Law:

Section:

Section 80J of the I ncome-tax Act, 1961-Deductions-Profits and gains from newly established industrial undertakings, etc.-Assessee, a manufacturer of hosiery goods, started an export wing and for this purpose constructed a new building and installed new machinery therein-S eparate accounts were being maintained for export wing-Whether export wing could be said to have been formed by reconstruction of hosiery business already in existence disentitling assessee to deduction under section 80J-Held, on facts, no Facts The assessee-company was a manufacturer of hosiery goods. During the accounting year ended 31-12-1969, relevant for the assessment year 1970-71, it constructed a new building and installed new machinery for producing woollen knitwears for its new export wing. Separate account books were also being maintained by the assessee in respect of the export wing. The assessee claimed deduction under section 80J in respect of the profits and gains derived from the export wing. The ITO, however, disallowed the claim holding that the assessee was already manufacturing hosiery goods and the export wing was merely a reconstruction of the business in existence. On appeal, the AAC allowed the assessee's claim for deduction under section 80J. On further appeal, the Tribunal held that the export wing could not be considered a separate industrial undertaking since the assessee had been manufacturing hosiery in the past. On reference: Held A new activity launched by the assessee by establishing new plants and machinery by investing substantial funds, may produce the same commodities of the old business or it may produce some other distinct marketable products or even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. All that is required to be seen is, whether the new undertaking is an integrated unit by itself, wherein articles are produced. Such a new industrially recognisable unit of an assessee cannot be said to be reconstruction of his old business, as there is no transfer of any assets of the old business to the new undertaking, which is a sine qua non in the case of…

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