B.P.Jeevan Reddy, C.J. - (1.) The following three questions have been stated by the Income-tax Appellate Tribunal under Section 256(2) of the Income-tax Act, 1961 : "1. Whether, on the facts and in the circumstances of the case, there was material on record justifying the Tribunal's finding that the business carried on by M/s. Chandra Katha Industries was not formed by splitting up or reconstruction of a business already in existence or by transfer of machinery or plant previously used for any purposes within the meaning of Section 80J of the Income-tax Act, 1961 ?
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the manufacturing of catechu is a chemical process and that the Income-tax Officer was justified in allowing depreciation at 10% as against the normal rate of 7% ?
(3.) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in quashing the order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, 1961 ?" 2. The assessee is a registered firm. The assessment year concerned is 1969-70. The Income-tax Officer allowed deduction of Rs. 16,288 under Section 80J of the Income-tax Act. He also allowed depreciation on the machinery at the rate of 10% as against the ordinary rate of 7%. The order of the Income-tax Officer was revised by the Commissioner of Income-tax under Section 263 of the Act. The Commissioner was of the opinion that the installation of machinery and plant by the assessee was merely a reconstruction of the business already in existence, the identity of which was not lost. On this ground, he held that the assessee was not entitled to the benefit of Section 80J. The Commissioner held further that the undertaking of the assessee cannot be called "chemical works" and, therefore, was not entitled to the higher rate of depreciation. The assessee filed an appeal before the Tribunal questioning the order of the Commissioner. The Tribunal, on an examination of the material, held that the plant established by the assessee was a newly built factory on a piece of land purchased by the assessee-firm. The Tribunal recorded the following further findings : "The assessee has started manufacturing of katha and cutch by mechanical process. Kutch is a bye-product of katha. Katha is an edible item whereas catechu is mostly used as pigments which is one of the components of painting material. The new industrial undertaking comprises new building with new plant and machinery such as boilers, refrigeration units, cold storage rooms, cold drying chambers, automatic saw machines, evaporating pans, chipping machines, wooden vats, electric meters, electrical installations, etc., etc. All these items were installed in the assessment year 1966-67 in the new premises at Kotla Road." 3. On the above factual findings, the Tribunal held that the assessee's undertaking is not formed by reconstruction of a business already in existence nor is it formed by the transfer of machinery or plant previously used for any purpose within the meaning of Sub-section (4) of Section 80J. The Tribunal also found that the process employed by the assessee is a manufacturing process.;