TMI Blog1986 (1) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... , stamp pads, inks, aniline printing conversion of flexible packaging materials, an engineering workshop and silk and twisting of silk yarn under different trade names. Under an agreement dated November 21, 1969, between the firm and the assessee which is private limited company incorporated under the Companies Act, 1956, the latter became entitled to carry on the business undertakings of the former on the terms and conditions set out in that agreement. In terms of that agreement, the assessee has been carrying on those business undertakings which were carried on by the "firm" except the business in silk and twisting of silk yarn. For the assessment year 1973-74, relevant to the accounting year ending on June 30, 1972, the assessee filed its return before the Income-tax Officer, Central Circle-I, Bangalore, inter alia, claiming a sum of Rs. 2,32,118 as permissible deduction under section 80J of the Act, with which claim only we are concerned in this reference. On August 23, 1976, the Income-tax Officer completed the assessment rejecting the said claim of the assessee. Aggrieved by the said order of the Income-tax Officer, the assessee filed an appeal in ITA No. 32 of 1976-77 befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such profits and gains reduced by the deduction, if any, admissible to the assessee under section 80HH or section 80HHA 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 manner specified in sub-section (1A) 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) : Provided that in relation to the profits and gains derived by an assessee, being a company, from an industrial undertaking which begins to manufacture or produce articles or to operate its cold storage plant or plants after the 31st day of March, 1976, or from a ship which is first brought into use after that date, or from the business of a hotel which starts functioning after that date, the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to understand sub-section 4, we must look at the whole of the section of which it forms a part, and some help will be derived from the side-note (though, of course, it is not part of the statute), which shows that the section is dealing with the control of justices over the structure of licensed premises ......." Applying this rule and the progressive rule of construction of statutes explained in the rulings relied on by Sri Srinivasan, we must ascertain the true scope and ambit of section 80J of the Act. The heading expressly, very deliberately and conscientiously employs the term "newly established" before the term "industrial undertakings" in respect of which detailed provisions are made for special deduction for a specified period. The object and intendment of allowing a special deduction for specified term is to encourage the establishment of new industries in the country. A new industrial undertaking unlike an established industrial undertaking has its own "teething troubles" or "special problems". The anxiety and solicitousness of the Legislature is to new industrial undertakings and not to old and established undertakings that have passed what is figuratively described ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence or by the transfer to a new business of building, machinery or plant previously used in any other business ; (ii) has begun or begins to manufacture or produce articles in any part of the taxable territories at any time within a period of thirteen years from 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 ; (iii) employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power: Provided that the Central Government may, by notification in the Official Gazette, direct that the exemption conferred by this section shall not apply to any particular industrial undertaking. (3) The profits or gains of an industrial undertaking to which this section applies shall be computed in accordance with the provisions of section 10. (4) The tax shall not be payable by a shareholder in respect of so much of any dividend paid or deemed to be paid to him by an industrial undertaking as is attributable to that part of the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of building, machinery or plant used in a business which was being carried on before April 1, 1948. We agree that it is not possible to exclude any new industrial undertaking other than the three categories mentioned above." Section 80J is almost a reproduction of section 15C of the old Act and, therefore, the construction placed on the latter equally governs the former also. We are of the view that these observations also support our above conclusion only and not the construction suggested by Sri Bhat. We are of view that the ratio in Chandroji Rao's case [1970] 77 ITR 743 (SC) relied on by Sri Bhat does not really bear on the point. What is important is that the undertaking established must be a newly established undertaking and not that the undertaking is a new undertaking to the person acquiring the same from another. The real test and emphasis is on the establishment of the undertaking for the first time and not on the person that establishes or acquires the same afterwards. On the foregoing discussion, we hold that the benefit of section 80J is allowable only to a newly established industrial undertaking for the periods specified therein and an existing undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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