COMMISSIONER OF INCOME TAX Vs. SEEYAN PLYWOODS

JUDGEMENT

(1.) At the instance of the Revenue, the Income Tax Appellate Tribunal (in short, the Tribunal) has referred the following question of law for the decision of this Court:

(2.) The respondent, an unregistered firm, is an assessee under the Income Tax Act. We are concerned with the assessment year 1977-78, for which the accounting period ended on 31-3-1977. The assessee deals in manufacture and sale of plywoods, veneers, etc. During the assessment year, it claimed deduction under S.80HH and S.80J amounting to Rs.23,251 and Rs.10,617/- respectively. The Income Tax Officer by his order dated 30-1-1980 held that the assessee is not entitled to the deductions claimed under S.80HH and 80J of the Act. The Commissioner of Income Tax (Appeals), by order dated 30-9-1983, affirmed the said disallowance; but in second appeal, the Tribunal held that the assessee is entitled to claim relief under S.80HH and 80J of the Income Tax Act for the relevant assessment year. It is thereafter, at the instance of the Revenue, the question of law, formulated hereinabove, has been referred by the Tribunal for the decision of this Court.

(3.) We heard counsel for the Revenue Mr. P. K. R. Menon and also counsel for the respondent assessee, Mr. S. A Nagendran and Mr. Premjit. The respondent assessee started an industrial undertaking in 1974. The claim of deduction under S.80J of the Income Tax Act was allowed in respect of the undertaking for the assessment years 1975-76 and 1976-77. Subsequently, the Income Tax Officer initiated proceedings under S.147 of the Act and held that the assessee was not entitled to the deductions on the ground that the cost of old machinery used in the undertaking exceeded 20% of the total cost of machinery and plant and the undertaking was not formed by the transfer of such machinery. The said decision was affirmed in appeal by the Appellate Assistant Commissioner.