1. In this reference at the instance of the Revenue under section 256(1) of the Income-tax Act, 1961, three questions are posed to us. They read thus :
'(1) Whether sub-rule (3) of rule l9A of the Income-tax Rules, 1962, is directly in conflict with the parent provision in section 80J of the Income-tax Act, 1961 ?
(2) If so, whether section 80J of the Income-tax Act, 1961, prevails over sub-rule (3) of rule l9A of the Income-tax Rules, 1962 ?
(3) Whether, on the facts and in the circumstances of the case, the assessee-firm could be said to have employed its own capital in the new industrial undertaking even when it was initially locked up in the business earlier carried on by it ?'
2. Counsel are agreed that the first question must be answered in the negative and in favour of the Revenue in view of the decision of the Supreme Court in Lohia Machines Ltd. v. Union of India : 152ITR308(SC) , and that in the circumstances the second question does not arise. The first and second questions are, therefore, answered accordingly without elaboration.
3. The third question poses difficulties. The relevant portion of the Income-tax Appellate Tribunal's order is at paragraph 14 and that portion has been paraphrased in the statement of the case.
4. The overall impression that we gather upon a reading of paragraph 14 of the Tribunal's order is that the assessee had borrowed moneys and had employed the same in its new industrial undertaking. There is no finding of fact by the Tribunal to that effect. In fact, the Tribunal has in paragraph 13 stated that there was, according to the assessee, no borrowing or debt on account of the new industrial undertaking and the Revenue had not been able to point out any specific borrowing or debt raised for setting it up. We are, therefore, unable to understand the reference in paragraph 14 to the fact that 'two funds are available with the assessee'. The Tribunal says in paragraph 14, 'The normal presumption would be that the assessee would utilise a particular fund out of more than one fund at his disposal for a particular purpose which would be most advantageous to him.' We are unable to see the need for a presumption. The question is one of fact, as to which were the funds at the assessee's disposal and which were employed by him in the particular case. The Tribunal says in the same paragraph that 'it would have been most advantageous to the assessee to have used its own fund for the new undertaking instead of using its Borrowed capital' and 'there is no apparent reason or material to hold that it did not do so.' We are unable to find in the Tribunal's order an affirmative finding of fact that the assessee did use its own fund for the new undertaking instead of its borrowed capital. The Tribunal says that 'it was for the assessee to have made a mental note of its decision to utilise a particular fund for a particular purpose'. We are unable to detect in the Tribunal's order a finding of fact of any such mental note having been made by the assessee or of a 'decision' by the assessee in this regard.
5. In the circumstances, we find ourselves unable to answer the third question on the basis of the statement of the case as it stands and are compelled to ask the Tribunal to prepare a supplemental statement of case elucidating the aforesaid facts. The Tribunal shall hear the parties before doing so.
6. There shall be no order as to costs up to this stage.