Law:

Section:

Section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from newly established industrial undertakings - Before granting benefit of section 80J to assessee in respect of its new manufacturing unit Tribunal directed ITO to verify whether items manufactured therein by assessee were entirely new ones unconnected with those manufactured by assessee earlier, whether new machinery had been purchased and used for that purpose, and whether fresh capital was employed - ITO found aforesaid facts in assessee's favour but denied relief under section 80J holding that there was no factory building to locate new machinery - Whether section 80J(4) conditions were satisfied and assessee was entitled to relief under section 80J - Held, on facts, yes Facts The assessee-company, which had been set up to manufacture metal lamp caps for electric bulbs, had started manufacturing a new type of screw caps. The Tribunal directed the ITO that before allowing the assessee the benefit of section 80J, the ITO should verify as to (i) whether those screw caps were an entirely new item unconnected with the old item manufactured by the assessee, (ii) whether new machinery had been purchased and used for that purpose, and (iii) whether fresh capital was employed. The ITO found that the facts which were directed by the Tribunal under section 80J to be verified were true except that there was no separate factory building to locate the new machinery and, hence, he denied relief under section 80J. The AAC allowed the assessee's claim. The Tribunal held that in its earlier order it had observed that if the aforesaid three facts were proved, then section 80J(4) would also be satisfied as regards the new industrial undertaking and since these facts were found to be satisfied the assessee was entitled to the deduction under section 80J. On reference: Held The first order of the Tribunal gave an impression that it was not open to the ITO to examine the requirement of section 80J(4), if the other necessary facts were found in favour of the assessee. If the other necessary facts were proved in favour of the assessee, the Tribunal appeared to have held that section 80J(4) would also be…

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