COMMISSIONER OF INCOME TAX Vs. SIMPSON AND CO

JUDGEMENT

(1.) THE Appellate Tribunal has referred the following question under Section 256(1) of the IT. Act, for the opinion of this court:

(2.) THE assessee is a company which was assessed for the assessment years 1962-63 and 1963-64. In the original assessment made for the assessment year 1962-63, the capital employed was found to be Rs. 14,40,792 and 6% thereon was given as a relief under the provisions of Section 84 as it was then in force. Similarly, for the assessment year 1963-64, the assessee was granted relief at 6% on the capital employed as determined by the ITO in accordance with the provisions of the rules. Later, the ITO considered that excessive relief had been granted to the assessee and he, therefore, reopened the assessment under Section 147(a) of the Act. Apparently, the view of the ITO was that excessive relief had been granted by reason of the failure of the assessee to disclose fully and truly all material facts relating to the assessment. THE ITO was of the opinion that the machinery had worked in each of these two years only for nine months and that, therefore, the relief of 6% had to be restricted proportionately to the period during which the machinery worked. THE appeal to the AAC was unsuccessful and the assessee appealed to the Tribunal. THE Tribunal held that the assessee was entitled to the relief of 6% on the capital employed for each of the assessment years without any limitation on any proportionate time basis. It is this order of the Tribunal that has given rise to the reference of the question set out earlier.

(3.) IT is at this stage that the controversy between the assessee and the revenue emerges. While the assessee wants 6% on the capital as computed, the revenue wants the computation to be restricted to the period during which the business was carried on during the relevant year. In the present case, it is stated, that two sets of machinery were installed in the two years and these two sets of machinery were actually utilised during the relevant years only for a period of nine months. This is how the department wants a proportionate part of 6% to be applied on the capital-computed. For this purpose, reliance was placed on the expression "as does not exceed six per cent. per annum" used in the section already extracted. The question is whether the expression "per annum" has to be understood as giving only a proportionate relief to the assessee.