1980 (4) TMI 154 - AT - Income Tax

Summary

Issues:
Claim for deduction under sections 80HH and 80J of the IT Act, 1961 for the assessment years 1975-76 to 1977-78.

Analysis:
The appeals by the assessee, a company, revolve around the claim for deduction under sections 80HH and 80J of the IT Act, 1961 for the assessment years 1975-76 to 1977-78. The assessee's claim was initially rejected by the assessing officer citing reasons related to the applicability of the provisions of sections 80HH and 80J. The assessing officer contended that the mere shifting of the factory premises and the purchase of some additional machinery did not qualify as a new industrial undertaking as per the IT Act. Additionally, the assessing officer highlighted the absence of separate profit and loss accounts for the new business location. The assessee, on the other hand, argued that the shift to a new location, increased range of production, and significant investment in new machinery warranted the deduction claimed under sections 80HH and 80J.

Upon review, the Appellate Assistant Commissioner (AAC) upheld the assessing officer's decision, emphasizing that the changes made by the assessee did not amount to the establishment of a new industrial undertaking as required by the IT Act. However, the Income Tax Appellate Tribunal (ITAT) analyzed the facts presented by the parties and considered various undisputed facts, including the increase in paid-up capital, shift to a new and improved premises, installation of new machinery, change in manufacturing line, and consequent profit earned. The ITAT referred to a decision by the Punjab and Haryana High Court in a similar case, emphasizing the need for substantial fresh capital investment, employment of labor, production of articles, clear profit attribution, and a distinct identity for the industrial unit to qualify for the benefits under the relevant sections of the Act.

Based on the facts presented and the legal principles outlined in the Punjab and Haryana High Court decision, the ITAT ruled in favor of the assessee. The ITAT concluded that the assessee met the criteria for claiming deductions under sections 80HH and 80J for the assessment years in question. The ITAT's decision highlighted the importance of analyzing each case based on its unique facts and conditions to determine eligibility for the statutory benefits. Consequently, the appeals by the assessee were partly allowed, granting the deduction-relief under sections 80HH and 80J of the IT Act for the relevant assessment years.