Law:

Section:

Section 80J of the Income-tax Act, 1961 [Corresponding to section 15C of the Indian Income-tax Act, 1922] - Deductions - Profits and gains from new industrial undertakings, ships or hotels, etc. - Assessment year 1961-62 - Assessee company was engaged in manufacture of certain types of V belts and rubber goods - During relevant previous year it set up a new unit for manufacture of some other industrial rubber goods under separate licence granted to it by Government - Assessee purchased second hand reconditioned machinery from a foreign company - New unit was run in separate name and separate trading and profit and loss account was prepared for it - Whether on facts, assessee was entitled to exemption under section 15C(2)(i) of 1922 Act in respect of aforesaid new unit - Held, yes FACTS The assessee-company was primarily engaged in the manufacture of certain types of a V belts and other rubber goods used in the textile industry. During the previous year ended 31-3-1961, it started the manufacture of some other industrial rubber goods, such as synthetic rubber coats, aprons, etc., under a separate industrial licence granted to it by the Government. The new unit was run in the separate name. Separate trading and profit and loss accounts were prepared for these two items of business. The assessee purchased machineries from an overseas company, which were admittedly second-hand but reconditioned. For the assessment year 1961-62, the assessee claimed deduction under section 15C(2)(i) of the 1922 Act in respect of the aforesaid machinery. The ITO disallowed it. On appeal the AAC allowed the deduction which was confirmed by the Tribunal. On reference: HELD Section 15C of the 1922 Act which was introduced in 1949, provides for exemption from tax of newly established industrial undertakings. From sub-section (1) of section it is clear that the exemption is available in respect of so much of the profits or gains derived from any industrial undertaking to which the section applies as do not exceed six per cent per annum on the capital employed in the undertaking computed in accordance with the rules. Sub-section (2) prescribes the conditions for the applicability of the…

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