TaxTMI 
TaxTMI 
2002 (10) TMI 242
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....was the same. It was therefore, thought proper to take over the business of M/s Mohan Cold Storage. As the cold storage was taken over by the assessee-firm, it claimed deduction under ss. 80-I and 80-IA of the Act on the profits of the cold storage. The AO examined the claim of the assessee but declined to allow the same on the following reasons: (i) The cold storage is not an industrial undertaking as the same was not engaged in the business of manufacturing/producing any article or thing. (ii) Even if it was an industrial undertaking, the same was not a new business. (iii) Taking over the existing business of another assessee, will amount to reconstruction of business as held by Hon'ble Karnataka High Court in reported in (1987) 164 ITR 135 (sic). (iv) The assessee has not fulfilled the condition that industrial undertaking has started manufacturing/producing articles or things on or before1st April, 1991. As per assessee, the business of cold storage was taken over w.e.f.18th Sept., 1991. (v) In asst. yrs. 1991-92 and 1992-93, the assessee did not claim any deduction under s. 80-I/80-IA of the Act. 4. On appeal, the CIT(A) upheld the findings of the AO against ....
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....red the rival submissions. The facts of the case have been mentioned above. A cold storage was running in the name of M/s Mohan Cold Storage & Gen. Mills. The cold storage plant was first operated in the financial year ending31st March, 1991. The partners of the assessee-firm before us and their profits/loss ratio was the same in the case of M/s Mohan Cold Storage & Gen. Mills. As the partners and their profit/loss sharing ratios was common, the partners decided to run the cold storage in the name of the assessee-firm and not in the name of erstwhile firm. As the cold storage could operate in the year under consideration, the assessee claimed deduction under s. 80-I/80-IA of the Act on the profits of the cold storage. The AO/CIT(A) have denied deduction due to the reasons mentioned earlier. 8. Sec. 80-I was brought on the statute by Finance (No. 2) Act, 1980 w.e.f.1st April, 1981. As per this section, certain deduction was available out of profit and gains derived from an industrial undertaking or a ship or the business of a hotel. Originally, provisions relating to priority industry was dealt with by s. 80-E which was inserted by the Finance Act,1966 w.e.f.1st April, 1966. That....
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....r after the 1st day of April, 1990 (but before the 1st day of April, 1991), there shall, in accordance with and subject to the provisions of this section be allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty-five per cent thereof: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words "twenty-five per cent", the words "thirty per cent" had been substituted. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely: (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. (iii) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part ofIndia, and begins to........ 80-IA Deduct....
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....rried on without the aid of power." 10. The reading of the above provisions makes it clear that the word 'assessee' is different from the word 'an industrial undertaking'. The deduction under s. 80-I/80-IA is available to the industrial undertakings and not to the assessee. The assessee may have more than one industrial undertaking but the undertaking fulfilling the conditions mentioned in section alone will be entitled to the benefit of deduction. 11. Furthermore, the conditions mentioned in the section are attached to the "industrial undertaking" and not to the assessee. In the instant case, there was a cold storage which began to operate during the financial year 1990-91 relevant to the asst. yr. 1991-92. Thus, in normal course, as per provisions of s. 80-I(1A), an industrial undertaking which begins to operate its cold storage plant will be eligible for deduction. As the assessment year in question is asst. yr. 1993-94, the provisions of s. 80-IA will be applicable. As per sub-s. (2) to s. 80-IA, the first condition for allowance of deduction was that the industrial undertaking should not be formed by splitting up or the reconstruction of a business already in existence. ....
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....oducing certain articles or things, only then it could be said to be an industrial undertaking eligible for deduction under s. 80-I/80-1A of the Act. A mere cold storage engaged in the preserving of potatoes cannot be said to be an industrial undertaking and, therefore, the preliminary condition of allowing deduction under s. 80-I/80-IA was not satisfied. We find that upto31st March, 1990, the industrial undertaking satisfying certain conditions were eligible for deduction under s. 80-I of the Act. However, by Finance Act, 1990, w.e.f.1st April, 1990, the benefit was extended to cold storage also. The meaning of the word 'industrial undertaking' has not undergone any change during the year under consideration. Knowing well that the cold storage may not be deemed to be an industrial undertaking, still the benefit of deduction under s. 80-I was extended to the cold storage plant. In the common parlance, a cold storage is engaged in the preserving only. It does not create or manufacture any article or thing. Still, if the benefit of deduction under s. 80-I was extended to the cold storage plant, the intention was very clear. Thus, the AO/CIT(A) have misapplied the meaning of the word ....