D.K. Kapur, J.
1. The facts giving rise to this reference under section 256(1) of the Income-tax Act are not very complicated. The assessed is a private limited company which was manufacturing wool tops which were converted into woollen yarn by some outside spinners. During the accounting period 1964-65 relevant to the assessment year 1965-66, the assessed itself started manufacturing yarn from the wool tops. The facts noticed by the Tribunal are that in the year 1964-65, approximately Rs. 3 lakhs worth of machinery was purchased and in subsequent periods, additions were made and some machinery was also discarded. In the accounting period relevant to the assessment year 1968-69, machinery worth about Rs. 8 lakhs had been installed in connection with the spinning unit. The question which arose before the income-tax authority was whether relief under section 80J of the Income-tax Act had to be allowed to the assessed.
2. The Income-tax Officer at various stages disallowed relief, but in the assessment year 1968-69, the Tribunal eventually held that relief was to be granted. That view was also followed in the year 1969-70. For this later year, the following question has been referred to us for our opinion :
'Whether, on the facts and in the circumstances of the case, the assessed was entitled to relief under section 80J of the Income-tax Act, 1961, in respect of the capital employed by it in the spinning unit set up by it for the manufacture of yarn from the wool tops for the assessment year 1969-70 ?'
3. This question has two parts. Firstly, whether section 80J is applicable to the facts of the case and, secondly, whether relief under section 80J is available for the assessment year 1969-70 even if it is to be allowed earlier.
4. As far as the facts go, it appears that the assessed set up a separate unit for converting wool tops into wool yarn which it did not have before. So, prima facie, it would appear that it was a new unit. The application of the section depends on the provision of section 80J(4) :
'(4) This section applies to any industrial undertaking which fulfills all the following conditions, namely :-
(i) it is not formed by the splitting up, or the reconstruction, of a business already in existence;
(ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose :
(iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of thirty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking;
(iv) in a case where the industrial undertaking manufactures or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power.'
5. The only part of this provision that requires to be applied to the facts of the present case is whether the spinning unit has been set up by reconstruction of a business already in existence. There is a judgment of the Delhi High Court in CIT v. Naya Sahitya : 84ITR567(Delhi) , which stated that when a book publisher who used to get his books printed in other presses, set up his own printing press for printing the books, it was not a new industry to which section 15C of the 1922 Act applied. That case would be against the assessed but the said case has been expressly overruled by a judgment of the Supreme Court in Textile Machinery Corporation Ltd. v. CIT : 107ITR195(SC) . On the other hand, in CIT v. Gedore Tools India (P.) Ltd. : 126ITR673(Delhi) , it was observed that when anew unit was set up which had not derived anything from the old unit by way of equipment or by way of factory buildings and no assets of the old unit had been transferred to the new unit, the new unit was not formed by reconstruction of the old unit. It was also observed that the intention of section 80J was to encourage the setting up of a new industry. Examined from that point of view, the facts of this case would indicate on the material now before us, that the new unit which was for spinning yarn was an independent unit compared to the previous unit which was for manufacturing wool tops.
6. We may mention here that the actual facts about the new unit on record are confined to the fact that a substantial investment was made in new machinery which was more than four times the investment on the previous machinery. Other facts such as location or capital or persons employed in the new factory or new unit are not before us. The finding of the Tribunal for both the years 1968-69 and 1969-70 is that the two units are separate and the spinning unit is a new industrial undertaking within the meaning of section 80J. Even otherwise, there being nothing to indicate that the old unit had been reconstructed, we would have thought that a spinning unit to manufacture wool yarn out of wool tops is a unit different from a unit which manufactures wool tops out of raw wool or waste. In fact, the wool tops appear to have been used previously as raw material by other spinners for making yarn and instead of following that procedure, the assessed set up its own spinning unit in which it started making woollen yarn. The provisions of section 80J would, thereforee, apply and would be available.
7. As far as the second part of the question is concerned, the relief under this section is to be given for five years. So, it becomes relevant to find out whether relief was available in the assessment year 1969-70. In this respect, the Tribunal states in the statement of facts that the new spinning unit was setup during the accounting year 1964-65 relevant to the assessment year 1965-66. It would follow that relief would be available even for the assessment year 1969-70, being the fifth year.
8. We would accordingly answer the question referred to us in the affirmative, in favor of the assessed but leave the parties to bear their own costs.