Law:

Section:

Section 80HH, read with section 80-I, of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertakings, etc., in backward areas - Assessment years 1990-91 and 1991-92 - Assessee, who had derived income from manufacture and sale of insulated wire from a newly established proprietary concern, claimed deduction under sections 80HH and 80-I - Assessing Officer found that new concern had been formed by splitting up and reconstruction of a business already in existence and there was transfer of plant and machinery previously used in old concern and disallowed assessee's claim - Tribunal, inter alia, observing that transferred assets did not exceed 20 per cent of total whether it be of plant and machinery or whole of assets of new unit; that establishment of a new unit at a place was different than old unit; and item now manufactured was also different to one manufactured earlier, that assessee was entitled for deduction under sections 80HH and 80-I - Whether Tribunal was justified - Held, yes FACTS The assessee, who was deriving income from manufacture and sale of insulated wire under the name of a newly established proprietary concern, claimed deduction under sections 80HH and 80-I. The Assessing Officer found that the new concern had been formed by the splitting up and reconstruction of a business already in existence and there was transfer of plant and machinery previously used in old concern and disallowed claim for deduction under sections 80HH and 80-I vis-a-vis, the new concern. However, the claim for deduction under section 80HH for the assessment year under consideration was allowed on the ground that it was the tenth year of the old business but claim under section 80-I was denied. On appeal, the Commissioner (Appeals) confirmed the action of the Assessing Officer. On further appeal, the Tribunal allowed the appeal of the assessee. On reference : HELD There was no error in the order of the Tribunal. The Tribunal had recorded a categorical finding of fact, that the alleged transferred assets did not exceed 20 per cent of the total whether it be of the plant and machinery or the whole of the assets of the new unit and that…

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