Law:

Section:

Section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from newly established industrial undertakings - Whether process of dyeing and printing gray cloth would amount to manufacturing of goods for purposes of section 80J irrespective of fact that gray cloth which is subjected to process of dyeing and printing belongs to assessee or someone else - Held, yes Facts The assessee, a partnership firm, carried on business of dyeing and printing cloth. In the period relevant to the assessment year 1972-73, the assessee did the job of dyeing and printing cloth of customers only and in the assessment years 1973-74 to 1975-76 major part of its business was to dye and print its own cloth. According to the assesses it manufactured or produced articles and thus was entitled to relief under section 80J for the assessment years 1972-73 to 1975-76. The ITO allowed the said claim. The Commissioner acting under section 263, however, disallowed the said relief for the assessment year 1972-73 on the ground that since the assessee did job work of others, its undertaking could not be said to be an industrial undertaking within the meaning of section 80J. The Commissioner also disallowed relief for other assessment years, inter alia, on the grounds (i) that since the assessee who was doing only job work later on switched over to dyeing and printing of its own cloth, there was reconstruction of the work already in existence, and (ii) that the building and machinery which had been used in the years 1971-72 and 1972-73, for the business of job work, were used in the years under consideration, and, therefore, the assessee was not entitled to relief under clause (ii) of sub-section (4) of section 80J. On appeal, the Tribunal held that subjecting cloth to process of dyeing and printing would amount to manufacture or production of articles for the purpose of granting relief under section 80J. However, according to the Tribunal, so far as the assessment year 1972-73 was concerned, the assessee was a mere contractor since it had subjected cloth belonging to its customers to the process of dyeing and printing. The Tribunal, therefore, held that the Commissioner was right in…

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