Bombay High Court
Commissioner Of Income-Tax vs Metropolitan Springs (P.) Ltd. on 6 March, 1991
Equivalent citations: [1991]191ITR288(BOM)
JUDGMENT T.D. Sugla, J.
1. The question of law referred to this court by the Tribunal under section 256(1) of the Income-tax Act, 1961, at the instance of the Department is :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in-law in holding that the assessee was entitled to deduction under section 80J of the Income-tax Act in respect of the manufacture by it of axle shafts, torsion bars and coil springs ?"
2. The assessee is engaged in the manufacture of springs mainly used in the automobile industry. The proceedings relate to the assessment year 1968-69 for which the previous year is the calendar year 1967. The assessee set up a project for the production of axle shafts and torsion bars during the earlier previous year. For this purpose, it imported machinery worth about Rs. 10 lakhs. However, in the absence of spine-milling and hobbing machines, it was initially doing forging only and was getting the forges drilled, splined and cut elsewhere on job work. Subsequently, certain machines were locally purchased from indigenous sources and installed after necessary modifications. However, one more machine known as a magnetic crack detector was necessary for the smooth and efficient running of the undertaking which was to help in locating the cracks, if any, in the articles manufactured. That machine was also installed in the previous year.
3. Deduction under section 84/80J for the assessment year 1967-68 was not granted and the matter was not carried beyond the Tribunal. This fact, itself, however, does not make much difference inasmuch as in that year there were no profit and there was no provision for carrying forward the deficiency in that year. It is for this reason that the question has been examined both by the Appellate Assistant Commissioner and the Tribunal on merits for the year under reference.
4. The Appellate Assistance Commissioner primarily relied on his findings give in the appellate order for the assessment year 1967-68. He observed that whether a new industrial undertaking was or was not set up was essentially a question of fact. An industrial undertaking was conceptually different from a business. In view of the meaning ascribed to the expression "new industrial undertaking" in the circular issued by the Central Board of Revenue on April 1, 1960 (which was produced) the facts according to the Appellate Assistant Commissioner clearly indicated that a new industrial undertaking was set up. According, the Appellate Asssistant Commissioner held that the assessee was entitled to deduction under section 80J. The objections such as that the same personnel and office premises were used for the new units. It may be stated, were not considered of any consequence by the Appellate Assistance Commissioner. The Tribunal agreed with the Appellate Assistance Commissioner and dismissed the departmental appeal.
5. We have been taken through the statement of case, paragraph 10 of the appellate order of the Appellate Assistant Commissioner for the assessment year 1967-68, which is the basis of the Appellate Assistant Commissioner's order for the year and the Tribunal's order for the year under reference. From the facts stated in the order of the Appellate Assistant Commissioner and found by the Tribunal, we are satisfied that the assessee had set up anew industrial undertaking which is a finding of fact. Once we agree with the Tribunal that the particular unit constitutes an industrial undertaking within the meaning of section 80J of the Income-tax Act, the result must follow that the assessee is entitled to deduction under section 80J. The mere fact that a part of the premises used by the old undertaking was used for the new industrial undertaking or that some members of the staff were common does not, in our opinion, make any material difference in the situation.
6. In the above view of the matter, we answer the question in the affirmative and in favor of the assessee.
7. No order as to costs.