Law:

Section:

Section 84 (later section 80J), read with section 101 of the Income-tax Act, 1961 - Deductions - Profits and gains from new industrial undertakings, ships or hotels - Assessment year 1963-64 - Assessee company established new factory - Assessee did not maintain any separate account for new unit and computed capital employed in new unit by taking fixed assets as per separate accounts and current assets and current liabilities apportioned on basis of turnover of new unit and old unit - Assessee had computed profits of new unit in accordance with Chapter IV-D and had discharged onus to prove all essential ingredients of section 84 for getting benefit of exemption under it - Whether assessee company was entitled to relief under section 84 in respect of profits of its new unit - Held, yes FACTS The assessee-company set up a new factory. The assessee did not maintain any separate account for the new unit but only a record of fixed assets employed therein. In respect of the current assets and liabilities, a common and consolidated account for both the new unit and the old unit was maintained. In order to claim relief under sections 84 and 101, the capital employed in the new unit had to be ascertained so that to the extent of 6 per cent of the capital employed the assessee would get the relief for exemption under those provisions. Since the company did not maintain any separate account for the new unit, it computed the capital employed in the new unit by taking the fixed assets as per the separate accounts and current assets and current liabilities apportioned on the basis of the turnover of the new unit and the old unit. The ITO considered that the claim under section 84 on the basis by taking the capital and profits of the new industrial undertaking as a proportion of the total sales was not admissible. He took the view that the assessee should have maintained separate accounts for this purpose. The AAC held that the assessee was entitled to the relief claimed. The Tribunal upheld the decision of the AAC. On reference : HELD In order to attract section 84, the industrial undertaking must fulfil the conditions laid down in sub-section (2) and must make profit. As to…

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