2011 (9) TMI 1086 - AT - Income Tax

Summary

Issues involved: Appeal by revenue against CIT(A) order u/s 80IB for assessment year 2007-08.

Summary:
1. The assessee, a company engaged in manufacturing flexible packaging materials, claimed deduction u/s 80IB for a new unit (Unit II) set up in AY 2004-05 alongside an existing unit. The Assessing Officer treated Unit II as an extension of the old unit and allowed deduction @ 30% on combined profits.
2. Before CIT(A), the assessee argued that Unit II was an independent undertaking eligible for 100% deduction u/s 80IB, citing CIT(A) decision for AY 2004-05. CIT(A) accepted the claim and directed AO to allow deduction as per assessee's claim.
3. Revenue appealed to the Tribunal, contending that Unit II was not eligible for separate deduction. Tribunal noted that in previous years, CIT(A) upheld similar claims by the assessee. Tribunal examined the nature of operations in both units and concluded that Unit II was financially separate, with distinct products and manufacturing processes. Referring to Supreme Court judgments, Tribunal held that the new unit need not produce entirely different items and emphasized the installation of new plant and machinery as a key factor.
4. Tribunal upheld CIT(A) orders for both years, dismissing revenue's appeals. The Tribunal found no reason to interfere with CIT(A) decision and upheld the deduction for Unit II under section 80IB. The appeal by the revenue was dismissed, and the order was pronounced on September 30, 2011.