SETHURAMAN J. - The Appellate Tribunal has referred the following question under s. 256(1) of the I.T. Act, for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the interpretation given by the Appellate Tribunal for the words 6% per annum used under section 84 is justified ?'
The assessee is a company which was assessed for the assessment years 1962- 63 and 1963-64. In the original assessment made for the assessment year 1962-63, the capital employed was found to be Rs. 14,40,792 and 6% thereon was given as a relief under the provisions of s. 84 as it was then in force. Similarly, for the assessment year 1963-64, the assessee was granted relief at 6% on the capital employed as determined by the ITO in accordance with the provisions of the rules. Later, the ITO considered that excessive relief had been granted to the assessee and he, therefore, reopened the assessment under s. 147(a) of the Act. Apparently, the view of the ITO was that excessive relief had been granted by reason of the failure of the assessee to disclose fully and trully all material facts relating to the assessment. The ITO was of the opinion that the machinery had worked in each of these two years only for nine months and that, therefore, the relief of 6% had to be restricted proportionately to the period during which the machinery worked. The appeal to the AAC was unsuccessful and the assessee appealed to the Tribunal. The Tribunal held that the assessee was entitled to the relief of 6% on the capital employed for each of the assessment years without any limitation of any proportionate time basis. It is this order of the Tribnunal that has given rise to the reference of the question set out earlier.
The answer to the question is dependent on the interpretation to be placed on the provisions of s. 84 of the Act, which ran as follows :
'Save as otherwise hereinafter provided, income-tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking or business of a hotel or from any ship, to which this section applies, as does not exceed six per cent. per annum on the capital employed in such undertaking or business or ship, computed in the prescribed manner.'
The section gave the assessee a relief in respect of newly established industrial undertakings. It is in the shape of an incentive by way of tax relief for a period of five years commencing from the year in which the undertaking began to manufacture or produce articles. The relief has to be calculated at the rate of 6% on the capital employed in the industrial undertaking. The computation of capital is governed by r. 19 of the I.T. Rules, 1962. This rule has been framed specifically for the purposes of s. 84. Rule 19 reads as under :
'...... the capital employed in an undertaking or a hotel to which the said section applies shall be taken to be -
(a) in the case of assets acquired by purchase and entitled to depreciation -
(i) if they have been acquired before the computation period, their written down value of the commencing date of the said period;
(ii) if they have been acquired on or after the commencing date of the computation period, their average cost during the said period....'
The expression 'average cost' is defined in r. 19(6) as follows :
'Average cost in relation to any asset means such proportion of the actual cost thereof as the number of days of the computation period during which such asset is used in the business bears to the total number of the days comprised in the said period.'
Therefore, in taking the capital employed with reference to the depreciable assets the capital is computed proportionately to the period during which the asset was brought into use. There are various other provisions in r. 19 bearing of the computation of capital. It is not necessary for our present purpose to go into them. After the capital is so computed, s. 84 grants tax relief to the extent of 6% thereon.
It is at this stage that the controversy between the assessee and the revenue emerges. While the assessee wants 6% on the capital as computed, the revenue wants the computation to be restricted to the period during which the business was carried on during the relevant year. In the present case, it is stated, that two sets of machinery were installed in the two years and these two sets of machinery were actually utilized during the relevant years only for a period of nine months. This is now the department wants a proportionate part of 6% to be applied on the capital computed. For this purpose, reliance was placed on the expression' as does not exceed six per cent. per annum' used in the section already extracted. The question is whether the expression' per annum' has to be understood as giving only a proportionate relief to the assessee.
As a matter of practice of the administration of this provision it is stated that the six per cent. per annum has all along been applied, on the computation of the capital as made under r. 19. Section 84 had its predecessor in s. 15C of the Indian I. T. Act, 1922, introduced in the year 1949. Section 15C was more or less repeated. The rules had not to deal with this aspect of application of six per cent. as the section contemplated rules being made only for computation of capital.
The learned counsel for the revenue, however, contended that whatever might have been the practice, about which he did not say anything, the expression 'per annum' would postulate the relief being granted only for the period during which the assets were actually in use, as otherwise those words would be otiose. It is in this context that we have to bear in mind the rules of statutory interpretation. Ordinarily, any statute would have to be construed on the language it employs. But in the case of a fiscal statute, the rule is that, if there are two ways in which the provision could be construed, the the construction most beneficial to the subject should be adopted. This is exmplified by several cases decided both in U.K. and in India. It would be unnecessary to give citations, but if one is minded, one may look into the cases collected in foot note 7, page 2 vol. 1, VIIth end, of Kanga and Palkhivalas Law and Practice of Income Tax. Further, a provision for exemption conceived in the interests of advancing the progress of industrialization to subserve the economic well-being of the country at large cannot be whittled down by judicial interpretation.
In Rex v. General Commissioners of Income Tax for the City of London (Ex parte Gibbs)  24 TC 221 , Viscount Simon L.C. observed with reference to the question as to whether the changes in the constitution of a firm have to be taken as cessation or succession under r. 9, the following :
'..... but because our duty in construing a statute such as this is to find out what the legislature must be taken to have really meant by the expressions which it has used, without necessarily attributing to the legislature a precise appreciation of the technical appropriateness of its language.'
The words 'six per cent, per annum' are ordinarily applied to calculation of interest and in similar contexts. But the words 'per annum' would be inappropriate in a taxing statute levying tax on the income earned during the previous year which is not necessarily a period of twelve months, though it would ordinarily be a period of twelve months. In the present case, the words 'per annum' could even be dispensed with, as Mr. Jayaraman contended, and yet the section would carry the same meaning. We do not, however, consider the expression a surplusage. The words 'per annum' appear to have been added only to ensure that the assessee would get, for each of the five years during which the relief under s. 84 is available, the said 6% on the capital employed. The words 'per annum' cannot be understood as contrasted with any broken period. It is also a well-settled principle of construction that in construing a provision for exemption or relief, it should be liberally construed. The reason behind this rule of interpretation is that the administrative authorities or the courts should should not whittle down the plenitude of the exemption or relief granted by parliament, by laying strees on any ambiguity here or there. The proportion contended for had already been worked out in taking the assets proportionate to the period of user. It was not, therefore, necessary to carry the same idea even in relation to 6%, them more appropriate words as those found in the rules would have been employed, especially when the Act was recast in 1961.
The question referred to us, accordingly, is answered in the affirmative and in favour or the assessee. He will be entitled to costs. Counsels fee Rs. 500.