9911796707
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Issues Involved:
1. Assessee's claim for deduction under Section 80-IA of the Income Tax Act. 2. Assessee's claim for depreciation of Rs. 6,26,912. Issue-wise Detailed Analysis: Ground No. 1: The learned Authorized Representative did not press this ground, and therefore it was rejected. Ground No. 2: This ground relates to the assessee's claim for deduction under Section 80-IA of the Act. Background and Facts: The assessee company, incorporated on 21st Jan 1981, was manufacturing mechanical and power steering gears. The mechanical steering gears are indigenous products, while the power steering gears have about 50-60% imported components. The company decided to establish a new undertaking to manufacture exclusively power steering gears-8043 (302 Type). The construction of a new shed for the new unit commenced in April 1994, and nine machines costing about Rs. 90 lacs were installed during the accounting year relevant to the assessment year 1995-96. The assessee claimed deduction under Section 80-IA in the return filed for the assessment year 1995-96. Assessment and Appeals: The AO's initial assessment order for the assessment year 1995-96 made a cryptic observation regarding the new industrial undertaking. The AO's detailed examination in the assessment year 1996-97 led to the disallowance of the claim under Section 80-IA, stating that no new unit came into existence before 31st March 1995, and the new unit was formed as a result of splitting up and reconstruction of the old unit. The CIT set aside the assessment order for the assessment year 1995-96, directing the AO to re-examine the issue. The AO's consequential assessment order for the assessment year 1995-96 was confirmed by the CIT(A). Legal Position and Analysis: Section 80-IA was inserted by the Finance Act, 1991, and subsequently amended. The deduction under Section 80-IA is available to an assessee whose gross total income includes any profits or gains derived from an industrial undertaking that fulfills the conditions laid down in sub-section (2) of the section. The primary purpose of Section 80-IA is to grant relief to a new industrial undertaking. The burden lies upon the assessee to produce cogent material in support of the claim. Relevant Questions for Consideration: 1. Whether the nine machines installed before 31st March 1995 brought into existence an integrated independent unit capable of producing the product-8034 (Type 302)? 2. Whether the new machinery installed and the old machinery transferred in the subsequent year were needed to make the unit integrated and independent? 3. Whether the product-8034 (Type 302) was also being manufactured in the old unit during the relevant period? 4. Whether the product-8034 (Type 302) was shown to have been manufactured simultaneously in the old unit and the new unit independently? 5. Whether there is any evidence from the relevant contemporaneous production records to prove that the 890 units of the product-8034 (Type 302) were actually manufactured in the new unit independently? Decision: The case for the assessment year 1995-96 is remitted back to the file of the CIT(A) with a direction to re-examine the matter in light of the guidelines provided and to decide the issue afresh after giving adequate opportunity of being heard to the assessee and the AO. Ground No. 3: This ground relates to the assessee's claim for depreciation of Rs. 6,26,912. The AO and the CIT(A) passed cryptic orders while rejecting the claim. The AO merely stated that it was not possible that the machinery was put to use on the same day it was installed on 31st March 1995. The CIT(A) is directed to de novo examine this issue after bringing the relevant material on record and to pass a fresh speaking order after giving an opportunity of being heard to the assessee. Conclusion: The appeal filed by the assessee for the assessment year 1995-96 is partly allowed for statistical purposes.
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