1983 (8) TMI 87 - AT - Income Tax

Assessee qualifies for deduction under section 80J for Unit No. 2 based on manufacturing activities.

The Tribunal held that the assessee was eligible for the deduction under section 80J for Unit No. 2, as the activities qualified as manufacturing based on ... - Issues: Claim of deduction u/s 80J for Unit No. 2, manufacturing activity eligibility, use of old building for new unit, common funds utilization.Analysis:1. The main issue in these departmental appeals was whether the assessee could claim a deduction u/s 80J for Unit No. 2, where previously outsourced work was now done in-house. The ITO rejected the claim citing reasons like lack of manufacturing activity and use of an old building.2. The ITO argued that dyeing & printing did not constitute manufacturing activity, but the CIT(A) disagreed, citing a Punjab High Court case where bleaching and dyeing were considered manufacturing. The Tribunal agreed with the CIT(A) that the assessee qualified as a manufacturing unit based on this precedent.3. Regarding the use of an old building, the ITO's contention was that it disqualified the assessee from the deduction. However, a 1976 amendment allowed for such situations, as confirmed by a Gujarat High Court decision. The Tribunal upheld this interpretation, removing the disqualification based on the use of the old building.4. The ITO's third reason, concerning common funds utilization, was previously addressed by the Tribunal for a prior assessment year and was deemed insufficient to disallow the claim. The Tribunal maintained this stance, affirming that common funds utilization did not affect the eligibility for the deduction.5. Ultimately, the Tribunal concluded that the assessee was indeed eligible for the deduction u/s 80J. The ITO was directed to calculate the capital employed in the industrial undertaking as per the law. The appeals brought by the department were dismissed, upholding the eligibility of the assessee for the deduction.