Law:

Section:

Section 80HH, read with section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from hotel or industrial under taking etc., in backward areas - Assessment year 1981-82 - Assessee, an erstwhile partnership firm, was engaged in business of manufacture and sale of black steel tubes of 2 inches diameter - Assessee after having converted into a private limited company set up a project called project No. 2 consisting of milling plant for manufacture of steel tubes of 4 inches diameter - ITO rejected assessee's claim for relief under sections 80HH and 80J on ground that it was a case where new project was formed by splitting up or reconstruction of a business already in existence as machinery and plant were common to both projects or moulding plant - Tribunal, however, held that deductions ware admissible to assessee as assessee had set up a new project for manufacturing of 4 inches diameter black pipe which was different from manufacturing 2 inches diameter black pipe by assessee and merely because some of facilities were common that would not mean reconstruction or splitting up - Tribunal, accordingly, allowed assessee's claim - Whether impugned order of Tribunal was justified-Held, yes FACTS The assessee a erstwhile a partnership firm, was engaged in manufacturing black steel tube of 2 inches diameter. It was converted into a private limited company, which set up a project called project No 2 consisting of a milling plant for manufacture of steel tubes of 4 inches diameter. The assessee claimed relief under sections 80J and 80HH to the extent of 7½ per cent of the capital employed in the project No. 2 after deduction of loans from UPFC and PICUP. The ITO rejected the claim on the ground that the condition laid down in section 80J(4)(i) was not satisfied in as much as it was a case where the new project was formed by the splitting up or the reconstruction of a business already in existence as several machinery and plant were common to both the projects or the moulding plants. The ITO also negatived the claim of deduction under section 80HH on the ground that the claim under section 80J was not admissible. The Commissioner (Appeals) upheld the…

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