COMMISSIONER OF INCOME TAX Vs. CIBATUL LIMITED

JUDGEMENT

(1.) IN this case, at the instance of the revenue, the following question has been referred to us for our opinion :

(2.) WHETHER , in computing the capital employed for the purpose of relief under s. 80(J)(3), an amount of Rs. 8,33,032 representing unistalled machinery should be taken into consideration ?'

(3.) WE may point out that the conclusion that we have reached has also been reached by the Calcutta High Court in CIT v. Indian Oxygen Ltd. : [1978]113ITR109(Cal) and by the Karnataka High Court in Ravi Machine Tools (P.) Ltd v. CIT [1978] 144 ITR 459. We may also point out that, asindicated by the Calcutta High Court in Indian Oxygen's case, the House of Lords in England in Birmingham Small Arms Co. Ltd. v. IRC [1951] 2 All ER 296, has by a majority interpreted the words 'capital employed' to mean the money invested in the purchase price of the assts as distingusihed from the actual user of the assets. Lord Tucker actually said that the words 'capital employed' Point to the conclusion that in their context they do not refer to the actual use made of a particular asset in the relevant accounting period once it is shown to have been a form of capital put into the business and still there. Similarly, Lord Radcliffe pointed out in that case in the House of Lords that the test in computing capital is not whether an asset belonging to the proprietor of a business is employed in his business or not, but whether there is capital employed in his business consisting of this or that asset. These tests have been applied both by the Calcutta High Court and by the Karnataka High Court in the two cases referred to above. In any event, so far as our statue and the rules before us are concerned, it is clear that in the light of r. 19A(2)(ii), there is no doubt that, in computing assets for the purpose of computing capital, uninstalled machinery which has been acquired by purchase must be taken into consideration while computing capital. The conclusion of the Tribunal was, therefore, right and the question referred to us must, therefore, be answered in the affirmative, that is, in favour of the assessee and against the revenue. The Commissioner will pay the costs of this reference to the assessee.