Tax relief granted for one year persists if not rescinded; in-kind donations can qualify as cash donations for deductions.

1. These two references, one at the instance of the assessee and another at the instance of the Commissioner of Income - tax, Gujarat, arise out of the same order of the Income - tax Appellate Tribunal,???hmedabad, and we, therefore, intend to dispose of them by this common judgment. Shortly stated, the facts leading to these two references are as under:
The assessee - company carries on business of manufacturing cement at its factory situate at Ranavav in Saurashtra. The capacity of the first cement plant of the assessee - company was 600 tonnes per day. In the year of account, relevant to the assessment year 1968-69, the capacity was expanded and it was raised to 1,600 tonnes per day. The assessee - company, therefore, made a claim for relief under S.80J of the I.T. Act, 1961, with reference to the capital employed in the expansion of the plant and machinery. The claim, as originally made before the ITO, was to the tune of Rs. 8,95,471 being 6% of the net capital employed to the tune of Rs. 1,49,24,526. The ITO concerned allowed the said claim for the assessment year 1968-69. It appears, however, that for the assessment year 1969-70, which is under reference, three questions arose before the ITO. The first related to whether the relief granted under S.80J for the assessment year 1968-69 should be continued in the year under reference, that is, 1969-70 or not. The second question related to deduction of an amount of Rs. 1,051 being the value of the cement bags donated by the assessee - company to a public charitable trust in Baroda under s. 80G of the I.T. Act, 1961. The third question related to the claim of Rs. 88,701 being the amount spent for repair to the guest house of the assessee - company occupied by the managing director of the company at Ranavav - whether it was in the nature of revenue expenses or capital expenditure. The ITO disallowed the assessee's claim as in his opinion the expansion of cement manufacturing unit did not amount to setting up a new industrial undertaking, inasmuch as the activities of the expanded part of the unit as well as those of the original units were much interconnected. He, therefore, held that the assessee could not be said to have set up a separate unit from the existing one. He also disallowed the claim on the ground that no separate books of accounts were maintained for the business activities pertaining to the expanded unit and, therefore, it could not be precisely ascertained as to how much capital had been invested in the expanded unit. The ITO disallowed the deduction of Rs. 1,051 being the value of the cement bags donated as the donation was in kind and not in cash as required under s. 80G. He also disallowed the claim of Rs. 88,701 as revenue expenses since in his opinion the assessee - company had constructed completely a new building and, therefore, the expenditure was in the nature of capital expenditure.

2. The assessee - company, therefore, carried the matter in appeal before the AAC. The AAC found that the assessee - company had increased the capacity of the plant from 600 tonnes to 1,600 tonnes per day. The AAC was of the opinion that in the absence of there being any specific provision? in the Act that the new unit should be altogether distinct and even physically at a distance from the old unit, and that, if the relief as admissible for assessment year 1968-69, in respect of the expanded unit of the assessee - company, that relief would continue to be available to the assessee - company for the subse