1991 (3) TMI 20 - HC - Income Tax

Deduction For New Industrial Undertaking Export Market Development Allowance New Industrial Undertaking Weighted Deduction

Summary

Issues:
1. Disallowance of claim under section 80J of the Income-tax Act, 1961.
2. Disallowance of claim under section 35B of the Income-tax Act, 1961.

Analysis:
1. The first issue revolves around the claim made by the assessee regarding the installation of a new transformer, furnace, and motors in the existing factory premises, resulting in an increase in the licensed capacity. The assessee contended that this constituted a new undertaking eligible for allowance under section 80J. However, the Income-tax Officer, Commissioner of Income-tax (Appeals), and Income-tax Appellate Tribunal rejected the claim, stating that no new identifiable undertaking separate from the existing business was established. The courts emphasized the need for a new and distinct industrial unit, independent of the old unit, to qualify for relief under section 80J. The absence of a physically separate industrial unit manufacturing a new article led to the denial of the claim.

2. The second issue pertains to the disallowance of the claim under section 35B of the Income-tax Act, 1961, which involved weighted deductions for specific charges. The court affirmed that the items claimed by the assessee, such as freight charges and bank commissions, did not fall within the provisions of section 35B(1)(b), leading to the rejection of the claim. The court cited previous decisions and statutory provisions to support the disallowance, highlighting the specific criteria for deductions under section 35B.

In conclusion, the court ruled against the assessee on both issues, emphasizing the necessity of establishing a new, independent industrial unit for claiming benefits under section 80J and adhering to the statutory requirements for deductions under section 35B. The judgment underscores the importance of distinctiveness and independence in determining the eligibility for tax benefits and deductions under the Income-tax Act, 1961.