Capital employed computation includes existing uninstalled machinery; deduction under the amended provision remains open to later adjustment.

For section 80JJ, uninstalled machinery shown in the balance sheet as existing on the first day of the relevant previous year was to be included in capital employed, because it was not a later purchase and the factual basis for exclusion was incorrect. For section 80J, borrowed capital and the deduction computation were left open to adjustment where a retrospective amendment was under challenge, so the relief could be modified in line with the Supreme Court's ruling on the amended provision. The note states that the assessee obtained relief on the first issue and that the second issue remained subject to future revision depending on the final judicial outcome.

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Issues: (i) Whether the value of uninstalled machinery existing on the first day of the relevant previous year was includible in the computation of capital for deduction under section 80JJ of the Income-tax Act, 1961. (ii) Whether borrowed capital was to be excluded in computing relief under section 80J of the Income-tax Act, 1961 in view of the retrospective amendment under challenge.

Issue (i): Whether the value of uninstalled machinery existing on the first day of the relevant previous year was includible in the computation of capital for deduction under section 80JJ of the Income-tax Act, 1961.

Analysis: The machinery was shown in the balance sheet as existing on the relevant date and was not a purchase made after the opening day of the previous year. The factual basis adopted by the lower authority for exclusion was therefore incorrect. The claim fell to be considered on the footing that the machinery formed part of the capital employed in the undertaking.

Conclusion: The assessee's claim was accepted and the uninstalled machinery value was to be included in the capital computation for section 80JJ.

Issue (ii): Whether borrowed capital was to be excluded in computing relief under section 80J of the Income-tax Act, 1961 in view of the retrospective amendment under challenge.

Analysis: The retrospective amendment affecting section 80J was pending consideration before the Supreme Court. In the circumstances, the computation of deduction was directed to remain open to adjustment according to the outcome of that decision.

Conclusion: The income-tax computation under section 80J was to be modified, if necessary, after the Supreme Court's decision on the amended provision.

Final Conclusion: Relief was granted on the first issue and the second issue was kept amenable to future modification depending on the Supreme Court's ruling, resulting in a favourable overall outcome for the assessee.

Ratio Decidendi: A capital asset such as machinery that is in existence on the relevant opening date cannot be excluded from capital employed on the mistaken assumption that it was acquired later, and a deduction computation affected by a challenged retrospective amendment may be adjusted in accordance with the final authoritative ruling.

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