Dipak Kumar Sen, J. - (1.) Bilaspur Spinning Mills & Industries Ltd. was assessed to income-tax in the assessment years 1968-69, 1969-70, 1970-71 and 1971-72, the relevant accounting years ending on September 30 of the calendar years 1967, 1968, 1969 and 1970 respectively. In its returns, the assessee claimed under Section 80J of the Income-tax Act, 1961, deduction of 6% of the capital employed by the assessee in its undertaking from its profits and gains in the computation of its total income. In each of the said assessment years, there were no profits and gains. The assessee claimed further that the said 6% of its capital employed should be carried forward as deficiency under the said section for being set off against its profits and gains of the subsequent assessment years.
(2.) Part of the capital of the assessee consisted of machinery purchased from a manufacturer in Japan on deferred payment basis. The assessee claimed that the quantum of the unpaid purchase price of the said machinery should be treated as money borrowed from an approved capital source for creation of capital assets in India and contended that the same should not be deducted from the capital value of its assets under Rule 19A, Sub-rule (3) of the Income-tax Rules in computing the deficiency allowable under the said Section 80J.
(3.) It was held by the Income-tax Officer in each of the said assessment years that such liability did not arise out of moneys borrowed and he deducted the said amount of unpaid price from the value of the capital employed by the assessee in calculating the deficiency to be carried forward.;