COMMISSIONER OF INCOME TAX Vs. BAROAX MORARJI LIMITED

JUDGEMENT

(1.) THIS reference pertains to the assessment year 1967 -68.

(2.) THE dispute is in relation to the computation of capital for relief allowed in respect of a new industrial undertaking under section 84 of the Income -tax Act, 1961, which was then in force, read with rule 19 of the Income -tax Rules, 1962, as in force at the relevant time. Under rule 19(3), as then in force, 'any borrowed monies and debts due' by the assessee shall be deducted while computing the capital employed in an undertaking. The Department contended before the Tribunal that the computation of money borrowed and debts due should not have been done as at the end of the relevant accounting period, but the value of the liability in this regard should have been taken on an average basis. This contention has been negatived by the Tribunal.

(3.) REGARDING question No. 1, the Department relies upon the provisions of rule 19(1) as in force at the relevant time. Rule 19(1) deals with those assets which constitute the capital employed in a new industrial undertaking. Under rule 19(1)(a), there is an express provision to the effect that, in the case of assets acquired by purchase, if such assets were acquired on or after the commencing date of the computation period, their average cost during the said period should be taken into account. This sub -rule deals with assets which are entitled to depreciation. Similarly, under sub -rule (b) which deals with assets acquired by purchase but which are not entitled to depreciation, there is a similar provision that, if such assets are acquired on or after the commencing date of the computation period, their average cost during the said period should be taken into account. Under rule 19(1)(d) also, in the case of other assets, there is an express provision for taking the average value as set out in that clause. There is no such provision for averaging under rule 19(1)(c) which deals with assets in the form of debts due to the assessee.