TMI Blog1982 (2) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... The case relates to the assessment year 1970-71 i. e., for the previous year ending December 31, 1969. At the time of the assessment before the ITO, the assessee claimed a deduction to the tune of Rs. 3,058, which related to the income of the export wing of the assessee. The ITO, however, did not allow this deduction, on the ground that the assessee was already manufacturing hosiery goods and the export wing was merely a reconstruction of the business in existence. The assessee filed an appeal before the AAC, and, inter alia, contended that the export wing of the company was established in a separate premises, and that separate books of account had been maintained for the knitwears, all of which had been manufactured for export and had, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote, as to what the Income-tax Appellate Tribunal has observed in respect thereof. The Tribunal has taken into account certain facts and circumstances, which may be noticed. It is not disputed that the assessee had spent a sum of Rs. 1,62,989 during the year before the assessment on the construction of a new building, and a sum of Rs. 14,859 had been spent during the year to which the assessment pertained. It is the case of the assessee that a part of the new building constructed during this period has been utilised for installing the machinery required for production of woollen knitwears for the export wing. The said machinery was purchased for Rs. 83,772 during the previous year. Some statistics have been given to show that more such mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not said in so many words. However, a conclusion was indeed drawn that on account of the comparative consideration of these figures, it could not be said that the export wing was a separate industrial undertaking. The Tribunal also declined to take into account that the assets of the export wing had mounted in subsequent years. The Tribunal noticed certain authorities, some of which had either been reversed or overruled by the Supreme Court. In so far as the assessee is concerned, the facts and circumstances on which they have relied upon, have been noticed in substance. The learned counsel for the assessee has, during the course of his arguments, added some more circumstances, the same being that the export wing had been separately re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. CIT [1977] 107 ITR 195 (SC). In this authority, the Supreme Court has laid down certain salient tests for deciding as to whether an undertaking is a reconstruction of an existing business, or not, One of these tests is that in the case of reconstruction, there must be a transfer of the assets of the existing business to the new industrial undertaking. This is evidently not so in the case in hand. The Supreme Court also held that a new activity launched by the assessee by establishing new plants and machinery by investing substantial funds, may produce the same commodities of the old business or it may produce some other distinct marketable products, even commodities which may feed the old business. These products may be consumed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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