JUDGMENT G. P. Singh, C. J.- 1. The questions of law referred in this reference made by the Income Tax Appellate Tribunal under section 256 (1) of the Income Tax Act, 1961, are as follows: "1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in ignoring the provisions of Rule 19-A of the Income Tax Rules, 1962, and thereby holding that the borrowed capital is to be treated at par with own capital of the assessee for working out capital employed for the purpose of section 80-J ? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is entitled to a deduction under section 80-J of the entire capital without differentiating between the own capital and borrowed capital ? 3. Whether the Tribunal was justified in allowing deduction under section 80-J at Rs. 67,548/- in place of Rs. 13,975 allowed ?" 2. The facts stated are that the assessee is a registered firm deriving income from manufacture and sale of barbed wire and G. I. wire etc. The relevant assessment year is 1971-72, for which the accounting year ended on 31st March 1971. The assessee claimed a deduction under section 80-J of the Act. The Income-tax Officer was of the view that the assessee could be given relief under section 30-J of the Act at 6 percent on the net capital employed. In other words, the Income-tax Officer was of the opinion that the amount borrowed and invested in the industrial undertaking by the assessee could not be taken into consideration for computing capital under section 80-J of the Act. On this basis, the Income tax Officer rejected the claim for deduction amounting to Rs. 67,548/- and allowed deduction only of Rs. 39,975f-. The order of the Income-tax Officer was upheld by the Appellate Assistant Commissioner. The Tribunal, however, took a different view. The Tribunal followed a decision of its Bombay Bench and held that the capital employed in an industrial undertaking is the entire investment of the assessee in the undertaking and that no distinction can be made between the assessee's own capital and borrowed capital. The Tribunal, however, took a different view. The Tribunal followed a decision of its Bombay Bench and held that the capital employed in an industrial undertaking is the entire investment of the assessee in the undertaking and that no distinction can be made between the assessee's own capital and borrowed capital. The Tribunal ignored Rule 19 A On the ground that a clear direction to the contrary was available from the decision of the Supreme Court in Indore Malwa United Mills Ltd. v, State of M.P. (1965) 55 ITR 736, which holds that after borrowing the money borrowed becomes the borrower's money. 3. Section 80-J in so far as relevant reads as follows:- "80-J. Deduction in respect of profits and gains from newly established industrial undertaking or ships or hotel business in certain cases.(1)Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the aggregate of deductions, if any, admissible to the assessee under section 80-H and section 80-1) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent per annum on the capital employed ill the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter in this section, referred to as the relevant amount of capital employed during the previous year.)" The manner of computation of capital employed is given in Rule 19-A of the Income-tax Rules, 1962 which in so far as relevant, reads as follows: - "19-A. Computation of capital employed in an industrial undertaking or a ship or the business of a hotel for the purposes of section 80-J (1) For the purposes of section 80-J, the capital employed in an industrial undertaking or the business of a hotel shall be computed in accordance with sub-rules (2) to (4), and the capital employed in a ship shall be computed in accordance with sub-rule (5). (2) The aggregate of the amounts representing the values of the assets as on the first day of the computation period, of the undertaking or of the business of the hotel to which the said section 80-J applies shall first be ascertained in the following manner: (i) in the case of assets entitled to depreciation, their written down value; (ii) in the case of assets acquired by purchase 'and not entitled to depreciation, their actual cost to the assessee; (iii) in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business; (iv) in the case of assets being debts due to the person carrying on the business, the nominal amount of those debts; (v) in the case of assets being cash in hand or bank, the amount thereof. Explanation 1. In this rule "computation period" means the period for which profits and gains of the industrial undertaking or business of the hotel are computed under sections 28 to 43-A. Explanation 2. The value of any building, machinery or plant or any part thereof as is referred to in clause (a) or clause (b) of the Explanation at the end of sub-section (6) of section 80-J shall not be taken into account in computing the capital employed in the industrial undertaking or, as the case may be, the business of the hotel. Explanation 3. Where the cost of any asset has been satisfied otherwise than in cash, the then value of the consideration actually given for the asset shall be treated as the actual cost of the asset. (3) From the aggregate of the amounts as ascertained under sub-rule (2) shall be deducted the aggregate of the amounts, as on the first day of the computation period, of borrowed moneys and debts due by the assrssee (including amounts due towards any liability in respect of tax) not being- (a) in the case of an assessee being a company, the amount of its debentures, if any, and (b) in the case of any assessee (including a company, any moneys borrowed from an approved source for the creation of a capital asset in India, if the agreement under which such moneys are borrowed provides for the repayment thereof during a period of not less than seven years. " 4. " 4. A perusal of sub-rule (3) of Rule 19-A will go to show that after aggregating the amount representing the values of the assets as given in sub-rule (2), the aggregate of the amount of borrowed moneys and debts due by the assessee have to be deducted, except as provided in clauses (a) and (b) of sub-rule (3). Sub-rule (3) of Rule] 9-A thus specifically. requires deduction of borrowed moneys in determining the capital employed by the assessee for the purpose of calculating the tax relief under section 80-J. As earlier stated by us, the Tribunal's opinion is that there can be no distinction between assessee's own capital and borrowed capital and that the tax levied under section 80-J cannot be limited to 6 per cent of the assessee's own capital employed in the industrial undertaking. In so holding the Tribunal impliedly held sub-rule (3) of Rule 19-A to be invalid, although it did not expressly say so Now the Tribunal had no such power to ignore the ru1cs made under the Act in deciding the appeal before it. The Tribunal's observation that it could do so because of the decision of the Supreme Court in Indore Malwa United Mills Ltd. v. State of M. P. (supra) is also not correct. The Supreme Court in that case was not at all concerned with section 80-J or Rule 19-A. The case related to the imposition of Industrial tax under the Indore Industrial Tax Rules, 1927, and the question was whether the company could claim deduction of the money borrowed by the Managing Agents which had become irrecoverable as a trading loss in computing its profits. The observation made by the Supreme Court at p. 740 of the Report tat after the borrowing, money became the company's money, does not assist us in the interpretation of section 80-J or in determining the validity of Rule 19-A (3). It is now settled law that the assessing authorities functioning under a taxing Act have no jurisdiction to decide the validity of any of its provisions or rules or notifications made there under. See Venkataraman & Co. v. State of Madras AIR 1966 SC 1089 , and Dhulabhai v. State of M. P. 1969JLJ 1-1968 RN 683-AIR 969 SC 78. It is now settled law that the assessing authorities functioning under a taxing Act have no jurisdiction to decide the validity of any of its provisions or rules or notifications made there under. See Venkataraman & Co. v. State of Madras AIR 1966 SC 1089 , and Dhulabhai v. State of M. P. 1969JLJ 1-1968 RN 683-AIR 969 SC 78. Indeed, even the High Courts and the Supreme Court in a reference have normally no jurisdiction to entertain the validity of the taxing Act or a statutory rule or order made under it. See Income Tax Commissioner M.P. v. Straw Products AIR 1966 SC 1113 . 5. Learned counsel for the assessee, however, has relied upon the decisions of the Calcutta, Madras and Allahabad High Courts in support of his submission that the expression "capital employed" as used in section 80-J is not restricted to assessee's own capital and that Rule 19-A (3) is invalid in so far as it provides for the deduction of borrowed moneys in computing the capital employed. These decisions are: Century Enka Ltd. v. Income Tax Officer 1977, 107 ITR 909 Cal., Madrars Industrial Lipings Ltd. v. Income Tax Officer 1977, 110 ITR 256 Mad. and Kota Box Mfg Co. v. Income Tax Officer 1980 123 ITR 638 Alla. These cases do support the contention of the learned counsel for the aS5essee, but as they are not binding on us, we have to examine ourselves the correctness of the view taken in them (See Commissioner of Income Tax v. M/s Vrajlal Manilal & Co., Sagar [4]. 6. The precursor of section 80-J of the present Act was section 15 C of the 1922 Act. Section 15 C also provided for exemption from tax of newly established industrial undertakings on so much of the profits or gains as did not exceed six per cent per annum 'on the capital employed in the undertaking, computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue." In pursuance of this rule making power, the Central Board of Revenue made the Indian Income-Tax (Computation of Capital of Industrial Undertakings), Rules, 1949, which correspond to Rule 19-A of the 1962 Rules. Rule 3 (3) of the 1949 Rules provided for deduction of any borrowed money and debt due by the person carrying on the business in computation of capital for purposes of section l5-C. Rule 3 (3) of the 1949 Rules was not challenged and was in operation till the coming into force of the 1961 Act and the making of the 1962 Rules. Rule 19-A (3) follows the same pattern as Rule 3 (3) of the 1949 Rules, except that the amount of debentures and the amount of long term loans i. e, loans providing for re-payment during a period of not less than seven years when taken from an approved source, are not deducted in computation of capital for purposes of section 80-J. Rule 19-A was later on amended and the exception made in respect of debentures and long term loans was withdrawn. The validity of Rule 19-A (3) in so far as it requires deduction of borrowed moneys and debts due by the assessee in computation of capital for purposes of section 80-J, was for the first time challenged in 1977 in the Calcutta High Court in Century Enka Ltd.'s case. The fact that such a rule existed right from 1949 when section 15-C was introduced and was followed by all concerned till 1977, itself shows that the rule was in accordance with the intention expressed by the legislature. When Parliament enacted section 80-J, it must have known as to how section 15-C of the 1922 Act was interpreted by the Central Board of Revenue and applied by the Income-tax Authorities. The fact that section 80-J was enacted in similar terms without showing any disapproval of the interpretation put by the Central Board of Revenue that the amount of borrowings and debts is to be deducted in computing the capital employed, goes to show that Parliament approved of that interpretation. This, in our opinion, is a very important factor to hold that Rule 19-A (3) which follows the same pattern as Rule 3 (3) of the 1949 Rules, is valid and is in line with the intention of Parliament in enacting section 80-J. Where contemporaneous and practical interpretation has stood unchallenged for a considerable length of time, it is regarded as of great importance in arriving at the proper construction of a statute. Further such an interpretation gains greater weight when the statute as interpreted is re-enacted and is regarded presumptively the correct interpretation of the law. This rule is based upon the theory that the legislature is acquainted with the contemporaneous interpretation of a statute, especially when made by a administrative body or executive officers charged with the duty of administering or enforcing the law, and, therefore, impliedly adopts the interpretation upon re-enactment (See Sutherland Statutory Construction, 3rd edition, pp. 520, 523 551, 524). This important principle was not considered by the Calcutta, Madras and Allahabad, High Courts in holding that Rule 19-A (3) in so far as it provides for the deduction of borrowings and debts in computation of the capital employed, goes beyond the rule making power conferred by section 80-J. Another equally important matter which has not been noticed by these High Courts is that the word "capital" in the business world means the net worth of an enterprise and thus necessarily excludes the borrowings. In Batliboi's. Advanced Accounting, 19th edition, p. 78, it is stated that "capital is the excess of a trader's assets over his liabilities." Similarly, in Encyclopaedia Britannica (Macropaedia), Vol. 3. p. 799, it is observed that "in business world the word capital usually refers to an item in the balance sheet representing that part of the net worth of an enterprise that has not been produced through the operation of the enterprise." It is, therefore, wrong to assume that the expression "capital employed' is not open to construction that it does not embrace moneys borrowed by the assessee and invested in the industrial undertaking. It may be that in some context the expression "capital employed" may include the borrowed moneys or borrowed capital; but we are clearly of opinion that in the context of section 80-J the expression does not include borrowed moneys and debts, as it is in this sense that this expression has been understood right from 1949. It also cannot be lost sight of that computation of capital employed has to be "in the prescribed manner" as is expressly provided in section 80-J and therefore, the rules can prescribe as to what should or should not be included in the computation. It also cannot be lost sight of that computation of capital employed has to be "in the prescribed manner" as is expressly provided in section 80-J and therefore, the rules can prescribe as to what should or should not be included in the computation. The provision for deduction of borrowed moneys and debts in Rule 19-A (3) is not such which changes the character of that which has to be computed under section 80•1 and is, in our opinion, perfectly valid, 7. Learned counsel for the assessee also relied upon Birmingham Small Arms Co. v. L. R. C. (1951) 2 All. ER 296. In this case it was held by the House of Lords that the claim of compensation made by the assessee company for war damage did not constitute capital employed in the trade or business of the assessee. This case has no bearing on the question with \\hich we are concerned in the instant case. It was also submitted by the learned counsel that the construction adopted by us would be discriminating the indigent assessees who have to borrowed funds for their undertakings and that Parliament could not have possibly intended to create this discrimination. We are unable to accept this submission. The indigent assessees who have to borrow capital are given relief by section 36 (1) (iii) of the Act which permits deduction of interest on borrowed capital in computation of income. The benefits of section 36 (1) (iii) is obviously not available to those who do not borrow capital to finance their undertakings. This may be the reason for not including borrowed moneys in computing the relief under section 80-J. It is well settled that Parliament has a very wide discretion of making classifications in matters of taxation. It is not possible to argue nor it is argued that the construction adopted by us will make section 80-J invalid being violative of Article 14. As explained by us, there are weighty reasons to hold that Rule 19-A (3) is consistent with the intention of Parliament and does not go beyond the rule making power conferred by section 80-J. 8. For the reasons given above, we answer the question as follows: (1) The Tribunal was not justified in ignoring Rule 19-A (3). (2) The Tribunal was not justified in holding that borrowed capital has not to be included in computation of capital employed. For the reasons given above, we answer the question as follows: (1) The Tribunal was not justified in ignoring Rule 19-A (3). (2) The Tribunal was not justified in holding that borrowed capital has not to be included in computation of capital employed. (3) The Tribunal was not justified in enhancing the deduction under section 80-J from Rs. 13,975/- to Rs. 67,548/-. There will be no order as to costs of this reference.