1996 (7) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to relief u/s 80J of the Income-tax Act, 1961.
2. Ownership and capital investment requirements for claiming relief u/s 80J.
3. Applicability of CBDT circular and judicial precedents.

Summary:

Entitlement to Relief u/s 80J:
The primary issue was whether the assessee, a lessee of an industrial undertaking, was entitled to the continuation of relief u/s 80J for the unexpired period of two years. The Tribunal held that the assessee was not entitled to the relief as it was not the owner of the industrial undertaking and had not invested any capital.

Ownership and Capital Investment Requirements:
The Tribunal emphasized that to claim benefits u/s 80J, the assessee must be the owner of the industrial undertaking and must employ its capital for running the new industrial undertaking. Since the assessee was merely a lessee and did not fulfill these conditions, the Tribunal denied the relief.

Applicability of CBDT Circular and Judicial Precedents:
The Commissioner of Income-tax (Appeals) had initially accepted the assessee's claim based on a CBDT circular and the decision in Madras Machine Tools Manufacturers Ltd. v. CIT. However, the Tribunal found that these references did not support the assessee's case. The Tribunal noted that the circular and the cited case applied to successors, not lessees. The Tribunal also referred to various judicial precedents, including decisions from the Kerala High Court, Karnataka High Court, and Bombay High Court, which supported the view that benefits u/s 80J are linked to newly established undertakings and not to changes in ownership or lease arrangements.

Court's Conclusion:
The court upheld the Tribunal's decision, stating that the assessee, being a lessee, could not be considered a successor to claim the benefit u/s 80J for the unexpired period. The court also highlighted practical difficulties in computing and carrying forward deficiencies if such benefits were granted to lessees. Therefore, the court answered the referred question in the affirmative, against the assessee, and affirmed the Tribunal's refusal to grant the relief u/s 80J for the unexpired period.