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TMI Blog2004 (10) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. There was a company by name, M/s Mitasu Dies (P) Ltd. (M/s MDP), Parwanoo, HP, which was carrying on the business of manufacture of transformers coils like electrical lamination, transformer core and HT/LT transformer coils. The said company was incorporated on6th June, 1988. This company was entitled to deduction of 100 per cent of profits from the manufacture of transformer coils, electrical lamination, etc., under s. 80-IA of the Act, since it was located inan industrially backward State specified in VIII Schedule to the Act and the article it manufactured was not an article specified in the XI Schedule to the Act. The benefit was available for a period of 8 years from the initial assessment year. The initial assessment year means the financial year in which the industrial undertaking begins to manufacture or produce the article or thing. M/s MDP started manufacturing activities during the financial year 1994-95 relevant to asst. yr. 1995-96. 4. M/s MDP Ltd., had claimed 100 per cent exemption of its profits in the asst. yrs. 1995-96 and 1996-97 and this was accepted by the Revenue vide intimation under s. 143(1)(a) of the Act, dt.15th March, 1996and27th March, 1997, resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. 8. The AO on receipt of this audit memo, vide his letter dt.5th Nov., 1999, addressed to the Addl. CIT, suggested that the order of assessment was erroneous and prejudicial to the interests of the Revenue and, therefore, the assessment records for asst. yr. 1996-97 should be forwarded to CIT for action under s. 263. It appears that the Addl. CIT was of the view that proceedings of reassessment can be initiated. This is clear from the endorsement in the office copy of this letter by the AO which reads as follows: "Discussed with Addl. CIT on30th Nov., 1999. Issue notice under s. 148 as per Addl. CIT." 9. Thereafter, the AO recorded his reasons for reopening assessment for asst. yr. 1996-97. The reasons were recorded on8th Dec, 1999. The reasons recorded are identical to that of the audit memo. And, therefore, they are not again repeated. 10. The assessee did not comply with the various notices issued by the AO in the reassessment proceedings. The AO has, therefore, proceeded to make assessment on the basis of the material available on record. The order of assessment is however claimed to have been made under s. 147 r/w s. 143(3) and not under s. 144. It is also relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-company which was wrongly claimed under s. 80-IA of the IT Act, 1961, by the assessee-company." 12. Aggrieved by the order of the AO, the assessee preferred appeal before CIT(A) and assessee challenged the validity of reopening on several grounds but did not succeed. On merits, the CIT(A) however held that M/s MDP Ltd., was amalgamated with the assessee-company and, therefore, it cannot be said that the industrial undertaking eligible for deduction under s. 80-IA was formed by splitting up or reconstruction of a business already in existence. 13. Aggrieved by the order of the CIT(A) in upholding the claim of the assessee for deduction under s. 80-IA, the Revenue is in appeal. The assessee has filed cross-objection in which it has challenged the order of the CIT(A) in upholding the validity of reassessment proceedings and also the levy of interest under s. 234B of the Act on the ground that there is no specific direction in the order of assessment to charge interest under s. 234B. 14. We shall first take up for consideration the ground of cross-objection regarding validity of reopening. The learned counsel for the assessee reiterated his submissions as were made before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble so as to deny the benefits of s. 80-IA. It is worthwhile to reproduce the relevant provision of s. 80-IA(2) of the Act: "80-IA(2): This section applies to any industrial undertaking which fulfils all the following conditions, namely: (i) It is not formed by splitting up or the reconstruction of a business already in existence; (ii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose." 16. Before we proceed to discuss the rival contentions, it is worthwhile to mention that similar provisions are contained in s. 80-J, 80-I, 84 and certain other provisions of the Act. There are several decisions of the various High Courts on the interpretation of the provisions of these sections and these decisions are applicable in the context of the provisions of s. 80-IA also. 17. As far as applicability of cl. (i) of s. 80-IA(2) is concerned, the Hon'ble Calcutta High Court in the case of CIT vs. N. Guru Investments (P) Ltd. (1979) 117 ITR 522 (Cal) has held that the word 'reconstruction' of a business already in existence contemplates a case where the original business continues without any cessation or loss of its identity and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or purpose behind the provisions of s. 80-IA(2)(ii) appears to be that investment in new plant or machinery to the extent of 80 per cent shall be made by the industrial undertaking if it wants to claim eligibility for exemption under s. 80-IA. By using old plant and machinery used by the assessee or anybody else, beyond 20 per cent of the total value of plant and machinery, the assessee cannot venture into a new business which is eligible for deduction under s. 80-IA of the Act. As already observed by us, there was no formation of an industrial undertaking or transfer to a new business of plant and machinery already used for any other purpose. M/s MDP had come into existence as early as 1988 and the provisions of s. 80-IA came into force only w.e.f.1st April, 1991. Therefore, the provisions of s. 80-IA(2)(ii) also did not apply to the case of the assessee. We, therefore, do not find any grounds to interfere with the order of CIT(A) on this aspect. The appeal of the Revenue is, therefore, dismissed. 21. The other surviving ground is the second ground in assessee's cross-objection. This is consequential and in view of the dismissal of the Revenue appeal, this ground in our vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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