M.N.Roy, J. - (1.) The petitioner, Century Enka Ltd. (hereinafter referred to as the " said company "), was incorporated for the object, inter alia, of " carrying on the business of manufacturers and processors of polymide, polyester, rayon or any other types of man-made fibres ; of silk, wool, cotton or any other types of natural fibres ; or in general or any fibres, filaments, yarns and fabrics (whether textile, felted, looped or otherwise) manufactured and/or processed from any base, whether organic or inorganic or compounds of mixtures thereof, by physical, chemical or any other process of treatment now prevalent or as may be devised in future, and of spinning, blending, combing, weaving, knitting, bleaching, processing, dyeing, printing, making or otherwise turning to account any other fabrics or finished articles thereof and of manufacturing the chemicals, dyestuffs, equipments, washing, bleaching and dyeing materials, raw materials, packing materials, and all other requisites needed for all or any of the above-purposes and of the by-products which can be conveniently produced therefrom and to buy, sell, import, export, distribute, trade, barter, exchange, pledge, make advances upon, speculate, enter into forward transactions or otherwise deal in all or any of the foregoing ", under the provisions of the Companies Act, 1956, and they carry on business, inter alia, of manufacture, process and sale of polymide, polyester, rayons or any other type of man-made fibres of silk, wool, cotton or any other types of natural fibres. It has been stated that on or about 1969, they established an industrial undertaking at Bhosai, Poona, for the manufacture and/or process of nylon yarn and other fibres and the nylon yarn as manufactured by them, al all material times, was known and still they are known as " Enkalon ". The said production, as mentioned above, had commenced in or about October, 1969. .
(2.) Section 80J of the I.T. Act, 1961 (hereinafter referred to as "the said Act"), lays down the provisions or deal with deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases and it has been claimed by the said company, that their undertaking satisfied all the conditions laid down in Sub-section (4) of Section 80J of the said Act.
(3.) The said company has stated that on or about 14th August, 1973, they filed the return under the said Act for the assessment year 1973-74, the relevant previous year for which was the year ended on 30th September, 1972, and thereafter, on or about 7th May, 1975, a revised return was filed. It has been claimed that in the said return and/or in the course of the assessment proceedings, the said company disclosed fully and truly all materials and primary facts necessary for the concerned assessment and in response to notices issued by the ITO, Central Circle XV, Calcutta, respondent No. 1, a representative of the said company appeared from 'time to time and produced all relevant papers, accounts and documents, which again were examined and discussed by the said officer and, on such, by an order of assessment dated 17th November, 1975, made under Section 143(3) of the said Act for the concerned year 1973-74, he assessed the total income of the said company at Rs. 1,74,01,933, It has been stated further that in making such assessment, the officer concerned rejected the contentions as raised by the said company and applied Rule 19A of the I.T. Rules, 1962 (hereinafter referred to as "the said Rules"), for the computation of the capital employed in the undertaking of the said company. It was stated that the officer concerned computed the capital employed as on 1st October, 1971, and determined the same at Rs. 5,72,19,430 and the amount of admissible deduction under Section 80J as aforesaid was determined at Rs. 34,33,166, viz., @ 6% on the said sum of Rs. 5,72,19,430. The said company has alleged that in making such determination, the amount of capital employed in the concerned undertaking, the officer concerned, wrongfully and illegally took into consideration the value of assets only on the first day of the relevant previous year and further deducted the amount of borrowed capital.;