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TMI Blog1985 (2) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Dyeing Unit as the said unit was not a separate unit, no separate trading and P L a/c were maintained for this unit and the accounts of this unit were not audited by the CA a laid down by the statue." The dispute is in relation to the deductions to be allowed under s. 80J of the IT Act in respect of the new industrial undertaking. The fact briefly stated are that the assessee was running the business or manufacture and sale of hosiery goods. During the accounting period relevant to the asst. yr. 1977-78 it established a dyeing unit for dying the yarn. Relief under s. 80J was claimed in relation to this unit for the asst. yrs. 1977-78, 1978-79 and 1980-81. The ITO did not allow the claim of the assessee for the following reasons: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing as well as the new unit were duly audited and the dyeing unit was a distinct and separate unit from the already existing hosiery manufacturing unit and the assessee had filed certificate in From No. 10D in the course of assessment proceedings, the ITO was not justified in refusing the assessee's claim for deduction under s. 80J in any of assessment years under appeal. He, therefore, allowed the claim of the assessee. The Revenue is aggrieved against the above findings by the CIT(A). 4. It has been urged on behalf of the Revenue that dyeing of yarn did not involve manufacturing. He urged that no name was acquired by the goods in the dyeing unit distance from the goods before processing. It was yarn before dyeing and it conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in CIT vs. Rohtas Industries Ltd. (1979) 120 ITR 110 (Cal) and CIT vs. Yamuna Cold Storage (1981) 23 CTR (P H) 75 : (1981) 129 ITR 728 (P H). 6. We have carefully considered the rival submissions. The first point for consideration is whether the dyeing of yarn can be termed as manufacture or production of articles. Their Lordships of the Allahabad High Court in the case of Singh Engineering Works (P) Ltd. vs. CIT (1978) CTR (All) 201 : (1979) 119 ITR 891 (All) have held that the manufacture involves bringing into existence of a new product, a product which is of a different chemical composition or whose integral structure is different from the raw materials. Applying this test, it is to be held that dyed yarn does not bring into existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticles or goods in any other industrial undertaking for purposes of business of construction, manufacture or production of any article or goods not being certain articles specified in the list in the Eleventh Schedule. It is, therefore, evident that for claiming investment allowance under s. 32A, machinery should be in an industrial undertaking, whether small-scale or otherwise, for the purposes of business of manufacture and production of article or things. The CIT(A) has allowed the claim of investment allowance. No appeals has been filed by the Revenue against the above deduction allowed by the CIT(A). This only shows that the Revenue haws accepted that it is an industrial undertaking engaged in the production of articles or things. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In view of the above discussion we are of the opinion that the assessee was entitled to deduction under s. 80J in respect of the dying unit. 10. Another ground which is only for the asst. yr. 1980-81 is that the CIT(A) has erred in holding that deduction under s. 80J was admissible to the assessee in respect of the spinning unit as in respect of this unit also the requirement of maintaining separate accounts was not satisfied. The grievance of the Revenue is that no separate accounts were maintained for this spinning unit and, therefore, the deduction under s. 80J should not have been allowed. We have noted earlier that maintenance of separate accounts in the new unit was not necessary so long as the profits from the new unit could re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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