TaxTMI 
TaxTMI 
1997 (2) TMI 5
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....ct, 1961, as it existed then, came up for consideration. Civil Appeal No. 9796 of 1995 is concerned with the assessment-year 1969-70, wherein section 80J of the Act came up for consideration. It was agreed at the Bar and it is also fairly clear that the controversy in these cases, is regarding the interpretation of the crucial words, viz., "capital employed in the undertaking" occurring both in sections 84(1) and 80J of the Income-tax Act (hereinafter referred to as "the Act"). We heard counsel. It will be sufficient if we advert to the minimal facts in the main appeal--Civil Appeal No. 1274 of 1980. The respondent-assessee is a public limited company. It has a chain of machine workshops. In the previous year (calendar year, 1961), relevant to the assessment year 1962-63, the assessee started a new industrial undertaking at Bhavnagar. It was to consist of several workshops, including one for the manufacture of small boats. The undertaking at Bhavnagar started business operations in the year of account. The profit for this year was Rs. 5,39,791. A good portion of the plant and machinery was installed for the new business operations, but some of them remained to be installed, t....
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....for the purpose of granting relief to the company in terms of section 84 of the Income-tax Act, 1961, for the assessment year 1962-63 ?" The High Court of Bombay, by its judgment dated July 7, 1978 (see [1979] 119 ITR 164), considered the rival pleas of the Revenue and the assessee in detail and concurred with the reasoning and conclusions of the Appellate Tribunal and answered the question in the affirmative and in favour of the assessee. Thereafter, this court granted special leave to the Revenue to appeal to this court against the aforesaid judgment of the Bombay High Court and that is how the appeal is before us. Section 84(1) of the Income-tax Act, 1961, at the relevant period read as follows : "84. (1) Save as otherwise hereinafter provided, income-tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking or hotel to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking or hotel, computed in the prescribed manner." (emphasis supplied). Rules 19(1) and (6) of the Income-tax Rules, 1962, in so far as they are relevant, provide as follows : "19. Comput....
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....ve been a form of capital put into the business during the relevant accounting period and does not refer to the actual use made of any particular asset during that period. The emphasis placed by counsel for the Revenue on rule 19(6) of the Rules has no relevance since reference to rule 19(6) is called for only in cases where the average cost in relation to an asset arises for consideration. On examining the rival pleas, we are of the view that the reasoning and conclusion of the High Court does not call for any interference. Section 84(1) of the Income-tax Act is very clear. It affords relief to an assessee as provided therein the moment "the capital is employed in the undertaking". The section does not state or specify that the asset should be actually used or utilised. After adverting to the interpretation placed by the House of Lords on similar or kindred words that occurred in the Finance Act (England) and also the decision of the Madras High Court in Jayaram Mills Ltd. v. CEPT [1959] 35 ITR 651, wherein similar words were construed with reference to the Excess Profits Tax Act, a Division Bench of the Calcutta High Court in CIT v. Indian Oxygen Ltd. [1978] 113 ITR 109 at pag....
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....8] 113 ITR 109, 120 (Cal) : '....it appears to us that the moment capital is utilised for the purposes of acquiring any asset for a business, such capital becomes employed in the business. Whether the asset itself is actually used in the business or not, so far as the capital is concerned, it continues to be employed in the business.' We entirely agree with this enunciation ......" (emphasis supplied). We find that the Bombay High Court has consistently followed the decision in CIT v. Alcock Ashdown and Co. Ltd. [1979] 119 ITR 164, the decision under appeal in the subsequent cases--see CIT v. Boehringer Knoll Ltd. [1984] 148 ITR 70 (Bom) ; CIT v. Hindustan Polymers Ltd. [1985] 156 ITR 860 (Bom) ; CIT v. Advani Oerlikon Pvt. Ltd. [1986] 161 ITR 449 (Bom) ; CIT v. Indian Smelting and Refining Co. Ltd. [1988] 169 ITR 562 (Bom) ; CIT v. Elpro International Ltd. [1989] 177 ITR 20 (Bom) and CIT v. Century Spinning and Manufacturing Co. Ltd. [1990] 181 ITR 214 (Bom). The other High Courts have also followed either one or more or all of the decisions reported in CIT v. Indian Oxygen Ltd. [1978] 113 ITR 109 (Cal) Ravi Machine Tools (P.) Ltd. v. CIT [1978] 114 ITR 459 (Kar) and the ....