Section 80J capital employed is computed undertaking-wise, with borrowed funds excluded and depreciation allowed on possession under sale agreement.

Under section 80J, capital employed is computed undertaking-wise, so liabilities of one industrial unit are not deducted against another unit's capital employed. The note also states that section 80J relief is available for the full year and is not confined to the period the undertaking actually worked, while borrowed capital is excluded from the capital employed computation. On depreciation, possession and payment under an agreement of sale were treated as sufficient to support depreciation on land and building despite the absence of a registered conveyance.

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Issues: (i) Whether, for relief under section 80J, only the liabilities of the particular industrial undertaking are to be deducted in computing the capital employed in that undertaking; (ii) whether relief under section 80J is admissible for the entire year and not confined proportionately to the period for which the units actually worked; (iii) whether the assessee is entitled to depreciation on land and building purchased under an agreement of sale where possession and consideration passed but the sale deed was not registered; (iv) whether borrowed capital is to be included in computing the capital employed for relief under section 80J.

Issue (i): Whether, for relief under section 80J, only the liabilities of the particular industrial undertaking are to be deducted in computing the capital employed in that undertaking.

Analysis: The computation of capital employed under section 80J read with the relevant rule had to be undertaken undertaking-wise. The liabilities referable to one unit could not be carried over to another unit for the purpose of reducing the capital employed of that unit. The interpretation adopted treated the statutory scheme as requiring deduction only of the liabilities attributable to the particular undertaking whose relief was being computed.

Conclusion: The issue was answered in favour of the assessee.

Issue (ii): Whether relief under section 80J is admissible for the entire year and not confined proportionately to the period for which the units actually worked.

Analysis: The question was treated as covered by earlier authority and the relief under section 80J was not to be restricted merely because the undertaking worked for only part of the year. The statutory benefit was held to extend to the whole year in the manner already settled by precedent.

Conclusion: The issue was answered in favour of the assessee.

Issue (iii): Whether the assessee is entitled to depreciation on land and building purchased under an agreement of sale where possession and consideration passed but the sale deed was not registered.

Analysis: The decisive consideration was that the assessee had possession, had paid the consideration, and had effectively acquired dominion over the property, notwithstanding the absence of a registered conveyance. The right to depreciation was therefore not defeated by want of completed legal title in the strict formal sense.

Conclusion: The issue was answered in favour of the assessee.

Issue (iv): Whether borrowed capital is to be included in computing the capital employed for relief under section 80J.

Analysis: The question was covered by prior authority holding that borrowed capital could not be treated as capital employed for the purpose of section 80J relief. On that basis, the computation had to exclude borrowed funds.

Conclusion: The issue was answered against the assessee.

Final Conclusion: The reference was answered by granting the assessee relief on the computation of capital employed undertaking-wise, on the availability of section 80J relief for the full year, and on depreciation for the land and building, while rejecting the claim that borrowed capital formed part of the capital employed.

Ratio Decidendi: For section 80J, capital employed is to be computed with reference to the particular industrial undertaking, and depreciation may be allowed where the assessee has acquired possession and paid consideration for the property even though legal title is not completed by registration.

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