LexCOMMISSIONER OF INCOME TAX versus M/S. ALCOCK ASHDOWN AND CO. LTD. ETC
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COMMISSIONER OF INCOME TAX A v. MIS. ALCOCK ASHDOWN AND CO. LTD. ETC .. FEBRUARY 5, 1997 (B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.] B:. Income Tax Act, 1961 Income Tax--Deductions-Section 84 (since omitted) and Section 80 ~rofits and gains of newly established undertakings-Expression 'Capital C employed in such unde1taking'-!nterpretation .of-Acquisition or purchase of an asset, even though the same was not utilised or put to use during the relevant accounting year, covered-Actual user of the asset i"elevant. The Respondent-assessee, a public limited company with a chain of · workshops, in the previous year relevant to the assessment year 1962-63, D started a new industrial undertaking wherein a good portion of plant and machinery purchased was installed for new business, but some of them agt.;-egating to Rs. 11,95,167 remained to be installed, though paid for. The assessees claim for relief under section 84 of the Act for an amount of Rs. 21,17 ,178 (including cost of workshop under construction aggregating to E Rs. 9,22,011) was rejected by the Income Tax Officer on the ground that the assets had not been put to use during the accounting year. The findings of the Income Tax Officer was affirmed by the Appellate Assistant Com- missioner but set aside by the Income Tax Appellate Tribunal. In the appeal filed by the Revenue, it was contended for the appellant F that in determining 'the capital employed in the undertaking' cost of only those assets used in business should be taken into account. For the assessee-Respondent it was contended that a proper inter- pretation of section 84 read with Rule 19(1) only envisaged that a par- ticular asset should have been a form of capital put into business during G ' the relevant year and does not refer to actual use made of any particular asset. Dismissing the appeals, this Court HELD : 1.1. In view of the provisions of Section 84 of the Income Tax H 939 940 SUPREME COURT REPORTS [1997] 1 S.C.R. A Act, 1961 the·moment an asset is acquired or purchased for the purpose of the business, it is capital employed, though the asset as such is not actually utilised 01· used during the accounting period. [947-B] 1.2. In the chain of events, the earliest act or event is the purchase or acquisition of the asset. That by itself entitled the assessee to get relief. B The employment of the capital is done or over. The subsequent or later events - including the actual user· of the asset has nothing to do in the matter. [947-C] 2. Many High Courts also took a consistent view that Section 84(1) C envisages relief to the assessee the moment capital is employed in the undertaking and. that it does not state or specify that the asset should be actually used or utilised. [944-H] CIT v. Alcock Ashdow11 & Co. Ltd., 119 lTR 164 (Born), upheld. D Jayaram Mills Ltd. v. CEPT 35 ITR 651 (Mad) and Binni11gham Small Anns Co. Ltd. v. !RC, (1951) 2 All ER 296 HL, referred to. CIT v. I11dian O.\ygcn Ltd., 113 ITR 109 (Cal); Rari-Machi11e Tools (P) Ltd. v. CIT, 114 ITR 459 (Kar); CIT v. Boehringer Knoll Ltd., 148 ITR 70 (Born); CIT v. Hi11dusta11 Polymers Ltd., 156 lTR 860 (Born); CIT v. E Advani Oerliko11 Pvt. Ltd., 161 ITR 449 (Born); CIT v. Indian Smelti11g & Refining Co. Ltd., 169 ITR 562 (Bom); CIT v. Elpro l11tematio11al Ltd., 177 !TR 20 (B0111); CIT v. Century Spg. & Manufacturing Co. Ltd., 181 ITR 214 (Born); CIT v. Mohan Meakin Breweries Ltd., 122 ITR 203 (HP); CIT v. Cibatu I Ltd., 115 ITR 879 (Guj); CIT v. Sw1daram Industries Ltd., 166 ITR p 35 (Mad); Periyar Chemicals Ltd. v. CIT, 162 ITR 163 (Ker); CIT v. South Agrifurane Industlies Ltd. 174 ITR697 (Mad) and CITv. Gopi Cha11d Textile Mills Ltd., 179 ITR 371 (P & H), approved. G C!VlL APPELLATE Jl'RISDTCTION : Civil Appeal No. 1274 of 1980 Etc. Fro~ the Judgment and Order dated 27.3.87 of the Bombay High Court in I.T.R. No. 453 of 1975. Dr. R.R. Mishra, S. Rajappa and S.N. Terdol for the Appellant. H S. Ganc:,h, P.D. Tyagi and Ms. AK. Verma for the Respondents. '-"'" C.l.T. v. ALCOCK ASHDOWN AND CO. LTD. [ P ARIPOORNAN, J.] 941 The Judgment of the Court was delivered by PARIPOORNAN, J. A common question of law arises for considera- tion in both the appeals. The appeals are preferred against the judgments A of the Bombay High Court in I.T.R. No.40 of 1969 dated 7.7.1978 and I.T.R. No. 453 of 1975 dated 27.3.1987. Civil Appeal No. 1274 of 1980 preferred against the judgment
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