TMI Blog1988 (6) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The Income-tax Officer, while computing the capital on which relief will have to be worked out, excluded (i) the borrowed capital (about which we are not concerned in this tax case) ; (ii) the value of the capital work-in-progress ; (iii) the value of the stores in transit ; and (iv) the value of the raw materials in transit. On the assessee's appeal, the Commissioner of Income-tax (Appeals) held that borrowed capital also should be included in the capital computation, following the decision of this court in Madras Industrial Linings Ltd. v. ITO [1977] 110 ITR 256. Regarding the remaining three items also, the Commissioner of Income-tax (Appeals) held that they should also be included in the capital for the purpose of grant of relief u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or relief. Regarding borrowed capital, the Tribunal held that the matter should go back to the Income-tax Officer for fresh consideration in view of the amendment of section 80J with retrospective effect from April 1, 1972, by the Finance (No. 2) Act; 1980. Accordingly, the Tribunal directed the Income-tax Officer to recompute the relief under section 80J, according to the amended law, subject to the direction that regarding the above three items, they should be included in the capital base. It is as against the order of the Tribunal, at the instance of the Revenue, that this court directed the Tribunal to state a case and refer the following question of law for the opinion of this court: "Whether, on the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an industrial undertaking and not the user of any asset as such. The company acquires an asset for its undertaking and the capital employed in the undertaking is the amount paid to acquire that asset. The user or non-user of the assets so acquired is immaterial for the computation of the benefit under section 80J. " In CIT v. Cibatul Ltd. [1978] 115 ITR 879 (Guj), the assessee purchased machinery in the previous year relevant to the assessment year 1969-70, which was not installed. The Income-tax Officer disallowed the claim for relief under section. 80J of the Income-tax Act, 1961, on the ground that the machinery was not yet installed and, therefore, was not in use and the amount of capital was not employed in the business. On appeal, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. Therefore, so long as the plant or machinery, though purchased, has not been installed, it would not be entitled to depreciation because it is not used and, therefore, under rule 19A(2)(ii), though money has been invested by the assessee in the plant in question, since the plant was not installed, the plant would not be entitled to depreciation, but, for the purpose of considering the aggregate of the amounts representing values of the assets as on the first day of the computation period, this plant would have to be included. The concept of use of the plant does not arise under rule 19A(2)(ii). It is only the question of assets acquired by purchase by the assessee and not entitled to depreciation. Both the requirements of clause (11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on the assets as on the first depreciation:- the first day of the computation day of the computation period, of the undertaking period of the undertaking or or of the business of the of the business of the hotel hotel to which the said section to which this section applies 80J applies shall first be shall first be ascertained in ascertained in the following the following manner :- manner:- (i) if they have been (i) in the case of assets (i) in the case of assets acquired before the entitled to depreciation, their entitled to depreciation their computation period, written down value. written down value. their written down value on the commencing date of the said period. --------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l employed." The position stated above by this court has not been changed by the introduction of sub-section (1A) to section 80J. It may be noted that the decision of this court in CIT v. Madras Wire Products [1980] 123 ITR 722 has been followed by this court in CIT v. Sundaram Industries Ltd. [1987] 166 ITR 35. See also CIT v. Alcock Ashdown Co. Ltd. [1979] 119 ITR 164 (Bom) and CIT v. Mohan Meakin Breweries Ltd. [1980] 122 ITR 203 (HP). We, accordingly, hold that the decision of this court in CIT v. Madras Wire Products [1980] 123 ITR 722 would govern this case as well. We answer the question of law referred to this court in the affirmative and against the Revenue. There will be no order as to costs in this case. - - Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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