TMI Blog2004 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... f law for the opinion of this court: "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing the Assessing Officer to recomputed deduction under section 80J by including a sum of Rs. 1,50,000 in the capital employed." The assesses is engaged in the business of cotton ginning and delintering cotton seeds at its principal place of business at Fatehabad. During the assessment year 1985-86, the assessee floated a small-scale industrial manufacturing unit known as the sawgin unit. The first unit of the assessee was known as the roller unit. The assessee claimed deduction of Rs. 55,975 under section 80J of the Income-tax Act, 1961 (for short, "the Act") during the assessment year 1985-86. The Assessing Officer by treating Rs. 1,50,000 as deemed transfer from Roller unit to Sawgin unit, restricted the allowance under section 80J to Rs. 44,590. Besides this, he reduced the investment allowance reserve from Rs. 1,17,172 to Rs. 77,405 for computing the capital employed for the purpose of calculating deductions under section 80J of the Act. The Commissioner of Income-tax (Appeals) (for short, "the CIT (Appeals)") confirmed the order of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year): Provided that in relation to the profits and gains derived by an assessee, being a company, from an industrial undertaking which begins to manufacture or produce articles or to operate its cold storage plant or plants after the 31st day of March, 1976, or from a ship which is first brought into use after that date, or from the business of a hotel which starts functioning after that date, the provisions of this sub-section shall have effect as if for the words 'six per cent.', the words 'seven and a half per cent.' had been substituted. (1A)(I) For the purpose of this section, the capital employed in an industrial undertaking or the business of a hotel shall, except as otherwise expressly provided in this section, be computed in accordance with clauses (II) to (IV) and the capital employed in a ship shall be computed in accordance with clause (V). (II) The aggregate of the amounts representing the values of the assets as on the first day of the computation period of the undertaking or of the business of the hotel to which this section applies shall first be ascertained in the following manner:- (i) in the case of assets entitled to depreciation, their writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from which is not taken into account in computing the profits of the business and any moneys not required for the purpose of the business, in so far as the aggregate of such investments or moneys exceed the amount of the borrowed moneys which under clause (III) are required to be deducted in computing the capital.... (4) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces articles, or operates one or more-cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of thirty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufactures or produces article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he condition specified therein shall be deemed to have been complied with and the total value of the machinery or plant or part so transferred shall not be taken into account in computing the capital employed the industrial undertaking." An analysis of the above reproduced provisions shows that the assessee is entitled to deductions in respect of a new industrial undertaking in accordance with and subject to the provisions of section 80J computed in the manner specified in sub-section (1A) of the section. In other words, the capital employed in an industrial undertaking is to be computed in accordance with sub-clauses (II) to (IV) of sub-section (1A) of the section. In Kerala State Cashew Development Corporation v. CIT [1994] 205 ITR 19, a Division Bench of the Kerala High Court interpreted section 80J of the Act and after making reference to the decision of the Karnataka High Court in Khoday Industries P. Ltd. v. CIT [1987] 163 ITR 646 held as under: "We may mention at the outset that the object with which section 80J has been enacted is to encourage the establishment of new industries in the country. The heading of the section refers to 'newly established industrial undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X
|