2005 (5) TMI 14 - HC - Income Tax

Whether the learned Tribunal was justified in law in allowing the benefit of deduction under section 80J to the assessee for the assessment year 1978-79? Since in the present case the new unit can function independently, the Tribunal is justified in holding that the benefit under section 80J of the Act is admissible.

Summary

Issues:
1. Interpretation of deduction under section 80J for assessment year 1978-79.
2. Determination of whether a new chamber qualifies as a separate industrial unit for deduction under section 80J.
3. Application of legal precedents regarding the viability of new industrial units for deduction under section 80J.
4. Admissibility of deduction under section 80J to a cold storage plant.

Analysis:
1. The primary issue in this case pertains to the interpretation of deduction under section 80J of the Income-tax Act, 1961, specifically for the assessment year 1978-79. The Income-tax Appellate Tribunal referred the question of law to the High Court to determine the justification of allowing the benefit of deduction under section 80J to the assessee for the said assessment year.

2. The case revolves around whether a new chamber constructed within an existing cold storage facility qualifies as a separate industrial unit eligible for deduction under section 80J. The Income-tax Officer initially denied the claim, arguing that the new chamber was merely an expansion of the existing cold storage, sharing common facilities and staff. However, the Commissioner of Income-tax (Appeals) found that the new chamber could be considered a viable independent unit capable of functioning by itself, even if the older chamber ceased operations. This led to a favorable decision allowing the benefit under section 80J to the assessee.

3. Legal precedents, including the Supreme Court's decision in Textile Machinery Corporation Ltd. v. CIT and the Calcutta High Court's ruling in CIT v. Harinkhola Ice and Cold Storage Ltd., were cited to support the viability of new industrial units for deduction under section 80J. The Tribunal upheld the Commissioner of Income-tax (Appeals) decision, emphasizing the independent functioning of the new chamber with separate staff and power connection, distinguishing it from cases where new units were not independent of existing operations.

4. The final issue addressed the admissibility of deduction under section 80J to a cold storage plant, with the Revenue contending that such deduction was not applicable. However, the High Court clarified that under the proviso to section 80J(1), deduction is admissible to a cold storage plant starting operations after March 31, 1976, provided the new unit functions independently. Relying on factual findings, the High Court held that the new chamber fulfilled the conditions for deduction under section 80J, contrary to the precedent cited by the Revenue.

In conclusion, the High Court ruled in favor of the assessee, affirming the admissibility of the benefit under section 80J for the new chamber constructed within the cold storage facility, based on its independent operational capacity and compliance with statutory requirements.