Retrospective amendment to section 80J governed capital employed computation, excluding approved financial institution loans from relief.

Retrospective insertion of section 80J(1A) by the Finance (No. 2) Act, 1980 with effect from 1 April 1972 governed the computation of relief under section 80J, and the court could rely on that amended statutory position in answering the reference. The argument that the amended provision could not be applied because it was not before the Tribunal, or because rectification was time-barred, was rejected. On that basis, loans from approved financial institutions were not treated as capital employed for the assessee's section 80J claim, and the reference was answered against the assessee.

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Issues: Whether loans from approved financial institutions form part of the capital employed for computing relief under section 80J, and whether the court could rely on section 80J(1A) of the Income-tax Act, 1961, in answering the reference.

Analysis: The question arose in a reference under section 256(1) of the Income-tax Act, 1961, concerning assessment years 1972 and 1973. The court noted that rule 19A of the Income-tax Rules, 1962 had earlier been held ultra vires, but Parliament subsequently inserted section 80J(1A) by the Finance (No. 2) Act, 1980 with retrospective effect from 1 April 1972. The contention that the court could not take recourse to the inserted provision, either because it was not before the Tribunal or because rectification was barred by limitation, was rejected. The court held that the reference had to be answered in light of the statutory position, including the retrospective amendment.

Conclusion: The loans from approved financial institutions were not accepted as capital employed for the assessee's claimed relief under section 80J, and the question was answered against the assessee and in favour of the Revenue.

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