Commissioner of Income Tax vs Century Spinning and Manufacturing Co. Ltd.

S.P. Bharucha J.

The question that we are called upon to answer at the behest of the Revenue in this reference u/s 256(1) of the Income Tax Act, 1961, reads thus :

"Whether, on the facts and in the circumstances of the case, the assessee was entitled to relief u/s 80J on the basis of inclusion in the capital employed, within the meaning of rule 19A(2) of the Income Tax Rules, 1962, of the amount of Rs. 7,00,111, being the average value of machinery in transit ?"

The question relates to the assessment year 1965-66, the relevant previous year having ended on December 31, 1964.

In computing the capital of the assessee''s Tyre Cord Unit for the purposes of section 80J of the Act, the Income Tax Officer deducted the amount of Rs. 7,00,111, being the average cost of machinery in transit. On appeal, the Appellate Assistant Commissioner held in the assessee''s favour and directed the Income Tax Officer to grant to the assessee relief u/s 80J even in regard to the machinery in transit. The Income Tax Appellate Tribunal, in further appeal, upheld the Appellate Assistant Commissioner''s order. The Tribunal held that the assets in the form of machinery did not lose the character of the assets simply because it was in transit.

It would appear clear from the statement of the case that the assessee had acquired the machinery in question and that, being in transit, it had not been installed and put to use. The case, accordingly, is covered by the decision of this court in Commissioner of Income Tax, Bombay City-I Vs. Alcock Ashdown and Co. Ltd., . The judgment concurred with the observations of the Calcutta High Court in Commissioner of Income Tax Vs. Indian Oxygen Ltd., , that "the moment capital is utilised for the purposes of acquiring any assets for a business, such capital becomes employed in the business. Whether the asset itself is actually used in the business or not, so far as the capital is concerned, it continues to be employed in the business".

Following the decision of Commissioner of Income Tax, Bombay City-I Vs. Alcock Ashdown and Co. Ltd., , we answer the question posed to us in the affirmative and in favour of the assessee.

No order as to costs.