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Issues involved: Interpretation of deduction u/s 80J of the Income-tax Act, 1961 for new buildings and machinery installed during the relevant accounting year.
Summary: The High Court of Karnataka was tasked with determining the eligibility of an assessee for a deduction u/s 80J of the Income-tax Act, 1961, regarding new buildings and machinery installed during the accounting year relevant to the assessment year 1970-71. The Income Tax Appellate Tribunal initially denied the claim, stating that the existing framework had only been expanded. However, upon further appeal, the Tribunal recognized the claim after conducting a spot inspection at the premises. The Tribunal found that the new machinery and buildings were indeed new and constituted an independent unit. The Tribunal referred to various legal precedents to support its decision, distinguishing certain cases and applying principles from others to conclude that the assessee was entitled to the deduction under section 80J. The High Court agreed with the Tribunal's findings, emphasizing that the new plant and machinery formed a distinct undertaking and were an independent unit. Citing a Supreme Court decision related to a similar provision under the Indian Income Tax Act, it was highlighted that the production of articles yielding additional profit attributable to the new capital outlay in a separate unit is crucial for claiming tax exemption. The Court also referenced a Delhi High Court case to support the view that a new industrial unit retains its separate identity even if established by a company running another unit. Ultimately, based on the facts presented and the application of correct legal principles by the Tribunal, the High Court ruled in favor of the assessee, affirming their entitlement to the deduction u/s 80J for the new buildings and machinery installed during the relevant accounting year.
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