Law:

Section:

Section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from new industrial undertakings, ships or hotels, etc. - Assessment year 1982-83 - Whether for purpose of arriving at capital employed for granting relief under section 80J, only liabilities pertaining to new industrial undertaking are to be deducted from aggregate of value of assets of that new industrial undertaking - Held, yes Circulars and notifications - CBDT circular No. 380 dated 10-4-1984. FACTS The assessee-company claimed relief under section 80J on the total capital employed of Rs. 1,08,97,124. At the rate of 7.5 per cent the relief worked out to Rs. 8,17,134. The balance-sheet of the new industrial undertaking of the assessee, showed that Rs 1,08,95,124 was shown as having been transferred from the head office, which was admittedly the old unit. According to the Assessing Officer, because the old unit had certain borrowings in its separate balance-sheet, the total amount available to the new unit had to be proportionately reduced, because the liability of the new unit was shown as liability of the old unit He, therefore, worked out the said figure at of Rs. 59,85,542 and deducted the same from the aggregate of the assets worked out by the assessee. Thus the total capital employed in the new unit was reduced to Rs. 49,09,577 and accordingly relief under section 80J at 7.5 per cent was worked out at Rs. 3,68,218. On appeal, the Commissioner (Appeals) accepted the contentions of the assessee that the aggregate the assets could not be reduced by a sum of Rs. 59,85,542 for working out the capital employed. The Tribunal upheld the finding, of the Commissioner (Appeals). On reference: HELD Section 80J provides for deduction in respect of profits and gains from newly established industrial undertaking. For working out such a deduction capital employed in the newly established industrial undertaking is required to be computed. Sub-section (1A) provides that employed that for the purpose of section 80J the capital employed in an industrial undertaking shall be computed in accordance with clauses (II) to clause (IV). As per clause (II) the aggregate of the amounts representing the values…

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