Reconstruction bar under section 80J applies only where old business continuity survives; a destroyed unit replaced by new machinery qualifies for relief.

Section 80J relief is available where the undertaking is a new industrial unit and not a reconstruction of an business. Reconstruction requires substantial continuity of the same business, usually with transfer of old assets into a revived undertaking. On the stated facts, the earlier factory was destroyed by fire, the old product ceased, fresh licences and a new power connection were obtained, new machinery was imported and installed, and the new unit manufactured a distinct product. Those features showed a fresh industrial undertaking rather than a resuscitated old business, so the reconstruction bar under section 80J(4)(i) did not apply and relief under section 80J(1) remained available.

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Issues: Whether the assessee's unit, after destruction of the earlier factory and installation of new machinery, was a reconstructed business falling within section 80J(4)(i) of the Income-tax Act, 1961, or a new industrial undertaking entitled to relief under section 80J(1).

Analysis: Relief under section 80J is denied only where the industrial undertaking is formed by reconstruction of the old business. Reconstruction contemplates substantial continuity of the same business and the same persons carrying it on, ordinarily with transfer of assets of the old business to the new undertaking. On the undisputed facts, the earlier factory was destroyed by fire, production of the old product ceased, fresh licences and power connection were obtained, new machinery was imported and installed, and the new unit manufactured a distinct product. These facts showed that the assessee had not resuscitated the old undertaking in altered form but had established a fresh industrial unit.

Conclusion: The unit was not formed by reconstruction within section 80J(4)(i) and the assessee was entitled to relief under section 80J(1).

Ratio Decidendi: To attract the reconstruction bar under section 80J(4)(i), there must be substantial continuity of the old business through transfer of its assets to a revived undertaking; where a destroyed unit is replaced by a new unit with new machinery and a distinct product, the undertaking is a new industrial undertaking eligible for section 80J relief.

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