Section 80IB deduction for composite industrial undertaking upheld despite interconnected units and no separate books for each unit.

Deduction under section 80IB is available to a composite industrial undertaking where several connected units together carry out the manufacturing process and produce a single marketable product. Physical separation of activities such as cutting, stitching, storage, buttoning and packing does not make each location a separate independent undertaking when the operations are interlinked. Separate books of account for each physical unit are not required in such a case, because the units form parts of the same manufacturing set-up. A partner's statement alone was insufficient to displace this position, and the disallowance of the deduction was unsustainable.

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Issues: Whether the assessee was entitled to deduction under section 80IB in respect of a composite industrial undertaking comprising several units carrying out interconnected activities, despite the absence of separate books of account for each unit.

Analysis: The deduction under section 80IB is available to an industrial undertaking that satisfies the statutory conditions. The fact that the undertaking functions through several physical locations or units performing connected activities such as stitching, cutting, storage, buttoning and packing does not make each location a separate standalone unit. Where these activities are interlinked and together result in a single marketable product, the undertaking is to be viewed as one composite industrial undertaking. In such a situation, the maintenance of separate books for each physical unit is not required, since the units are only parts of the same manufacturing set-up and not independent undertakings. The statement recorded from the partners, by itself, was insufficient to dislodge this position.

Conclusion: The assessee was eligible for deduction under section 80IB, and the disallowance made by the Assessing Officer was unsustainable.

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