AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 436
X X X X Extracts X X X X
X X X X Extracts X X X X
....matic representation in respect of production of both the units so as to meet out cause of natural justice. Under the facts and circumstances of the case, ld. CIT(A) ought to have accepted the various submissions and documentary evidence produced to hold that the appellant had set up a new industrial undertaking eligible for deduction u/s 80I of the Act and ought to have quashed the order passed by AO. 2. The ld. CIT(A) has erred in law and on the facts in holding that the appellant's case was of expansion/modification of old unit and not of setting up of new industrial undertaking and thus making it ineligible for claim of deduction u/s 80I of the Act. Both the lower authorities gravely erred in holding that due to violation of the provisions of explanation 2 to section 80I(1), even while setting up a new unit, the appellant was not eligible to claim the deduction u/s 80I of the Act. 3. The ld. CIT(A) has erred in law and on facts in confirming the action of AO holding that the claim of deduction u/s 80I and 80HH of the Act was available to the appellant only for 8 and 10 years commencing from AY 1983-84. The ld. CIT(A) ought to have appreciated the submissions, evidences ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y had new machinery as well as old machinery used in claimed new industrial was rejected in AY 1993-94 as old machinery was more than 20%. As per assessment year 1993-94 claim for deduction for deduction u/s 80HH (2)(ii) were rejected. Which was confirmed by the CIT(A)IX, Ahmedabad vide order No.CIT(A)IX, GNR. As per direction of ITAT's order. I had verified the claim and .... Of assessment year 1993-94. I reject the claim u/s 80HH & 80I(2)9ii). I had verified the submission filed vide letter dated 23.11.2007. It is not disputed and denied that the assessee company has started installing new plant and machinery from AY 1988-89 in piece-meal and phasewise. It is also seen that the assessee company also claimed depreciation in respect of plant and machinery and building as they were installed/constructed and put into use in the respective assessment years. From the above there is no escapement from the conclusion that the intention of the assessee company was mere expansion of its business rather than setting up new industrial undertaking as a whole. Had the assessee company intended to set up new industrial undertaking it would not have claimed depreciation in respect of asset....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctively for the purpose of deductions under sections 80HH and 80I. The assessee company was therefore not eligible or entitled for deductions u/s 80HH and 80I for AY 1996-97." 3. Aggrieved, the assessee went in appeal before CIT(A) who also confirmed the addition made by the AO after giving proper opportunity to the assessee of being heard, by observing as under :- "5.2. I have considered the entire facts on record regarding this issue. The basic issue is, whether the appellant is entitled to deduction u/s 80HH and 801, in the given circumstances as referred supra. The A.O has elaborately discussed the issue in the assessment order . It is also noticed that Ld. C.I.T (A) in the order No. CIT(A)-6/DCIT S.K/287/09-10 dated 18/06/2010 for A.Y. 1991-92 -confirmed the addition in similar set of facts. The observation of CIT(A) are as under:- "Keeping in view the aforesaid facts, circumstances and various judicial pronouncements, the fact emerges that the appellant has claimed depreciation on the additional plant and machinery only in the year of installation (i.e. in the A.Ys. 1988-89, 89-90 and 90-91) which clearly establishes the fact that the plant and machinery installed in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claimed benefit u/s. 80HH and 80! in respect of the entire profit of the business. The concept of the old unit and the new unit was thought of afterwards when the appellant came to know that from the A. Y. 1991-92 it would not be entitled to the benefit of section 80! as eight years got over in the A. Y. 90-91. It is also a fact that new addition of plant and machinery was an essential requirement to manufacture changed item as per new technology. The appellant's claim of depreciation on the plant and machinery installed in the year of purchase, on the basis of actual use reveals that in order to manufacture modified items it required additional plant and machinery. Further it is also a fact that had there been new unit the appellant could have bifurcated the profit between the old and new unit right from the assessment year under consideration and it could have claimed benefit u/s. 80HH in respect of profit of old unit and 801 in respect of new unit. It is a fact that the production has gone up due to expansion/modification of the old unit and due to adoption of new plant technology. Only increase in production and power do not establish that the new unit has been set up....
X X X X Extracts X X X X
X X X X Extracts X X X X
....coustic Ind.(P) Ltd. 32 Manoj Ind.Estate 40A, G.D.Ambedkar Road Wadala, Mumbai-400031 PAN AABCC2902P DCIT SK Circle Himatnagar Dist.S.K. 2 2630/Ahd/2010 1993-94 Assessee Revenue 3 2631/Ahd/2010 1994-95 Assessee Revenue 4 2632/Ahd/2010 1995-96 Assessee Revenue dated 19/09/2014, are as under :- "5.1. The Id.CIT(A) confirmed the findings of the AO. The Id. counsel for the assessee placed reliance on the judgment of the Hon'ble Bombay High Court rendered in the case of Commissioner of Income-tax-V, Pune vs. Finolex Cables Ltd. reported at (2012) 24 taxmann.com 279 (Bom.) :: 114 TTJ 785 (Pune), whereas the Hon'ble High Court has held as under :- "13. The following principles of law clearly emerge from the decision of the Supreme Court- (i) There must be a new undertaking where substantial investment of fresh capital is made in order to enable earning of profit attributable to what new capital: (ii) The manufacturing or production of articles yielding additional profit attributable to a new outlay of capital in a separate and distinct unit is the heart of the matter; (iii) The true test is not whether a new industrial undertaking connotes expansion of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of "trial run" is an afterthought and just to take advantage of the deduction available u/s 80I and 80HH of the Act. As per the observation of the AO as taken from the submissions of the assessee itself clear that there was a substantial increase in the production turnover, which is reproduced as under:- AY 1988-89 Rs.1,27,63,220/- (20 months) AY 1989-90 Rs.1,53,09,991/- AY 1990-91 Rs.2,00,46,759/- 5.4 Under these facts, the onus was on the assessee to demonstrate the quantum of input used in all three years when the depreciation is claimed and also the quantity of production produced in the "trial run". Since the trial run has been made in all the three years, it was incumbent upon the assessee to explain that how many days trial run was carried out and how much electricity was consumed, whether raw material was used or not, whether any finished products were produced and what was the accounting treatment of these goods, etc. and nothing has been placed on record by the assessee. The Revenue has demonstrated that there is substantial increase in the production turnover of the old Unit and as per the Revenue, such increase in the production was not possible when the product....