G.G Bharuka, J.:—In these cases there is a consolidated statement of case relating to the assessment years 1977-1978 and 1978-1979 which has been referred to this Court under section 256(1) of the Income-tax Act, 1941 (hereinafter to be referred to as ‘the Act’) seeking an answer to the following question of law:
“Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee had set up a new Industrial unit which is eligible for relief under Section 80 J.”
2. The asseessee is a limited Company. During the assessment years in question, the assessee Company had claimed deduction under Section 80 J but the same was rejected by the Income-tax Officer. The assessee preferred an appeal to the Commissioner of Income-tax (Appeals), who allowed the same. Against this part of the Appellate Order, the Revenue went in appeal to the Tribunal, which affirmed the order of the Commissioner of In-come-tax (Appeals) on this count.
3. It has been noticed by the Tribunal in paragraph 3 of its order that some of the basic facts were not disputed even by the Income-tax Officer. These facts are, (i) the assessee had made substantial investments in executing an ambitious modernisation and expansion project with a view to push up production of malleable cast iron, forged fittings etc. with improved technology so as to enable the Company to cater the over increasing demand of automobile Industry, (ii) the assessee - Company had installed new machineries in newly constructed buildings, and (iii) there was greater production by engaging more workers.
4. The Tribunal after going through the Annual reports of the assessee-Company for the Calendar years 1972 to 1977 and, on perusal of the Directors reports contained therein, has recorded its own findings of facts to the extent that, “there can be no dispute that the assessee made substantial investment in setting up a new factory building as also in the installation of new plant and machineries”. The Tribunal also agreed with the findings of the C.I.T (Appeals), who, on consideration of some Technical Expert reports, had held that “the expansion effected by the assessee during the calendar years 1974, 1975 and 1976 brought into existence a new unit, which had separate and distinct identity of its own as it was capable of producing ferritic black hard malleable and pearlitic iron malleable castings.”
5. Even though the aforesaid facts were not challenged by the Revenue before the Tribunal, still an objection was taken with regard to the grant of deduction under Section 80J of the Act on the pleas that, (i) the management of both the old and the new unit is common, (ii) common books of accounts were maintained, and (iii) the assessee's power units are same for both the old and the new unit. Notwithstanding these objections it was conceded before the Tribunal by the Department that the assessee had furnished the details of production pertaining to both the old and the new units in pursuance of the C.I.T (Appeals) order and the month-wise details of the production for each of the two assessment years under appeal for both the old and the new units were available on the Income-tax Officer's file.
6. In my view the question as referred to is concluded by the decision of the Supreme Court in the case of Textile Machinery Corporation Ltd. v. C.I.T reported in (1977) 107 I.T.R, 195. In this case the Supreme Court has laid down the requisites for entitlement of deduction under Section 15C of the Income-tax Act, 1922, which corresponds to Section 80J of the Income-tax Act, 1961. It has been held by the Supreme Court at page 206 of the report that in order to be entitled to the benefit of deduction in question, the following facts have to be established by the assessee, namely, (i) investment of substantial fresh capital in the industrial undertaking set up, (ii) employment of requisite labour therein, (iii) manufacture or production of articles in the said undertaking, (iv) earning of profits clearly attributable to the said new undertaking, and (v) above all, a separate and distinct identity of the industrial unit set up.
7. As stated earlier, in the present case the Tribunal has recorded findings of facts in respect of each of the pre-requisites as laid down by the Supreme Court in the above referred case and, as such, the assessee is clearly entitled to the benefits of Section 80J of the Act.
8. Since the Revenue has not tried to resist the claim in question on the ground of ‘re-construction’ of the unit, therefore, it is not necessary to enter into that issue.
9. So far as the objection regarding common source of power is concerned that per se can not be a ground for denying the deduction claimed because this reason by itself can not destroy the independent identity of the unit. Similarly common management of the two units or maintenance of common books of accounts per se are also not germane for considering the claim under Section 80J of the Act. This view of mine is fortified by the view taken by Karnataka High Court in the case of International Instruments (P) Ltd. v. Commissioner or Income-tax, Karnutaka, reported in (1980) 123 I.T.R, 11 at page 21 wherein it has been held that,
“The fact that there was common management or the fact that separate accounts had not been maintained, would not also lead to the conclusion that they were not separate undertakings. Even if separate account is not maintained the investment on each of the units can be reasonably determined with the material which the assessee may make available to the department. We are, therefore, of the view that the finding of the Tribunal that the assessee was not entitled to relief under section 84 and deduction under Section 80J of the Act, during the assessment years in question is erroneous.”
10. Similar view has been taken by the Calcutta High Court in the case of Commissioner of Income-tax (Central), Calcutta Versus Rohtas Industries Ltd., reported in (1979) 120 I.T.R, 110 at page 123 and by the Bombay High Court, in the case of Mahindra Sintered Products Ltd. v. Commissioner Of Income-Tax., reported in (1989) 177 I.T.R, 11 at page 114.
11. Under the aforesaid facts and circumstances, I am clearly of the view that the Tribunal was right in law in holding that the assessee bad set up a new Industrial unit, which is eligible for relief under Section 80J of, the Act. Accordingly, the question as referred is answered in affirmative i.e in favour of the assessee and against the department. However, there shall be no order as to costs. Let a copy of this judgment be transmitted to the Assistant Registrar, Income-tax Appellate Tribunal, Patna Bench, Patna.
G.G Sohani, C.J:—I agree.