KANHIYALAL RAMESHWAR DAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) ON an application made by the assessee under Section 256(1), Income-tax Act, 1961 (hereafter called "the Act"), the Appellate Tribunal made a reference to this court inviting our opinion on three questions of law framed by the Appellate Tribunal as follows :

(2.) THE facts leading to this reference may be shortly stated here. THE assessee, M/s. Kanhiyalal Rameshwar Das, a resident firm of Bundi, is engaged in the business of cutting rocks for making building stones and of excavating silica sand for sale. Its previous year, that is to say, the accounting year, is Diwali to Diwali. During the course of proceedings of assessment for the assessment year 1969-70, relating to the previous year ending Diwali, 1968, the assessee filed a revised return claiming tax relief under Section 80J of the Act in respect of the capital employed on the purchase of some machinery. THE assessee claimed that it had purchased second-hand and used machinery (crane, jeep, compressor and crusher) in 1966 and a new machine for polishing stones in 1967. In his returns filed for the assessment years 1966-67, 1967-68, 1968-69 and 1969-70, the assessee did not claim any relief under Section 80J in respect of the capital employed on the aforementioned purchases. It was only during the course of assessment proceedings for 1969-70 that it occurred to the assessee that he should claim such relief and it was on such realisation that he filed a revised return for 1969-70 claiming such relief. THE ITO rejected the claim, but on appeal the AAC allowed it. THE Revenue carried the matter in further appeal to the Appellate Tribunal. By its order, dated July 30, 1973, the Tribunal allowed the appeal, reversed the order of the AAC, and held on facts that the assessee had purchased old and used machinery in 1966, long after he had established the original industrial undertaking in the accounting year ending Diwali, 1965. THErefore, the Tribunal took the view that Section 80J of the Act did not apply to this undertaking inasmuch as no capital had been employed by it on the purchase of new machinery in 1966. As for the purchase of a new polishing machine by the assessee in 1967, the Tribunal held as under ;

(3.) A little deliberation on the other wording of Sub-section (4)(ii) would confirm the correctness of our reading of this sub-section, as discussed above. Mindful of the plain meaning of the language employed by it in enacting Sub-section (4)(ii) and conscious of the fact that the said language takes in machinery previously used for any purpose, no matter whether such use was by the assessee or by a third person, the Legislature took care to use the explanatory words "(not being a building taken on rent or lease)" in order to make an exception in respect of a leasehold building which, even if previously used for any purpose by the lessor would still entitle the assessee to tax relief in respect of the capital employed in aqquiring the lease. However, if the building transferred to the new business is not a building taken on rent or lease by the assessee, the capital employed on the acquisition of such a building, if it happens to be a previously used building, would not qualify for tax relief under Section 80J, Sub-section (4). We may further mention here that Sub-section (4)(ii) has been amended since 1976 in that the words "a building (not being a building taken on rent or lease)" have been omitted from it and the second proviso and the Explanation, reproduced in an earlier part of this judgment, have been inserted in it. We are not called upon for the purpose of this reference to express any opinion on the effect of these amendments on the transfer to a new business of a building previously used for any purpose by the lessor.