Law:

Section:

Section 84 (later section 80J) of the Income-tax Act, 1961 [Corresponding to section 15C of Indian Income-tax Act, 1922] - Deductions - Profits and gains from new industrial undertakings, ships or hotels etc. - Assessment years 1959-60 to 1961-62 - Assessee manufacturing motor cars, established new industrial unit for manufacture of body panels which were to be used as component parts of motor cars - All authorities concerned found that said unit fulfilled all requisite statutory conditions - Whether new industrial unit established by assessee was entitled to exemption in respect of profits thereof under section 84 - Held, yes FACTS The assessee was a manufacturer of motor cars. In the relevant assessment year, the assessee established a new industrial unit in a new house for the manufacture of 'body panels' for the motor cars by purchasing new plant and machinery. The assessee had also kept separate books of account for this new unit. The ITO disallowed the assessee's claim for tax relief for this new unit under section 15C(1) of the 1922 Act, and section 84 of the 1961 Act, respectively, for the relevant assessment years on the ground that the 'body panels' manufactured by the assessee were not sold in the market, but were used as component parts of the motor cars. However, the AAC allowed the appeals filed by the assessee, and the Tribunal upheld the order of the AAC. On reference : HELD It had been found by all the authorities concerned that the conditions laid down in section 15C(2)(ii) and (iii) of the 1922 Act, had been fulfilled and this new undertaking was formed not by splitting up or reconstruction of business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business. It was also elementary that no motor car could be manufactured by the assessee if the 'body panels' were not purchased previously because the assessee was not a manufacturer of 'body panels' and the assessee could not carry on any business as a manufacturer of motor cars as such. Therefore, instead of purchasing those materials, as the assessee had started a new manufacturing unit for the purpose of manufacturing the…

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