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TMI Blog1993 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... e computing the capital employed for the purpose of section 80J, the said provisions had to be ignored ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the deficiency in question had to be determined on the basis of computation of capital employed in accordance with rule 19A and not rule 19 of the Income-tax Rules ? (3) If the assessee has previous year of 15 months, whether the amount of capital employed during the previous year should be computed at the rate of six per cent. per annum as provided under section 80J for period of 12 months or 15 months? " Questions Nos. 1 and 2 are referred at the instance of the Revenue, whereas question No. 3 is refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant Commissioner that the capital employed for that purpose should be computed in terms of rule 19A and the Income-tax Officer was in error in computing it on the basis of rule 19. The Appellate Assistant Commissioner accepted the contention raised on behalf of the assessee and held that the computation should have been done in accordance with the provisions of rule 19A. The assessee and the Revenue were both aggrieved by the order of the Appellate Assistant Commissioner and, therefore, they preferred cross-appeals to the Tribunal. The Tribunal also agreed with the view taken by the Income-tax Officer and the Appellate Assistant Commissioner that the capital employed during the previous year should be computed at the rate of six per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contended by learned counsel for the Revenue is that the point which falls for consideration as a result of question No. 1 is now covered by the decision of the Supreme Court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308. In that case, the Supreme Court has held that sub-rule (3) of rule 19A is a valid piece of subordinate legislation. Following that decision, it will have to be held that the Tribunal erred in law in holding that while computing capital employed for the purpose of section 80J, sub-rule (3) of rule 19A was required to be ignored. With respect to question No. 2, it was submitted by learned counsel for the Revenue that we should not interpret the provision of section 80J in such a manner as to confer a doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital employed. Thus, the nature of relief was quite different and the purpose for which capital was to be computed was also different. For the first time, on April 1, 1968, a new relief was made available to the assessee whereby the assessee was permitted to carry forward and set off the deficiency against profits and gains derived from any industrial undertaking or business of a hotel. While making that provision, the Legislature also provided the method of calculating the capital employed for that purpose and that becomes clear from the use of words " on the relevant amount of capital employed during the previous year ". What is meant by ' relevant amount of capital employed ' becomes clear if we turn to sub-section (1) of section 80J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rule 19A. Therefore, for computing the capital employed for the purpose of section 80J, the only relevant rule which can be looked into is rule 19A and the capital could not have been computed in terms of rule 19 as contended by learned counsel for the Revenue. In view of this clear intention of the Legislature, the contention raised on behalf of the Revenue that as the Legislature ordinarily does not confer a double benefit as the expression used in sub-section (3) of section 80J should be construed as the capital employed as calculated under section 84 so far as the assessment year 1967-68 is concerned, cannot be accepted. The view which we are taking is also supported by the decision of the Karnataka High Court in Kirloskar Asea Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the relevant previous year. In support of this contention, he relied upon a decision of this court in CIT v. Sarabhai Sons Ltd. [1983] 143 ITR 473. That was a case where the undertaking was granted relief only for nine months and a contention was raised on behalf of the Revenue that since the new undertaking had only worked for a part of the year, it was entitled to only proportionate relief. Even though the new undertaking had worked only for a part of the year, the assessee in that case was held entitled to the relief for the whole period. It was urged that though this is a converse case, the same contention in which considerable force was found by this court would be available in this case also. In our opinion, there is no substanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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