Law:

Section:

Section 84 [now section 80J] of the Income-tax Act, 1961 - Deductions - Profits and gains from newly established industrial undertakings - For setting up factory assessee-company purchased and installed new plant and machinery in building taken on lease by assessee which was occupied earlier by a stranger for business purposes - However, value of building so used by assessee did not exceed 20 per cent of total value of machinery, plant and building used in new undertaking - Whether assessee was entitled to deduction under section 84(1) - Held, yes Facts For the purpose of setting up a factory, the assessee-company purchased and installed new plant and machinery in certain premises which were taken on lease and which were earlier used by its occupant for business purposes. The ITO rejected the assessee's claim for the benefit of partial exemption under the then existing section 84 on the ground that the new industrial undertaking was formed by the transfer to the new business of a building previously used for other businesses. On appeal, the AAC allowed the claim of the assessee. On the revenue's appeal, the Tribunal upheld the AAC's order. On reference : Held In the case of the same assessee, a Division Bench of this Court had held in CIT v. Suessin Textiles, Ball Bearing & Products (P.) Ltd.[1979] 118 ITR 45 that for the purposes of section 15C(2)(i) of the Indian Income-tax Act, 1922, it was not necessary that the building transferred to the newly started undertaking must have been previously used by the assessee himself in any other business, and that a building earlier used for business by a stranger was included in the mischief contemplated in the said clause. On the basis of this finding, the assessee's claim had been rejected. However, when pursuant to that decision, the matter went back to the Tribunal, on investigation of facts the Tribunal found that the total value of the leasehold premises utilised by the assessee was so insignificant as compared to the other assets of the assessee-company that it was not even shown in the balance sheet and, hence, the assessee could not be denied the benefit of the relief conferred under section 15C. The…

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