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TMI Blog1984 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ct on the ground that the undertaking was formed for the first time by investing a sum of Rs. 23 .86 lakhs on plant and machinery taken over from the BARC for the purpose of starting new business of manufacturing electronic components. The claim was disallowed by the ITO on the ground that the requirements of s. 80J are not fulfilled. The order of the ITO was confirmed on appeal by the AAC and also by the Tribunal. All the three authorities held that, for claiming relief under s. 80J of the Act, the machinery and plant must be one which was not used for any purpose earlier and in the absence of any evidence, the authorities presumed that the plant and machinery taken over from the BARC must have been used by it before its transfer. The assessee thereafter sought for reference of the present question, namely, whether the assessee is entitled to the relief under s. 80J of the Act. The learned counsel for the assessee, Mr. Ratnakar, contended that the view taken by the authorities is manifestly erroneous. It is urged that what is prohibited by clause (ii) of sub-s. (4) of s. 80J is the transfer of plant and machinery previously used by the same assessee and not the transfer of machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1956 and 18 years in 1960. The incentive introduced in 1949 has been thus stepped up ever since and the only object is that which we have already mentioned. " In CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208, the Gujarat High Court pointed out the purpose of the Act in the following words (p. 215): " Now, the legislative intent behind the enactment of this provision was to provide what is conveniently and aptly called a 'tax holiday' to a newly established industrial undertaking. The section is an exemption section and it grants certain partial benefit so far as the profits of a new industrial undertaking are concerned for a limited period. The principal object of the provision, as observed in Textile Machinery Corporation's case [1977] 107 ITR 195 (SC), is to encourage setting up of new industrial undertakings by offering tax incentives. After the country gained independence in 1947, it was most essential to give fillip to trade and industry from all quarters and this seems to be the background for the enactment of old section 15C and its continuance in the statute book in one form or the other thereafter till this date with progressive amendments made from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case may be, computed in the prescribed manner in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year) ....... (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 machinery or plant previously used for any purpose; ...... Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking 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 comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits or gains derived from any industrial undertaking or hotel to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking or hotel, computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue. (2) This section applies to any industrial undertaking which- (i) is not formed by the splitting up, or the reconstruction of, business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business." The scheme of s. 15C(1) and s. 80J are one and the same. In respect of all the three categories mentioned in clause (i) of s. 15C(2) corresponding to clauses (i) and (ii) of sub-s. (4) of s. 80J, the words " of the assessee " or " by the assessee ", as the case may be, must be read into the sections. What is essential is employment of substantial capital and not mere transfer from one undertaking to another by the same assessee. In Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC), Goswami J., speaking for the court, observed (p. 203) : " Again, the new undertaking must not be substantially the same old existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at is to prevent exemption to those industrial undertakings which are formed by splitting up or by reconstruction or by transfer to a new business of plant or machinery of the old business. Of course, the words " any other business " have been replaced by the words " for any purpose ". Except for this change, the scheme is the same. This is a direct case which applies to the facts of the present case. In CIT v. Suessin Textile Bearing Ltd. [1982] 135 ITR 443 (Guj), the court held that the words " by the assessee " must be read into clause (ii) of sub-s. (4) of s. 80J in order to give effect to the object and intendment of the section. We respectfully agree with the view taken by the Gujarat High Court. The learned counsel for the Revenue, however, relied upon decision of the Bombay High Court in CIT v. Suessin Textiles, Ball Bearing Products (P.) Ltd. [1979] 118 ITR 45. This decision, no doubt, supports the case of the Revenue, but we do not find any discussion in the judgment. We respectfully differ from the view of the Bombay High Court. The assessee had started the business of manufacturing electronic components for the first time. The company was not formed by any tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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