Section 80J computation must use opening balance on first day, excluding same-day transactions from capital employed.

Relief under section 80J, as modified by rule 19A, was confined to capital employed as on the first day of the computation period. The phrase "as on the first day" meant the capital actually in existence at the commencement of that day, i.e. the opening balance, and not transactions occurring later the same day. The earlier decision on the retrospective amendment did not expand the computation to include intra-day transactions. The deduction therefore had to be computed only on the opening balance on the first day, and the Tribunal was wrong in ignoring rule 19A; the question was answered against the assessee and in favour of the Revenue.

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Issues: Whether, for relief under section 80J, the capital employed on the first day of the computation period had to be taken as the opening balance on that day or could include transactions occurring during that day so as to reflect the closing balance of the first day.

Analysis: Relief under section 80J, as modified by rule 19A, is confined to the capital employed as on the first day of the computation period. The expression "as on the first day" was held to refer to the capital actually in existence at the commencement of that day, namely the opening balance, and not to later transactions entered into on the same day. The earlier decision upholding the retrospective amendment did not enlarge the computation so as to include intra-day transactions.

Conclusion: The deduction had to be computed only on the opening balance on the first day of the computation period, and the Tribunal was not right in ignoring rule 19A. The question was answered in the negative, against the assessee and in favour of the Revenue.

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