K.A Thanikkachalam, J.:— At the instance of the assessee the Tribunal referred the following question for the opinion of this court under section 256(1) of the Income-Tax Act, 1961, hereafter referred to as “the Act”:

“Whether, on the facts of the case, the Tribunal was justified in holding that the assessee was not entitled to the relief under section 80J of the Act?”

2. There was an industrial undertaking owned by a partnership firm by name Arasan Splints and Veneers Factory, Sivakasi. The said partnership firm was allowed deduction under section 80J of the Act for the three preceding years. The assessment year with which we are concerned in this tax case is 1980-81. In the relevant previous year, the assessee-com-pany under an agreement, dated April 2, 1979, took on lease the land and buildings and the entire plant and machinery of the said industrial undertaking previously run by Arasan Splints and Veneers Factory and carried on manufacturing of splints and veneers. The assessee claimed continuation of relief under section 80J of the Act for the fourth year, which was rejected by the Income-Tax Officer on the ground that the assessee could not be said to be the owner of the industrial undertaking and had not invested any capital, and, therefore, it is not entitled to the said relief. However, on appeal the Commissioner of Income-Tax (Appeals) accepted the claim made by the assessee on the basis of a circular issued by the C.B.D.T (Circular Letter F. No. 15/5/63-IT(AI) dated December 12, 1963), wherein the benefit under section 84 of the Act, which corresponds to section 80J of the Act was granted even to a successor to the business for the unexpired period of five years. The Commissioner of Income-Tax (Appeals) also relied upon a decision of the Madras High Court in Madras Machine Tools Manufacturers Ltd. v. Commissioner Of Income-Tax, Madras., [1975] 98 ITR 119, wherein distinction between a company and an undertaking was made. Aggrieved by the order passed by the Commissioner of Income-Tax (Appeals), the Department preferred a second appeal before the Tribunal. On a plain reading of the agreement between the assessee and the successor-in-interest, the Tribunal came to the conclusion that the assessee is only a lessee of the industrial undertaking, which was previously run by Arasan Splints and Veneers Factory, Sivakasi, and, therefore, according to the Tribunal, the assessee is not a successor to claim the benefit under section 80J of the Act for the unexpired period of two years. The Tribunal further held that in order to claim benefit under section 80J of the Act, the assessee must be the owner of the industrial undertaking and the assessee should employ its capital for running the new industrial undertaking. Since the assessee failed to fulfil both these conditions, the Tribunal came to the conclusion that the assessee is not entitled to the benefit under section 80J of the Act for the balance period. The Tribunal was also of the view that the decision of the Madras High Court in Madras Machine Tools Manufacturers Ltd.'s case, [1975] 98 ITR 119, and the circular issued by the Board will not come to the aid of the assessee in granting relief under section 80J of the Act for the balance period. Accordingly, the appeal filed by the Revenue was allowed. Before us learned counsel appearing for the assessee submitted that a plain reading of section 80J of the Act would go to show that the assessee need not prove the ownership over the new industrial undertaking and employment of capital is not a condition precedent for getting benefit under section 80J of the Act it was stated that a transferee is not entitled to the benefit under section 80J of the Act, for the balance period. Learned counsel, further relying upon the circular issued by the C.B.D.T, submitted that when the benefit is available to a successor, there is no impediment in extending such benefit to the lessee also. According to learned counsel wherever it is necessary in the Act, the Legislature insisted that the assessee should be the owner of the new industrial undertaking for the purpose of obtaining benefit under that particular provision. Significantly such conditions precedent were not stipulated in section 80J of the Act for obtaining the benefit under that section. Learned counsel further submitted that section 80J, sub-section (4), clause (ii) of the Act will be applicable to the facts of this case. It was, therefore, pleaded that the Tribunal was not correct in denying the benefit under section 80J the Act for the balance period to the assessee.

3. On the other hand, learned standing counsel appearing for the Department, submitted that the assessee is not the owner of the new industrial undertaking. The assessee has not employed the capital for establishing the new industrial undertaking. The assessee is not a successor. Therefore, the assessee cannot claim the benefit under section 80J of the Act for the balance period. According to learned standing counsel in view of the provisions contained in section 80J(4)(ii) of the Act, inasmuch as the assessee claimed benefit under section 80J of the Act on the transferred asset, the assessee is not entitled to the benefit under section 80J of the Act for the unexpired period. According to standing counsel that since the assessee is not the successor, it cannot claim the benefit of the circular issued by the C.B D.T It was further submitted that if the benefit under section 80J of the Act is granted to the assessee for the balance period, that would complicate the matter in adjusting deficiency or any part thereof, to be carried forward relating to different assessment year. For these reasons, learned standing counsel submitted that the Tribunal was correct in refusing to grant the benefit under section 80J of the Act for the balance period.

4. We have heard learned counsel appearing for the assessee as well as learned standing counsel appearing for the Department.

5. In order to support his contention, learned counsel appearing for the assessee relied upon the decision of the Kerala High Court in Kerala State Cashew Development Corporation v. Commissioner Of Income-Tax., [1994] 205 ITR 19. The assessee therein which is a wholly owned undertaking of the Government of Kerala, was formed in the year 1970 for the purpose of taking over and running sick cashew factories. The assessee took over five factories in the year 1970-71 and 22 factories in the year 1971-72 of which two were purchased outright and the rest taken on a lease from the owners for periods ranging from two to five years. The balance-sheet of the assessee showed as its assets only the buildings, sheds and machinery in the two concerns purchased, besides additions made by way of new machinery. The substantial part of the assets by way of buildings and machinery taken on lease was not reflected in the balance-sheet.

6. In the assessment year 1972-73, the assessee claimed deduction under section 80J as if it were a newly established undertaking. The Income-Tax Officer declined to grant deduction on two grounds: firstly, on the ground that it was not an industrial undertaking manufacturing or producing articles; secondly, on the ground that the assessee was using only buildings, machinery and plant, which had been previously used by owners. No new machinery or plant had been set up nor were any new buildings put up, attracting the application of section 80J. In the assessment year 1973-74, the claim was negatived stating that the assessee had not earned any positive income during the period and, therefore, no deduction could be allowed. In the subsequent years, it was held that the assessee had only reconstructed a business already in existence by way of transfer of building and machinery previously used and was, therefore, not entitled to any relief under section SOJ. On these facts, a question arose, whether the Appellate Tribunal was justified in holding that the assessee is not entitled to get the benefit under section 80J(4) of the Income-Tax Act, 1961? While answering this question, the Kerala High Court held that the fact that the assessee was a new company was irrelevant. The cashew factories which were taken over by the assessee existed as the undertakings of businesses already in existence. The change of hands of the industrial undertaking did not make it a newly established one for purposes of section 80J. It was further held that the benefit of section 80J is allowed only for the first five years after the industrial undertaking begins to manufacture or produce articles. What is important is the beginning of manufacture or production of articles in the industrial undertaking and not by a particular assessee. In the case of old units taken over by an assessee, as in this case where the cashew factories in question had been in existence for decades, the manufacture or production of articles by the industrial undertaking had begun long back and, therefore, the five year period mentioned in sub-section (2) had also expired long ago. Such an undertaking could not avail of the deduction under section 80J as the period of five years has to be reckoned from the date of commencement of manufacture or production and not from the date on which the undertaking comes into the hands of the new management. The assessee was not entitled to the special deduction under section 80J.

7. A plain reading of the abovesaid decision would go to show that the assessee has not claimed the benefit under section 80J for the unexpired period. After availing of the benefit under section 80J of the Act for a period of five years, the assets were transferred to the assessee and the assessee claimed benefit under section 80J of the Act as though it is a newly established undertaking. Therefore, the benefit under section 80J of the Act was denied. The Kerala High Court also pointed out in that decision that the benefit under section 80J is linked with the newly established undertaking and not with the assessee. On the other hand, according to the facts arising in the present case, the assessee who is a lessee, is claiming the benefit under section 80J for the unexpired period of two years. Therefore, the abovesaid decision would render no assistance to the assessee.

8. Learned counsel appearing for the assessee also relied upon the decision in Madras Machine Tools Manufacturers Ltd. v. Commissioner Of Income-Tax, Madras., [1975] 98 ITR 119 (Mad), wherein this court has drawn a distinction between the company and its undertaking, in the following manner: A company may own or run many undertakings some of which may be entitled to the benefit of section 84 and others may not be so entitled. It is not, therefore, possible to equate the undertaking with the company. When a company owns more than one undertaking, the application of section 84 has to be with respect to the particular undertaking and not to the company in general. When we apply section 84 to a particular undertaking it has to be seen when that undertaking commenced the manufacture or production of articles. It is true that the word “undertaking” has not been defined in the Income-Tax Act. But in common parlance, it is taken as a concern started or formed for a specific purpose or a project engaged in.

9. In order to support his contention that the benefit granted under section 80J of the Act should be construed liberally, learned counsel appearing for the assessee relied upon the decision of the Supreme Court in Bajaj Tempo Ltd. v. CIT, [1992] 196 ITR 188, wherein the Supreme Court held that “where the appellant had started a new industrial undertaking by taking on lease the building in which the promoter company had carried on its business, but the part played by the lease was not dominant to the formation of the new undertaking, the appellant was entitled to the relief under section 15C in relation to the new undertaking.” It was further held “that it is not correct to say that the transfer of a building to the new business to disentitle the new undertaking to relief should have been the transfer of a building of the assessee only. The words ‘previously used in any other business’ should not be construed so narrowly as to confine it to a building of the assessee only.” It was further held “that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it”.

10. Even according to the facts arising in this case, the assessee claimed benefit under section 15C of the Act on a newly started industrial undertaking, which is not the case of the assessee before us. It is no doubt true that the provision in a taxing statute granting incentives for promoting growth and development should be construed liberally, but it should lead only to a logical end. It cannot go to the extent of reading something, which is not stated in the provision.

11. Learned standing counsel appearing for the Department relied on a decision in Ashok Motors Ltd. v. Commissioner Of Income-Tax, Madras., [1961] 41 ITR 397 (Mad), wherein the court, while considering the provisions of section 15C of the Indian Income-Tax Act, 1922, held that section 15C of the Indian Income-Tax Act, 1922, does not make an industrial undertaking per se the unit of assessment. It makes a clear distinction between an assessee and the industrial undertaking.

12. Even in a case where the assessee carried on an industrial undertaking as well as business activities intimately connected with the industrial undertaking, the advancement of which cannot be secured except by the assessee's engaging in such other business activities, it is only the profits of the industrial undertaking that would be eligible for the exemption under section 15C.

13. Reliance was also placed upon the decision in CIT v. Gedore Tools India Pvt. Ltd., [1980] 126 ITR 673 (Delhi). According to the facts arising in that case, the assessee-company set up a second factory housed in a newly constructed separate building wherein new machinery was installed. It claimed exemption under section 80J of the Income-Tax Act, 1961, on the basis of capital employed in the new industrial undertaking. On these facts, a question arose, whether the assessee was entitled to the relief under section 80J of the Income-Tax Act, 1961, by reference to the capital employed in the industrial undertaking. While answering this question, the Delhi High Court held that the new undertaking fulfilled the required conditions and the assessee-company was entitled to claim relief under section 80J of the Income-Tax Act, 1961. The employment of capital in the new unit is different from that of the capital belonging to the assessee-company. If surplus or reserve capital is available with the assessee-company, it could utilise a specific amount of that capital for the purchase of the plant, machinery, buildings and other assets of the new undertaking. As soon as the capital is so utilised for acquiring assets for the new undertaking, it will be employment of capital. The actual amount of capital so utilised in the new undertaking will then qualify for the purpose of calculating the deduction. In the abovesaid case also the assessee claimed the benefit under section 80J on establishing a new industrial undertaking, which is not the case here.

14. Reliance was also placed upon the decision of the Karnataka High Court in Khoday Industries P. Ltd. v. CIT, [1987] 163 ITR 646. According to the facts arising in that case a partnership firm was carrying on business in the manufacture of Indian made foreign liquors, gem clips, and pins, carbon papers, typerwriting ribbons, stamp pads, inks, etc., an engineering workshop and silk and twisting of silk yarn. Under an agreement between the firm and the assessee, the assessee acquired those business undertakings which were carried on by the firm except the business in silk and twisting of silk yarn. For the relevant assessment year, the assessee claimed relief under section 80J. On these facts, a question arose whether the Income-Tax Appellate Tribunal was justified in law in denying the deduction under section 80J of the Act to the assessee-company? While answering this question, the Karnataka High Court held that the benefit of section 80J is allowable only to a newly established industrial undertaking for the periods specified therein and an existing undertaking on acquisition by another does not become a newly established undertaking to claim benefit allowable under section 80J of the Act. Therefore, the assessee in that case claimed benefit under section 80J of the Act for the first time not by establishing a new industrial undertaking, but by acquiring the business undertaking which was carried on by its predecessor. But, according to the facts arising in the present case, the assessee is not claiming the benefit under section 80J for the first time. Therefore, on the facts, the judgment of the Karnataka High Court cited supra is distinguishable.

15. Our attention was also drawn to another decision of the Bombay High Court in CIT v. Super Tools Co. Pvt. Ltd., [1993] 202 ITR 50. According to the facts arising in that case, the assessee-company was incorporated in April 1960, for the business of manufacture of carbide tipped tools. The manufacture of carbide tipped tools was originally started by a firm known by the name and style of S., which had erected a factory building and installed its own plant and machinery and had started production in 1959. The assessee-company did not have its own building or plant and machinery. It, therefore, occupied the firm's building and used the firm's plant and machinery for the purpose of carrying on its business of manufacturing carbide tipped tools under an agreement with the firm. The agreement continued till the accounting year relevant to the assessment year 1965-66. In the assessment year 1965-66, the assessee claimed relief under section 84 of the Act. On these facts, a question arose, whether the assessee was entitled to the relief under section 84 of the Income-Tax Act, 1961, for the assessment year 1965-66? While answering this question, the Bombay High Court held that from a conjoint reading of the two clauses (i) and (ii) of sub-section (2), it is clear that the whole idea is that the industrial undertaking should be in the true sense a new industrial undertaking. It should not be formed by transferring of a building, machinery or plant previously used for any purpose. These two clauses read together make it abundantly clear that the new business of manufacture formed by transfer of building, machinery or plant previously used by another firm for the purpose of manufacture does not fulfil the requirements of section 84 of the Act and, as such, the assessee is not entitled to rebate thereunder.

16. Thus, it is clear that in the abovesaid decision the assessee after having acquired the plant and machinery used by some other entity, had started a new industrial undertaking and claimed benefit under section 84 of the Act for the first time. Since the undertaking was not a newly established one, the benefit under section 84 of the Act was denied. But in the instant case the assessee is not claiming the benefit under section 80J of the Act for the first time. What the assessee claimed was the benefit under section 80J of the Act for the unexpired period. Therefore, the abovesaid decision of the Bombay High Court is also distinguishable on facts.

17. Lastly, the decision of the Bombay High Court in Commissioner Of Income-Tax v. Tyresoles Concessionaries Pvt. Ltd., [1995] 213 ITR 660, was brought to our notice. According to the facts arising in that case, the assessee was a limited company, engaged in the business of retreading tyres. Pursuant to a scheme of an amalgamation, an associate concern of the assessee, BB, carrying on business in cargo in barges, merged with the assessee-com-pany with effect from January 1, 1975. After the amalgamation, the assessee-company made a claim, among other reliefs, to the benefit under section 80J of the Act. On these facts, a question arose whether the assessee is entitled to the relief under section 80J of the Act. While answering this question, the Bombay High Court held “that in view of the fact that the Tribunal gave a categorical finding that the assessee had fulfilled all the conditions laid down in section 80J, the assessee-company (amalgamated company) was entitled to relief under section 80J of the Act for the balance of the period of five years in terms of section 80J. This judgment was rendered by granting relief under section 80J of the Act to the assessee for the unexpired portion on the ground that the assessee is a successor to the amalgamated company”.

18. As already pointed out, in the present case, the assessee is a lessee and the assessee claimed benefit under section 80J of the Act, not on the basis of establishing a new industrial undertaking in the year in which the undertaking was established and the production commenced, but the assessee claimed benefit under section 80J of the Act for the unexpired portion of two years out of five years, since the assessee's lessor, claimed and got relief under section 80J of the Act for the first three years. There is a circular issued by the Central Board of Direct Taxes (Circular letter F. No. 15/5/63-IT(AI) dated December 13, 1963). In the said Circular, the Board agreed with the view that the benefits under section 84 of the Act, which corresponds with the present section 80J, attaches to the undertaking and not to the owner thereof, and, therefore, a successor to the business would be entitled to the benefits for the unexpired period of five years. Therefore, in order to get the benefit of section 80J of the Act for the unexpired period, the assessee must prove that it is a successor to his predecessor, which was enjoying the benefit under section 80J of the Act. But, according to the facts arising in the present case, the assessee is only a lessee, having a right to enjoy the plant and machinery for a specified period on payment of monthly rent. Ownership is a bundle of rights. Leasehold right is a part of the bundle of rights in ownership. Therefore, the assessee is not a successor to his lessor. Learned counsel appearing for the assessee submitted that the benefit available to the successor may be extended to the lessee also. But it is not possible to do so, because successor and the lessee are not one and the same, because in the case of a lease the ownership still vests with the lessor. Learned counsel appearing for the assessee contended that a plain reading of section 80J of the Act would go to show that the assessee is not liable to prove that it is the owner of the new industrial undertaking and the capital should be employed as a condition precedent for obtaining benefit under section 80J of the Act. It remains to be seen that benefit under section 80J of the Act is conferred with regard to a new industrial undertaking established for the first time. In the present case, the assessee has not claimed benefit under section 80J of the Act for the initial period. Therefore, the abovesaid contention put forward by the assessee would become untenable. Unless the assessee who claims benefit under section 80J of the Act for the unexpired period establishes that it is the successor of its lessor, and it fulfils all necessary conditions in each year, it cannot claim the benefit under section 80J of the Act for the unexpired period of two years out of five years.

19. According to the provisions contained in sub-section (3) of section 80J of the Act, if it is found that the profits and gains from the undertaking are nil or fall short of the statutory percentage, in any year, the amount of the deficiency thereof can be carried forward and set off against the profits and losses from the undertaking for the subsequent year. If the profits of the subsequent year are also nil, or inadequate to absorb the deficiency brought forward, the unabsorbed deficiencies of both the prior and later years can be carried forward further to the still later year and so on. This computation of deficiency and carry forward thereof would be impossible if benefit under section 80J of the Act is granted to a lessee for the unexpired period of two years out of five years. This is the practical difficulty. In view of the foregoing reasons, we hold that the Tribunal was correct in refusing to grant the relief under section 80J of the Act to the assessee for the unexpired period of two years out of five years. Accordingly, we answer the question referred to us in the affirmative and against the assessee. No costs.