1. There being difference of opinion between Members on some of the points involed as per orders annexed, the Special Bench Tribunal order is as follows :

1. 80J Relief to be recomputed within the parameters laid down by the Hon'bel Supreme Court in the case of Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, i.e., all liabilities are to be deducted for the purpose of computing capital employed, which shall have the effect of the Revenue's appeal on the point being allowed and the assessee's rejected (Unanimous view)—Ground No. 1 in both the appeals.

2. Coming to sec. 35B dispute on which both the parties were in appeal, the revenue is ('s claim to be) rejected whereas the assessee partly succeeds inasmuch as, in respect of packing material expenses to the tune of RS. 65,08,653, directions have been given that section 35B deduction should be allowed in respect of bifurcated expenses on wrappers. The directions are similar to the one given in the assessee's own case in respect of assessment year 1976-77 (Unanimous view)—Ground No. 2.

3. Ground No. 3 of the Revenue's appeal against the CIT(A)'s decision that the assessee is entitled to depreciation and investment allowance on fixed assets without reducing their cost to the extent of Central Subsidy received from the Govt. for moving into or setting up plants in industrially backward areas, is rejected (Unanimous view).

4. The Revenue also fails on its last ground agitating that the learned CIT (Appeals) had erred in holding that there was no justification for endorsement of income by withdrawing the weighted deduction under section 35B on Rs. 27,76,816. It is held that the power to make enhancement vests in the first appellate authority and if he does (sic).

5. Cash Compensatory Support held to be not taxable (Majority view)—Ground No.3.

6. Draw-back of Duty is held to be taxable (Unanimous view)—Ground No. 4.

7. Import Entitlement is held to be taxable (Unanimous view)—Ground No. 5.

8. The assessee fails in respect of its claim of exemption with regard to Rs. 7,35,191 which arose out of difference in exchange rate (Unanimous view).

ORDER

Per Shri V.P. Elhence, Judicial Member - These cross-appeals for the assessment year 1979-80 arise out of the order dated 28-5-1984 of the learned Commissioner of Income-tax (Appeals)-I, New Delhi.

2. The assessee is a private limited company, carrying on the business of manufacturing hand tools, most of which were exported. We first of all deal with the dispute regarding 80J relief in respect of which following grounds are raised by the assessee and revenue respectively in these two cross-appeals :

Ground raised by the assessee in its appeal :

"That the learned Commissioner of Income-tax (Appeals) has not given any direction on ground Nos. 2.2 and 3.2 filed with the memorandum of appeal before him regarding the correct determination of the capital employed within the meaning of section 80J, particularly by identifying such a capital with the total value of the assets and not the depreciated value as appearing in the books."

Ground raised by the Revenue is its appeal :

"On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in :

1. Directing the IAC (A) to allow relief under section 80J in respect of Unit-IV (Kundli) and Unit No. V (Aurangabad) in accordance with the interpretation of the provisions of section 80J made by the Calcutta High Court in the case of Century Enka Limited reported in 107 ITR. "

3. Brief facts in the beckground of the dispute regarding relief under section 80J are that the assessee, had claimed relief under section 80J in the sum of Rs. 22,50,390 in respect of its Unit No. IV known as Kundli Unit which was reduced by the Inspecting Asstt. Commissioner (Assessment) to Rs. 14,72,014. As in the past this difference was due to the application of the provisions of rule 19A. Likewise the claim in respect of Unit No. V (Aurangabad) was also reduced from Rs. 24,28,218. When