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TMI Blog1990 (9) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidy in regard to the exports etc. and there was no other activity. He pleaded that the revenue has no dispute on the fact that in the immediately preceding assessment year, the assessee was held to be an industrial undertaking and claim under section 80-I was also found allowable and allowed as such. His plea was the compliance or satisfaction of section 80-I has to be examined in the first year of claim. He pleaded that once it is found that in the first year of claim of relief under section 80-I, the assessee fully justifies and complies with the conditions and thereby it is found that it was eligible to the deduction under section 80-I, then as per the Act for the next 7 assessment years, the deduction is absolutely automatic. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area where activity is undertaken and not in the nature of the operation. He, therefore, vehemently pleaded that notwithstanding the fact that in the year there was no manufacturing operation do not sense in the year the assessee was found to be manufacturing industrial unit and this being the following year, the claim of deduction should be allowed. 18. The DR on this issue pleaded that the claim of the assessee that it is the first year of which the compliance of these satisfaction or the satisfaction of this section for the grant of relief under section 80-I is partly true for which has to be appreciated that if after the initial year in the subsequent years either the manufacturing operation is closed as is in the year under review or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking satisfies the conditions (i) to (iv) above, in the initial year, the ITO is not normally expected to review the eligibility year and year, and his jurisdiction is normally limited to the verification of the working of profits from the undertaking, as he has to necessarily allow deduction @ 20% of such profits. In case of loss of the unit, the question of allowability of the claim does not arise. 21. The normal limitation or jurisdiction of the ITO under this section is based on the presumption that once the industrial activity has commenced in the initial year, the industrial activity shall be continuing for the following years as well. This is obvious as in the face of it, for he can never go into the question of examining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e undisputed fact is that the unit did not carry on any manufacturing activity, entirely due to its own violation and not due to any compelling circumstances such as industrial unrest or other natural calamity. In these circumstances, the assessee cannot be said to have ensured the continued compliance of sub-clauses (iii) (iv) of sub-section (2) of section 80-I. 23. The Legislature had enacted section 80-I, etc., with the sole intention of boosting of industrial growth in the country and they had provided this tax holiday not only for the first year of setting up but also for the seven successive years, not as a blanket permit but with a very salient rider attached to it, which is that the industry shall continue to produce or manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier year and that unlike in section 33, etc., withdrawal of relief already granted was not permissible under section 80J. 25. Likewise in the case before Karnataka High Court in Nippon Electronics (India) (P.) Ltd.'s case, the 'A' had claimed in the second year of setting up of the unit, it had ensured the proportion of the machineries from existing units transferred to the new unit to the total value of the machinery in the new unit at 20%, and therefore, the benefit or relief under section 80-I should be allowed. The Karnataka High Court rejected this claim of the assessee as by observing that the assessee having failed to comply with the condition in the initial year, cannot seek to revive its claim in the second and successive years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale effected in the earlier year. In the absence of this unit carrying on the manufacturing activity in the assessment year, it cannot be said to satisfy the third condition of manufacture or production of article or thing and therefore, for the year under appeal, it does not remain as an industrial unit for the limited application of this section. Therefore, the relief under section 80-I cannot be permitted for the year under appeal. 29. This can be construed from another angle as well. The deduction has to be allowed under section 80-I out of the profits of the undertaking, which must be derived from the activity of the unit. In the absence of any industrial activity of the unit, the profit of the unit would be obviously nil and fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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