Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court:
' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to deduction under Section 80J of the Income-tax Act, 1961, read with Rule 19A of the Income-tax Rules, 1962, in respect of the second unit of the cold storage for the assessment year 1970-71 '
2. The assessee is a company and the relevant assessment year is 1970-71, corresponding previous year being the calendar year which ended on December 31, 1970. The relevant assessment was completed by the ITO by taking the status of the assessee-company as a company in which thepublic were not substantially interested. However, in the body of the assessment order there was no discussion either on this issue or on the other relating to the rebate under Section 80J of the I.T. Act, 1961, in respect of the new chamber in the cold storage.
3. Being aggrieved by the said decision, the assessee went up in appeal before the AAC. The AAC rejected the contention of the assessee. Relating to the deduction under Section 80J of the I.T. Act, 1961, it was submitted before the AAC that during the previous year relevant to the assessment year 1969-70, the company had completed one new chamber in its cold storage for which the assessee-company had erected a completely new building and placed new racks, new overhead coils, ducting and cooling implements. It was also stated before him that the new chamber was entirely separate from the old and entirely new materials were utilised except for certain old plant and machinery whose written down value was given at Rs. 31,603. The AAC, however, noted that a similar claim was put forward in the assessment for the assessment year 1969-70, which was also turned down by the ITO and this was upheld in appeal. Following the 'same and in view of the old plant and machinery having been used in the new industrial undertaking, the assessee's claim for deduction under Section 80J was turned down.
4. Being aggrieved, the assessee went up in appeal before the Tribunal. On the question of the applicability of Section 80J, the Tribunal found from the documents placed that since the year 1966, the assessee had started the setting up of the second unit of the cold storage plant and, in all, for factory building, plant and machinery, racks and electric installations, invested a sum of Rs. 5,39,672 out of which Rs. 51,603 represented the written down value of the old machines and electric motor which were used for the new plant as also the old plant. Referring to the order of the AAC for the assessment year 1969-70, the Tribunal found that the AAC refused the benefit of the rebate under Section 80J for the assessment year 1969-70, when such benefit was first claimed because the air-cooler machine remained the same and the additions were made to the racks, buildings, some overhead coils, liquid heater, etc., and also because separate books of account for the unit not having been maintained, the exact amount of capital introduced in the new unit was not readily available. After examining the provisions of Section 80J arid the relevant decisions, the Tribunal was of the view that in view of the Explanation to Sub-section (4) of Section 80J of the Act, the total value of the old assets, if used for the second unit of the cold storage, did not exceed the statutory limit of 20% of the total value of the building, machinery or plant used therefor, the assessee was entitled to the deduction. On this aspect of the issue, the Tribunal observed in its order as follows:
' In the instant case before us the authorities below laid unnecessary stress on the maintenance of separate books of account in respect of the second unit. Rule 19A of the Income-tax Rules, 1962, provides the manner of computation of capital employed in an industrial undertaking for the purposes of Section 80J. Hence, a reference to the said rules would have cleared the position. According to the revenue, the claim under Section 80J had been made in respect of additions to storage capacity of the existing unit. This is factually wrong, A second unit has been set up in a different building with different plant and machineries and independent electrical systems and, therefore, the authorities below by making certain observations simply rejected the assessee's claim, No doubt, the assessee put into use the air-cooler machine and some other electrical gadgets to motivate the second unit and these machineries were also used for a similar purpose for the first unit too. Total cost had been given at Rs. 5,39,672, including Rs. 31,803. If the common assets are allocated equally between the two units then the assessee could be said to have used old assets valuing round about Rs. 16,000 which was certainly within the permissible limit, as laid down by the Explanation already discussed earlier. The authorities below had not given any finding that the second cold storage unit was formed by splitting up or reconstruction of the existing unit nor was there any finding that it was formed by the transfer of assets previously used except for a negligible portion. Hence, to our mind, the assessee-company is entitled to the deduction under Section 80J of the Act.'
5. Upon these, the question as indicated above has been referred to this court. Though numerous decisions are there, the principles of the scope of Section 80J of the I.T. Act, 1961, are fairly well settled. We are concerned with Sub-section (4) of Section 80J of the Act, which, inter alia, provides as follows :
'(4) This section applies to any industrial undertaking which fulfils 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:
Provided that the condition in Clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in Section 33B, in the circumstances and within the period specified in that section :
Provided further that, where any building or any part thereof previously used for any purpose is transferred to the business of the industrial undertaking, the value of the building or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking..........
Explanation 1.--For the purposes of Clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:
(a) such machinery or plant was not, at any time, previous to the date of the installation by the assessee, used in India ;
(b) such machinery or plant is imported into India from any country outside India ; and
(c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (XI of 1922), or this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee,
Explanation 2.--Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery of plant or part so transferred does not exceed twenty per cent, of the total value of the machinery or plant used in the business, then, for the purposes of Clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with and the total value of the machinery or plant or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking. '
6. We have to bear in mind the purpose or the scope of Section 80J. It is to encourage new industrial undertakings in respect of separate and distinct undertakings and not to give certain relief in respect of a portion of the capital so employed.
7. Reliance was placed on behalf of the revenue to the decision of this court in the case of CIT v. Rohtas Industries Ltd. : 120ITR110(Cal) , as also the decision of the Bombay High Court in the case of CIT v. AssociatedCement Companies Ltd. : 118ITR406(Bom) , about whether the difficulty of determining the actual profit or capital employed would disentitle the assessee in claiming relief under Section 80J of the Act, if otherwise entitled to. Our attention was drawn to the observations of this court in the case of CIT v. Dunlop Rubber Co. (India) Ltd. : 107ITR182(Cal) . It is not necessary, in our opinion, to discuss these decisions in detail. It is true that certain percentage of the profit had to be given relief and that profit would have to be determined after taking into consideration the capital employed.
8. Now, in this case though no separate books as such were maintained, the old machinery that was being used was only to the extent of Rs. 31,603 and this was the written down value. Eliminating that, the other amount of money for setting up new industries could easily be ascertained. Therefore, the defect in accounts would not conclude the matter, if it was possible to apportion the capital, and that apportionment, in the facts and circumstances of the case, was not an impossible thing. Furthermore, the question itself postulates that a separate unit had been constructed, but the only difficulty was that a part of the old machinery was used that could be accounted for.
9. Having regard to the principles and conditions laid down in Expln. 2 to Sub-section (4) of Section 80J of the I.T. Act, 1961, and the facts found by the Tribunal, in our opinion, the Tribunal arrived at a correct decision and, in those facts and circumstances of the case, the question referred to us must be answered in the affirmative and in favour of the assessee.
10. In the facts and circumstances, each party will pay and bear its own costs.
Sudhindra Mohan Guha, J.
11. I agree.