1985 (9) TMI 60 - HC - Income Tax

Summary

Issues involved: Interpretation of relief under section 80J of the Income-tax Act, 1961 for a new industrial undertaking.

Summary:
The High Court of Bombay considered a reference u/s 256(1) of the Income-tax Act, 1961 regarding the entitlement of relief u/s 80J for a new industrial undertaking. The assessee, engaged in manufacturing self-locking nyloc nuts, set up a plant for manufacturing nyloc inserts by raising fresh capital. The Income-tax Officer denied relief under section 80J, stating there was no new undertaking. The Appellate Tribunal disagreed, finding a new industrial undertaking had been established. The Revenue's argument was based on section 80J(4)(i), contending that as there was a reconstruction of an existing business, relief was not available. However, the Court held that no reconstruction occurred as defined by the Supreme Court, emphasizing that setting up a new plant did not constitute reconstruction. The Court ruled in favor of the assessee, directing the Revenue to pay the costs of the reference.

In conclusion, the Court determined that the establishment of a new industrial undertaking for manufacturing nyloc inserts by the assessee qualified for relief u/s 80J of the Income-tax Act, 1961, rejecting the Revenue's argument of reconstruction and ordering the Revenue to cover the costs of the reference.