ORDER
[ENTITY], J. - The Tribunal, Jaipur Bench, Jaipur has referred the following question of law to this Court for its opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that relief under [SECTION] of the [ACT] is allowable to the assessee, ignoring the provisions of [SECTION] of the [ACT], and thus confirming the direction of the AAC to the ITO keeping in view the decisions of the Calcutta High Court in the case of [PRECEDENT], and the Madras High Court in the case of [PRECEDENT] ?"
2. The assessee is a partnership concern operating a factory for cotton ginning and pressing. The assessment year is 1975-76. In the return filed by the assessee for the aforesaid year, it claimed relief under [SECTION] of the [ACT] (hereinafter referred to as the Act) for a sum of Rs. 38,581 on the capital employed in the undertaking amounting to Rs. 6,43,025, which included sundry liabilities of the firm. The ITO granted relief at the rate of 6 per cent only on the self-owned capital. He did not allow the relief on the borrowed capital. The assessee went in appeal. The AAC by his order dt. 5-2-1979, allowed the appeal. Following the view taken in [PRECEDENT], he allowed the appeal and directed the ITO to recompute the deduction of the borrowed capital under [SECTION] The revenue went in appeal, which was dismissed by the Tribunal. Thereafter, the Commissioner moved an application before the Tribunal to make a reference to this Court. The Tribunal has accordingly made this reference.
3. We have heard Mr. [ENTITY] for the revenue and Mr. [ENTITY] for the assessee.
It was argued by Mr. [ENTITY], the ld. counsel for the revenue, that the view taken by the Calcutta and the Madras High Courts in the decisions referred top above, has been overruled by their Lordships of the Supreme Court in [PRECEDENT]. As such, the orders of the Commissioner (A) as well as of the Tribunal deserve to be set aside. Mr. [ENTITY], the ld. counsel for the assessee, with all fairness, conceded that in view of the law laid down in the case of [PRECEDENT] (supra), he has nothing to say.
4. Suffice it to say that the view taken in the cases of [PRECEDENT] (supra), [PRECEDENT] (supra), and like others, by the Calcutta, Madras, Allahabad, Punjab and Haryana and Andhra Pradesh High Courts has been overruled and the view expressed by the Madhya Pradesh High Court in [PRECEDENT], and [PRECEDENT], was approved by their Lordships of the Supreme Court in the case of [PRECEDENT] (supra). It would be useful to reproduce the following passage of the judgment rendered in the case of [PRECEDENT] (supra) :
"(i) in so far as it provided for the exclusion of borrowed monies and debts and particularly long-term borrowing in the computation of the capital employed by a new industrial undertaking for the purposes of the tax exemption could not be said to be outside the rule-making authority conferred on the Central Board under [SECTION] of the [ACT], and was a prefectly valid piece of subordinate legislation;
(ii) that [SECTION], in so far as it provided for computation of the capital employed as on the first day of the computation period, was within the rule-making authority of the Central Board under [SECTION](I);
(iii) that, since [SECTION] did not suffer from any infirmity and was valid in its entirety, the [ACT], in so far as it amended [SECTION] by incorporating the provisions of [SECTION], as [SECTION] in [SECTION], with retrospective effect from April 1, 1972 was merely clarificatory in nature and was, accordingly, valid."
5. The Tribunal was thus, not justified and correct in holding that deduction under [SECTION] is allowable to the assessee on the entire amount claimed top be the capital invested by the assessee in its industrial undertaking including borrowed capital, ignoring the provisions of [SECTION] of the [ACT].
6. The reference is answered in the negative, that is, against the assessee and in favour of the revenue. Parties will bear their own costs of this Court.