Mehta, J.

1. These two references : one at the instance of the assessee and another at the instance of the CIT, Gujarat, arise out of the same order of the ITAT, Ahmedabad, and we, therefore, intend to dispose 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 section 80J of the Income-tax Act, 1961 with reference to the capital employed in 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 The claim, as originally made before the ITO, was to the tune of Rs. 8,95,471 being 6 per cent of the net capital employed to the tune of Rs. 1,49,52,600 The ITO concerned allowed the said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 section 80J for the assessment year 1968-69 should be continued in the year under reference, i.e., 1968-69 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 section 80G of the Income-tax Act, 1961. The third question related to the claim of Rs. 88,701 being the amount spent for repairs 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 assessees 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 those of the original units were 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 account were maintained for the business activities pertaining to the expanded unit and, therefore, 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 section 80J. 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 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 was admissible for the 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 subsequent period of four years, and the claim would be ex-facio admissible since the relief granted in the initial year of the assessment, viz., 1968-69, had not been withdrawn. He, however, with the assessees consent modified the figure of relief by reducing it from Rs. 8,95,471 to Rs. 8,73,269. The AAC also upheld the claim of the assessee so far as it related to the donation as in his opinion the assessee would have been entitled to the deduction under section 80G if it had made a cash donation and, therefore, following the decision of the Bombay High Court in CIT v. Associated Cement Co. Ltd. : [1968] 68 ITR 478 [LQ/BomHC/1967/130] , he allowed the deduction of the amount of Rs. 1,051 being the value of the cement donated. As regards the third claim, the AAC was of the opinion that the ITO was right in holding that virtually the entire bungalow was reconstructed and, therefore, the expenditure could not be treated as revenue expenditure. The AAC, however, accepted the alternative contention urged on behalf of the assessee that the claim should be allowed as terminal allowance under section 32(1)(iii) since the condition for the allowance that the deficiency was written off in the books of account was fulfilled. He, therefore, upheld the claim of the assessee-company fully to the extent of Rs. 88,701.

3. At the instance of the ITO, the matter was carried in further appeal before the ITAT, which was rejected since in the opinion of the Tribunal unless the assessment for the assessment year 1968-69 was disturbed by withdrawal of the relief, there could be no substance or justification in the Revenues attempt to withdraw the claim under section 80J of the Income-tax Act, 1961 for the subsequent year, i.e., assessment year 1969-70. The Tribunal also upheld the order of the AAC so far as the deduction on the amount of Rs. 1,051 being the value of the cement bags donated was concerned. The Tribunal did not find any justifying reasons to interfere with the order of the AAC because it would not make any difference merely because the assessee had made the donation in kind and the AAC was, therefore, justified, having regard to the decision of the Bombay High Court in Associated Cement Co.s case (supra) in granting the deduction under section 80G of the Act. As regards the allowance of Rs. 88,701 granted by the AAC as terminal allowance under section 32(1)(iii), the Tribunal was of the view that allowance should be subject to the ceiling prescribed under section 40(a)(v), as it stood at the relevant time, and, therefore, directed the ITO to obtain figures of salary payable to the managing director, who was occupying the said bungalow and to work out the amount of disallowance to be made under section 40(a)(v), subject however, to a maximum allowance of Rs. 12,000. In other words, the Tribunal held that the minimum disallowance would be to the extent of Rs. 76,701. In that view of the matter, which the Tribunal took in the appeal preferred by the ITO, the CIT sought reference as well as the assessee also sought reference since the Tribunal has confirmed the order of the AAC in favour of the assessee on two questions while partially reversed the order of the AAC on third question. The questions which have been referred to us at the instance of Commissioner are as under :-

1. Whether on the facts the Tribunal was right in law in holding that there was no case for the Revenue to withdraw the assessees claim under section 80J for the year under reference, when such claim had been accepted in the earlier assessment year, which assessment had not been disturbed

2. Whether the relief under section 80J of the Act is available in respect of donations made in kind

At the instance of the assessee-company the following two questions have been referred to us :-

1. Whether on the facts the Tribunal was justified in applying section 40(a)(v) of the Income-tax Act in respect of the expenditure of Rs. 88,701 incurred in respect of the assessees building occupied by the Managing Director and in holding that the minimum disallowance to be made will be Rs. 76,701

2. Whether the Tribunal was justified in law in this case in directing minimum disallowance of Rs. 76,701 out of the total expenditure of Rs. 88,701 on a ground which was different than the one on which the ITOs disallowance of Rs. 88,701 was based

4. We will take up the Income-tax Reference No. 238 of 1975 first which is at the instance of the assessee. The learned Advocate, appearing for the assessee-company, did not press Question No. 2 before us.

5. So far as Question No. 1 is concerned, we are of the opinion that the question is concluded by a decision of this Court in Addl. CIT v. Tarun Commercial Mills Ltd. [1978] 113 1TR 745. The question in the said decision before this very Division Bench was in the "context of certain expenses incurred by the assessee-company, the Tarun Commercial Mills Ltd., on account of the use of cars by the managing directors and the telephones maintained at their respective residences as well as the remunerations paid to them at an agreed percentage on the net annual profits of the Company. The ITO in that case considered these expenses as perquisites and the amounts being in excess of one-fifth of the remuneration payable to them, since they were admittedly employees of the Company, and disallowed the aggregate amount of Rs. 13,530 comprising of different amounts on different heads since he was of the opinion that section 40(a)(v) applied and the case was not governed according to section 40(c) of the Income-tax Act, 1961. The order of the ITO, dated 1st February, 1979 was confirmed by the AAC. However, the ITAT reversed that order and held that the provisions contained in section 40(c) were applicable in cases of expenses incurred on account of directors since that was the clause which specifically dealt with the type of the expenses incurred by the Company in respect of its directors and section 40(a)(v) would not be attracted since the particular enactment of a statute should prevail over its general enactment. At the instance of the Revenue the question was referred to this Court. Whether section 40(a)(v) would be applicable in the facts of the case or not. This Court agreed with the Tribunal and held that the view of the Tribunal that when there is a general enactment as well as a special enactment in respect of the same head in a statute, the particular enactment would override the general enactment cannot be assailed as unreasonable or impossible and, therefore, wrong. It was further held by this Court that the construction canvassed by the Revenue, apart from militating against the aforesaid rule of construction, would subject the expenses incurred by a company for providing benefit for amenity or perquisite to a director or employee to the twin scrutiny, namely, a prescribed ratio applicable to an employee and also the test of excessive and reasonable limits applicable to a director, and such a construction would result in absurdity inasmuch as the expenses laid out by a company for providing amenity or benefit to an ordinary director would be subjected only to the test of reasonableness and would put a director in a better position than a director-employee of a company for whose benefit or amenity or perquisite the Company entails expenses, and that such a result could not have been envisaged by the Parliament. In view of this decision of this Court, which has not been taken in appeal to the Supreme Court by the Revenue, Question No. 1 referred to us at the instance of the assessee would be concluded. The result therefore, is that in the Income-tax Reference No. 238 of 1975 we answer Question No. 1 in the negative, i.e., in favour of the assessee and against the Revenue. In view of our answer to Question No. 1, Question No. 2 referred in this reference at the instance of the assessee is not pressed by the learned Advocate for the assessee-company.

6. This takes us to the questions referred to us in the Income-tax Reference No. 239 of 1975 at the instance of the Revenue. We do not find any justifying reasons to interfere with the order of the Tribunal so far as both these questions are concerned. The Tribunal was perfectly justified in taking the view that if the relief of tax holiday was granted to the assessee-company for the assessment year 1968-69, the assessee was, therefore, entitled to continuance of that relief for the subsequent four years and the ITO would not be justified in refusing to continue the allowance for the assessment year under reference, i.e., 1969-70 without disturbing the relief for the initial year. At this stage, it should be noted that for purposes of entitlement to the relief under section 80J which is corresponding to section 15(c) of the 1922 Act, an industrial unit claiming such relief must be new, in the sense, that new plants and machineries are erected for producing either the same commodities or some distinct commodities- Textile Machinery Corporation Ltd. v. CIT : [1977] 107 ITR 195 [LQ/SC/1977/53] and CIT v. Indian Aluminium Co. Ltd : [1977] 108 ITR 367. [LQ/SC/1977/52 ;] ">[1977] 108 ITR 367. [LQ/SC/1977/52 ;] [LQ/SC/1977/52 ;] It should be emphasised that it was common ground between the parties that the assessee-company has increased the capacity of its cement manufacturing plant from 600 tonnes per day to 1,600 tonnes per day by setting up new machinery and plant necessary for that purpose. In our opinion, the Tribunal was right when it expressed its view that the question involved was not a question whether there would be no bar to the view which the ITO has taken on principle of res judicata. The neat question to which the Tribunal addressed itself, and in our opinion rightly, was whether the ITO was justified in refusing to continue the relief of tax holiday granted to the assessee-company for the assessment year 1968-69 in the assessment year under reference, i.e., 1969-70 without disturbing the relief granted for the initial year. It should be stated that there is no provision in the scheme of section 80J similar to one which we find in case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under section 80J can be withheld or discontinued provided the relief granted in the initial year of the assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted. The learned Advocate for the Revenue invited our attention to certain observations made by the Gujarat High Court in CIT v. Satellite Engineering Ltd. : [1978] 113 ITR 208, where the Court was concerned with the question, whether an industrial undertaking which did not satisfy the prescribed conditions so as to entitle itself to the relief under section 80J in the initial year can successfully claim the relief if the prescribed conditions are satisfied in the subsequent years. We do not think that this decision of this Court in Satellite Engineering Ltds case (supra) can be of any assistance to the cause of the Revenue, because the question with which this Court was concerned in that case was altogether a different one in the context of which the Division Bench was speaking. It should be understood that this is subject to the right of the ITO to adjust the relief by fixing the quantum having regard to the respective capital employed in the new undertaking in the year with which he is concerned. In that view of the matter, therefore, the Tribunal was perfectly justified in taking the view as it did and we answer Question No. 1 in the affirmative, that is against the Revenue and in favour of the assessee.

7. So far as Question No. 2 is concerned, we -. are of the opinion that the Tribunal was justified in agreeing with the AAC who allowed the deduction on Rs. 1,051 being the value of the cement bags donated by the assessee to a charitable institution recognised under section 80G of the Act. The contention of the Revenue is that having regard to the provisions contained in sub-section (2)(a)(iv) of section 80G the deduction in respect of donation to a charitable institution is made in cash. In submission of the learned Advocate for the Revenue, this is the only construction possible on the plain reading of the relevant clause under which the deduction is sought and granted. The Tribunal was not impressed with this contention since in its opinion it is too technical a contention to which it could accede. The High Court of Bombay in Associated Cement Co.s case (supra) at page 485 took the same view in similar circumstances. The Associated Cement Company had at the request of the University of Bombay fabricated a small rotary experimental furnace for the department of Chemical Engineering by spending an amount of Rs. 6,600 for which necessary resolutions were made by the company. The Revenue contended before the Court that the company was not entitled to deduction under section 80G since in effect and substance the company had made the donation in kind and not in cash. The Division Bench of the Bombay High Court was not impressed with this contention. Since apart from the contention being too technical, in the ultimate analysis it is the substance of the transaction which counts and the Court found on consideration of the transaction that it was a donation in cash. The Tribunal here also considered the substance of the transaction and was of the view that this was virtually a donation in cash. We do not think that the view of the Tribunal can be said to be unreasonable or perverse since the substance of the transaction was to make a donation in cash though in actual practice the assessee-company gave cement bags since it was manufacturing cement itself. We do not think, therefore, that we should interfere with the view which the Tribunal has taken confirming the view which was taken by the AAC.

8. The result is that we must answer Question No. 2 that on the facts and in the circumstances of the case the company was entitled to the relief under section 80G of the Act and, therefore, the question is to be answered in the affirmative and in favour of the assessee and against the Revenue by saying that having regard to the facts and circumstances of this case the assessee-company is entitled to the relief under section 80G of the Income-tax Act, 1961.

9. In the result, in Income-tax Reference No. 238 of 1975 Question No. 1 is answered in the negative, that is in favour of the assessee and against the Revenue. Question No. 2 was not pressed in view of our answer to Question No. 1. In Income-tax Reference No. 239 of 1975 Question No. 1 is answered in the affirmative, that is in favour of the assessee and against the Revenue. Question No. 2 is also answered in the affirmative, that is in favour of the assessee and against the Revenue. In both these references, the CIT shall pay the costs to the assessee.