Leased plant and machinery cannot be treated as capital employed for section 80J relief when not used in manufacturing activity.

Section 80J relief is confined to profits and gains derived from a newly established industrial undertaking engaged in manufacture or production. Where the assessee has leased out its plant and machinery, those assets are not used by the assessee in manufacturing activity, and rental income from the lease is not income derived from the industrial undertaking. The value of the leased stock-in-trade or plant and machinery is therefore excluded from capital employed for section 80J computation, and cannot be added for relief purposes.

---

---

Issues: Whether the value of stock-in-trade or plant and machinery leased out by the assessee could be treated as part of the capital employed for computing relief under section 80J of the Income-tax Act, 1961.

Analysis: Relief under section 80J is available in respect of profits and gains derived from a newly established industrial undertaking engaged in the manufacture or production of articles. Where the assessee has leased out its plant and machinery, those assets are not being used by the assessee for manufacturing or producing articles. The rental income from leasing out the manufacturing facility is also not income derived from the industrial undertaking for the purpose of section 80J.

Conclusion: The value of the leased assets was rightly excluded from the computation of capital employed, and the assessee was not entitled to include it for section 80J relief.

---