1998 (6) TMI 46 - HC - Income Tax

Powers Of Tribunal, New Industrial Undertaking, New Industrial Undertaking In Backward Area, Special Deduction

Summary

Issues:
1. Interpretation of eligibility for relief under sections 80HH and 80J in respect of bus body building activities.
2. Consideration of conditions under sections 80HH(2)(ii) and section 80J(4)(ii) for deduction eligibility.

Issue 1 - Interpretation of eligibility for relief under sections 80HH and 80J in respect of bus body building activities:
The assessee, a public limited company engaged in various activities, claimed deductions under sections 80HH and 80J of the Income-tax Act for being an industrial undertaking involved in manufacturing. The Inspecting Assistant Commissioner rejected the deduction claim for tyre retreading and engine reconditioning, stating they did not involve manufacturing. Regarding bus body building, the claim was rejected due to lack of separate accounts. The Commissioner of Income-tax (Appeals) accepted the deduction claim for bus body building based on proportionate profits. The Revenue challenged this decision, arguing that the conditions under sections 80HH(2)(ii) and 80J(4)(ii) were not fulfilled. However, the Tribunal dismissed the appeal as the Revenue failed to provide evidence that the conditions were not met.

Issue 2 - Consideration of conditions under sections 80HH(2)(ii) and section 80J(4)(ii) for deduction eligibility:
The Revenue contended that the assessee did not meet the conditions specified in the sections due to starting the unit with old machinery. The Tribunal found no evidence presented by the Revenue to support this claim. The Revenue raised new grounds before the Tribunal, alleging non-fulfillment of conditions, but failed to substantiate with material. The Tribunal exercised discretion not to entertain new pleas without proper evidence. The High Court upheld the Tribunal's decision, stating that unless it was shown that the discretion was improperly exercised, they would not interfere. Consequently, both questions of law were answered in favor of the assessee, and costs were awarded.

This judgment highlights the importance of maintaining separate accounts for claiming deductions under specific sections of the Income-tax Act and the necessity of providing substantial evidence to challenge eligibility criteria. The decision emphasizes the Tribunal's discretion in entertaining new pleas and the standard of proof required to contest tax assessments effectively.