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TMI Blog1993 (9) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... r some processing, the milk is distributed to the consumers. It also produced butter and ghee. The assessment was completed by the Income-tax Officer and, as per the order dated March 19, 1976, the loss of Rs. 5,29,880 was determined. The assessee, inter alia, claimed that the value of assets of Rs. 10,92,237 purchased out of Government grants and loans should be included in the computation of capital employed. The assessee also contended that half of the profits earned by the assessee during the accounting year relevant to the assessment year under consideration should be added to the aggregate value of the assessee's assets. Both the contentions are rejected by the Tribunal. Thereafter, at the instance of the assessee, the following quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year relevant to the assessment year is to be allowed. The capital employed is to be computed in the manner specified in sub-section (1A). Clause (I) of sub-section (1A) provides that the capital employed in an industrial undertaking or the business of a hotel shall, except as otherwise expressly provided in this section, be computed in accordance with clauses (II) to (IV) and the capital employed in a ship shall be computed in accordance with clause (V). For the purpose of this reference, the relevant provision is clause (II)(i) and Explanation 3, which are as under : "(II) The aggregate of the amounts representing the values of the assets as on the first day of the computation period of the undertaking or of the business of the hot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the assessee was not entitled to take into account the amount of grant-in-aid given by the Government in the computation of the capital employed by the assessee for the purchase of machinery. In this view of the matter, it can be held that the Tribunal was right in holding that while computing the capital employed by the assessee for the purpose of section 80J of the Income-tax Act, the Government grant should not be taken into account. However, with regard to the loan, there is no discussion by the Tribunal. It is mentioned in the order that the assessee had been paid by the Government certain amounts by way of repayable loan and another amount by way of outright grant. It is also mentioned in the statement of case that the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Gujarat should not be taken into account in computing the capital employed by it for the purpose of section 80J of the Income-tax Act, whereas the loan amount is required to be taken into account. In other words, question No. 1 in so far as it pertains to grant is answered in the negative, i.e., in favour of the Revenue and against the assessee and as regards loan, the same is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. Regarding question No. 2, admittedly, the Tribunal has not taken into account the provisions of section 80J. Learned counsel for the assessee submitted that in view of the retrospective operation of sub-section (1A) of section 80J from April 1, 1972, this question may not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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