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Issues: Assessment of relief under section 80J of the Income Tax Act, 1961 for a new industrial undertaking of book-binding.
Judgment Summary: The assessee, an individual, claimed relief under section 80J for a new industrial undertaking of book-binding. The Income Tax Officer (ITO) initially refused the relief, leading to appeals and subsequent contradictory decisions by the Appellate Assistant Commissioner (AAC) and the Tribunal. The main issue was whether the business was formed by splitting up an existing business. The Tribunal sought a report from the ITO regarding various aspects of the business, including materials used, workers employed, and agreements with related firms. The ITO's report indicated that the book-binding business started by the assessee was independent, with materials supplied by Manipal Power Press and some purchased externally. The Tribunal found that the business satisfied certain requirements of section 80J but believed it was formed by splitting up an existing business, a conclusion not supported by tangible evidence. The High Court analyzed the situation and concluded that there was no unity of control between the assessee's business and Manipal Power Press, ruling out the possibility of splitting up an existing business. The mere fact that some work was outsourced to the assessee did not imply a splitting up. As a result, the High Court held that the assessee's business was not formed by splitting up an existing business, thus entitling the assessee to relief under section 80J. The questions referred to the court were answered in favor of the assessee, who was awarded costs.
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