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Issues involved: Interpretation of deductions u/s 32A and u/s 80HH of the Income-tax Act, 1961.
Interpretation of deduction u/s 32A: The case involved the deduction of investment allowance u/s 32A for machinery or plant wholly used for business purposes. The Tribunal concluded that the new machinery installed after March 31, 1976, fell under section 32A(2)(b)(ii), allowing the deduction. Interpretation of deduction u/s 80HH: The issue revolved around the entitlement of the assessee to a deduction u/s 80HH for profits from a newly established industrial undertaking in backward areas. The conditions specified under sub-section (2) were analyzed, including the commencement of manufacturing after December 31, 1970, and the employment of workers in the manufacturing process. The Revenue contended that section 80HH did not apply due to various reasons, such as the absence of an industrial undertaking, non-manufacture of articles, and formation through splitting up or reconstruction of an existing business. The court emphasized that the term "industrial undertaking" was not defined in the Income-tax Act, requiring a broad interpretation to encourage new industrial enterprises. Referring to precedents, it was established that industrial undertakings need not be limited to manufacturing and production of articles. The Tribunal found that the assessee, by investing in new machinery and engaging in manufacturing activities, fulfilled the conditions for deduction u/s 80HH. The decision was supported by the precedent that a new industrial unit within an existing establishment could qualify for the deduction. Ultimately, the court ruled in favor of the assessee, affirming their entitlement to the deduction u/s 80HH.
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