Tax holiday relief u/s 80-J, Income Tax Act. - Income Tax - 1019/CBDT

INSTRUCTION NO. 1019/CBDT Dated : October 28, 1976 Section(s) Referred: 80J Statute: Income - Tax Act, 1961 It has come to the notice of the Board that in the assessment of a company for the year ended 31st December, 1969 relevant to the assessment year 1970-71 completed in October, 1972, tax holiday relief (section 80-J deduction) was allowed to the extent of Rs. 88,54,254, being 6% of the capital employed in a new industrial undertaking which was computed at Rs. 14,75,70,913. The capital computation was incorrect because the total value of the depreciable assets as on the first day of the computation period was taken at Rs. 12,38,12,606 and sums of Rs. 8,13,120 representing the value of the plant and machinery not installed and Rs. 2,00,23,917 shown on the assets side of the balance sheet as pre-paid interest and insurance charges were included in the total value of assets. The last mentioned sum did not represent any actual payment but was merely a book adjustment debiting pre-paid interest charges and crediting unsecured loans in respect of interest payable for future years. 2. Board have considered the question whether in the computation of capital employed in an industrial undertaking the value of plant and machinery not installed and fictitious assets created by book adjustment are includible in the computation of capital employed. The Board are of the view that machinery and plant which has not been used for the purposes of the business of the undertaking as on the first day of the computation period. In view thereof, the value of such machinery or plant cannot be included in computing the capital employed in the undertaking under rule 19A of the Income-tax Rules. The provisions of the said rule do not also provide for the inclusion of fictitious assets in the computation of the capital of the undertaking.