TaxTMI 
TaxTMI 
2026 (9) TMI 1635
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....03.1999 143(3) r.w.s.243 3. 4376/Del/2026 1997-98 -Do- 16.02.2000 143(3) 4. 4377/Del/2026 1998-99 -Do- 20.11.2000 143(3) 5. 4378/Del/2026 1999- 2000 -Do- 29.03.2004 147 r.w.s.143(3) 6. 4379/Del/2026 2000-01 -Do- 29.03.2004 143(3) 7. 4380/Del/2026 2001-02 -Do- 28.03.2003 143(3) 8. 4381/Del/2026 2002-03 -Do- 09.12.2004 143(3) 9. 4382/Del/2026 2003-04 -Do- 25.02.2005 143(3) 10. 4383/Del/2026 2004-05 -Do- 21.03.2006 143(3) 3. Since all the appeals are having common issues which fact is fairly admitted by both the parties before us, therefore, all the appeal are taken together and decided by a common order. 4. We take the appeal of the assessee for AY 1995-96 in ITA No. 4374/Del/2026 as the lead case. 5. Briefly stated the facts are that assessee has filed its return of income on 29.11.1995 declaring total income at Rs. 1,27,11,600/- after claiming deduction u/s 80IA of the Act on the profits of derived from new manufacturing unit installed at Gat No. 1242/44, Village Vadubudruk, Taluka Shirur, Pune for the manufacturing of "Hydrauli....
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....95-96. Therefore, for deciding the issue, the relevant questions, which need to be answered, are as under: i. Whether the nine machines costing Rs. 90,32,912, which were installed before 31.03.1995, brought into existence an integrated independent unit, which by themselves, independently of the old unit, were capable of producing the Product - 8043 (Type 302). ii. Whether the new machinery costing Rs. 2,74,52,116 installed and the old machinery of WDV of Rs. 64,12,458 transferred from the old unit, in the subsequent year, were needed to make the impugned unit integrated and independent. iii. Whether the Product - 8043 (Type 302) was also being manufactured in the old unit during the period 1.04.1994 to 31.03.1995. iv. Whether the Product - 8043 (Type 302) was shown to have been manufactured simultaneously in the old unit as well as in the new unit independently of the old unit during the months of February and March 1995. v. Whether there is any evidence, from the relevant contemporaneous production records maintained in the factory to prove that the 890 units of the Product - 8043 (Type 302) were actually manufactured/ produced in the n....
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....and phased installation within the same financial year, thereby vitiating the conclusions drawn. 6. That the learned CIT(A) erred in treating the Grinding Machine - Mysore Kirloskar (installed on 31.03.1995) as indispensable, ignoring that a grinding facility already existed and the said machine was only an additional unit, rendering the adverse inference on production capability factually incorrect and unsustainable. 7. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has has erred in drawing adverse inference regarding absence of production in February-March 1995 on erroneous assumptions, ignoring contemporaneous evidence such as sales records, RG-1/MODVAT records, financial statements and statutory documents. 8. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that there was splitting up or reconstruction of existing business based merely on variation in production levels, ignoring settled law and commercial realities. 9. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in disregarding relevant evidences such as increase in licensed cap....
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.... by the assessee on the basis of oral arguments advanced by both the parties and the written submission and paper books placed before us by the ld. AR for the assessee during the course of hearing. 11. As observed above, the solitary issue for examination which is common in all the assessment years is whether the assessee had started manufacturing activity on or before 31.03.1995 so as to get the eligibility for claiming the deduction u/s 80IA/80IB of the Act for Ten consecutive assessment years starting from AY 1995-96. 12. Before us, the ld. AR for the assessee, submits the Tribunal, vide its order dated 04.08.2006, had also laid down certain guiding principles while framing five questions for consideration of the Ld. CIT(A). According to the Ld. AR, the said principles are in the nature of directions which ought to have been followed by the Ld. CIT(A) while passing the order pursuant to such directions in the set aside proceedings. As per law to claim deduction u/s 80IA of the Act, new unit must be independently capable of manufacturing the articles and should not be dependent upon the old existing unit, so as to be regarded merely as an expansion of the old unit. The empl....
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....auguration on 24.02.1995. Page 56 contained the newspaper cutting of the advertisement published in Economic Times, edition on 25.02.1995 and page 29 contained the photographs of inaugural function (forming part of audited financial statements) attended by Mr. Erwin Teufel, Minister-President of Baden-Württemberg, Germany. From the perusal of these photographs, fact that they had visited the newly installed unit where various machines purchased and installed at the time of inauguration, as well as the production process being carried out on such machines stood confirmed. Thus the ld. AR submits that this conclusive evidence reaffirming the claim of the assessee that new unit was operational as on the date inauguration cannot be ignored/ brushed aside. 15. Ld. AR refers pages 80 to 81A of the PB containing the details of the new machinery purchased for new unit and their date of receipt/installation. The Ld. AR submits as per these details total two Grinding Machineries were purchased by the assessee out of which one was received on 15.06.1994 and the other was received on 31.03.1995. As per ld. AR, production could be possible from one Grinding machine and therefore, the al....
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....ing and purchase of plant and machinery. * The project was financed through a rights issue of 22,500 equity shares of Rs. 10 each at a premium of Rs. 30 per share. (Refer to heading "Finance" at P. No. 6 of PB). * The audited balance sheet also shows that a term loan of Rs. 2.97 crores was raised from ICICI Investment Corporation, and a major part of the industrial establishment of Rs. 1366 lakhs, was completed. (Refer to heading "Finance" at P. No. 6 of PB) * The new factory building was inaugurated on 24th Feb 1995. (Refer to heading "Finance" at P. No. 6 of PB) Fixed Asset Schedule, Building plan and revised building plan PB 18 & PB 35-36 * Shows construction of separate/new factory building. * The fixed asset schedule (at page 18 of PB) shows the cost of the building as Rs. 1 crore as of 31st March 1994, with Rs. 1.78 crores added during the year, confirming the construction of a new building for manufacturing operations. Increase in Production Capacity (Audited Balance- sheets of FY 94-95 & 95-96) PB 25 & 274 * With the acquisition of plant and machinery of Rs. 7.96 Cr (P. No. 18 PB) in FY 1994-95, increase in capacity (PB 25) Type of Gear L....
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....ng agreement (pages 77-79 of PB). Machinery chart for F.Y. 1994-95 PB 80-81A Shows nine machines costing Rs. 90,32,912/- installed before 31.03.1995 for the new unit. Chartered Engineer's certificate PB 82-90 Certifies that the machinery installed before 31.03.1995 constituted a complete assembly line and was technically capable of manufacturing Product 8043 independently. MSEB load sanction PB 92-97 * Load sanctioned for the new unit by Maharashtra State Electricity Board, with certificate/order dated 10.08.1994. (P.No. 92-96 of PB). * Power consumption increased significantly, as reflected in the profit and loss account. [P. No. 15 r/w P. No. 22 (Schedule P) of PBJ Excise consultant opinion PB 98-99 Contemporaneous advice regarding Central Excise registration/compliance for new unit. Manufacturing process PB 101-102 and PB 453- 456; chart at PB 443 Shows process flow and machines used for Nut/Worms, Sector Shaft, Pistons, assembly and testing. Unit-wise P&L, raw material consumption and taxable profit bifurcation PB 103-109 Shows unit-wise financial results, material consumption and expenses of new unit. Monthly prod....
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.... the new undertaking. Supports separate operational identity. Capacity Licensed capacity increased from 20,000 to 36,000 units and installed capacity from 10,000 to 24,000 units. Corroborates establishment of new capacity. Phased expansion Project was implemented in phases; subsequent machinery was added for expansion. Rebuts CIT(A)'s view that later machinery proves earlier incapability. Old machinery No plant and machinery was transferred from old unit to new unit in the initial year. Rebuts allegation of splitting up/reconstruction. Common records One excise/sales tax registration and one invoice series existed because both units were in the same factory campus. Rebuts adverse inference from common statutory records. Invoices Invoices were stamped to identify old/new unit sales. Rebuts allegation of afterthought. Common services Common services were used for efficiency, economy and synergy. Common services do not destroy independent undertaking. Expense allocation Common expenses were allocated on a reasonable basis. Supports reliability o: wise computation. 15. Thus, the evidences now relied upon are....
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....independently. 29. The Ld. CIT(A) has rejected the Chartered Engineer's certificate mainly because the visit was in 2006. This rejection is untenable. The certificate was not relied upon to prove that the engineer personally witnessed production in 1995. It was relied upon as expert technical opinion on whether the machinery installed as per contemporaneous records was capable of independent production. Such technical opinion could not be rejected without any contrary expert material. 30. Further, the rejection of the Chartered Engineer's certificate by the Ld. CIT(A) is contrary to settled principles governing appreciation of expert/technical evidence. The Hon'ble ITAT Ahmedabad Special Bench/Third Member in ACIT v. National Lamination Industries [2007] 109 ITD 181 (Ahd) (TM), while dealing with deduction under section 80IB, held that once expert opinions from recognised technical institutions were filed, the same were required to be considered on merits; though such opinion may not be sacrosanct, it cannot be ignored and must either be accepted or rejected on cogent reasons, especially where no contrary technical material is brought on record. ....
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....nd ease in manufacturing process. 38. The CIT(A) has overlooked that in F.Y. 1994-95, several parts/components were being procured from vendors, and manufacturing with bought-out components is commercially normal. A unit does not cease to be a manufacturing unit merely because some parts are bought out. The assessee was carrying out substantial manufacturing, assembly and testing operations in-house. 39. Subsequent installation of boring, turning, hobbing, milling or surface grinding machines does not mean the earlier line was incapable. It only shows phased industrial implementation and augmentation. Industrial projects are not static; capacity is expanded after commencement. 40. The installed capacity itself increased from 24,000 units in F.Y. 1994-95 to 36,000 units in F.Y. 1995-96. This supports the assessee's case that later additions were for capacity enhancement and not for first-time creation of independent capability. 41. Further, even the old machinery transferred in the subsequent year was within the statutory tolerance, and in any case was not the basis on which the new unit came into existence before 31.03.1995. 42. Ther....
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.... Commissioner of Income-tax v. Leo Fasteners [2017] 84 taxmann.com 6 / 398 ITR 462 (Mad.); SLP Dismissed in CIT v. Leo Fasteners [2018] 95 taxmann.com 18 (SC), the Revenue had similarly alleged that the eligible unit had taken over the manufacturing activity of the earlier concern/unit. The Hon'ble Madras High Court rejected the allegation and held that even if the assessee ultimately took over the manufacturing activity earlier carried on by the old concern, that by itself would not disentitle the assessee from deduction under section 80IB. 52. The High Court further held that the Revenue cannot deny deduction merely because the product manufactured by the new unit is commercially similar to that manufactured by the old unit. The statute only requires manufacture or production of an article or thing; it does not require that the article must be different from that manufactured in the old unit. 53. In the present case also, the assessee has established a new unit with separate/new factory building, fresh capital, new machinery, increased sanctioned power load, fresh employees, enhanced capacity, unit-wise accounts and independent production/sales records. ....
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....urcation as "self- serving". These are not self-serving loose papers but regular books/statutory/accounts supported by material consumption records, invoices and excise/NODVAT records. In absence of any rejection of books or contrary enquiry, these records could not be ignored. 6. Therefore, Question No.5 also deserves to be answered in favour of the assessee." 20. Thereafter, Ld. AR has rebutted all the allegations made by the Ld. CIT(A) in its order as tabulated below: XI. SPECIFIC REBUTTAL OF CIT(A)'S KEY OBSERVATIONS S. No. Observation of Ld. CIT(A) Rebuttal on behalf of the assessee PB / Case-law reference i. Mere inauguration of factory building on 24.02.1995 does not establish that the new unit was an integrated and independent undertaking. * The assessee has never claimed deduction merely on the basis of inauguration. * Inauguration is only one contemporaneous event evidencing readiness of the new unit. * The claim is based on cumulative evidence, namely separate/new factory building, fresh capital, new machinery, increased electricity load, enhanced licensed/installed capacity, fresh employees, unit- wise accounts, sales ....
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.... grinding function attributed to Mysore Kirloskar Grinding Machine was capable of being carried out on the other grinding machine already available with the assessee. * Without prejudice, even assuming that any support of old unit machinery was taken for such limited grinding operation, the value of Mysore Kirloskar Grinding Machine was only Rs. 12,00,000/-, which was far below the permissible 20% limit for use/transfer of old machinery. * The Ld. CIT(A) has wrongly assumed that unless every machine was available on the date of inauguration, the new unit could not be said to have come into existence. * The correct test is whether the unit had come into existence and was capable of manufacture before 31.03.1995, not whether the entire production line was complete on 24.02.1995. * Further, Product 8043 consisted of several parts and the manufacturing process involved in-house operations as well as bought-out inputs/sub- assemblies. * Such commercial mode of manufacturing cannot be equated with splitting up or reconstruction of the old unit. * Manufacturing process: PB 101- 102, PB 453-456; * Chartered Engineer's certificate: PB 82- 90. V. Mysore Kirlosk....
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....t production and commencement of production in new unit only shows commercial transition and capacity redistribution. * It does not prove splitting up or reconstruction. The old unit continued to exist; there is no finding that the old unit was dismantled, closed or that its entire plant was shifted. * A new unit can manufacture the same product as the old unit if it has fresh capital, new plant and independent capability. * In ACIT v. Leo Fasteners [2017] 84 taxmann.com 6 / 398 ITR 462 (Mad.), SLP dismissed in CIT v. Leo Fasteners [2018] 95 taxmann.com 18 (SC), the Revenue had similarly alleged that the eligible unit had taken over manufacturing activity of the earlier concern/unit. The Hon'ble Madras High Court rejected the allegation and held that such takeover/transition, by itself, does not disentitle the assessee from deduction. * Production data: PB 110-112. * Textile Machinery Corporation Ltd. v. CIT, Case Law PB 107-114; * CIT v. Indian Aluminium Co. Ltd., Case Law PB 51-52; * CIT v. Associated Cement Companies Ltd., Case Law PB 149-151. * ACIT v. Leo Fasteners [2017] 84 taxmann.com 6 / 398 ITR 462 (Mad.), SLP dismissed in CIT v. Leo Fasteners [....
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....55, especially PB 46- 49. * Textile Machinery Corporation Ltd.; * Gujarat Alkalies; * Finolex Cables. xii. Total project cost was Rs. 13.66 crores, whereas machinery investment in F.Y. 1994-95 was only Rs. 90.32 lakhs; therefore, no complete independent unit existed. * The observation proceeds on a wrong factual premise. * As per the Rights Issue Letter dated 23.12.1994, the estimated project cost of Rs. 13.66 crores was not exclusively for setting up the new unit. * It was for the overall expansion-cum-diversification project, including increase in installed capacity of Power Steering Gears for HCVs from 10,000 n.p.a. to 24,000 n.p.a. and for LCVs from 3,600 n.p.a. to 16,000 n.p.a. * The HCV power steering gears continued to be manufactured in the old unit and were never manufactured in the new unit. * Therefore, the Ld. CIT(A) wrongly assumed that the entire Rs. 13.66 crores was required to be deployed for establishment of the new LCV unit. * Further, the project cost itself included several heads, namely building, imported/indigenous plant and machinery, electrification, furniture and fixtures, vehicles and working capital. * The Fixed Asset S....
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.... * It supports technical capability. * Production is proved through other contemporaneous/alternative records, namely unit- wise P&L, material consumption, sales register, invoices, production/dispatch data and RG- 1/MODVAT workings. Certain primary records were destroyed due to the 2006 floods, which is supported by photographs and news report. * Unit-wise accounts: PB 103-109; * production/dispatch: PB 110-112; * sales invoices: PB 113-134; * RG-1/MODVAT: PB 134A-134L; * flood evidence: PB 228-232. xvi. Invoices were in continuation of old unit invoice series and only bore rubber stamp of new unit; hence they may be afterthought. * Separate invoice series is not a statutory condition under section 80IA/80IB. * The issue is whether turnover and results of the new unit can be identified. * The invoices were part of regular sales records and are corroborated by unit-wise accounts, material consumption, production data and RG-1/MODVAT workings. * No third-party/customer verification was conducted by the Department to disprove the invoices. Suspicion cannot replace evidence. * This issue was already explained in the first appellate proceedings. ....
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....ilities could not be treated as splitting up or reconstruction. * He also accepted that common services such as heat treatment, quality, maintenance, purchase, marketing and accounting were used for efficiency, economy and synergy. Occasional interchange of workers due to absenteeism or idle capacity is normal business practice and does not amount to splitting up or reconstruction. * Without fresh adverse material, the same conclusion could not have been reversed on conjectures. * Machinery PB 80-81; chart: * comparative chart: PB 437-442. * Atul Ltd. v. ACIT, Case Law PB 1-12. * CIT(A) Order dated 03.03.2000 (AY 1996-97) xx. The assessee failed to prove manufacture of 890 units independently in the new unit. * The assessee produced the best available contemporaneous and corroborative evidence. Production/sale of 890 units is supported by unit- wise accounts, material consumption, sales register, invoices, production and dispatch data and RG- 1/MODVAT workings. * Loss of certain primary records due to floods was beyond the assessee's control and is supported by evidence. * Further, the earlier CIT(A) recorded that sales of both units were report....
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.... 92 ITR 173 (Delhi); Case Laws PB 159-164 23. It is thus, prayed by the Ld. AR that the assessee has successfully demonstrated that new unit was installed and commercial production was commenced form the same upto 31.3.1995 and therefore, the assessee is entitled for the deduction u/s 80IA of the Act. He prayed accordingly. 24. On the other hand, the Ld. DR stated that ld. CIT(A) had recorded a finding that, as per the chart furnished by the assessee during the appellate proceedings, the critical machines essential for the manufacturing process, namely, CNC ACE Auto Lathe, Testing Machine and Mysore Kirloskar Grinding Machine, were installed after 24.02.1995, i.e., on 01.03.1995, 25.02.1995 and 31.03.1995, respectively. Accordingly, it was contended that no production could have taken place on or before 31.03.1995, as claimed by the assessee. The Ld. DR further contended that the Chartered Engineer's certificate was not a contemporaneous document, having been obtained in 2006, and therefore, could not be relied upon for determining the position as it existed on 31.03.1995. He also supported the finding of Ld. CIT(A) that the Chartered Engineer's certificate did not co....
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....ngly, even if, a minor process for a short period was done at old unit, the same would not disentitle the assessee from claiming the deduction u/s 80IA of the Act. He further contended that Section 80IA itself permits the use of old machinery up to 20% of the total value of the new machinery. In support of this contention, reliance is placed on the judgement of hon'ble Gujarat High court in the case of Atul Ltd. v. ACIT (OSD) reported in 2024:GJHC:70791 and in the case of Gujarat Alkalies & Chemicals Ltd. v. Commissioner of Income Tax reported in [2013] 350 ITR 94 (Guj.) and in the case of Pr. Commissioner of Income Tax v. Medley Pharmaceuticals Ltd. reported in [2019] 7 TMI 1414 (Bom.). 27. Ld. AR further contended that, even if the finding of the Ld. CIT(A) that the Testing Machine and CNC ACE Auto Lathe machine were installed on 25.02.1995 and 01.03.1995, respectively, were accepted, the same would support the case of the assessee that manufacturing activity had commenced on or before 31.03.1995. Regarding the installation of other Grinding Machine received on 31.03.1995, as stated above, it was explained before the Ld. CIT(A) that the said machine was second set of the s....
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....n of new building, obtaining license for industrial production on 06.04.1994, raising loan from ICICI, and issuance rights issue for financing the purchase of the said machinery and building construction increases in installed capacity, approval from Ministry of Industrial Development which cannot be doubted. Further, letter sanctioning the additional power load, appointment letters issued to the staff of the new unit and the audited Balance Sheet for the year ending 31.03.1995 are also filed before the lower authorities to establish that new building was constructed and new plant & machinery was duly installed. 31. The contemporary evidence in the form of photographs annexed to the audited Balance Sheet for F.Y. 1994-95, confirming the visit of Mr. Erwin Teufel, Minister-President of Baden-Württemberg, Germany, along with other Directors from Germany to inaugurate the new unit on 24.02.1995, cannot be ignored. The event had witnessth the construction, installation and production from new machinery at new unit in February 1995. Third party evidence like the advertisement published in 'The Economic Times' on 24.02.1995, announcing the inauguration of new unit, is als....
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....ssessee has explained the entire manufacturing process and functions performed by each machine to demonstrate that these machines are capable of independently manufacturing Product Code 8043 (Type 302) before of the end of the previous year relevant to assessment year under consideration. For this following evidences were filed by the assessee: 1. Chartered Engineer's certificate who has certified that manufacturing process could have been independently carried out with the eight machines available at the time of inauguration. 2. The Mysore Kirloskar Grinding Machine installed on 31.03.1995 was the second grinding machine and that the grinding operation required for manufacture of the product was being performed by another grinding machine which was already available at the time of inauguration of the new unit. 3. The CNC ACE Auto Lathe Machine though may be not installed on 24.02.1995 however, admittedly when it was installed on 01.03.1995 and such delay in no manner refutes the assessee's claim that manufacturing activity was commenced upto 31.3.1995. Moreover, for few days if the old machine was used that would not disentitle the assessee from clai....
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.... exceed twenty percent of the total value of the machinery or plant used in the business, then, for the purpose of clause (i) of the sub-section (3), the condition specified therein that such new industrial undertaking is not formed by transfer to a new business of machinery or plant previously used for any purpose shall be deemed to have been complied with. Therefore, even considering the fact that the boiler was used for the purpose of obtaining steam to run the new turbine for generation of the power, cost of new turbine is less than twenty percent of the total value, would Condition No. 2 of the conditions prescribed in Clause (i) shall be deemed to have been complied with in the facts of the case. The total value of the plant and used for the purpose of generating power works out to Rs. 14,56,44,295/- (Rs. 18,27,180/- value of the plant and machinery and Rs. 1,26,42,715/- for turbine new industrial unit) and the value of boiler (pre-existing and pre-used) is Rs. 14,76,600/- purchased second hand on 09.11.1998. In view of such facts even as per the Explanation-2 to section 80IA(3) there is no breach of the condition on use of the old boiler for obtaining steam to run the turbin....
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.... will go to establish the assessee's claim that the unit formed in 1998 is a new undertaking: i. the old unit approved under license No.CIL/420 (1985) dt.26-12-1985 started producing Iron ore in the year 1986 and was setup at a total cost of Rs. 3 crores having a capacity of producing 2 lac tons of beneficiated Ore per year; ii in these circumstances it was considered imperative to install a new and more sophisticated beneficiation plant whose operations would result in production of higher ferrous content of about 63% plus; iii. accordingly the appellant applied for allowing it to import plant and machinery, pursuant to the approval from the Ministry of Industry, an agreement came to be entered into between the appellant and the Government which recognized the setting up of the new unit and required that the unit should comply with fresh net foreign exchange earnings from the date of commencement of production of newly set up unit; iv. pursuant to the approval the appellant set up and installed primary beneficiation section (PBS-II) and other related plant and machineries along with a slime treatment plant from a Swedish company, this plant ....
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....ld machinery transferred WDV of Rs. 64,12,458 transferred from the old unit, in subsequent year, were needed to make the new unit integrated and independent?" 44. The allegation of ld. CIT(A) in this regard was that the initial investment during F.Y. 1994-95 was only Rs. 90 lakh out of the total investment of Rs. 13.66 crores. Further, major amount of Rs. 3,38,64,574/- was spent for purchases of new machinery in the subsequent year, thus the new unit became an integrated and independent unit only in the subsequent year and not in A.Y. 1995-96. Ld. CIT(A) further alleged that some machines such as boring machines, turning machines, hobbing machines, surface grinding machines, milling machines, etc., which were essential to make the unit integrated and independent, were installed after 31.03.1995, thus it could not be said that the new unit had become an integrated and independent unit during A.Y. 1995-96. 45. It was the claim of the assessee that, in the subsequent year, more machineries were installed to increase the production capacity, create additional facilities, develop in-house capacity for certain parts which were earlier purchased from vendors, and facilitate the manu....
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....shed goods in the form of Hydraulic Power Steering Gears capable of being sold as a unit. All this manufacturing process was done through new machines installed in the year under appeal. 48. Ld. CIT(A) without bringing any contrary material on record to dispute the contention raised by the assessee has alleged that the without the help of new machines purchased in FY 1995-96 manufacturing in the year under appeal i.e. in AY 1995-96 was not possible. 49. The Hon'ble jurisdictional High Court in the case of Commissioner of Income Tax & Ors. v. M/s Delhi Press Patra Prakashan Ltd. & Ors. Reported in [2013] 355 ITR 14, while allowing the deduction u/s 80I, which is similar to Section 80IA/80IB, held that nothing in the language of Section 80I disqualifies an undertaking from claiming the benefit merely because it processes raw material supplied by others. Relevant findings of the Hon'ble Court are as follows: "42. We are unable to appreciate the contention that the industrial undertaking which undertakes job work would not be entitled to claim deduction under Section 80I of the Act. The language of Section 80I(2) of the Act does not indicate in any manner that an industr....
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....e product was manufactured in old unit does not, by itself, militate against the existence of a separate and independent new undertaking. This view is supported by the order of hon'ble Supreme Court in the case of Textile Machinery Corporation Ltd. v. CIT (supra) wherein the Hon'ble Apex court has held that a new industrial undertaking may manufacture the same product as was manufactured by the existing undertaking, so long as the new undertaking is itself an integrated and independent unit. This fact was also appreciated by the Tribunal in its order dated 04.08.2006. 53. It is also not in dispute that separate factory building for new unit was constructed with fresh capital and new machinery with additional sanctioned power load and fresh manpower. Further, separate unit-wise accounts, production and dispatch records and sales records were maintained. We have already hold that the new unit was capable of carrying out the manufacturing process independently. 54. We also find merits in the explanation of the assessee that such continuation of production in the old unit was necessitated due to commercial considerations and the need to maintain continuous supplies to its custome....
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....no such condition provided in the Act that fresh series of bills is required to be issued from the new unit. Once the assessee has maintained separate records of purchases, material consumed and sale made, whether the invoices were issued of the same series or a single invoice book cannot, by itself, render them unreliable or can be a basis for denial of deduction us/ 80IA of the Act more particularly when the ld. CIT(A) had accepted the fact that stamp was affixed to identify the sales pertaining to the new unit. Further such invoices were accepted by the Excise authorities for the purposes of claiming MODVAT credit and constitute contemporaneous excise-linked records reflecting the production activity. There is also no material on record to show that the invoices bearing the identification of the new unit were not the invoices actually issued to the ultimate customers, nor any verification was done from the customers to disprove the sales made to them. If the lower authorities has doubts about the sale to these parties from the new unit, enquiries could have been made by issuing summon however, as observed above, no such effort was made either by AO or by Ld. CIT(A). Accordingly,....
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....red the rival submissions, the material placed on record and the findings of the lower authorities. The disallowance of depreciation was made merely on the presumption that the machinery received on 30.03.1995/31.03.1995 could not have been installed and made ready for use on the same day. However, the assessee furnished purchase invoices, Goods Inward Notes, purchase orders etc. It was also explained that the machinery was added to an already operational manufacturing set-up and no contrary material was brought on record by the Revenue to disprove the assessee's documentary evidence. The Hon'ble Delhi High Court in the case of Stitchwell Qualitex (RF) v. ITO & Anr. Reported in 2015 (9) TMI 850 (Del.) has held that the expression "used for the purposes of business" under section 32 includes a situation where the asset is kept ready for use. The Hon'ble Court also recognized this principle in the context of machinery installed in an expansion of an existing business. 65. In the present case, there is no dispute that the machinery was acquired. The assessee has submitted all the plausible evidence regarding its receipt and installation. The Revenue has also failed to b....