Capital employed under section 80J excludes borrowed monies and debts, leaving inclusion of loans and borrowings impermissible.

Loans and borrowings were held to be excluded from capital employed for relief under section 80J because rule 19A(3) validly required borrowed monies and debts, including long-term borrowings, to be left out of the computation. That settled precedent made any direction to include such borrowings unsustainable. The issue was answered against the assessee and in favour of the Department.

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Issues: Whether loans and borrowings could be included in the capital employed for granting relief under section 80J of the Income-tax Act, 1961.

Analysis: The question stood covered by binding precedent holding that rule 19A(3) of the Income-tax Rules, 1962, validly required exclusion of borrowed monies and debts, including long-term borrowings, while computing capital employed for the purposes of section 80J. In view of that settled position, the direction to include loans and borrowings in the capital employed was unsustainable.

Conclusion: The inclusion of loans and borrowings in the capital employed for section 80J relief was held to be impermissible, and the question was answered against the assessee and in favour of the Department.

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