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Issues involved: Interpretation of relief under section 84 of the Income Tax Act.
Summary: The High Court of Madras was tasked with determining the interpretation of the relief provided under section 84 of the Income Tax Act. The case involved an assessee company that had been granted relief at 6% on the capital employed for the assessment years 1962-63 and 1963-64. The Income Tax Officer (ITO) later reopened the assessment, claiming that excessive relief had been granted due to the machinery working for only nine months in each year. The Appellate Tribunal held that the assessee was entitled to the relief of 6% without any time limitation. The key issue revolved around whether the relief should be proportionate to the period during which the machinery worked. The court analyzed the provisions of section 84, which granted relief to newly established industrial undertakings for a period of five years. The computation of capital employed was governed by Rule 19 of the Income Tax Rules, 1962, which calculated capital proportionately to the period of asset usage. The controversy arose as the revenue sought to restrict the relief based on the actual period of business operation. The court considered the statutory interpretation rules, emphasizing that fiscal statutes should be construed in favor of the taxpayer when there are multiple interpretations. The court highlighted that the term "per annum" in section 84 should not limit the relief to a proportionate basis, as it was intended to ensure the assessee received 6% on the capital employed for each of the five years. The court emphasized that provisions for exemption or relief should be liberally construed to prevent diminishing the benefits granted by Parliament. Ultimately, the court answered the question in favor of the assessee, allowing them to receive the full relief of 6% on the capital employed.
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