IMPORTANT POINT
The moment an asset is acquired or purchased for the purpose of the business, it is capital employed , within the meaning of Section 84(1) of the Income Tax Act, though the asset as such is not actually utilised or used during the accounting year.

JUDGMENT

Paripoornan, J.-A common question of law arises for consideration in both the appeals. The appeals are preferred against the judgments of the Bombay High Court in I.T.R. No. 40 of 1969 dated 7.7.1978 and I.T.R. No. 453 of 1975 dated 27.3.1987. Civil Appeal No. 1274 of 1980 preferred against the judgment of the Bombay High Court in I.T.R. No. 40 of 1969 is the main appeal. The judgment rendered therein is reported in (1979) 119 ITR 164. This judgment was followed in the latter case, I.T.R. No. 453 of 1975.

2. In Civil Appeal No. 1274 of 1980, the question arose with reference to the assessment year 1962-63, wherein the interpretation of Section 84 of the Income-tax Act, 1961, as it existed then, came up for consideration. Civil Appeal No. 9796 of 1995 is concerned with the assessment year 1969-70, wherein Section 80-J of the Act came up for consideration. It was agreed at the Bar and it is also fairly clear that the controversy in these cases, is regarding the interpretation of the crucial words viz. capital employed in the undertaking occurring both in Sections 84(1) and 80-J of the Income-tax Act (hereinafter referred to as the Act ).

3. We heard counsel.

4. It will be sufficient if we advert to the minimal facts in the main appeal-Civil Appeal No. 1274 of 1980. The respondent-assessee is a public limited company. It has a chain of machine workshops. In the previous year (calendar year 1961), relevant for the assessment year 1962-63, the assessee 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 started business operations in the year of account. The profit for this year was Rs. 5,39,791/-. A good portion of the plant and machinery was installed for the new business operations, but some of them remained to be installed, though they were paid for. Some of the workshops were still under construction. The value of the plant and machinery not installed came to Rs. 11,95,167/-, while the cost of the workshop under construction came to Rs. 9,22,011/-. The aggregate for the above two items came to Rs. 21,17,178/-. The assessee claimed relief for this amount under Section 84 of the Act as "capital employed in the new industrial undertaking" at Bhavnagar. The Income-tax Officer declined to afford the relief claimed on the ground that the assets had not been put to use during the accounting period. The appeal filed before the Appellate Assistant Commissioner was futile. In second appeal filed by the assessee, the Appellate Tribunal held that the industrial undertaking at Bhavnagar formed an integral whole and the new workshops under construction remaining to be installed were part and parcel of that undertaking. The Appellate Tribunal also held that the business of the industrial undertaking at Bhavnagar had already commenced and was being carried on during the year of account. The Tribunal further held that it was not in dispute that the assets in question could not be segregated from the industrial undertaking at Bhavnagar. These are the basic findings of the Appellate Tribunal. On the basis of the above findings, the Tribunal concluded that "the capital employed in the undertaking" has to be distinguished from "assets used in the undertaking" and the relief envisaged by Section 84 of the Act is with reference to the capital utilised for the purpose of acquiring the asset for the business and the question as to whether it (the asset) was actually used in the business or not during the relevant year is of no consequence. The Tribunal decided the question in favour of the assessee and held that the aggregate amount of Rs. 21,17,178/- was includible in the computation of capital for the purpose of granting relief under Section 84 of the Act to the assessee. On motion by the Revenue, the Appellate Tribunal referred the following question of law under Section 256(1) of the Act to the High Court of Bombay :

"Whethe