SENGUPTA, J. - (1.) BY consent of the parties the application being Matter No. 5592 of 1988 relating to the asst. yr. 1980-81 is treated as on the day's list and heard along with the application being Matter No.5588 of 1988 which relates to the asst. yr. 1979-80.
(2.) THE question in these cases in whether for the purpose of allowance under S. 80J of the IT Act, 1961 ('the Act') the capital of the new unit should be computed by reducing the capital employed with reference to the over all liabilities of the company as a whole or taking into account the liability of the industrial unit or which the capital employed was being computed. In the original assessment for the aforesaid two assessment years the AO found that deduction under S. 80J was allowed on the basis of book values of the assets of New Paper Machine No. 3 and that gross capital employed had been taken into consideration instead of making a portion of the same in the ratio of actual fund of the assessee vis-a-vis overall borrowed funds. So, he issued notice under S. 154 to the assessee proposing rectification in this regard. Then, rejecting the claims of the assessee, the AO passed separate orders under S. 154 of the Act for these two years and computed the relief under S. 80J by considering the depreciations as actually allowed in the Income-tax assessments. For the reasons given by him in the assessment order for 1978-79, he took the gross capital employed in proportion with the new funds of the assessee vis-a-vis overall borrowing. In the appeal, the CIT (A) held that the correct method would have been to deduct the liabilities pertaining to the New unit only. Therefore, he called upon the AO to desist from making abatement of the figure of the capital employed with reference to the overall liabilities of the assessee-company as a whole. In respect of the depreciation the assessee urged that the AO erred in adopting the written down value of assets while computing capital employed in connection with deduction under S. 80 J. The CIT (A) had mentioned that the order passed by the AO was one under S. 154 and that the provisions of S. 154 were not at all applicable.
(3.) IN the Revenue's appeal, the Tribunal found that for the asst. yr. 1978-79 the CIT (A) directed the AO to deviate from making abatement of the figure of the capital employed with reference to the overall liabilities of the assessee-company as a whole. Following its earlier order dt. 13th March, 1987, the Tribunal maintained the order of the CIT (A) on this issue.;