Section 80-I deduction denied where relocation and allied product expansion did not create a new industrial undertaking.

Relocation of a manufacturing unit and addition of allied products did not amount to a new industrial undertaking for section 80-I where commercial operations had already begun in an earlier year. The annual accounts and licensing evidence showed prior commencement of business, and the shift from one site to another was treated as an extension of the same undertaking rather than a fresh start. The provision's machinery test also failed because previously used machinery exceeded the statutory ceiling of 20 per cent of total machinery value in the initial year, so the deduction condition was not met. The assessee was therefore not entitled to the section 80-I deduction.

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Issues: Whether the assessee was entitled to deduction under section 80-I for the assessment years in question, and whether the undertaking was a new industrial undertaking beginning manufacture in the later year or merely an expansion or relocation of the existing unit with use of previously used machinery exceeding the permissible limit.

Analysis: The assessee had applied for and obtained industrial licence for manufacture of the relevant chemical products before the claimed new start, and the evidence in the annual accounts showed that business operations had already commenced in the earlier assessment year. The relocation from one site to another did not create a fresh industrial undertaking, and the addition of further products was treated as an extension of the same undertaking. On the facts found, the machinery previously used formed more than 20 per cent of the total value of machinery used in the initial year, so the condition in the provision and its Explanation was not satisfied.

Conclusion: The assessee was not entitled to deduction under section 80-I, and the Revenue's objection succeeded.

Ratio Decidendi: For section 80-I, a mere shifting of location or addition of allied products does not constitute a new industrial undertaking where commercial production had already begun earlier and the value of previously used machinery exceeds the statutory ceiling.

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