Dipak Kumar Sen, J.
1. Bilaspur Spinning Mills & Industries Ltd. was assessed to income-tax in the assessment years 1968-69, 1969-70, 1970-71 and 1971-72, the relevant accounting years ending on September 30 of the calendar years 1967, 1968, 1969 and 1970 respectively. In its returns, the assessee claimed under Section 80J of the Income-tax Act, 1961, deduction of 6% of the capital employed by the assessee in its undertaking from its profits and gains in the computation of its total income. In each of the said assessment years, there were no profits and gains. The assessee claimed further that the said 6% of its capital employed should be carried forward as deficiency under the said section for being set off against its profits and gains of the subsequent assessment years.
2. Part of the capital of the assessee consisted of machinery purchased from a manufacturer in Japan on deferred payment basis. The assessee claimed that the quantum of the unpaid purchase price of the said machinery should be treated as money borrowed from an approved capital source for creation of capital assets in India and contended that the same should not be deducted from the capital value of its assets under Rule 19A, Sub-rule (3) of the Income-tax Rules in computing the deficiency allowable under the said Section 80J.
3. It was held by the Income-tax Officer in each of the said assessment years that such liability did not arise out of moneys borrowed and he deducted the said amount of unpaid price from the value of the capital employed by the assessee in calculating the deficiency to be carried forward.
4. On appeal by the assessee, the Appellate Assistant Commissioner upheld the order of the Income-tax Officer on the ground that the assessee had not adduced any evidence to prove that the unpaid purchase price of the imported machinery was a loan from an approved source and that the payment of the said loan was to be made over a period exceeding seven years.
5. Being aggrieved, the assessee went up on further appeal before the Income-tax Appellate Tribunal. It was found by the Tribunal that there was no dispute about the aggregate of the amounts representing the value of the capital assets of the assessee relevant to the computation.
6. It was found further that the purchase having been made from a supplier in Japan on credit, the money was admittedly borrowed by the assessee from an approved source within the meaning of the Explanation to Sub-Rule (3) of Rule 19A.
7. A certificate signed by the directors and the chartered accountant of the assessee and a deferred payment guarantee issued by the United Commercial Bank recording that arrangements had been made to pay the price of the machinery in twenty half-yearly instalments with the approval of the Reserve Bank of India was produced before the Tribunal which took note of the same and held that the second condition prescribed under Rule 19A(3)(b) have also been fulfilled.
8. In the premises, the Tribunal held that the assessee's claim should be accepted and the computation of its capital for the purpose of the said Section 80J and the said Rule 19A of the Rules should be revised for all the years.
9. The Revenue applied under Section 256(1) of the Act calling upon the Tribunal to draw up a statement of the case and refer six questions of law to this court.
10. The questions suggested included the following :
'(a) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in admitting evidence produced for the first time before it without allowing the Department an opportunity of scrutiny and examination of such evidence ?
(b) Whether, on the facts and in the circumstances of the case, the Tribunal had no evidence or had relied on irrelevant materials to come to the conclusion that the provision for the payment of purchase price of the machinery did not envisage any contingency under which the entire amount of the purchase price or any unpaid balance thereof became payable before the expiry of seven years ?'
11. The Tribunal referred only the following question :
'Whether, on the facts and in the circumstances of the case and on a correct interpretation of Rule 19A(3Xb) of the Income-tax Rules, 1962, the Tribunal was justified in holding that the unpaid purchase price of the machinery was 'moneys borrowed' within the meaning of the said rule?'
12. At the hearing, learned advocate for the Revenue contended that the Tribunal should not have accepted new evidence in the proceedings before it and further that the Tribunal failed to consider relevant evidence as on record. Learned advocate for the assessee contended to the contrary.
13. The questions on the state of evidence which were sought to be raised in the application of the Revenue under Section 256(i) of the Act were not allowed and have not been referred by the Tribunal. The Revenue did not come up under Section 256(2) of the Act for a direction to the Tribunal to state a case on the said questions.
14. In our view, it is not open to the Revenue in this reference to agitate on questions which have not been referred.
15. On the question referred, the Tribunal has found as a fact that the assessee in obtaining capital assets from a foreign supplier on a deferred payment basis has borrowed from an approved source within the meaning of the Explanation to Sub-rule (3) of Rule 19A. The Tribunal has further found that the money borrowed is repayable over a period of not less than seven years. The said findings have not been challenged and have become final. It is not the case of the Revenue that on the facts found, Rule 19A(3) read with the Explanation thereto will not apply.
16. For the above reasons, the question referred is answered in the affirmative and in favour of the assessee. There will be no order as to costs.