TaxTMI 
TaxTMI 
1980 (12) TMI 29
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....allowing deduction u/s. 80J at Rs. 67,548 in place of Rs. 13,975 allowed ? " The facts stated are that the assessee is a registered firm deriving income from manufacture and sale of barbed wire and G.I. wire, etc. The relevant assessment year is 1971-72, for which the accounting year ended on 31st March, 1971. The assessee claimed a deduction under s. 80J of the Act. The ITO was of the view that the assessee could be given relief under s. 80J of the Act at 6 per cent. on the net capital employed. In other words, the ITO was of the opinion that the amount borrowed and invested in the industrial undertaking by the assessee could not be taken into consideration for computing capital under s. 80J of the Act. On this basis, the ITO rejected the claim for deduction amounting to Rs. 67,548 and allowed deduction only of Rs. 39,975. The order of the ITO was upheld by the AAC. The Tribunal, however, took a different view. The Tribunal followed a decision of its Bombay Bench and held that the capital employed in an industrial undertaking is the entire investment of the assessee in the undertaking and that no distinction can be made between the assessee's own capital and borrowed capital. T....
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....tion, their actual cost to the assessee ; (iii) in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business ; (iv) in the case of assets being debts due to the persons carrying on the business, the nominal amount of those debts; (v) in the case of assets being cash in hand or bank, the amount thereof. Explanation I.-In this rule, 'computation period' means the period for which profits and gains of the industrial undertaking or business of the hotel are computed under sections 28 to 43A. Explanation 2.-The value of any building, machinery or plant or any part thereof as is referred to in clause (a) or clause (b) of the Explanation at the end of sub-section (6) of section 80J shall not be taken into account in computing the capital employed in the industrial undertaking or, as the case may be, the business of the hotel. Explanation 3.-Where the cost of any asset has been satisfied otherwise than in cash, the then value of the consideration actually given for the asset shall be treated as the actual cost of the asset. (3) From the aggregate of the amounts as ascertained....
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....now settled law that the assessing authorities functioning under a taxing Act have no jurisdiction to decide the validity of any of its provisions or rules or notifications made, thereunder: [See K. S. Venkataraman and Co. (P.) Ltd. v. State of Madras [1966] 60 ITR 112 (SC) and Dhulabhai v. State of M.P. [1968] 22 STC 416 (SC)].. Indeed, even the High Courts and the Supreme. Court in a reference have normally no jurisdiction to entertain the validity of the taxing Act or a statutory rule or order made under it: [See CIT v. Straw Products [1966] 60 ITR 156 (SC)]. Learned counsel for the assessee, however, has relied upon the decisions of the Calcutta, Madras and Allahabad High Courts in support of his submission that the expression " capital employed " as used in s. 80J is not restricted to the assessee's own capital and that r. 19A(3) is invalid in so far as it provides for the deduction of borrowed moneys in computing the capital employed. These decisions are: Century Enka Ltd. v. ITO [1977] 107 ITR 909 (Cal), Madras Industrial Linings Ltd., v. ITO [1977] 110 ITR 256 (Mad) and Kota Box Mfg. Co. v. ITO [1980] 123 ITR 638 (All). These cases do support the contention of the learne....
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....ent approved of that interpretation. This, in our opinion, is a very important factor to hold that r. 19A(3) which follows the same pattern as r. 3(3) of the 1949 Rules, is valid and is in line with the intention of Parliament in enacting s. 80J. Where contemporaneous and practical interpretation has stood unchallenged for a considerable length of time, it is regarded as of great importance in arriving at the proper construction of a statute. Further, such an interpretation gains greater weight when the statute as interpreted is re-enacted and is regarded presumptively the correct interpretation of the law. This rule is based upon the theory that the Legislature is acquainted with the contemporaneous interpretation of a statute, especially when made by an administrative body or executive officers charged with the duty of administering or enforcing the law, and, therefore, impliedly adopts the interpretation upon re-enactment: (See Sutherland's Statutory Construction, 3rd Edn., pp. 520, 521, 523, 524). This important principle was not considered by the Calcutta, Madras and Allahabad High Courts in holding that r. 19A(3) in so far as it provides for the deduction of borrowings and de....