( 1 ) BY this reference application, the Tribunal has referred the following questions set out at page 2 of the application for our opinion :"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing deduction in computing the capital employed under Section 80j of the Income-tax Act, 1961, and the amount of Rs. 1,45,206 being the expenditure on incomplete capital jobs ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the fixed deposit of Rs. 5,13,36,000 should be included in the capital employed for the purpose of Section 80j of the Income-tax Act, 1961 ?"

( 2 ) IN the first original assessment, the assessee claimed a sum of Rs. 1,45,206 representing expenditure on incomplete capital jobs, should be taken into account in the capital employed for the purpose of Section 80j of the Income-tax Act, 1961. Similarly, the assessee claimed a sum of Rs. 5,13,36,000, which was in the bank as fixed deposit should also be treated as capital employed for the purpose of Section 80j of the Act. The Income-tax Officer did not allow the claim of the assessee. The Appellate Assistant Commissioner has directed the Income-tax Officer to include Rs. 1,45,206 being the expenditure on incomplete capital jobs and also Rs. 5,13,36,000 fixed deposits in banks in the assets while computing the capital for the purpose of Section 80j of the Act.

( 3 ) IN giving effect to the order of the Appellate Assistant Commissioner, the Income-tax Officer again did not include both the amounts, while computing the capital employed for the purpose of Section 80j of the Act. In fact, the Income-tax Officer has no authority to ignore the direction of the appellate authority. He has committed a gross error. In the cases where for one reason or other the order of the appellate authority is wrong, the Income-tax Officer has no authority to ignore the direction unless that appeal order has been set aside. Admittedly, that appeal order of the Appellate Assistant Commissioner has not been challenged by the Revenue before the Tribunal.

( 4 ) THE subsequent order of the Income-tax Officer, again was challenged by the assessee before the Commissioner of Income-tax (Appeals ). The Commissioner of Income-tax (Appeals) allowed the claim of the assessee on merits as well as on the ground that the Income-tax Officer has no authority to ignore the direction of the Appellate Assistant Commissioner. When the direction of the Appellate Assistant Commissioner is not being challenged and set aside in appeal before the Tribunal, the Income-tax Officer cannot ignore the direction. In appeal before the Tribunal, the Tribunal has confirmed the order of the Commissioner of Income-tax (Appeals) on both the issues.

( 5 ) AFTER hearing learned counsel for the parties, we are surprised that the Income-tax Officer has ignored the direction of the appellate authority. Such type of attitude of the Income-tax Officer shows that either he is dishonest or ignorant of the basic terms of judicial propriety.

( 6 ) ON the merits, various High Courts have decided the issues in favour of the assessee, including this High Court. Question No. 1 relates to the issue whether expenditure on incomplete plant and machinery can be allowed for computing the capital employed for the purpose of Section 80j of the Act.

( 7 ) IN the case of CIT v. Union Carbide India Ltd. , this court has taken the view that work-in-progress had to be taken into account in computing the capital for the purpose of Section 80j of the Act.

( 8 ) IN the case of CIT v. Alcock Ashdown and Co. Ltd. and Filtrone India Ltd. [1997] 224 ITR 353, the apex court held that the amount of Rs. 21,17,178 representing the value of plant and machinery yet to be installed and the cost of workshops under construction could be taken into account in determining the capital employed in the undertaking for the purpose of granting relief given in

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