TMI Blog2007 (2) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 80J for the assessment years 1979-80 and 1980-81 when the period of five years laid down in sub-section (2) of section 80J had already expired?" Briefly the facts as noticed in the statement of case are as under: "The assessee-company is manufacturing hand-knitting machines developed by one of the directors. It was claimed that the assessee was an industrial undertaking, and, therefore entitled to deduction under section 80J of the Income-tax Act at 7.5 per cent. The concerned M/s. Metalways Engineering Works was under the sole proprietorship of Sh. R. K. Mahajan and this business, as a running concern, was transferred to a limited company named M/s. Metalways (P.) Ltd. In the new company, Sh. Mahajan, who was ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Accordingly, a direction was issued to the Inspecting Assistant Commissioner to allow deduction to the assessee. In further appeal before the Tribunal, the order passed by the Commissioner of Income-tax (Appeals) was upheld. We have heard Shri Sanjiv Bansal, learned counsel appearing for the Revenue, and Shri S. K. Mukhi, learned counsel appearing for the assessee, and with their assistance perused the paper book. Primarily, learned counsel for the Revenue has raised two issues, namely, that the machinery having been installed in the year 1974-75, the assessee would not be entitled to any deduction under section 80J of the Act on that machinery after the assessment year 1978-79 and accordingly the relief claimed for the years in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the judgments of the High Courts, namely: Kerala State Cashew Development Corporation v. CIT [1994] 205 ITR 19 (Ker), CIT v. Gopal Plastics P. Ltd. [1995] 215 ITR 136 (Mad) and CIT v. Laxmi Metal Industries [1999] 236 ITR 130 (All). To appreciate the controversy in the present case, it would be appropriate to extract the relevant provisions of section 80J of the Act, which read as under: "80J. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , namely: (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of thirty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant was not, at any time, previous to the date of the installation by the assessee used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof, previously used for any purpose is transferred to a new business and the total value of the machinery or plant or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t purchase of the machinery and for that reason the assessee would not be entitled to the benefit of deduction under section 80J of the Act during the years in question as the period had already expired during the year 1978-79 if calculated from the first year of use of machinery in the assessment year 197475. As is found from a plain reading of the provisions of section 80J of the Act, the benefit is not available on the machinery or plant rather the same is referable and calculated on the capital employed in the industrial undertaking. As far as eligibility of the petitioner and fulfilment of condition (ii) in sub-section (4) thereof, is concerned a deeming provision has been added in Explanation 2 thereto which provides that in case the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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