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TMI Blog1981 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... building and compound wall) for the purposes of rule 3(1)(a)(i) of the Indian Income-tax (Computation of Capital of Industrial Undertakings) Rules, 1949 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in including the amount of Rs. 1,59,50,000 for the purposes of computation of the capital employed by the assessee for giving relief under section 15C of the Indian Income-tax Act, 1922 ? " It would appear to us that the answer to be given to question No. 1 is now concluded by our decision given this morning in Income-tax Reference No. 181 of 1971 (CIT v. Zenith Steel Pipes Ltd. [1982] 137 ITR 34), and in accordance with the observations made therein, the question will have to be answered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or so doing. According to the ITO, the company had a sum of Rs. 1,60,00,000 in fixed deposits as on 31st March, 1959, and a sum of Rs. 1,89,00,000 represented the fixed deposits as on 31 st March, 1960. The amount of fixed deposits had gone as high as Rs. 2,51,50,000 during the financial year 1959-60 and the total of fixed deposits was never less than Rs. 1,76,00,000 at any time in the year. According to the ITO, it was thus clear that a considerable amount was not required by the company for the purposes of the business. This amount was thus required to be excluded on a proper application of r. 3(5). According to the company, the keeping of these large amounts became necessary as it was accumulating funds to finance the entire cost of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agreement with the stand of the assessee, but despite such agreement, the AAC ultimately upheld the deduction made by the ITO. The assessee thereafter carried the matter to the Income-tax Appellate Tribunal. Before the Tribunal, the assessee succeeded on both aspects of the matter. As far as the deduction of the initial depreciation for the purpose of the written down value of the assets was concerned, the Tribunal referred to a decision of this court in Burmah-Shell Refineries Ltd. v. G. B. Chand, ITO [1968] 67 ITR 653, where a prima facie view was expressed that this was not to be deducted in determining the written down value of the assets for the purpose of computation of the capital employed. As stated earlier, we have taken a contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the CBDT, which prescribe the method of computation of the capital as provided by s. 15C, are the Indian Income-tax (Computation of Capital of Industrial Undertakings) Rules, 1949, and we are concerned with sub-r. (5) of r. 3. Rule 3(5) reads as under : " Any investments the income from which is not to be taken into account in computing the profits of the business and any moneys not required for the purposes of the business, shall be left out of account, but where any investments in the beneficial ownership of the person carrying on the business are so left out of account, the sum (if any) to be deducted under sub-rule (3) in respect of borrowed money shall be computed as if the principal of the borrowed money were reduced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not recommend any declaration of dividend for this year also. " It would appear that the streptomycin plant was indeed commissioned in March, 1962, and we are informed at the Bar that its cost came to over Rs. 4 crores. Can a company like the assessee-company, which accumulates and retains for the purposes of its future expansion large amounts out of the profits earned daring the year, be said to have accumulated these amounts for purposes other than its business ? Indeed, any such contention would appear ridiculous when so put. These are what are known in business parlance as " retained profits ". Retained profits may be retained for the purpose either of meeting and reducing the present liabilities or for meeting the working capital ..... X X X X Extracts X X X X X X X X Extracts X X X X
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