Hi Monish!

You answered the question yourself. For standard 8051, the timer clock (and machine cycle) is "oscillator_freq/12". This is specially the case when you are using on-chip oscillator for interval timing.

You can also use external clock for event counting. That has a maximum frequency of ((oscillator_freq/12)/2), as it takes 2 machine cycles to recognize a 1-to-0 transition

There are the famous 8051_FAM documents on philips website. Do read them to get an insight into 8051.

Regards
Aman