The written down value of assets should be used for computing capital employed under Section 80j, and freight, loading charges, and insurance incurred in connection with export business are not entitled to weighted deduction under Section 35b.

AJIT K. SENGUPTA, J.

( 1 ) IN this reference under Section 256 (1) of the I. T. Act, 1961, at the instance of the assessee, the following questions, have been referred for the assessment year 1974-75 :"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1,94,776 being cash assistance on exports are liable to be assessed as revenue receipts ?

( 2 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal is right in holding that expenses on freight, loading charges, insurance, etc. , incurred in connection with the export business, were not entitled to weighted deduction under Section 35b of the Income-tax Act, 1961?

( 3 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of computing the capital employed for granting deduction under Section 80j of the Income-tax Act, 1961, the value of assets should be taken at the written down value and not at the original cost to the assessee ?

( 4 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was right in holding that the liability for gratuity of Rs. 56,025 is not an allowable deduction in computing the total income of the assessee even when no provision has been made in the books of account maintained by the assessee ?"

( 5 ) SO far as the first question is concerned, it must be answered in the affirmative and in favour of the Revenue in view of the decision of this court in the case of Jeewanlal (1929) Ltd. v. CIT [1983] 142 ITR 448.

( 6 ) SO far as the fourth question is concerned, it must also be answered in the affirmative and in favour of the Revenue in view of the decision of this court in the case of CIT v. New Swadeshi Mills of Ahmedabad Ltd. [1984] 147 ITR 163.

( 7 ) THE next question which falls for consideration is whether for the purpose of computing the capital employed for granting deduction under Section 80j, the value of the assets should be taken as the written down value and not at the original cost to the assessee.

( 8 ) SECTION 80j of the I. T. Act, 1961, in so far as it is relevant for our present purpose reads as follows :"80j. Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases.-- (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the aggregate of the deductions, if any, admissible to the assessee under Section 80h and Section 80hh) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent. per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant to the- assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year);. . . . . . (2) The deduction specified in Sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning (such assessment year being hereafter, in this section, referred to as the initial assessment year) and each of the four assessment years immediately succeeding the initial assessment year :. . . . . . "

( 9 ) IN exercise of the rule-making power vested under Section 295 of the Act, the Central Board of Revenue has framed Rule

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