Section 40(b) of the Income Tax Act

A new industrial undertaking is not considered a reconstruction of an existing business for tax deduction purposes if it is a separate, independent production unit manufacturing commercially tangible products that can operate without losing its identity in the old business. The transfer and substantial use of assets and manpower from an old business to a new one may indicate reconstruction.

Incentive provisions in the Income-tax Act, particularly those granting deductions for new industrial undertakings, must be construed liberally to achieve their legislative purpose. This principle guides the interpretation of conditions such as what constitutes a 'new undertaking' versus a 'splitting up or reconstruction' of an existing business for claiming deductions.

A partner's income from a firm, including salary, bonus, commission, or remuneration, is considered business income in their hands. Expenses necessary for earning this business income are deductible.

Provisions intended to promote economic growth, such as those encouraging cooperative societies, are to be interpreted liberally. Restrictions on such provisions should be construed to advance their objective, not frustrate it.