1984 (11) TMI 30 - HC - Income Tax

Summary

Issues:
1. Applicability of relief under section 80J of the Income-tax Act to the assessee's spinning unit.
2. Availability of relief under section 80J for the assessment year 1969-70.

Analysis:
The judgment pertains to a reference under section 256(1) of the Income-tax Act regarding the applicability of relief under section 80J to an assessee, a private limited company engaged in manufacturing activities. The primary issue was whether the spinning unit set up by the assessee qualified for relief under section 80J. The Tribunal had previously held in favor of the assessee for the assessment years 1968-69 and 1969-70. The key consideration was whether the spinning unit constituted a new industrial undertaking as per the provisions of section 80J(4) of the Act.

The court analyzed the facts and relevant legal precedents to determine if the spinning unit was a new unit or a reconstruction of an existing business. Referring to case law, the court noted that the intention of section 80J was to encourage the establishment of new industries. It observed that the spinning unit, which involved substantial investment in new machinery and operated independently from the previous unit, qualified as a new industrial undertaking. The court emphasized that the spinning unit's operation differed significantly from the previous unit's activities, indicating a separate and distinct entity eligible for relief under section 80J.

Regarding the availability of relief for the assessment year 1969-70, the court noted that the spinning unit was established during the accounting year 1964-65, making it eligible for relief in the fifth year, which included the assessment year in question. Therefore, the court concluded that the assessee was entitled to relief under section 80J for the assessment year 1969-70. The judgment was delivered in favor of the assessee, with each party bearing its own costs.

In summary, the court upheld the applicability of relief under section 80J to the assessee's spinning unit, considering it as a new industrial undertaking. Additionally, the court affirmed the availability of relief for the assessment year 1969-70, based on the establishment of the spinning unit within the stipulated timeframe.