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TMI Blog1997 (3) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... 62, the Appellate Tribunal's view that the assessee is entitled to deduction under section 80J for the assessment year 1974-75 in respect of the new industrial undertaking notwithstanding the fact there was no opening capital on the first day of the computation period is sustainable in law?" The assessee is a company. The assessee, in the course of assessment proceedings for the assessment year 1974-75, relevant to the previous year ended on March 31, 1974, claimed deduction under section 80J of the Act in respect of the profits derived from its new industrial undertaking. The Income-tax Officer, however, rejected the claim of the assessee on the ground that the assessee's business was only the execution of civil construction work. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of granting deduction under section 80J of the Act. The Revenue having failed to secure a reference before the Appellate Tribunal this court has called for a statement of the case and hence the reference is before us. Mr. C. V. Rajan, learned counsel for the Department, submitted that the view of the Appellate Tribunal that the assessee would be entitled to deduction under section 80J of the Act though there was no opening capital on the first day of the computation period is erroneous in law as the Supreme Court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, has held that the computation of the capital should be calculated as on the first day of the computation period. According to learned counsel for the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rules, the assets acquired on or after the commencement of the computation, period were required to be left out and only the amounts representing the value of the assets as on the first day of the computation period were to enter into the computation of capital employed in any industrial undertaking or the business of a hotel. The Supreme Court upheld the validity of rule 19A of the Rules and held that the computation of capital has to be in respect of the first day of the computation period as the point of time at which the capital employed must be computed. The Supreme Court also held that the words, "in respect of the previous year" found in section 80J of the Act are facilitative for the computation of the "capital employed" which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een from the order of the Appellate Tribunal that there is a complete mixing up of the concept of the computation period with the concept of the previous year. No doubt, the Income-tax Officer was not quite accurate in stating that there was no capital employed as on the first day of the previous year. But, however, the Commissioner of Income-tax (Appeals) found that it was admitted that there was no opening capital as on the first day of the computation period. The Appellate Tribunal, when it noticed the order of the Commissioner of Income-tax (Appeals) was not correct in stating that the Commissioner of Income-tax (Appeals) found there was no opening capital as on the first day of the previous year. The direction as prayed for by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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