Law:

Section:

Section 84 (Now section 80J) of the Income-tax Act, 1961 - Deduction - Profits and gains from new industrial undertakings ships or hotels etc. , - Assessment years 1965-66 and 1966-67 - Assessee-company was engaged in retail sale of liquors - It set up a branch and obtained licence for manufacture of alcoholic spirit for said branch - Subsequently, new company was floated which purchased business of assessee-company - However, as per agreement to sell assessee-company became major shareholder in new company - Thereupon, new company claimed deduction under section 84 - ITO rejected claim holding that assessee-company sought to reconstruct same business in a new manner and, therefore, conditions of section 84(2)(i) were not fulfilled - Whether in view of finding of fact recorded by Tribunal that assessee-company and new company were two separate and distinct entities and that relationship between them was purely that of vendor and vendee, assessee company as well as new company were entitled to deduction under section 84 - Held, yes FACTS The assessee was a private company which was engaged in retail sale of liquors. In 1961 this concern set up a branch and obtained a licence for manufacture of alcoholic spirit and, consequently, this new business was being carried on by the aforesaid branch. The business lasted up to 28-6-1962 where after a new company was floated as a public concern. This company carried on the manufacture of alcoholic spirit. An agreement to sell was executed between the assessee-company and the new company and the agreement to sell was later adopted by the purchasing company. In the new company the assessee-company became major shareholder. This company claimed rebate in accordance with the provisions of section 84 technically known as tax holiday, on the ground that it was a new business and was therefore, entitled to rebate for a period of five years. The assessee-company as a major shareholder also claimed a rebate in their capacity as shareholders. The ITO held that no new company came into existence and the assessee company sought to reconstruct the same business in a new manner and, therefore, the conditions of section 84(2)(i) were not…

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