The central legal point established in the judgment is the requirement for a new industrial undertaking to be separate and distinct from the existing business in order to qualify for relief under section 80J of the Income Tax Act, 1961.

Srinivasa Iyengar, J.—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 Commissioner of Income Tax Vs. Indian Aluminium Co. Ltd., (1973) 88 ITR 257 Cal, 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 Commissioner of Income Tax Vs. Textile Machinery Corporation, (1971) 80 ITR 428 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 Commissioner of Income Tax Vs. Indian Aluminium Co. Ltd., (1973) 88 ITR 257 Cal and of the Delhi High Court in Commissioner of Income Tax Vs. Ganga Sugar Corporation, ILR (1971) Delhi 496 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 ye