TMI Blog2001 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the Tribunal was justified in law in directing the Income-tax Officer to work out and allow the assessee relief under section 80J of the Income-tax Act, 1961, in respect of its Mohuda unit? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that sub-rule (3) of rule 19A of the Income-tax Rules is in conflict with the provisions of section 80J of the Income-tax Act and is, therefore, to be ignored and that in computing the capital employed in the Mohuda Unit for the purposes of section 80J, the capital borrowed by the assessee should also be included? 3. Whether, on the facts and circumstances of the case, the Tribunal was justified in remitting the case back to the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in this connection has been placed on a decision of the apex court in Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188, the decision of the Karnataka High Court in CIT v. Nippon Electronics (India) Pvt. Ltd. [1990] 181 ITR 518; and the decision of the Madhya Pradesh High Court in Glass Fibre Textiles v. CIT [1988] 170 ITR 453. The factual matrix, in a nutshell, is as follows: The assessee is a company registered and incorporated under the Companies Act. It is engaged in manufacturing cement. The assessee in setting up its Mohuda unit purchased some second-hand machinery from Heavy Engineering Corporation, Ranchi. The fact that Heavy Engineering Corporation is a public sector undertaking is not in dispute. The Income-tax Officer (hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction, if any, admissible to the assessee under section 80HH) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent. per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year) . . ." Clause (ii) of sub-section (4) of section 80J of the Act, which is relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be construed to mean the machinery or plant previously used, those machinery, etc., which were used in the earlier business of the assessee, which alone would not form part of the new business. The learned Tribunal has held as under: "In the present case, the assessee had purchased some second-hand machinery from Heavy Engineering Corporation, Ranchi, for setting up the new Mohuda unit. It was claimed by the assessee, on the strength of the decision of the Calcutta High Court in CIT v. Sainthia Rice and Oil Mills [1971] 82 ITR 778, that the purchase of second hand machinery from outside, for setting up the new industrial undertaking will not amount to violation of the condition laid down in section 80J(4)(ii) and that the assessee wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is essential for the formation of new industrial undertaking and that must again mean a transfer to the new business of the transferee of any machinery used by the said transferee in his old business. Merely because, some machinery in the new industrial undertaking has been purchased from the second-hand market cannot, in our opinion, disentitle the assessee to the relief or the exemption contemplated under section 15C of the Indian Income-tax Act, 1922." The said decision would, therefore, squarely apply in the instant case. The decisions of the Supreme Court in Bajaj Tempo Ltd.'s case [1992] 196 ITR 188, the Karnataka High Court in Nippon Electronics' case [1990] 181 ITR 518 and the Madhya Pradesh High Court in Glass Fibre Textil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit under section 80J would be claimed on the other. A benefit in relation to the second-hand machinery, which are reutilised while setting up a new industrial unit, sub-section (4) Of section 80J of the Act does not prohibit procurement of new or second-hand machinery from outside. The Explanation appended to sub-section (4) of section 80J of the Act also serves as a guide to construction of the statute. The object of an Explanation to a statutory provision is-- (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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