Law:

Section:

Section 80J of the Income-tax Act, 1961, read with rule 19A of the Income-tax Rules, 1962 - Deductions - Profits and gains from newly established industrial under takings - Certain amount was included in value of plant and machinery purchased by assessee which was in process of installation - During relevant year said amount had not been allocated between building and machinery and was shown as unallocated capital expenditure in books - Whether said amount was includible in computation of capital employed for purposes of working out relief under section 80J and could not be excluded by reason of being unallocated under relevant category - Held, yes Facts In working out the capital employed for setting up a new unit, the assessee-company included a certain amount described as 'unallocated capital expenditure'. The said amount was included in the value of the plant and machinery which had been purchased by the assessee and was in the process of installation, but by the end of the accounting year had not been allocated to the plant and machinery and the building. The ITO excluded the said amount for the purpose of computing the capital employed for calculation of deductions under section 80J on the ground that the said amount did not represent fixed assets used in the assessee's business. On appeal, the ITO set aside the ITO's order, holding that that the capital employed by the assessee in setting up the new unit included all assets whether fixed or current and, as such, the amounts spent during the construction period of the said project formed part of the capital employed. According to the AAC, the said amount represented expenditure incurred on capital assets which had to be allocated partly against the building and partly against the plant and machinery and the mere fact that the ratio of allocation was not fixed during the year would not alter the character of the expenditure. On the revenue's appeal, the Tribunal confirmed the AAC's findings. On reference: Held The matter stood concluded by this High Court's decision in CIT v. Alcock Ashdown & Co. Ltd. [1979] 119 ITR 164 , wherein it was held that the moment capital was employed for the purpose of…

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