J.S. VERMA, J.—This reference under Section 256 (1) of the Income-Tax Act, 1961 at the instance of the revenue is to answer the following questions of law, namely:- "(1) Whether on the facts and in the circumstances of the case, the Tribunal is justified in upholding the order of the Appellate Assistant Commissioner, that capital employed in the assessees industrial undertaking should be computed, without deducting the amount of liabilities?" "(2) Whether on the facts and in the circumstances, the Tribunal is justified in upholding the order of the Appellate Assistant Commissioner that the relief under sec. 80 J should be allowed for the full year although the factory ran for three months only?" 2. The relevant assessment year is 1971-72. For this period the assessee claimed deduction at the rate of 6% on Rs. 17,65,121/- under sec. 80 J of the Income-tax Act, 1961. The I. T. O. however, allowed rebate only on the amount of Rs. 3,04,780/-. The I. T. O. took the view that relief under Sec. 80 J of the Income-tax Act, 1961 should be allowed without deducting the liabilities or the amount of subsidy from the capital employed in the business of the new industrial under-taking. Aggrieved by the J.T. O. s view the assessee preferred an appeal to the A. A. C. The A. A. C. accepted the assessees contention and held that full relief should be given under Sec. 80 J of the Act on Rs. 17,65,121/-. The Tribunal has affirmed this view. It has also been held that even though the factory ran for 3 months only during that period the deduction to be allowed under Sec. 80 J must be for the full year. 3. Learned counsel for the revenue contended that the above quoted first question is concluded in favour of the revenue by the decision of the Supreme Court in Lohia Machines Ltd. vs. Union of India (1). Learned counsel stated in respect of the second question that the reported decisions are all in assessees favour and the Central Board of Direct taxes has also issued a circular dated March 3, 1984 accepting this view. In reply the learned counsel for the assessee contended that the first question is only partly covered by the Supreme Court decision in Lohia Machines Ltd. vs. U. O. I. (supra), but in respect of a sum of Rs. In reply the learned counsel for the assessee contended that the first question is only partly covered by the Supreme Court decision in Lohia Machines Ltd. vs. U. O. I. (supra), but in respect of a sum of Rs. 60,08,147/- out of the total of Rs. 17,65,121/-, the point is not concluded in favour of the revenue by that decision. 4. We shall first take up the above quoted second question which can be disposed of at the thresh hold since it does not require any detailed consideration. The High Courts of Bombay, Ca!cutta, Gujarat, Kerala, Karnataka, Madhya Pradesh and Madras in several decisions have taken the consistent view that relief under Sec. 80 J should be allowed for the full year, even though new Industrial under-taking ran only for a portion thereof. These decisions are C. I. T. vs. Godrej Soap Ltd. (2), C. I. T. vs. Oyster Packager Ltd. (3), C. I. T. vs. Sarabhai Sons Ltd. (4). C. I. T. vs. Protein Products Ltd. (5), C. I. T. vs. Mysore Petro chemical Ltd. (6), C. I T. vs. Sanghi Beverages Pvt. Ltd. (7), C. I. T. vs. Sanghi Eros. Ltd. (8), C. I. T. vs. Simpson & Company (9), Rock-weld Electrodes India Ltd. vs. C. I. T. (10). It may also be mentioned that a special leave petition against a decision of the Madras High Court following its earlier decision in (1980) 122 ITR 282 was rejected by the Supreme Court, which indicates that the Supreme Court has also approved this view. Mention of this fact is found at page 12 of the statutes part of (1985) 151 ITR. We may also add that Circular No. 378 dated March 3, 1984 reproduced at page 1 of the statutes part of (1984) 149 ITR expressly says following the view taken in this Madras decision and by the Karnataka High Court that the deduction under Sec. 80 J should not be reduced proportionately with reference to the period for which the business of the under-taking etc. was not carried on during relevant previous year. It is, therefore, clear that the Tribunals view on the above quoted question No. 2 being the same, it must be upheld. 5. We shall now consider the argument of learned counsel for the assessee in respect of the above quoted question No. 1. was not carried on during relevant previous year. It is, therefore, clear that the Tribunals view on the above quoted question No. 2 being the same, it must be upheld. 5. We shall now consider the argument of learned counsel for the assessee in respect of the above quoted question No. 1. Admittedly, the Supreme Court in Lohia Machines Ltd. vs. U. O. I. (supra) upheld the validity of rule 19 A of the Income-tax Rules, 1962 in its entirety in relation to Sec. 80 J of the Act and, therefore, the Tribunals view contrary to it cannot be upheld. The only question is whether deduction has to be made in respect of the amount of Rs. 6,08,147/- as claimed by the learned counsel for the assessee. His argu-ment is that according to rule 19A (3) (b) as it applied during the assessment year 1971-72 the assessee is entitled to relief to the extent of Rs. 6,08,147/-under Sec. 80 J of the Act, the same being borrowed from the National Small-Scale Industries Ltd. The question is whether this contention can be accepted? here are two conditions which must be satisfied before the assessee can get benefit of rule 19 A (3) (b) as it then existed. These conditions are; (i) that the money should have been borrowed from an "approved source" for the creation of a capital asset in India and (ii) the agreement should provide for repayment thereof during the period of not less than seven years. For the purpose of this sub-rule "approved source" is to be understood as defined in the Explanation given there under. Even assuming that the National Small Scale Industries Corporation Ltd. can fall within the meaning of "approved source" as contemplated by Clause (b) the further condition to be satisfied in respect of this amount is that according to the agreement, repayment thereof should have been during a period of not less than seven years. It has not been shown to us by the learned counsel for the assessee that such an argument was considered by the A. A. C. or the Tribunal, so that the requisite foundation on facts is present for the same. However, it has been shown to us that in the assessment order of the I. T. O. dated 20.10.1975. It has not been shown to us by the learned counsel for the assessee that such an argument was considered by the A. A. C. or the Tribunal, so that the requisite foundation on facts is present for the same. However, it has been shown to us that in the assessment order of the I. T. O. dated 20.10.1975. Anntxure-A this aspect was considered and a clear finding was recorded that this provision did not apply because the agreement provides the period of repayment as less than the se\en years. Apparently this finding by the I. T. O. was not assailed before the A. A. C. or the Tribunal. The facts which are necessary to provide foundation for the arguments of the learned counsel for the assessee are, therefore, not only non-existent but on the contrary the finding in that behalf is to the contrary. There is thus no basis to hold that the assessee is entitled to relief in respect of the sum of Rs. 6,08,147/- even according to the Supreme Court decision in Lohia Machines Ltd. vs. U. O. I. (supra). It follows that the Tribunals view in respect of the entire above quoted question No. 1 in the assessees favour cannot be upheld, being contrary to the aforesaid Supreme Court decision. 6. Consequently, the reference is answered as follows:— (1) Answer to question No. 1 is that the Tribunal was not justified in upholding the order of the A. A. C. by taking the view in assessees favour and against the revenue. (2) Answer to question No. 2 is that the Tribunals view in assessees favour is justified. No costs.