Court decision on relief under Income-tax Act for second-hand machinery purchase.

The court ruled in favor of the assessee regarding entitlement to relief under section 80J of the Income-tax Act for purchasing second-hand machinery from a different entity. However, the conflict between rule 19A(3) and section 80J was decided in favor of the Revenue, following the precedent set in Lohia Machines Ltd. v. Union of India. The issue of penal interest under section 215 was remitted back for reconsideration by the Appellate Assistant Commissioner, as per the decision in Central Provinces Manganese Ore Co. Ltd. v. CIT.

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Issues Involved:
1. Entitlement to relief u/s 80J of the Income-tax Act, 1961.
2. Conflict between sub-rule (3) of rule 19A of the Income-tax Rules and section 80J of the Income-tax Act.
3. Levy of penal interest u/s 215 of the Income-tax Act.

Summary:

Issue 1: Entitlement to Relief u/s 80J
The Tribunal was justified in directing the Income-tax Officer to allow the assessee relief u/s 80J for its Mohuda unit. The assessee, a cement manufacturing company, purchased second-hand machinery from Heavy Engineering Corporation, a public sector undertaking. The Tribunal observed that the benefit of section 80J is denied only if the machinery or plant previously used by the assessee in any business is transferred to a new unit set up by him. Since the second-hand machinery was purchased from an entirely different entity, the assessee did not violate section 80J(4)(ii). The court referred to the decision in Orissa Cement Ltd. v. CIT [1993] 200 ITR 636 and held that the second-hand machinery was new to the assessee, thus entitling them to the benefit u/s 80J.

Issue 2: Conflict Between Rule 19A(3) and Section 80J
The Tribunal's decision that sub-rule (3) of rule 19A of the Income-tax Rules conflicts with section 80J and should be ignored was not upheld. The court referred to the Supreme Court decision in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308, which supports the Revenue's stance. Therefore, this question was answered in favor of the Revenue.

Issue 3: Levy of Penal Interest u/s 215
The Tribunal was justified in remitting the case back to the Appellate Assistant Commissioner for reconsideration of the levy of penal interest u/s 215. This issue is covered by the Supreme Court decision in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961. The pending appeal should be considered in accordance with this opinion.

Conclusion:
The references were disposed of with the first question answered in favor of the assessee, the second in favor of the Revenue, and the third requiring reconsideration by the Appellate Assistant Commissioner.

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