TMI Blog1997 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... 1987. Civil Appeal No. 1274 of 1980 preferred against the judgment of the Bombay High Court in I. T. R. No. 40 of 1969 is the main appeal. The judgment rendered therein is reported in [1979] 119 ITR 164. This judgment was followed in the latter case, I. T. R. No. 453 of 1975. In Civil Appeal No. 1274 of 1980, the question arose with reference to the assessment year 1962-63, wherein the interpretation of section 84 of the Income-tax Act, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by the Revenue, the Appellate Tribunal referred the following question of law under section 256(1) of the Act to the High Court of Bombay : "Whether, on the facts and in the circumstances of the case, the amount of Rs. 21,17,178 representing the cost of plant and machinery not installed and the cost of workshops under construction, could be taken into account in determining the capital employed in the undertaking at Bhavnagar 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets actually used and if the assets are not actually and directly used in the business, the amount representing the cost thereof should not be taken into account in determining the capital employed in the undertaking. On the other hand, counsel for the assessee, Mr. S. Ganesh, submitted that the proper interpretation of section 84 read with rule 19(1) of the Rules only envisages that the particular asset should have 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 utilise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit under section 80J. This is the view that was taken by the High Court of Calcutta in CIT v. Indian Oxygen Ltd. [1978] 113 ITR 109 and also of the High Court of Madras in Jayaram Mills Ltd. v. CEPT [1959] 35 ITR 651. In Indian Oxygen's case [1978] 113 ITR 109, after referring to the observations of the House of Lords in the case of Birmingham Small Arms Co. Ltd. [1951] 2 All ER 296, it was held--see [1978] 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 Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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