2010 (4) TMI 746 - HC - Income Tax

Condonation of delay - If the order of the Tribunal passed in the miscellaneous petition is taken into account, the appeal is in time - Held that there is no delay, since the appeal is filed being aggrieved by the order passed in the miscellaneous petition filed under section 254 of the Act Regarding rectification - assessee claimed deduction under sections 80HH and 80-I on the ground that it has established a new factory for manufacturing industrial vanaspathi - On facts the Assessing Officer has also come to the conclusion either the SCD plants or Haize Boiler cannot be considered as the machinery manufacturing industrial vanaspathi - There was no necessity for the Assessing Officer to inspect the industrial unit as he has decided the case relying upon the documents made available to him by the assessee - When the assessee had purchased the new machinery in the earlier assessment year and has installed the same, such unit cannot be treated as new unit for the present assessment year - Decided in favour of the revenue

Summary

Issues Involved:
1. Jurisdiction under section 254(2) of the Income-tax Act, 1961.
2. Deduction under sections 80HH and 80-I of the Income-tax Act, 1961.
3. Assessment of new industrial unit and machinery installation.

Detailed Analysis:

Jurisdiction under Section 254(2):
The first issue raised was whether the Tribunal was correct in exercising jurisdiction under section 254(2) of the Income-tax Act to rectify its earlier order dated April 28, 2003. The Tribunal reappreciated various controversies raised by the assessee and granted relief which had not been granted earlier, potentially amounting to a review of its earlier order. However, the learned counsel for the Revenue contended that this question need not be considered in this appeal and should be addressed in an appropriate case. Therefore, the court did not consider this question in the present appeal.

Deduction under Sections 80HH and 80-I:
The second issue was whether the Tribunal was correct in holding that the relief declined by the Tribunal in its order dated April 28, 2003, under sections 80HH and 80-I on the ground that the industrial undertaking and the machinery and plant had been installed in the earlier assessment year and not a new unit in the current assessment year for claiming deduction, could be reversed by relying on certain judgments of various courts. The Tribunal initially dismissed the claim of the assessee under section 80HH but later, on an application under section 254, concluded that the assessee had established a new industrial unit and used only a few old machines, granting the deduction under sections 80HH and 80-I.

Assessment of New Industrial Unit and Machinery Installation:
The third issue was whether the Tribunal correctly appreciated that the machinery and plant had been installed in the assessment year 1984-85 except for the SCD plant and Haize Boiler, which were used for deodorization, and that the installed plant and machinery had already commenced operations, over which depreciation and extra shift allowance of Rs. 46.36 lakhs had already been claimed.

The court examined the background of the case, focusing on the assessment year 1985-86. The assessee, engaged in manufacturing vanaspathi, claimed deductions under sections 80HH and 80-I, asserting the establishment of a new industrial unit. The Assessing Officer denied the claim, stating that the assessee had only modernized the existing unit by adding a few machines, not establishing a new industry. The Commissioner of Income-tax (Appeals) upheld this view, leading the assessee to appeal to the Income-tax Appellate Tribunal, which initially dismissed the claim but later reversed its decision, granting relief under sections 80HH and 80-I.

The court considered whether the assessee had established a new industrial unit in the relevant assessment year or merely modernized the existing unit. It was noted that the assessee had purchased machinery in the earlier assessment year and erected it, and the remaining machinery was from the old vanaspathi unit. The court found that the Assessing Officer was justified in concluding that the value of the old machinery was more than 20% of the total value, making the assessee ineligible for deductions under sections 80HH and 80-I.

The court also reviewed relevant judgments cited by the assessee but found them inapplicable to the facts of the case. It was determined that the Tribunal had not provided details about the new plant and machinery installed during the relevant assessment year and had accepted that the machinery was erected in the earlier year. Consequently, the machinery could not be considered new for the purpose of claiming deductions.

Conclusion:
The court concluded that the Tribunal erred in granting relief to the assessee and that the Assessing Officer's decision to deny deductions under sections 80HH and 80-I was justified. The appeal was allowed, and the questions of law were answered in favor of the Revenue and against the assessee.