TaxTMI 
TaxTMI 
2008 (3) TMI 24
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....ncome Tax Act, 1961 (forshort as 'Act') from assessment year 1995-96 onwards. The Assessee's claim ofdeduction was initially not objected to for the assessment year 1995-96 as no scrutiny assessment under Section 143(3) of the Act was made and only processing of the return of income was done under Section 143(1)(a) of the Act. During the course of the assessment proceedings under Section 143(3) of the Act for assessment year 1996-97, the Assessing Officer asked the Assessee to justify its claim of deduction under Section 80-IA of the Act. The Assessee submitted that during the period relevant to assessment year 1995-96 and thereafter he had setup a new project with the state of art technology for multiplying the production capacity and enha....
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....d done was to undertake a modernization-cum-expansion programme of the existing undertaking. For this, the Assessing Officer relied upon the extract from the Directors' report for the year 1993-94. It was further held by the Assessing Officer that no separate and independent industrial unit came into existence and it was only absorption of the old business and so-called new industrial undertaking was nothing but modernization of the existing unit and as such the Assessee's case was hit by the provisions of Section 80-IA(2)(i) of the Act. The Assessing Officer, therefore, disallowed the claim of the Assessee under Section 80IA of the Act. 5. Against the assessment order, the Assessee f....
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....nvestment in plant and machinery amounting to Rs.104.88 lacs. Further, the old unit became unviable with coming into existence of new industrial undertakings backed with latest technology, higher efficiency and better quality product. The Assessing Officer himself has stated that there was a complete absorption of the old business by the new unit and this absorption makes it all the clear that in certain part of the year, both the units existed independently simultaneously and the old unit gradually faded away after coming into the existence of new industrial unit. All these facts goes on to show that the new unit set up by the Assessee was not formed either by splitting up of the existing industrial undertaking or formed by reconstruction ....
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....p; As observed by Supreme Court in Textile Machinery v. CIT [1997] 107 ITR 19(SC), 'The term 'reconstruction' implies that the identity of the business should not be lost, and substantially the same business should be carried on by substantially the same person. The true test is not whether the new industrial undertaking connotes expansion of the existing business of the Assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business'. 12. As per findings of fact recorded by the Tribunal, it has been stated that 'in the present case the old undertaking no longer existed and remained identifiable. It was completely....
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....ial undertaking. The undertaking must continue to carry on the same business though in some altered or varied form. If the alteration and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. (See CIT v. Gaekwar Foam and Rubber Co. Ltd. [1959] 35 ITR 662 [Bom.] 14. From the perusal of Section 80-IA of the Act it is clear that the statute itself has envisaged and approved of a situation in which an old existing smaller industrial undertaking is absorbed by a new much bigger industrial undertaking. 15. In the present case, only capacity was increased and there was expansion of old business with so....