Court grants relief to assessee under Income-tax Act for Ambattur unit profits, emphasizing statutory conditions.

The High Court held that the assessee was entitled to relief under sections 84 and 101 of the Income-tax Act, 1961, for the profits of its Ambattur unit. The court emphasized that meeting statutory conditions established the right to relief, and the lack of separate accounts did not disqualify the claim. The computation method for capital employed and profits was deemed appropriate, and the onus of proof was considered discharged by the assessee. The court affirmed that difficulty in apportionment could not be a basis for rejection, ruling in favor of the assessee against the Revenue.

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Issues Involved:
1. Entitlement to relief under sections 84 and 101 of the Income-tax Act, 1961.
2. Requirement of maintaining separate accounts for new industrial units.
3. Computation method for capital employed and profits for tax exemption purposes.
4. Onus of proof for claiming tax exemption.
5. Applicability of principles of apportionment.

Detailed Analysis:

1. Entitlement to Relief under Sections 84 and 101:
The primary issue was whether the assessee was entitled to relief under sections 84 and 101 of the Income-tax Act, 1961, for the profits of its Ambattur unit. The assessee claimed exemption under these sections, stating that the new industrial undertaking at Ambattur met all the conditions specified in section 84(2) and had made profits. The Tribunal held that the assessee was entitled to the relief claimed, as it had fulfilled the statutory conditions and made assessable profits.

2. Requirement of Maintaining Separate Accounts:
The Income-tax Officer (ITO) initially rejected the assessee's claim on the grounds that separate accounts for the new unit were not maintained. The assessee argued that there was no statutory requirement to maintain separate accounts for claiming exemption under sections 84 and 101. The Appellate Assistant Commissioner and the Tribunal agreed with the assessee, stating that the lack of separate accounts did not disqualify the claim for exemption.

3. Computation Method for Capital Employed and Profits:
The assessee computed the capital employed in the new unit by apportioning the current assets and liabilities based on the turnover ratio between the new unit and the old unit. The ITO rejected this method, stating that it was not admissible. However, the Tribunal held that the method adopted by the assessee was correct and that the ITO should have suggested a more appropriate method if he found it unsatisfactory. The Tribunal emphasized that the ITO could not deny the exemption altogether on this basis.

4. Onus of Proof for Claiming Tax Exemption:
The Revenue argued that the onus of proving entitlement to exemption under sections 84 and 101 lay on the assessee. The Tribunal found that the assessee had discharged this onus by submitting the computation of capital and profits before the ITO. The Tribunal noted that the ITO should have examined the computation and suggested corrections if necessary, rather than rejecting the claim outright.

5. Applicability of Principles of Apportionment:
The Tribunal and the High Court both acknowledged that the difficulty in apportionment could not be a ground for rejecting the claim. The Supreme Court's observations in similar cases were cited, emphasizing that a rule of apportionment consistent with commercial accounting must be evolved for determining the income attributable to the new industrial undertaking. The High Court agreed with the Tribunal's view that the apportionment method based on turnover was appropriate and that the assessee was entitled to the relief claimed.

Conclusion:
The High Court concluded that the assessee was entitled to the relief claimed under sections 84 and 101 of the Income-tax Act, 1961, for the profits of its Ambattur unit. The court emphasized that the right to relief was established once the statutory conditions were met and that the computation of the extent of relief was a separate matter. The court answered the question in the affirmative, in favor of the assessee, and against the Revenue.

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