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TMI Blog1985 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... value. However, for the asst. yr. 1972-73 and 1973-74, the CIT (A) held that considering the retrospective amendment of s. 80J brought about by the Finance (No. 2) Act, 1980 w.e.f. 1st April, 1972, the capital employed should be on the basis of the written down value of the assets and not on the basis of their actual cost. The Revenue is aggrieved by the order of the CIT (A) for the asst. yr. 1970-71 and 1971-72 and has, therefore, come up in the present appeal before us. On the other hand, the assessee-company is aggrieved by the order of the CIT (A) for the asst. yr. 1972-73 and 1973-74 and is, therefore, in appeal before us. 3. The ld. Departmental Representative Shri Burman invited our attention to cl. (i) of sub-r. (2) of r. 19A of the IT Rules, 1962 which lays down that in the computation of capital employed in an industrial undertaking for the purpose of s. 80J, the aggregate of the amounts representing the values of the assets, as on the first day of the computation period of the undertaking shall first be ascertained in the following manner i.e. in the case of asset entitled to depreciation, their written down value. Proceeding further, he submitted that the Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts i.e. the actual cost of the assets as reduced by the depreciation year after year. In this connection, Shri Dastur also pointed out that if considered from the stand point of the market value of the assets, the market value of the assets in view of the escalation in the costs year after year might be not only more than the written down value but perhaps even more than the actual cost. He, therefore, vehemently argued before us that in the working out of the capital employed for the purpose of deduction under s. 80-J of the IT Act, 1961, the capital introduced in the business is the only criterion i.e. in other words the value of the assets whether entitled to depreciation or not should be taken at its actual cost and not at its written down value on the first day of the computation period. Our attention was invited to the decision of the Special Bench of the ITAT in the case of Amar Dye-Chem Ltd. vs. ITO (1983) SOT Vol. 3, 384 (Bom) where the Special Bench of the ITAT held, following the ruling of the Hon'ble Supreme Court in the case of Central Bank of India vs. Their Workmen AIR 1960 SC 12 that if a rule goes beyond what the section, contemplates, the rule must yield to the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicable to the asst. yr. 1970-71 and 1971-72 is as follows: "Where the gross total income of an assessee included any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this s. applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by deduction, if any, admissible to the assessee under s. 80HH) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent per annum on the capital employed in the industrial undertaking or a ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant to the asst. yr. (the amount calculated as aforesaid being hereafter, in this s. referred to as the relevant amount of capital employed during the previous year)." While it is true that the issue under consideration in the present appeal was not before their Lordships of the Hon'ble Supreme Court in the case of Lohiya Machines Ltd. and Another vs. Union of India and Others (1985) 44 CTR (SC) 328 : ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with sub-r. (2) to (4), and the capital employed in a ship be computed in accordance with sub-r. (5). (2) 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 hotel to which the said s. 80J applies shall first be ascertained in the following manner: (i) in the case of assets entitled to depreciation, their written down value; (ii) in the case of assets acquired by purchase and not entitled to depreciation their actual cost to the assessee; (iii) in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business; (iv) in the case of assets being debts due to the person carrying on the business the nominal amount of those debts; (v) in the case of assets being cash in hand or bank, amount thereof. (3) From the aggregate of the amounts as ascertained under sub-r. (2) shall be deducted the aggregate of the amounts as on the first day of the computation period, of borrowed moneys and debts owed by the assessee (including amounts due towards any liability in respect of tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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