Raghuvir, J.:— The following four questions have been referred to this court for its opinion under section 256(1) of the Income-tax Act, 1961 (“the Act”):
“1. Whether, on the facts and in the circumstances of the case, the liabilities of the particular unit only should be deducted in working out the capital employed in that unit for the purpose of calculating the relief under section 80J?
2. Whether, on the facts and in the circumstances of the case, the relief under section 80J should be allowed for the entire year and not restricted proportionately to the number of days for which the units have worked?
3. Whether, on the facts and in the circumstances of the case, the assessee is entitled to depreciation on land and building?
4. Whether, on the facts and in the circumstances of the case, borrowed capital will have to be taken into account for the purpose of ascertaining the capital employed to work out the relief under section 80J?”
2. Among the four questions, the second question is covered by the decision in R.C No. 284 of 1978, dated August 7, 1984 (Commissioner Of Income-Tax v. Uni Sankyo Ltd., [1987] 165 ITR 402) (infra).
3. Following the said decision, the question is answered, allowing for the entire year and not to restrict proportionately to number of days for which the units have worked, in favour of the assessee.
4. The fourth question is also covered by the decision in R.C No. 75 of 1977, dated December 1, 1984, Vinnyallore Industries Ltd. v. Commissioner Of Income-Tax, [1986] 162 ITR 881 (AP), against the assessee. Therefore, the question is answered against the assessee.
5. The first question relates to the interpretation of clause (3) of section 80J and rule 19A of the Act. On a reading of the same, we are of the view that the liabilities of each undertaking only have to be deducted in ascertaining the capital employed by an assessee. That method is the only reasonable method of interpreting sub-rule (3) and rule 19A. A similar conclusion was reached in Indian Oil Corporation Ltd. v. S. Rajagopalan, ITO, [1973] 92 ITR 241, by the Bombay High Court. In that case, the same conclusion was reached by adding the words “in respect of the industrial undertaking in which the capital employed is to be computed”. We would avoid adopting that method, but we hold, on an interpretation of the relevant clauses (without adding any words), that the meaning is the same as has been stated by the Bombay High Court. Thus, we answer that the liabilities of a particular unit alone should be deducted for according relief under section 80J. The answer is in favour of the assessee.
6. As to the third question, the land and the building in the instant case were purchased under an agreement of sale on March 13, 1971. The consideration for sale is Rs. 3,50,000. The facts show that possession of the land and building was delivered to the vendee-assessee. The vendee paid the consideration to the vendor. There was no deed registered to complete the sale transaction. The question is, is the assessee entitled to depreciation on the land and building. A similar question as respects movable property was considered by this court as respects a transport bus in S.P.B.P Sri Rangacharyulu v. CIT, [1965] 58 ITR 95. In that case, the “C” form document was not executed and the vehicle was not mutated in favour of the vendee. The vendee, in that sense, did not have full legal title to the vehicle. Yet, depreciation was allowed in that case though the discussion is more relevant to movable property. The reasoning was followed by the Calcutta High Court in Commissioner Of Income-Tax, Central-I v. Steelcrete (P.) Ltd., [1983] 142 ITR 45, and applied to machinery. The Allahabad High Court in Addl. CIT v. U.P State Agro Industrial Corporation, [1981] 127 ITR 97, decided the question in respect of immovable property and permitted depreciation. The Delhi High Court, however, took a contrary view in CIT v. Hindustan Cold Storage and Refrigeration P. Ltd., [1976] 103 ITR 455. In this regard, it is not necessary to reiterate what was stated in the case of a motor vehicle by this court in S.P.B.P Sri Rangacharyulu v. CIT, [1965] 58 ITR 95, as we adopt the reasoning and apply it even to the land and building in question. We answer the third question in the affirmative, in favour of the assessee.
7. Thus, the above four questions are answered as indicated above. No costs.