I. S. NIGAM, A.M.: Against consolidated order of CIT (A)-VI Bombay, relating to asst. yr. 1970-71 to 1973-74, Revenue has come up in appeal for asst. yr. 1970-71 and 1971-72 while assessee-company has come up in appeal for t h e asst. yr. 1972-73 and 1973-74. Since issue involved in all four appeals is same, they are, for sake of convenience, disposed of by common order. assessee is limited company. Amongst claims before ITO was that in computation of capital employed for determining relief under s. 80J of IT Act, 1961 actual cost of assets should be taken and not their written down value on first day of computation period. This claim was not accepted by ITO. When matter went up in appeal, CIT (A), while deciding appeals for asst. yr. 1970-71 and 1971-72, held that capital employed should be on basis of cost of acquisition of various assets and not on basis of written down value. However, for asst. yr. 1972-73 and 1973-74, CIT (A) held that considering retrospective amendment of s. 80J brought about by Finance (No. 2) Act, 1980 w.e.f. 1st April, 1972, capital employed should be on basis of written down value of assets and not on basis of their actual cost. Revenue is aggrieved by order of CIT (A) for asst. yr. 1970-71 and 1971-72 and has, therefore, come up in present appeal before us. On other hand, assessee-company is aggrieved by order of CIT (A) for asst. yr. 1972-73 and 1973-74 and is, therefore, in appeal before us. ld. Departmental Representative Shri Burman invited our attention to cl. (i) of sub-r. (2) of r. 19A of IT Rules, 1962 which lays down that in computation of capital employed in industrial undertaking for purpose of s. 80J, aggregate of amounts representing values of assets, as on first day of computation period of undertaking shall first be ascertained in following manner i.e. in case of asset entitled to depreciation, their written down value. Proceeding further, he submitted that Hon ble Supreme Court in case of Lohiya Machines Ltd. and Another vs. Union of India and Others (1985) 44 CTR (SC) 328: (1985) 152 ITR 308 (SC) has upheld validity of both r. 19A of IT Rules, 1962 and retrospective amendment of s. 80J brought about by Finance (No. 2) Act, 1980 w.e.f. 1st April, 1972. He, therefore, submitted that action of ITO in working out capital employed on basis of written down value of assets where they entitled to depreciation was perfectly justified and on this issue, order of CIT (A) for asst. yr. 1970-71 and 1971-72 was erroneous and should be reversed. On other hand, assessee s ld. counsel Shri Dastur at outset submitted that in case of Lohiya Machines Ltd. and Another vs. Union of India & Others (1985) 44 CTR (SC) 328: (1985) 152 ITR 308 (SC) validity of r. 19A and retrospective amendment of s. 80-J brought about by Finance (No. 2) Act, 1980 was challenged only on two issues namely, whether meaning of 'capital employed should be with reference to first day of computation period or should be with reference to average capital employed during previous year and secondly whether borrowing should be included in capital employed, and issue under consideration in present appeal was not before their Lordships of Hon ble Supreme Court. Proceeding further Shri Dastur referred to ruling of Hon ble High Court of Bombay in case of CIT vs. Alcock Ashdown & Co. Ltd. (1979) 8 CTR (Bom) 223: (1979) 119 ITR 164 (Bom) wherein their Lordships quote with approval rulings of Hon ble High Court of Calcutta in case of CIT vs. Indian Oxygen Ltd. (1978) 113 ITR 109 (Cal) and Hon ble High Court of Madras in case of Jayram Mills Ltd. vs. CEPT (1959) 35 ITR 651 (Mad) and held that moment capital is utilised for purpose of acquiring any asset for business, such capital becomes employed in business, and whether asset itself is actually used in business or not, so far as capital is concerned, it continue to be employed in business. He also referred to wordings of s. 80-J of IT Act, 1961 which speaks of capital employed in industrial undertaking and submitted to us that this means capital introduced in industrial undertaking and not written down value of assets i.e. actual cost of assets as reduced by depreciation year after year. In this connection, Shri Dastur also pointed out that if considered from stand point of market value of assets, market value of assets in view of escalation in costs year after year might be not only more than written down value but perhaps even more than actual cost. He, therefore, vehemently argued before us that in working out of capital employed for purpose of deduction under s. 80-J of IT Act, 1961, capital introduced in business is only criterion i.e. in other words value of assets whether entitled to depreciation or not should be taken at its actual cost and not at its written down value on first day of computation period. Our attention was invited to decision of Special Bench of ITAT in case of Amar Dye-Chem Ltd. vs. ITO (1983) SOT Vol. 3, 384 (Bom) where Special Bench of ITAT held, following ruling of t h e Hon ble Supreme Court in case of Central Bank of India vs. Their Workmen AIR 1960 SC 12 that if rule goes beyond what section, contemplates, rule must yield to statute and such being legal position, Tribunal constituted under Act to administer it cannot afford to suffer or yield to r. that is inconsistent and incompatible with or which tarnishes or makes inroads into any substantive provision of Act, i.e., in other words, Tribunal as creature of statute must enforce and uphold provisions of statute and resist any attempt of rule to ravage or whitle them down. He therefore, vehemently argued before us that since cl. (i) of sub-r. (2) of r. 19A of CIT Rules, 1962 was not in conformity with s. 80-J of IT Act, 1961, it should be ignored in preference to substantive provisions of statute. This formed basis of Shri Dastur s arguments that order of CIT (A) for asst. yrs. 1970-71 & 1971-72 was justified and should be upheld while order of CIT (A) for asst yr. 1972-73 and 1073-74 was erroneous and should be reversed. ld. Departmental Representative Shri Burman in reply pointed out so f r as asst. yrs. 1972-73 and 1973-74 are concerned, s. 80-J has been retrospectively amended by Finance (No. 2) Act, 1980 with effect from 1st April 1972 and sub-cl. (i) of cl. (ii) of su-s. (1A) of s. 80-J as retrospectively introduced also prescribes that in computation of capital of industrial undertaking, aggregate of amounts representing values of assets as on first day of computation period of undertaking shall be ascertained in case of assets entitled to depreciation on basis of their written down value. It was further pointed out by him that as already submitted by him earlier, this retrospective amendment of s. 80-J has been held to be valid by Hon ble Supreme Court in case of Lohiya Machines Ltd. and Another vs. Union of India and Others. He, therefore, submitted that assessee- company has no case for asst. yr. 1970-71 and 1971-72 and in any case even arguments advanced by Shri Dastur will not apply to asst. yr. 1972- 73 and 1973-74 where there is no question of any conflict between provisions of s. 80-J of IT Act, 1961 and any rule under IT Rules, 1962. We have carefully considered rival submissions. Sub-s. (1) of s. 80J as it stood prior to its retrospective amendment by Finance (No. 2) Act, 1980 with effect from 1st April 1972 and which will be applicable to asst. yr. 1970- 71 and 1971-72 is as follows: "Where gross total income of assessee included any profits and gains derived from industrial undertaking or ship or business of hotel, t o which this s. applies, there shall, in accordance with and subject to provisions of this section, be allowed, in computing total income of assessee, deduction from such profits and gains (reduced by deduction, if any, admissible to assessee under s. 80HH) of so much of amount thereof as does not exceed amount calculated at rate of six per cent per annum on capital employed in industrial undertaking or ship or business of hotel, as case may be, computed in prescribed manner in respect of previous year relevant to asst. yr. (the amount calculated as aforesaid being hereafter, in this s. referred to as relevant amount of capital employed during previous year)." While it is true that issue under consideration in present appeal was not before their Lordships of Hon ble Supreme Court in case of Lohiya Machines Ltd. and Another vs. Union of India and Others (1985) 44 CTR (SC) 328: (1985) 152 ITR 308 (SC). Their Lordships considered meaning of words "computed in prescribed manner" and held that this involved, as part of process of computation, both inclusion as well as exclusion of items which may otherwise be regarded forming part of capital employed. Their Lordships of Hon ble Supreme Court in this connection observed as follows: "The legislature having laid down legislative policy of giving relief to assessee who is starting new industrial undertaking of business of hotel, had necessarily to leave it to Central Board to determine what should be amount of capital employed that should be required to be taken into account for purpose of determining quantum of relief allowable under section. What should be quantum of relief allowable to assessee would necessarily depend upon diverse factors such as impact of relief on industry as whole, response of industry to grant of relief, adequacy or inadequacy of relief granted in promoting growth of new industrial undertakings, state of economy prevailing at time, whether it is buoyant or depressed and administrative convenience. These are factors which may change from time to time and, hence, in very nature of things, working out mode of computation of "capital employed" for purpose of determining quantum of relief must necessarily be left to Central Board which would be best in position to consider what should be quantum of relief necessary to be given by way of tax incentive in order to promote setting up of new industrial undertakings and hotels and, for that purpose, what amount of "capital employed" should form basis of computation of such relief." In view of what has been laid down by Hon ble Supreme Court there c n be no doubt that rules framed by CBDT of purpose of determining relief under s. 80J cannot be said to be inconsistent or incompatible with what as laid down in provisions of statute i.e. sub-s. (1) of s. 80-J. We may at this stage also refer to r. 19A of IT Rules, 1962, relevant portions of which are as follows: "19A(1) For purposes of s. 80J, capital employed in industrial undertaking or business of hotel shall be computed in accordance with sub-r. (2) to (4), and capital employed in ship be computed in accordance with sub-r. (5). (2) aggregate of amounts representing values of assets as on first day of computation period, of undertaking or of business of hotel to which said s. 80J applies shall first be ascertained in following manner: (i) in case of assets entitled to depreciation, their written down value; (ii) in case of assets acquired by purchase and not entitled to depreciation their actual cost to assessee; (iii) in case of assets acquired otherwise than by purchase and not entitled to depreciation, value of assets when they became assets of business; (iv) in case of assets being debts due to person carrying on business nominal amount of those debts; (v) in case of assets being cash in hand or bank, amount thereof. (3) From aggregate of amounts as ascertained under sub-r. (2) shall be deducted aggregate of amounts as on first day of computation period, of borrowed moneys and debts owed by assessee (including amounts due towards any liability in respect of tax.) (4) resultant sum as determined under sub-r. (3) shall be diminished b y value, as ascertained under sub-r. (2), of any, investments income from which is not taken into account in computing profits of business and n y moneys not required for purpose of business in so far as aggregate of such investments or money exceed amount of borrowed moneys which under sub-r. (3) are required to be deducted in computing capital. (5) capital employed in ship shall be taken to be written down value of ship as reduced by aggregate of amounts owed by assessee as on computation date on account of moneys borrowed or debts incurred in acquiring ship." It cannot be disputed that according to clauses (i) of sub-r (2) of r. 19A of IT Rules, 1962 in computation of capital employed in industrial undertaking in case of assets entitled to depreciation, they have to be taken at their written down value. Considering all this, we have no hesitation in holding that in computation of capital employed in prescribed manner, as laid down under r. 19A of IT Rules, 1962, assets, where they were entitled to depreciation, had to be taken at their written down value as was rightly done by ITO. On this issue, therefore, order of CIT (A) for asst. yr. 1970- 71 and 1971-72 was erroneous and is reversed while order of ITO is restored. For asst. yrs. 1972-73 and 1973-74, which are governed by s. 80J of retrospectively amended by Finance (No. 2) Act, 1980 w.e.f. 1st April. 1972 and where basis of computation of capital employed has been laid down in itself and not under any rules prescribed by CBDT there is no question of any conflict between provisions of statute and any rules under IT Rules, 1962, Here again it will be necessary to point out that their Lordships of Hon ble Supreme Court in case Lohiya Machines Ltd and Another vs. Union of India and Others in last but one paragraph of their majority judgment, laid down that retrospective amendment of s. 80-J brought about by Finance (No. 2) Act, 1980, in so far as it amended s. 80-J by incorporating r. 19A in section itself with retrospective effect from 1st April 1972, was merely clarificatory in nature and must accordingly be held to be valid. Considering all this, order of CIT (A) for asst. yrs. 1972-73 and 1973- 74 upholding order of ITO that in computation of capital for purpose of determining relief under s. 80-J, assets, where they were entitled to depreciation, should be taken at their written down value was perfectly justified. appeals filed by Revenue for asst. yrs. 1970-71 and 1971-72, therefore, succeed and are hereby allowed while appeals filed by assessee-company for asst. yrs. 1972-73 and 1973-74 fail and are dismissed. *** INCOME TAX OFFICER v. PARKE DAVIS (INDIA) LTD.