Rule 19a(2) and 19a(3) of the Income-tax Rules, 1962, are ultra vires and beyond the scope of Section 80j of the Income-tax Act, 1961.

( 1 ) IN this application I am concerned with the assessment made under the Income-tax Act, 1961, for the assessment year 1972-73. The petitioner is a public limited company. For the aforesaid assessment year the petitioner claimed relief under section 80j of the Income-tax Act, 1961, and in view of the contentions urged in this application it is necessary to refer to the relevant portion of the assessment order dealing with this question. The said assessment order stated, inter alia, as follows: " (vi) Relief Under Section 80j. The assessee claimed Rs. 49,69,033 under Section 80j for the year on the basis of average capital. For reasons discussed in the preceding year, the assessee's claim is disallowed. The claim is confined to Rs. 21,85,515 as under: Rs. Rs.  

21,85,515 1,49,56,675

a) Assets entitled to depreciation :

Written down value of fixed assets as on 30-9-1970 as per last asstt. Order

3,73,26,323

(b) Assets not entitled to depreciation :

Land as per balance-sheet as on 30-9-1970 8,91,979

(c) Current assets : As per balance-sheet as on 30-9-1970 3,08,08,326

. Total assets 6,90,26,628

[as per rule 19a (2) deduct the following as per balance-sheet as on 30-9-1970 (as per rule 19a (3))]

(i) Current liabilities and provisions 53,40,400

Less : Provision for excise duty on Polymer Chips on the ground that the same is not ' due ' within the meaning of cl. (iii) of Expln. at foot of r. 19a (3)

13,96,000

39,44,400

(ii) Loans (secured & unsecured) 2,86,56,984

3,26,01,384  

3,64,25,244

( 2 ) IT appears that in accordance with Rule 19a (2) of the Income-tax Rules, 1962, for the purpose of granting relief on the capital employed the aggregate amount of the value of the assets on the first day of the previous year has been taken to be the basis. Rule 19a (2) in so far as it directs that the capital employed on the first day of the computation period should be taken as the basis has been held by me to be beyond the scope of Section 80j of the Act and as such not within the competence of the rule-making authority. I have so held in Civil Rule No. 2887 (W) of 1972 Century Enka Ltd. v. Income-tax Officer. For the reasons given in the said judgment I must hold in this case also that, so far for the computation of capital employed the aggregate amount of the assets on the first day of the computation period has been taken as the basis, it is invalid and the Income-tax Officer must recompute the same in the light of the observations made in the aforesaid judgment. In this case, however, counsel on behalf of the revenue sought to argue that in view of Section 296 of the Act the question whether the rule was beyond the purpose of the Act did not really fall for consideration. It was urged that Section 296 of the Act enjoined that the rules framed by the Central Government should be placed before Parliament, and the same might be modified by Parliament. This is one of the methods by which the legislative forum maintains supervision over the subordinate authority in respect of delegated legislation. But by this process the rules framed by the delegates do not become legislation of Parliament. In some statutes where it is intended by the legislature that the rules when framed should have the effect of the statute, the rule-making power in such statutes has specifically provided for such situations; for instance, in the Central Excises and Salt Act, 1944, before its amendment in 1973, Section 38 had provided that the rules when framed under the Act would become part of the statute. If such was the position in the instant case different considerations might have arisen and it might have required consideration as to whether such rules which by the provisions of the Act are directed to be part of the statute could be considered to be beyond the jurisdiction of the rule-making authority. Even where an Act provides that the subordinate legislation shall have the effect as