SMT. SUJATA V. MANOHAR, J.-The assessee are Messrs Industrial Perfumes Ltd., Bombay. For the assessee it year 1961-62 the Income tax Officer computed the capital employed in the new industrial undertaking of the assessee-company for the purpose of granting partial exemption from tax under section 15-C of the Income-tax Act, .322 at Rs. 13,33,902. It included a sum of Rs. 1, 39,113 being the average profit, of the assessee company for the previous year relevant to the assessm ent year 1961-62. The calculation of the capital employed in the new undertaking was made in accordance with the provisions of R. 3(6) of the Indian Income-tax (Computation of Capital of Industrial Undertakings) Rules, 1949.
2. On 21-1-1963 the I. T. O. Rectified the computation of the capital employed in the new undertaking of the assessee by holding that profits or losses during a given period would be automatically reflected in the assets of the business. Hence there was no reason for adding separately tie average amount of profit to the capital so calculated, He accordingly deleted the sum of Rs. 1,39,113 from the calculation of the capital and come used it at Rs. 11,29,789.
3. The order of the I. T. O. Passed under section 154 was upheld by the Appellate Assistant Commissioner. The Tribunal, however, held, that the question whether the average profits or losses have to be added c: deducted for computing capital employed under section 15-C was a question en which two views were possible. The view expressed by the assess" was not absurd on the face of it. It would not, therefore, be possible to say that t; ere was a mistake apparent from the record which could be rectified by the I. T. O. In the exercise of his jurisdiction under section 154 of the I. T.
Act. The a Tribunal accordingly cancelled the order passed by the I. T. O. Under section 154. In coming to this conclusion the Tribunal followed its decision is I. T. A. Nos. 6051 and 6052 of 1965-66.
In the case of Tata Engineering & Locomotive Co. Ltd. v. Income-tax Officer, Companies Circle 122)
Bombay. Tax decision of the Tribunal in Tata Engineering & Locomotive Company's case has been upheld by our High Court to (1977) 108 I T R 86.' In that case an identical question arose relating to the computation of the capital employed in a new industrial undertaking under the provisions of section 15-C of the I.-T. Act, 1922 and r. 3, sub-rule (6) of the Indian income-tax (Computation of Capital of Industrial Undertakings) Rules, 1944. The I.-T. C. Though be initially accepted the computation as made by the a assessee, had subsequently passed an order under section 154 of the I.-T. Act, 1961 taking the view that the inclusion of the amount of the average profit it the capital employed was not justified. The High Court held that the question, on proper interpretation of R.
3(6), was undoubtedly a debatable question- and the rule could be interpreted in different ways. It, therefore, held that in such a case, it could not be said that there was any mistake apparent on be record in the original order passed by the I. T. O. It, therefore, held that the rectification order passed under section 154 was not justified. In view of this judgment the Tribunal was clearly right in cancelling the order of rectification under section 154 in the present case.
4. The question referred to us viz. "whether on the facts and circum stances of the case the order passed under section 154 of the I.-T. Act, 1961 for the assessment year 1962-63 is valid in laa" is answered in the negative, that is, in favour of the assessee and against the Commissioner. The applicant to pay to the respondents the costs of this reference.