JUDGMENT
Arijit Pasayat, C.J.
1. Heard.
2. At the instance of the Revenue, the following questions have been referred for the opinion of this court by the Income-tax Appellate Tribunal, Delhi Bench “E” (in short “the Tribunal”), under Section 256(1) of the Income-tax Act, 1961 (in short “the Act”) :
“1. Whether, the Tribunal is correct in ignoring Rule 19A(3) of the Income-tax Rules, 1962, and holding that borrowed money should be taken into account in computing the capital employed for the purpose of Section 80J?
2. Whether the Tribunal is correct in holding that in computing the ‘capital employed’ for the purpose of Section 80J, the average of the capital as on the first day and on the closing day of the accounting period should be taken and not the capital as on the first day of the accounting period ?”
3. The disputes relate to the assessment year 1974-75. In view of the decision in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308 (SC), the first question is answered in the negative, in favor of the Revenue and against the assessed. In so far as the second question is concerned, the capital has to be taken as on the first day of the accounting period and not on the average as was done by the Tribunal. The necessary exercise of computing the correct figure shall be undertaken by the Tribunal while dealing with the matter under Section 260 of the Act. The reference stands disposed.