Section 80J deduction depends on whether new plant forms a separate industrial undertaking, not mere expansion of existing business.

Deduction under section 80J was available where the new buildings and machinery constituted a new and identifiable industrial undertaking separate from the existing business. The decisive test applied was whether the new unit was independent and distinct, not whether there had been mere expansion of an old business. On the Tribunal's factual finding that the existing plant and machinery had been replaced and the new assets formed a separate unit, the claim succeeded because the arrangement was treated as a new undertaking rather than reconstruction of the old business.

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Issues: Whether the assessee was entitled to deduction under section 80J of the Income-tax Act, 1961 in respect of the new buildings and machinery installed during the accounting year relevant to the assessment year 1970-71.

Analysis: The Tribunal's factual finding was that the existing plant and machinery had been replaced, the new buildings and machinery formed an independent unit, and the undertaking was separate from the pre-existing business. Applying the governing principle that the decisive test is whether the new unit is a new and identifiable industrial undertaking separate and distinct from the existing business, the Court held that mere expansion of an old business does not by itself disqualify the claim where a new industrial undertaking is set up. The facts found supported the conclusion that the new plant and machinery constituted a new undertaking and not a mere reconstruction of the old business.

Conclusion: The assessee was entitled to deduction under section 80J.

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