Srinivasa Iyengar, J.
1. The Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was entitled to the 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 ?'
2. The assessee made a claim for relief under s. 80J of the Income-tax Act, 1961, (hereinafter referred to as 'the Act'), in a sum of Rs. 21,30,606. In support of the claim, particulars were given about the extent of the ore raised and the new buildings put up and new machinery installed. The ITO, however, declined to grant relief being of the opinion that the existing framework had only been expanded to secure larger output. On the appeal also, the claim of the assessee was not recognised. The AAC took the view that all that had been done was only to add a little more during the relevant year to the well-established business of the company which was being carried on for several years. The decision of the Calcutta High Court reported in : 88ITR257(Cal) (CIT v. Indian Aluminium Co. Ltd.), which was, however, distinguished on the ground that the facts were different.
3. However, on further appeal to the Tribunal, the claim of the assessee was recognised. It transpires that the Tribunal also made a spot inspection in order to verify or check up the materials that had been placed on record. Paragraph 9 of its order indicates what had been found and the facts as in existence :
'As the claim was that the entire machinery was new and newly installed and this could best be verified on personal inspection, we paid a visit to the Hutti Gold Mines on 6th December, 1975, when two departmental representatives were also present. It was found that one old factory shed covered by asbestos sheet was still being used but the entire machinery has been replaced. That shed housed the new cyanide plant. The rest of the factory buildings are new and the machinery also is new. A drawing which was made out in 1962 in accordance with which the whole scheme has been ultimately carried out has also been filed before us. This shows what were there before. The existing crushing plant and the pre-existing conveyor belts. etc., have been dismantled. The old mill in the factory shed to which we have referred has also been dismantled. That factory shed is of a total floor area of about 10,000 sq. ft., only whereas the new mill and refinery building, which are adjacent to the same, cover about 41,000 sq. ft. A few of the existing thickeners and agitators have been continued and new ones added. The new buildings which years 1969-70 and 1970-71 cost in all Rs. 51,72,111. The new machinery installed during the same period were of the value of Rs. 1,00,63,822. These new buildings and machinery are used for the purpose of crushing gold ore and refining purposes. After having personally these on the spot we are satisfied that these machineries are entirely new and can be taken as an independent unit by themselves.'
4. The Tribunal noticed several decided cases. It was of the opinion that the facts in CIT v. Textile Machinery Corporation : 80ITR428(Cal) were distinguishable and the decision therein could not be applied to the facts in the instant case. It was also of the opinion that the principles enunciated in the decision of the High Court of Calcutta in Indian Aluminum Co.'s case : 88ITR257(Cal) and of the Delhi High Court in CIT v. Ganga Sugar Corporation Ltd. : 92ITR173(Delhi) were applicable to the facts in the instant case and accordingly, the assessee was entitled to relief under s. 80J of the Act in respect of the new buildings and machineries installed during the accounting year relevant to the assessment year 1970-71.
5. In our opinion, the facts found by the Tribunal clearly justify the conclusion that the new plant and machinery constituted a new undertaking. It was an independent unit by itself. The Supreme Court reversed the decision in CIT v. Textile Machinery Corporation : 80ITR428(Cal) on a further appeal. That is reported in : 107ITR195(SC) (Textile Machinery Corporation Ltd. v. CIT). The provision that was considered was s. 15C of the Indian I.T. Act, 1922, analogous to s. 80J of the I.T. Act, 1961. It was observed therein as follows (p. 203) :
'The assessee continues to be the same for the purpose of assessment. It was its existing business already liable to tax. It produced in the two concerned undertaking commodities different from those which it has been manufacturing or producing in its existing business. Manufacture or production of articles yielding addition as profits attributable to the new outlay of capital in a separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability under section 15C. Sub-section (6) of the section also points to the same effect, namely, production of articles. The answer, in every particular case, depends upon the peculiar facts and conditions of the new industrial undertaking on account of which the assessee claims exemption under section 15C. No hard and fact rule can be laid down. Trade and industry do not run in earmarked channels and particularly so in view of manifold scientific and technological developments. There is great scope for expansion of trade and industry. The fact that an assessee by establishment of a new industrial undertaking expands his existing business, which be certainly does, would not, on that score, deprive him of the benefit under section 15C. Every new creation in business is some kind of expansion and advancement. The true test is not whether the new industrial connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business.'
6. In that decision, the Supreme Court approved the conclusion that had been reached by the Delhi High Court in the case of CIT v. Ganga Sugar Corporation Ltd., : 92ITR173(Delhi) . In our opinion, the facts in that case bear a close parallel to the facts in the instant case as the same commodity was being manufactured by the new industrial undertaking. It was observed in that the case (pp. 179, 180) :
'The concept of reconstruction of business would not be attracted when a company which is already running one industrial unit sets up another industrial unit. The new industrial unit would not lose its separate and independent identity even though it has been set up by a company which is already running an industrial unit before the setting up of the new unit.'
7. These observations were approved of by the Supreme Court. In our opinion, the facts noticed by the Tribunal leave no room for doubt that what had been set up was a new industrial undertaking. The Tribunal applied the correct principles in coming to a conclusion whether the undertaking was a new industrial undertaking or not.
8. We, accordingly, answer the question in the affirmative and in favour of the assessee.