment clarified that borrowed capital is not to be included in the capital computation, as per the decision in Lohia Machines Ltd.'s case [1985] 152 ITR 308.

Maintainability of Appeal:
Regarding the maintainability of an appeal under section 246(1) u/s 144B(2) of the Income-tax Act, 1961, the judgment analyzed whether an appeal could be filed by an assessee who had not objected to the draft assessment order. It was argued that the right of appeal is a valuable right and cannot be assumed to be abandoned or lost by implication. The judgment distinguished previous cases where lack of objection led to the dismissal of appeals, emphasizing that in the present case, the assessee did not appear or accept the proposed assessment at the draft stage. Consequently, the court answered question No. 3 in the affirmative and against the Revenue.

Conclusion:
The judgment provided detailed interpretations of the capital employed for deduction under section 80J of the Income-tax Act, 1961, emphasizing the significance of written down value and excluding borrowed capital from the computation. Additionally, it clarified the circumstances under which an appeal can be maintained under section 246(1) u/s 144B(2) of the Act, highlighting the importance of explicit objection for preserving the right of appeal. The reference was disposed of with no order as to costs, and both judges concurred with the decision.