TMI Blog1977 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this section, be allowed in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction if any admissible to the assessee under section 80HH) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent. per annum on the capital employed in the industrial undertaking or ship or business of the hotel as the case may be, computed in the prescribed manner in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year) ........" Rule 19A(2).--"The aggregate of the amounts representing the values of the assets as on the first day of the computation period, of the undertaking or of the business of the hotel to which the said section 80J applies shall first be ascertained in the following manner :- (i) in the case of assets entitled to depreciation, their written down value ; (ii) in the case of assets acquired by purchase and not entitled to depreciation, their actual cost to the assessee ; (iii) in the case of assets acquired otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the book on Accounting and the Law by J.L. Dohr, E. L. Phillips, G. C. Thomson and W. C. Warren, page 30. The passages referred to were under the headings "Classification of proprietary capital" --page 30 and "working capital" at page 48. We do not consider that any explanation or definition of the term "proprietary capital" or "working capital" would help us in solving the meaning of the words "capital employed" occurring in section 80J of the Act. It would be dangerous to apply the meanings attributable to other expressions, especially when those expressions relate to technical matters in interpreting the words of the section. "Capital employed" is not defined for the purpose of section 80J or generally in the Act. Our attention was drawn to Explanation (b) and (c) to section 35D of the Act. There is specific reference to "capital employed" in those sections and an explanation is given as to the meaning to be attributed to those words in that section. It was not urged before us either on behalf of the revenue or on behalf of the assessee, and we think rightly, that the said explanation would be helpful in interpreting the words "capital employed" occurring in section 80J of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich prompted the enactment of section 36A(?) which originally came in the Finance Act of 1965, on April 1, 1965, and try to discuss the intention in enacting the Chapter in which section 80J occurs, it is clear that the legislation is meant for the purpose of helping newly started concerns to establish themselves. This is the main object behind the section. We cannot give an interpretation to any of the expressions occurring in any of the sections without bearing in mind this primary and essential purpose and intention of the legislature. So understood, we have certainly to give the same benefit to those concerns that have to borrow, which is available to concerns that have no need to borrow. We see no justification whatever in giving to the words "capital employed" occurring in, section 80J a meaning which would take out of the ambit of the provisions companies which are indigent and not able to finance their needs by their own resources. Now, turning to the argument advanced on behalf of counsel for the revenue that the words "capital employed" must be understood along with the words "computed in the manner prescribed", the suggestion was that even if "capital employed" can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s principle is too well-established to be supported by quoting of any authority. We are, therefore, of the view that rule 19A(3) as it is now framed and which has come into force after the third amendment of the Rules on April 1, 1972, is in excess of the rule-making power of the Board conferred by section 295 of the Act. This sub-rule cannot be relied on for the purpose of computing the words, "capital employed" for the purpose of section 80J. At page 4 of the affidavit filed by the petitioner in support of the petition is extracted a part of the assessment order from which it is seen that a sum of Rs. 35,02,795 had been deducted from the sum of Rs. 61,17,104. The sum of Rs. 61,17,104 represents "capital employed" by the assessee, The amount of Rs. 35,02,795 had been deducted because that amount represented the borrowed capital. Reference had been made by counsel for the assessee to certain books on accountancy for illustrating the words "capital employed". The view that we are taking is supported by the decision of the Calcutta High Court in Century Enka Ltd. v. Income-tax Officer [1977] 107 ITR 909 (Cal). The decision is rendered by a single judge of the Calcutta High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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