COMMISSIONER OF INCOME TAX Vs. ALCOCK ASHDOWN AND COMPANY LIMITED

JUDGEMENT

(1.) THE assessee before us is a public limited company having a chain of machine shops, and we are concerned with the asst. year 1962 63, the corresponding previous year being the calendar year 1961. The assessee had started a new industrial undertaking at Bhavnagar. It was to consist of several workshops including one for the manufacture of small boats. The undertaking at Bhavnagar had started business operations in the year of account. Its profit in this year was Rs. 5,39,791 according to the company's statement of account. A considerable part of the plant and machinery was installed for the purpose, but some of the plant and machinery which had been paid for remained to be installed. Similarly, some of the workshops were still under construction in the year of account. The value of the plant and machinery not installed came to Rs. 11,95,167 whilst the cost of the workshops under construction came to Rs. 9,22,011. In this reference, we are concerned with the aggregate figure of Rs. 21,17,178 made up of these two items.

(2.) THE assessee claimed before the ITO that it was entitled to relief under S. 84 of the IT Act, 1961, by reference to the capital employed in the new industrial undertaking at Bhavnagar. The assessee's claim was that it was entitled to have the relief computed even in respect of the machinery which had not been installed and the workshops still under construction. The ITO took the view that the amounts in question which aggregated to Rs. 21,17,178 could not be included in the capital employed because the assets had not been put to use during the accounting period. He came to this conclusion after analysing S. 84 r/w r. 19 of the IT Rules. Accordingly, he held that this amount could not be taken into account for the purpose of capital computation.

(3.) SUB s. (1) of S. 84, at the relevant period, read as follows :