TaxTMI 
TaxTMI 
2008 (2) TMI 445
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....n respect of Undertaking II and Rs. 55,17,158 under section 80-IA of the Income-tax Act in respect of Undertaking III. (ii) Without prejudice to the above and on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the Assessing Officer has erred in denying the deduction under section 80-I/80-IA to the assessee and further erred in holding that the assessee satisfies all the 4 requisites stipulated for eligibility for deduction under section 80-I/80-IA without appreciating the facts of the case that capsule manufacturing process involving various steps is to be treated as one integrated process and accordingly, feeding of gelatine sorting, printing, processing etc., should have been independent of old unit. (iii) Without prejudice to the above and on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that undertaking II/III are separate, independent undertaking entitled to deduction under section 80-I/80-IA of the Income-tax Act without fully appreciating the facts of the case that the capsule manufacturing machine may be the most important part of an integrated process, but it is not the w....
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....04. The relief sought for by the assessee under sections 80-I and 80-IA was however turned down by the Assessing Officer this year mainly for the reason that since the product manufactured by the assessee in all the four undertakings was capsules and that too in the units located in the same premises and hence all the four undertakings would constitute one undertaking and not four separate undertakings as claimed by the assessee. 5. Perusal of the record shows that the Department had carried out a survey under section 133A of the Income-tax Act at the factory premises of the assessee-company. At the time of survey, existence of all the four undertakings located in the same premises of the factory was noticed. It was also noticed that all of them were involved in the production of capsules. The Assessing Officer held the view that all the four undertakings claimed by the assessee to be separate and independent from each other for the purpose of relief under sections 80-I and 80-IA were essentially one undertaking as all of them were engaged in the production of the same article, namely, capsules in the same factory of the assessee-company. Based on the results of survey, he formed ....
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.... is attached to the gelatine dip tank of the respective hard capsule manufacturing machine. In other words, the supply of raw material is controlled and monitored machine-wise and also undertaking-wise. (v) The machines in each undertaking have distinctive features, for example, Undertakings III and IV have heat recovery system which does not exist in the machines installed in Undertakings I and II. Learned CIT(A) has mentioned several distinctive features in the machines used in each undertaking. (vi) Online sorting of capsules is carried out machine-wise. (vii) Sorting and packing operations are common operations for all the undertakings but they are in the nature of post-manufacturing operations. (viii) In terms of operational independence, each of the four undertakings is working independently of the other undertakings. He observed that production continued uninterruptedly in Undertaking IV even after the closure of Undertaking III. 7. Based on his observations and also on perusal of the materials available on record, the learned CIT(A) held that each of the undertaking was separate and independent and was producing capsules in its own right. Following the principles laid ....
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....ndertaking could be shut or run without affecting the other units. He submitted that one licence was obtained in terms of the provisions of Industrial Development Regulation Act as each company could obtain only one licence under the said Act and not multiple licences for each of its undertakings. He submitted that the assessee had to maintain only one packing department because of the requirements under the Drugs and Cosmetic Act which required production to be linked with the batches produced. He submitted that unit-wise production details, unit-wise consumption of gelatine, unit-wise record of workers, etc., were maintained by the assessee and hence it could not be said that all the units were one undertaking only because of the fact that all of them were located in the same premises or because all of them had certain things in common. He further submitted that the assessee had treated each of its undertakings separately in the books of account on the basis of which it had worked out the profits and gains of each of its undertakings for claiming relief under section 80-I/80-IA. According to him, the Department too had treated the undertakings as separate and independent and acco....
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....rticles and products may be consumed by the assessee in his old business or sold in the open market. The revenue in such cases generally contends that the establishment of a new unit manufacturing the same product as the existing ones is not a new 'undertaking' eligible for tax incentives whereas an assessee setting up such a new unit always contends that the new unit is an undertaking notwithstanding that it produces or manufactures the same product as the existing ones or that it is located in the same premises where the existing ones is located. 13. There is no doubt that the benefit of section 80-I/80-IA is not available to a unit or new unit unless the unit is in the nature of an 'undertaking'. The term 'unit', according to The New Oxford Dictionary of English, signifies an individual thing or person regarded as single and complete, especially for purposes of calculation. It also signifies a 'device that has a specified function'. The term 'undertaking', on the other hand, is defined in the same Dictionary as 'task that is taken on' and also as 'the action of undertaking to do something'. In Black's Law Dictionary, the term 'undertaking' is defined to mean, inter alia, 'to ta....