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TMI Blog1984 (9) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1969-70 did not constitute setting up of a new industrial undertaking ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee-firm is not entitled to deduction under section 80J of the Income-tax Act, 1961 ? " The facts leading to this reference may be shortly stated here. The assessee, M/s. Kanhiyalal Rameshwar Das, a resident firm of Bundi, is engaged in the business of cutting rocks for making building stones and of excavating silica sand for sale. Its previous year, that is to say, the accounting year, is Diwali to Diwali. During the course of proceedings of assessment for the assessment year 1969-70, relating to the previous year ending Diwali, 1968, the assessee filed a revised return claiming tax relief under section 80J of the Act in respect of the capital employed on the purchase of some machinery. The assessee claimed that it had purchased second-hand and used machinery (crane, jeep, compressor and crusher) in 1966 and a new machine for polishing stones in 1967. In his returns filed for the assessment years 1966-67, 1967-68, 1968-69 and 1969-70, the assessee did not claim any relief under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out in Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195, attributable to the new outlay of capital in a separate and distinct unit ". Though section 80J does not, strictly speaking, define what is a newly established industrial undertaking, it contains enough material for the guidance of the assessing and adjudicating authorities under the Act, and of the courts, to enable them to determine as to what is meant by a newly established industrial undertaking of which mention is made in the marginal heading. Whether an industrial undertaking is a newly established undertaking to which section 80J applies can be determined by testing it on the touchstone of section 80J, sub-section (4) which, as it stood at the time material for the instant case, was as under: " 80J. (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 business already in existence; (ii) it is not formed by the transfer to a new business of a building (not being a building taken on rent or lease), machinery or plant previously used for any purpose; (iii) it manufactures or produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section: Provided further that, where any building or any part thereof previously used for any purpose is transferred to the business of the industrial undertaking, the value of the building or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking. Explanation 1.-For the purpose of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely: (a) such machinery or plant was not, at any time, previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h source it was acquired. We do not see any justification for reading into sub-section (4)(ii), the words " by the assessee himself " after the last word " purpose " occurring therein. The meaning which the assessee would want us to draw from sub-section (4)(ii) is impossible to be drawn unless we read into this sub-section, the words " by the assessee himself " after the word " purpose ". The law does not permit a court to add into a statute words which are not there. A little deliberation an the other wording of sub-section (4)(ii) would confirm the correctness of our reading of this sub-section, as discussed above. Mindful of the plain meaning of the language employed by it in enacting sub-section (4)(ii) and conscious of the fact that the said language takes in machinery previously used for any purpose, no matter whether such use was by the assessee or by a third person, the Legislature took care to use the explanatory words " (not being a building taken on rent or lease) " in order to make an exception in respect of a leasehold building which, even if previously used for any purpose by the lessor would still entitle the assessee to tax relief in respect of the capital employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a Division Bench of that High Court held, while construing section 15C(2), Indian Income-tax Act, 1922 (which is similar to section 80J(4) of the Act), that the exemption given by section 15C in respect of a new industrial undertaking will not be available where the undertaking is formed by the transfer to the new business of machinery previously used in any other business of the assessee himself or of another from whom the assessee has acquired the machinery. Reference may also be made here to a Division Bench judgment of the Gujarat High Court in CIT v. Suessin Textile Bearing Ltd. [1982] 135 ITR 443, which was cited in support of the opposite view. The assessee in the cited case had taken on rent a building for office purposes and a shed for installing machinery. Both the building and the shed had been used by other persons for their own purposes prior to letting them out, to the assessee. The assessee claimed tax relief under section 84 of the Act, as it stood at the time of the assessment year 1962-63, which was under consideration in that case, in respect of the capital employed by him in hiring the said accommodation. The relevant provision of section 84 on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery parts and wagons, etc., set up two new units, a steel foundry division and a jute mill division. The income-tax authorities held that the two units were formed by reconstruction of the business already in existence. The Tribunal reversed that finding and held that the two units were not formed by reconstruction of the business already in existence. The High Court reversed the findings of the Tribunal and held in agreement with the income-tax authorities that the two units had been formed by re-construction of an existing business within the meaning of section 15(2)(i) of the Indian Income-tax Act, 1922. On appeal, the Supreme Court reversed the decision of the High Court and held that the steel foundry division and the jute mill division were not formed by the assessee by the reconstruction of the business already in existence. It was in this context that their Lordships pointed out that the new business must be " a separate and distinct unit " and that the true test " is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inery Corporation's case [1977] 107 ITR 195. With great respect to the learned judges of the Division Bench of the Gujarat High Court, we do not find anything in the judgment of the Supreme Court in Textile Machinery Corporation's case [1977] 107 ITR 195 which would have made any difference to the interpretation of law as made by the Bombay High Court. For all these reasons , we answer the first question in the affirmative and, therefore, in favour of the Revenue and against the assessee. Question (ii).-The statement of the case submitted by the Appellate Tribunal would show that the assessee had purchased a new polishing machine in 1967 but the Tribunal further observed : " Mere acquisition of the machine would not, in our opinion, constitute setting up of a new industrial undertaking in the context of these facts ". In other words, the assessee had failed to satisfy the Tribunal on facts that by adding the process of polishing of stone to his existing business, which consisted of cutting of rocks for making building, stones, the assessee had started, to quote their Lordships of the Supreme Court from their judgment in Textile Machinery Corporation's case [1977] 107 ITR 195 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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