Law:

Section:

Section 84 of the income-tax Act, 1961 [Now section 80J, with effect from 1-4-1968]-Deductions-Profits and gains from newly established undertaking-Assessee partner in firm running saw mill-Firm purchased machinery in february 1961-Firm dissolved in April 1961-Saw mill under installation, coming to assessee's share, completed after firm's dissolution-ITO disallowed assessee's claim for exemption under section 84 on the ground of new undertaking coming into existence after splitting up of business-AAC and tribunal allowed claim-Whether tribunal right in law-Held, on facts, yes Facts The assessee was a partner in a firm BT and the business was carried on in the name of NB Saw Mill. Certain machineries were purchased in February 1961. On 15-4-1961, the firm was dissolved. On this dissolution, the saw mill which was under installation came to assessee's share. During the assessment year 1962-63, the assessee claimed exemption under section 84 in respect of the saw mill whose installation was completed after dissolution. The ITO rejected the assessee's claim on the ground that the said undertaking came into existence on the splitting up of the business of the firm BT. The AAC and the Tribunal, however, allowed the assessee's claim. On reference, the revenue urged that the assessee's business was formed on splitting up of a business already in existence. Held 1. In the present case, it could not be said that the new industrial undertaking of the assessee was formed by the splitting up of any existing business, as it could not be said that the same persons were carrying on substantially the same business. The assessee, on dissolution of the firm, had no interest in the business which might have been carried on by other partners, either individually or collectively. Thus, it was a new business unconnected with the earlier business which was being carried on by assessee in the relevant accounting year. 2. The Tribunal was, accordingly, right in law in holding that the assessee was entitled to exemption. Cases referred to CIT v. Gaekwar Foam and Rubber Co. Ltd. [1959] 35 ITR 662 (Bom.), CIT v. Ganga Sugar Corporation Ltd. [1973] 92 ITR 173 (Delhi), Chembra Peak Estates…

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