TaxTMI 
TaxTMI 
2006 (7) TMI 298
X X X X Extracts X X X X
X X X X Extracts X X X X
....6 and 1996-97. 5. The facts of the case, in brief, are these: The assessee company, incorporated on 21st Jan., 1981, was manufacturing mechanical and power steering gears. The mechanical steering gears are indigenous products and did not require imported components/parts, whereas the power steering gears are based on hydraulic operation system and have about 50-60 per cent imported components: It decided to establish a new undertaking to manufacture exclusively power steering gears-8043 (302 Type), for light and medium commercial vehicles like Tata 407, Tempo-Traveller, Tempo Trax, Tata 608, Tata Sierra and off-road vehicles. The construction of a new shed for the new unit commenced in April, 1994. During the accounting year relevant to asst. yr. 1995-96 nine machines costing about Rs. 90 lacs were installed. In the return filed for asst. yr. 1995-96 on 29th Nev., 1995 the assessee claimed deduction under s. 80-IA of the Act in respect of the new undertaking. The AO while dealing with the assessee's claim in the assessment order for asst. yr. 1995-96 dt. 2nd Jan., 1998 made a cryptic observation as under: "During the year company has established new industrial undertaking. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he so-called new unit had been formed as a result of splitting up and reconstruction of the old unit and therefore, assessee was not entitled for deduction under s. 80-IA, and hence the claim for deduction was denied. 8. The original assessment order for asst. yr. 1995-96 dt. 2nd Jan., 1998 was set aside by the CIT, Pune vide his order under s. 263 dt. 9th Feb., 2000. In para 4 of his order under s. 263 the CIT, inter alia observed, that during the assessment proceeding for asst. yr. 1996-97 the AO made detailed inquires and came to the conclusion that the new unit did not start functioning before 31st March, 1995, but while framing the assessment for asst. yr. 1995-96, this important issue was not properly examined by the AO and no proper finding was recorded, and therefore on that ground the assessment was erroneous as well as prejudicial to the interest of Revenue. The CIT accordingly set aside the assessment order for asst. yr. 1995-96 and directed the AO to examine the issue afresh after considering the relevant facts and the legal position and to record proper finding. 8.1 The consequential assessment order for asst. yr. 1995-96 was passed by the AO on 28th March, 2002,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e), for light and medium commercial vehicles like Tata 407, Tempo-Traveller, Tempo Trax, Tata 608, Tata Sierra and off-road vehicles. During the accounting year relevant to asst. yr. 1995-96 nine machines costing Rs. 90,32,912 were installed as under: ------------------------------------------------- S. No. Name of machine Cost (Rs.) ------------------------------------------------- 01. CNC Vertical Machines Centre 27,26,163 (Hard Ford Type) ------------------------------------------------- 02. CNC ACE Auto Lathe 9,84,303 ------------------------------------------------- 03. Grinding Machine (2 Nos.) 20,57,716 ------------------------------------------------- 04. Gear Hobing Machine 10,73,856 -----------------....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; Total 42,90,64,866 ---------------------------------------------------- 13. It is seen that the assessee's claim for deduction under s. 80-IA was rejected by the AO and the CIT(A) for asst. yr. 1995-96 for the reasons as under: (i) that the so-called new unit was formed as a result of splitting up and reconstruction of the old unit. (ii) that the so-called new unit cannot be said to be an independent unit having a separate identity from the old unit. (iii) that the new unit did not come into existence before 31st March, 1995. 14. In order to be able to decide the above issue we first proceed to examine the legal position in this regard in the following paras. 15. The s. 80-IA of the Act was inserted by the Finance Act, 1991 w.e.f. 1st April, 1991. It was subsequently amended by the Finance Act, 1992 w.e.f. 1st April, 1993 and then by Finance Act, 1993 w.e.f. 1st April, 1994/1st April, 1995. The deduction under s. 80-IA was available to an assessee whose gross total income included any profits or gains derived from any business of an industrial underta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 20. In the case of CIT vs. Associated Cement Companies Ltd. (1979) 118 ITR 406 (Bom), it was held by the Bombay High Court that the establishment of a new industrial unit as a part of an already existing industrial establishment may result in an expansion of the industry or the factory, but if the newly established unit is itself an integrated independent unit in which new plant and machinery are put up and are themselves, independently of the old unit, capable of production of goods then it can be classified as a newly established industrial undertaking. 21. The new industrial unit brought into existence by establishing new plant and machinery and by investing substantial funds may produce the same commodity as of the old business or it may produce some other distinct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. One thing is certain that the new undertaking must be an integrated unit by itself wherein articles are produced. The industrial unit must be new in the sense that new plant and machinery are erected for producing either the same commodity or....