TEKSONS PVT LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference at the instance of the assessee under s. 256(1) of the I.T. Act, 1961. The question referred to us reads as follows : 'Whether, on the facts and in the circumstances of the case, the moiety of the book profits were includible in the capital employed in the industrial undertaking having regard to rule 19(5) of the Income -tax Rules, 1962 ?'

(2.) THE assessee is a private limited company carrying on the business of manufacturing radiators, fuel engines, etc., for automobiles. We are concerned n this reference with the assessment year 1964 -65. In the assessment the assessee claimed relief under of the I.T. Act, 1961. The ITO computed the capital employed at Rs. 27,25,755 and 6% of the said amount worked out to Rs. 1,63,545; this was the eligible relief as determined by the ITO.

(3.) THE matter was thereafter carried to the Income -tax Appellate Tribunal. In its judgment, the Tribunal extracted sub -r. (5) of r. 19 and confirmed the decision taken by the AAC in the following words : 'The Income -tax Officer by taking the average value of the assets and liabilities has, no doubt, properly considered the working in terms of the rules provided for this purpose and, therefore, we do not see how the assessee could say that the average profits of the year contemplated under rule 19(5) should be added back so long as the said average profits are already covered by the assets and liabilities taken at the end of the year. Apart from this, we find that sub -rule (5) of rule 19 relates to the average amount of capital employed in a business during any computation. Period and not with regard to the amount of capital employed in business. In the instant case, we are concerned with computation of capital employed and it has been rightly computed under rule 19(1), (2), (3) and (4). Further, sub -rule (5) of rule 19 only gives the manner of taking the profits in the case of computation of average capital employed but it does not suggest that it should be taken into account when computation is worked out under rule 19(1), (2) (3) and (4) which provide the method of computation of capital. In that view of the matter, in our opinion, sub -rule (5) 19 cannot held to come into play in the assessee's case. Therefore, we reject this contention of the assessee.'