The central legal point established in the judgment is the interpretation and application of various provisions of the Income-tax Act, 1961, and the Companies (Profits) Surtax Act, 1964, in determining the allowability of revenue loss, capital employed, depreciation for scientific research assets, treatment of fees paid to the Registrar of Companies, and the deductibility of surtax.

( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, the following questions have been referred as questions of law arising out of the order of the Tribunal for the opinion of this court:" (1) Whether, on the facts and in the circumstances of the case, the sum of Rs. 5,57,251 was allowable as a revenue loss having regard to the provisions of Section 43a of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the capital employed should mean the cost of acquisition (not written down value) of the assets and also the liabilities and the borrowed moneys for the purpose of relief under Section 80j in respect of the assessee's Deep Sea Fishing Division ? (3) Whether, on the facts and in the circumstances of the case, depreciation should be allowed in respect of assets used by the assessee for scientific research ? (4) Whether, on the facts and in the circumstances of the case, fees of Rs. 2,25,000 paid to the Registrar of Companies in connection with the increase of the authorised capital of the company is capital expenditure and, therefore, not allowable under Section 37 of the Income-tax Act? (5) Whether, on the facts and in the circumstances of the case, surtax paid by the assessee under the Companies (Profits) Surtax Act, 1964, is an allowable deduction from the total income of the assessee ?"

( 2 ) OF the above questions, question No. 3 has been referred at the instance of the Revenue. The other questions are referred at the instance of the assessee.

( 3 ) THE controversy sought to be raised in question No. 1 is covered by a decision of this court in CIT v. Bharat General and Textile Industries Ltd. . Following the same, we answer the question in the negative and in favour of the Revenue. We hold that the loss caused by additional expenditure incurred by reason of exchange fluctuation is capital in nature.

( 4 ) THE controversy raised in question No. 2 is covered by a decision of this court in Income-tax Reference No. 9 of 1981, titled Indian Aluminium Co. Ltd. v. CIT. The judgment in that case was delivered on April 8, 1986. Following the said decision, we answer question No. 2 by stating that under Rule 19a (2) (i) of the Income-tax Rules, 1962, in determining the value of the assets for computation of the capital employed, if the assets are entitled to depreciation, their written down value would be taken into account. The written down value of the assets has to be determined in accordance with the Income-tax Act, 1961. In the case of assets acquired during the accounting year, written down value means the actual cost to the assessee. In the case of assets acquired before the accounting year, written down value means the actual cost of acquisition less the aggregate of all deductions of depreciation actually allowed to the assessee in the past years. To the extent as above, depreciation already allowed would have to be considered.

( 5 ) THE controversy raised in question No. 3 referred at the instance of the Revenue is covered by the amended Section 35 (2) (iv ). The relevant amendment was effected by the Finance (No. 2) Act, 1980--[1984] 124 ITR (Statutes) 69, with retrospective effect from April 1, 1962. In view of the provisions of the said section, the question is answered in the negative and in favour of the Revenue.

( 6 ) THE controversy raised in question No. 4 is covered by a decision of this court in Brooke Bond India Ltd. v. CIT. Following the said decision, we answer the question by stating that the fees paid to the Registrar in connection with the increase of the authorised capital of the company is capital expenditure and deduction thereof is not allowable under Section 37 of the Income-tax Act, 1961.

( 7 ) THE controversy raised in question No. 5 is also covered by a decision of this court in Molins of India Ltd. v. CIT. Following the said decision, we answer the question by stating that the surtax paid under the Companies (P