HARRIES, C.J. - (1.) THIS is a reference made by the Tribunal under s. 66 of the Indian IT Act in which the following question has been propounded for the opinion of the Court :-- " Whether the Tribunal was correct in holding that r. 5 of Schedule I to the EPT Act, 1940, did apply in this case." The assessee is a limited company whose main business is to act as managing agents for joint stock companies and it appears that at the time the case was before the Tribunal they were in fact acting as managing agents for about thirty companies. The question arose whether r. 5 of Schedule I of the EPT Act applied and whether the assessee was entitled to relief under that rule. The chargeable accounting period was 1st September, 1939, to 31st March, 1940, the standard period being 31st March, 1938, to 31st March, 1939. The average bank loan during the standard period was Rs. 2,74,114 though the actual amount due as a result of loans by the bank on the last day of the standard period was Rs. 5,37,345. The average of the bank loans during the chargeable accounting period was Rs. 5,32,143 and on some dates the loans amounted to no less than Rs. 6,25,000. The Tribunal came to the conclusion that the proper way of applying r. 5 of Schedule I of the EPT Act was to strike an average of the loans during the standard period and an average of the loans during the chargeable accounting period. The average during the accounting period was very much higher than the average during the standard period and the Tribunal accordingly held that there had been an increase in the capital of the assessee as envisaged by r. 5 of Schedule I of the EPT Act and the assessee was therefore entitled to the relief given by that rule. The Tribunal was asked by the CEPT to state a case on this question and the case has been stated in which the question which I have already set out has been propounded for the opinion of the Court. Dr. Gupta on behalf of the CEPT has contended that the Tribunal were wrong in taking the average of the loans during the standard period. He has relied upon the wording of r. 5 of Schedule I of the EPT Act which is in these terms :-- " If at any time after the close of the standard period, any increase in the capital employed in a business has been effected by means of a loan from a bank carrying on a bona fide banking business, or by means of a public issue of debentures secured on the property of the company, the interest on so much of the loan or debentures as has been utilized in effecting the increase in the capital shall not be deducted in computing the profits for the purposes of excess profits tax and, notwithstanding the provisions of r. 2 of Schedule II, that amount of such loan or debentures shall not be deducted in arriving at the amount of the capital employed in the business." Dr. Gupta's argument is that the loans from the bank during the accounting period must be compared with the loan from the bank actually existing at the close of the standard period and he has urged that there is no justification whatsoever for striking an average of the loans during the standard period. He has contended that the words "If at any time after the close of the standard period" mean that the loans actually at the end of the standard period must be taken and not the average throughout the standard period. If that construction be right, then it appears to me that a grave injustice might be done to the assessee. Dr. Gupta admits that in ascertaining what the bank loan was during the accounting period it is essential that an average be taken. If an average be taken during the accounting period then it appears grossly unjust that it should not be taken also during the standard period. Why should the state of the loan account on the very last day of the accounting period only be considered ? Justice would demand that if an average is struck of the loans during the accounting period a similar average should be taken during the standard period. However, if the rule does not permit that then we should have to give effect to Dr. Gupta's contention whether it was just or unjust. In my view, however, there is nothing in r. 5 which compels the Court to hold that the actual amount of the loan on the last day of the standard period only can be taken into account. It seems to me that the words "If at any time after the close of the standard period, any increase in the capital employed in a business has been effected by means of a loan from a bank" mean that if at any time after the expiry of the standard period the capital has been increased by loans from the bank then the rule will apply. That however does not mean that if there has been after the expiry of the standard period any increase over and above the loans existing at the last day of the standard period the rule applies. What is being compared is the state of the loan account in the accounting period with the state of the loan account in the standard period and not a comparison of the state of the loan account in the accounting period with the actual loan existing on the last day of the standard period. That was the view of the Tribunal and I think the Tribunal was right. THIS very matter was considered by a Bench of the Bombay High Court in the case of Killick Nixon and Co. vs. CIT (1945) 13 ITR 445 (Bom) in which it was held that the scheme of s. 6 of the EPT Act, 1940, is to compare the average amount of capital during the standard period with the average amount of capital during the chargeable accounting period and make adjustments in the standard profits on the footing of the increase in the capital during the chargeable accounting period. For this purpose the figure that is relevant is the average amount of capital for the standard period and not the amount of capital ascertained as in use on the last date of the standard period, and where the profits of an assessee liable to excess profits tax were computed by taking into account under r. 5 of Schedule I r/w s. 6 of the EPT Act, the average of the bank overdraft and debenture loans during the standard period and not the total of the bank overdraft and debenture loans as on the last date of the standard period, the Bench held that the profits had been rightly computed. The Bombay decision precisely covers the facts of this case and should be followed. What is to be compared is the bank loans existing during the accounting period and those existing during the standard period and the only way that can be done is to strike an average of the loans during both the periods. There is no justification for the view that the average loan during the accounting period is to be compared with the actual loan existing on the very last day of the standard period. In my view the Tribunal were right in the view they took and I would accordingly answer the question propounded in the affirmative. The assessee will be entitled to the costs of these proceedings. Certified for two counsel.;