TMI Blog1978 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... started business operations in the year of account. Its profit in this year was Rs. 5,39,791 according to the company's statement of account. A considerable part of the plant and machinery was installed for the purpose, but some of the plant and machinery which had been paid for remained to be installed. Similarly, some of the workshops were still under construction in the year of account. The value of the plant and machinery not installed came to Rs. 11,95,167 whilst the cost of the workshops under construction came to Rs. 9,22,011. In this reference, we are concerned with the aggregate figure of Rs. 21,17,178 made up of these two items. The assessee claimed before the ITO that it was entitled to relief under s. 84 of the I.T. Act, 1961, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital employed in the undertaking were acquired for the purposes of the business and they should, therefore, have been included in the capital employed in the undertaking. On behalf of the department emphasis was placed on the reason and the basis for the relief. Further, reference was made to r. 19(6) and it was submitted that this rule would clearly indicate that the assessee was to have relief only in respect of the assets in actual use and not on assets which were not in use. The Tribunal allowed the appeal and found in favour of the assessee. It based its decision on several aspects. In the first place, it observed that the industrial undertaking at Bhavnagar was one integral whole and the new machinery remaining to be installed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and held that the aggregate amount of Rs. 21,17,178 was includible in the computation of capital for the purpose of granting relief under s. 84 to the assessee. Accordingly, the following question has been referred to us at the instance of the Commissioner under s. 256(1) of the I.T. Act, 1961 : " 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 workshop 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 ? " Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying on the business, the nominal amounts of those debts ; (d) in the case of any other assets, the value of the assets when they became assets of the business : Provided that if any such asset has been acquired within the computation period, only the average of such value shall be taken in the same manner as average cost is to be computed ........" Sub-rule (6)(i) of r. 19 indicates how average cost in relation to any asset is required to be calculated. Mr. Joshi on behalf of the revenue reiterated the argument which the department had urged before the Tribunal and submitted that the relief under s. 84 was meant only for assets actually used and that this view was completely borne out by the method provided in r. 19(6) for calcula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and still there.The Calcutta High Court also referred to a decision of the Madras High Court in Jayaram Mills Ltd. v. CEPT [1959] 35 ITR 651, where the Madras High Court had followed the two decisions of the House of Lords. It is true that both the House of Lords and the Madras High Court were concerned with E. P. T. Acts, but had occasion whilst so doing to distinguish between the expressions " capital employed " and " assets used in the undertaking ". After citing these decisions the Calcutta High Court in Indian Oxygen Ltd.'s case [1978] 113 ITR 109, 120 (Cal) observed as follows : " Looking at the position from another point of view it appears to us that the moment capital is utilised for the purposes of acquiring any asset for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred at the instance of the Commissioner. All the relevant statutory provisions and rules have been brought to the attention of the Calcutta High Court. It passed its decision on a consideration of the two decisions of the House of Lords and of the Madras High Court. As far as this court is concerned, we have taken the view that since the I. T. Act is a piece of all-India legislation, as far as possible if any High Court has construed any section or rule and come to a particular interpretation thereof, that interpretation should be followed by this court unless there are compelling reasons brought to our notice for departing from the view taken by another High Court. No such compelling reason has been brought to our notice by learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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