COMMISSIONER OF INCOME TAX Vs. TEXMACO LTD

JUDGEMENT

(1.) This reference under Section 256(1) of the I.T. Act, 1961, arises out of the assessment for the assessment year 1956-57. The following question has been referred to us :

(2.) The only point involved in this reference relates to the ITO's action in computing the capital employed under Section 15C of the Indian I.T. Act, 1922, on the basis of written down value of fixed assets as on January 1, 1955, as reduced by the initial deprecutioa allowed for the various years. The facts of the case are that the Tribunal had directed the ITO to give relief to the assessee under s, 15C of the Indian I.T. Act, 1922, and compute the capital employed for the purpose in accordance with the rules. The ITO computed the capital as stated above and the assessee was aggrieved by the reduction of the written down value of the fixed assets by the initial depreciation. It was suggested before the AAC that the Bombay High Court had held in the case of Burmah-Shell Refineries Ltd. [1968] 67 ITR 653, to which we shall presently refer, that for the purpose of computing the capital employed under Section 15C of the 1922 Act, the written down value had to be worked out without deducting therefrom the initial depreciation. The AAC accepted this view and further held that it was at best a debatable issue and, therefore, the ITO should not have computed the capital in the manner done.

(3.) Aggrieved by the said decision of the AAC, the Department went up in appeal. The first contention was the applicability of Section 35 of the old Act in rectifying the mistake. As this has not been referred to us, we need not detain ourselves on this aspect of the matter. The Tribunal in its order observed as follows ;