TaxTMI 
TaxTMI 
2007 (3) TMI 286
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.... the Department have been incurred by the assessee at Aurangabad unit. The Aurangabad unit commenced manufacturing sometime in the year 1975-76 and as part of expansion of business, new units were started in Daman in the year 1994-95. During the previous year relevant to the assessment year, the production at Aurangabad unit came to a standstill due to labour problems and also on account of the fact that the old and outdated machineries resulted into low profit. The workers at Aurangabad resorted to a strike. The assessee made efforts for settlement and reconciliation with the workers, but these efforts failed and eventually production had to be stopped. During the present year the Aurangabad unit did not function a single day. 4. The assessee incurred the following expenses: ---------------------------------------------------- S. No. Particulars Amount (Rs.) ---------------------------------------------------- 1. Staff payment  ....
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....ty and accordingly, the workmen who were on the roll of the company reported for work w.e.f. 1st Sept., 1999. After cleaning up the factory and preparing for commencement of work in the factory, the management initiated all the required steps to put the manufacturing activities on stream. The machines were arranged and kept ready. However, the management was required to apply for the renewal of the Food and Drug Administration licence required for the manufacturing of drugs and medicines. The drug inspector of Aurangabad, along with the Asstt. Commr.-Food and Drug Administration, visited the plant on 20th Dec., 1999, and carried out the inspection of the premises, plant and machinery. In the inspection report, the drug authorities have pointed out many deficiencies and have refused to renew the manufacturing licence unless and until all the defects, deficiencies and shortcomings observed and pointed out by the Food and Drug Administration authorities are rectified, attended to and complied with to the satisfaction of the authorities. The company also appointed M/s S.R. Enterprises, the renowned project consultants for pharmaceuticals and food processing industries to advise the man....
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....arned counsel appearing for the assessee forcefully argued before us that the manufacturing activity at Aurangabad unit was part of the larger manufacturing activity carried on by the assessee at three units. All the three units are engaged in manufacturing of identical pharmaceutical formulations. It is contended that under compelling circumstances, the Aurangabad unit was closed but the same manufacturing activity was continued at the two units at Daman. It is argued that in these circumstances compensation paid to workers of Aurangabad unit is allowable business expenditure and for this proposition he relied on the following cases: (i) CIT vs. Diesel Engineer (1998) 149 CTR (Mad) 146 : (2000) 244 ITR 488 (Mad); (ii) CIT vs. P.I. Simon (1991) 187 ITR 302 (Ker). 11. The learned Departmental Representative supported the orders of the Revenue authorities and relied on Tribunal Mumbai decision in the case of Jt. CIT vs. Abbot Laboratories (India) Ltd. (2006) 102 TTJ (Mumbai) 423 : (2006) 100 ITD 343 (Mumbai). 12. We have considered the rival submissions and have gone through the relevant facts. In the case of Diesel Engineer, the assessee firm was carrying on certain manu....
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.... closed due to reasons already mentioned supra. The other two units have continued the similar manufacturing activity, Considering these facts in our view the Aurangabad unit was part of the same business activity and, therefore, the compensation paid at the time of closure of the unit would be an allowable expenditure. We, therefore, delete the addition. 14. Ground No. 2 pertains to disallowance of depreciation of Rs. 7,72,903 in respect of the assets of Aurangabad unit. The depreciation has been disallowed by the AO and such disallowance was confirmed by the CIT(A) on the ground that the assets at Aurangabad were not put to use even for a single day during the entire year. The learned counsel submitted before us that since the assets were kept ready for use, the depreciation was allowable. It is further contended that after introduction of the concept of "block of assets" depreciation must be allowed. 15. The learned Departmental Representative supported the orders of the Revenue authorities and relied on the Tribunal Mumbai decision in the case of Asstt. CIT vs. Rishiroop Polymers (P) Ltd. (2006) 105 TTJ (Mumbai) 132 : (2006) 102 ITD 128 (Mumbai). 16. We have considered....
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....ct of interest income and sales-tax refund. The details of interest income are on p. 43 of the paper book. The learned counsel appearing for the assessee contended that interest is being earned on bank fixed deposits and other advances necessitated by business compulsions and, therefore, the assessee is entitled to deduction. The learned Departmental Representative relied on the Supreme Court decision in the case of Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99 : (2003) 262 ITR 278 (SC). 20. We have considered the rival submissions vis-a-vis the facts and the legal position. In the case of Pandian Chemicals Ltd., interest income was earned on deposits with State Electricity Board for supply of electricity to the industrial undertaking. The Supreme Court held that such interest is not income derived from the business of the industrial undertaking. From the above case it may be seen that even though the deposit with Electricity Board was made by the assessee for the purpose of operating industrial undertaking, the apex Court held that interest income received on such deposit was not eligible for deduction as it cannot be said to be income derived from the business of the u....