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Issues:
- Claim of relief under section 80J of the Income-tax Act, 1961 for a bonded expansion department as a new industrial undertaking. - Disallowance of relief by the department on the grounds of expansion of an existing business and not a new industrial undertaking. - Assessment of whether the bonded expansion department qualifies as a separate and viable unit for relief under section 80J. - Interpretation of the requirement for physical separation and distinct identity of a new industrial undertaking. - Consideration of objections raised by the department regarding alleged opening stock and depreciation claims on machinery. Analysis: The judgment pertains to departmental appeals concerning the eligibility of a company engaged in manufacturing abrasives for relief under section 80J of the Income-tax Act, 1961. The appeals arose from the assessment years 1971-72 to 1974-75 and 1975-76. The primary issue revolved around whether the bonded expansion department constituted a new industrial undertaking for the purpose of claiming relief under section 80J. The department contended that the expansion was not a new industrial undertaking but a reconstruction of the existing business, citing concerns about physical separation and common accounts. The Commissioner (Appeals) extensively analyzed the claim of the assessee, emphasizing the substantial expansion undertaken by the company to manufacture new qualities of products. The first appellate authority found that the bonded expansion department was distinct, separate, and viable, producing goods different from the pre-existing business. The installation of new machinery, increase in production, and specific design of machinery for the new plant supported the claim for relief under section 80J. The Commissioner (Appeals) also addressed objections related to alleged opening stock and depreciation claims, concluding that these did not invalidate the eligibility for relief. Upon careful consideration, the Tribunal upheld the order of the first appellate authority, affirming that the bonded expansion department qualified as a new industrial undertaking eligible for relief under section 80J. The Tribunal highlighted that the mere proximity of the new unit to the old machinery did not negate its eligibility, emphasizing the substantial expansion and distinct identity of the new industrial undertaking. The Tribunal dismissed the appeals for the assessment years 1971-72 to 1974-75 based on this determination. The judgment underscores the importance of factual findings, substantial expansion, and distinct identity in determining eligibility for relief under section 80J. It clarifies that physical separation and separate accounting are not absolute requirements, and the focus should be on the establishment of a new industrial undertaking with unique characteristics and production capabilities. The Tribunal's decision emphasizes the need for a holistic assessment of the expansion undertaken and the nature of the products manufactured to ascertain eligibility for tax relief under relevant provisions.
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