TaxTMI 
TaxTMI 
TaxTMI 
2010 (12) TMI 1229
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....s follows. The assessee's Unit No. I was situated at No. 36 Silver Industrial Estate, Bhimpore, Daman. There is no dispute that this Unit was entitled to the deduction under section 80-IB. During the year ended 31.03.2004, relevant to the assessment year 2004-05, the assessee started Unit II on the second floor of the aforesaid building and made a claim for deduction under section 80-IB in respect of the profits derived from the said Unit. In the assessment order passed on 27th December 2006 for the assessment year 2004-05 under section 143(3), the Assessing Officer held that Unit II was actually an expansion of the existing manufacturing facilities of Unit I and, therefore, was not eligible for the deduction under section 80-IB from the assessment year 2005-06. For the assessment year 2004-05, however, the deduction under section 80-IB was allowed because that was the fifth and last year for claiming the deduction in respect of Unit I. Apparently the deduction for both Unit I and Unit II was allowed in the assessment year 2004-05 because the Assessing Officer had considered Unit II to be only an expansion of Unit I. However, in the assessment order for the assessment year 2004-05....
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....2005-06 reveal that the Assessing Officer had rejected the assessee's claim on the ground that the new Unit did not satisfy the tests of - (a) physical severance, (b) technical severance, and (c) financial severance. It is seen that the Assessing Officer while discussing the aspect of technical severance in the assessment order for the assessment year 2004-05 had noted that the new Unit was set up with new set of plant and machinery and had also attributed the increase in the manufacturing capacity to the addition of new machinery in Unit II. While discussing the aspect of financial severance, he had also conceded the possibility of the new funds having been taken by the assessee for the purchase of new manufacturing facility. In short, he did not question the assessee's claim that the Unit II was set up with the help of new machinery and plant, for the acquisition of which the assessee had taken fresh funds. Nevertheless he observed that the claim based on technical severance would have been accepted if the assessee had started manufacturing an entirely different product in the new Unit using entirely different raw material and supplying the products to an entirely different....
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....2008) 111 ITD 190 (Mum) (SB) (2) Periyar Chemicals Ltd. vs. CIT (1997) 226 ITR 467 (Ker) (3) CIT vs. Naya Sahitya (1972) 84 ITR 567 (Del) 11. The learned counsel for the assessee relied strongly on the findings recorded by the CIT(A) in his order for the assessment year 2004-05 and pointed out that these findings were not challenged by the revenue by filing an appeal to the Tribunal and, therefore, the findings continued to prevail and should be given due weight. On the merits of the assessee's claim, he submitted that even if the assessee manufactures the same items in Unit II, it will be eligible for the deduction under section 80-IB in view of the judgment of the Supreme Court in Textile Machinery Corporation Ltd. vs. CIT (supra) as also the judgment of the Supreme Court in the case of CIT vs. Indian Aluminium Co. Ltd. (1977) 108 ITR 367 (SC). He also strongly relied on the judgment of the Bombay High Court in the case of CIT vs. Associated Cement Companies Ltd. (1979) 118 ITR 406 (Bom). He agreed that the product manufactured in Unit II falls in the same excisable item under which the products manufactured in Unit I also fall, but contended that it is irrelevant in the lig....
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....ing the investment the assessee took additional term loan of ₹ 1,20,00,000/-. Thus the funds or accruals generated in Unit I were not utilized in the Unit II, which was a financially separate and viable proposal. The CIT(A) has also recorded two important findings in the aforesaid order, namely, (i) that in the new Unit the assessee was manufacturing "flexible laminated packaging material", whereas in the old Unit it was manufacturing "monolayer poly films"; and (ii) that the process of manufacturing in both the Units was different as explained by the assessee with the help of a process flow chart. It also appears to us from the specimen invoices filed by the learned counsel for the assessee before us that though the products manufactured by both the Units fell under the same excisable goods, namely, "plastic plain & printed bags" and the tariff was also the same, the quality was different as can be seen from the fact that the product manufactured by Unit I was priced at ₹ 408.14 per unit whereas the product manufactured by Unit II was priced at ₹ 696.89 per unit. It is noteworthy that the invoice relating to Unit I shown before us is dated 1st March 2004 where....