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TMI Blog2010 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed deductions under ss. 80HH and 80-I in these years on the basis that with each expansion a new industrial undertaking came into existence in the year in which the production capacity was increased and the period of allowability of deductions will increase accordingly. 2.1 In asst. yr. 1991-92, AO rejected such claims of the assessee holding that it was a case of gradual expansion and reconstruction of existing unit and the increase in the production capacity cannot be held as establishment of new industrial undertaking. CIT(A), however, confirmed the view of the AO, aggrieved assessee preferred appeal to Tribunal. 3. In the meanwhile, assessment for asst. yr. 1992-93 was taken up. AO, following his order for asst. yr. 1991-92, again rejected assessee's claims. In first appeal, however, CIT(A) took a different view than his predecessor in 1991-92 and allowed the claim of the assessee holding that it was eligible for such deductions. Aggrieved Revenue filed appeal before Tribunal, i.e., ITA No. 660/Del/1999. 4. As the events will have it the assessee's second appeal for asst. yr. 1991-92 came up for hearing, nobody intimated Tribunal about the fact that Revenue's appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tribunal for asst. yr. 1992-93. Hon'ble High Court vide order dt. 23rd Jan., 2009 in IT Appeal No. 417 of 2004 [reported as Thirani Chemicals Ltd. vs. Dy. CIT (2009) 227 CTR (Del) 52 : (2009) 30 DTR (Del) 109-Ed.] set aside the matter back to Tribunal for constitution of Special Bench consisting of Three Members by following observations: "To cut short the controversy and after discussing the matter with learned counsel for both the parties, it appears that it would be appropriate to have the matter heard on the third question by a Larger Bench of the Tribunal because ex facie there arc two conflicting views rendered by two Benches of the Tribunal consisting of two Members each. One Bench has decided in favour of the assessee while another has decided against the assessee. The controversy, therefore, needs to be resolved and judicial propriety requires that in a situation such as this the matter should be heard by a Larger Bench. Under the circumstances, the two substantial questions that have been referred for decision are answered by holding that the appropriate course of action would be for question No. 3, as framed on 24th Feb., 2006 to be heard and decided by a Three Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment would squarely apply to the present case. Regarding the effect of expansion in industrial undertaking, the Court observed as under: "The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee, but whether it is all time the same-a new and identifiable undertaking, separate and distinct from the existing business. No particular decision in one case can lay down an inexorable test to determine whether a given case comes under s. 15C or not. In order that the new undertaking can be said to be not formed out of the already existing business, there must be a new emergence of a physically separate industrial unit which may exist on its own as a viable unit. An undertaking is formed out of the existing business if the physically identity with the old unit is preserved". Applying the aforesaid test, the Hon'ble Court allowed the claim of the assessee under s. 15C since the Tribunal found that new plant and machinery were housed in a separate building and also functioned independently by way of distinct unit. 9.2 The other judgment of the Supreme Court is in the case of CIT vs. Indian Aluminium Co. Ltd. (1977) 108 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as pleaded that with each expansion of capacity a new industrial undertaking came into existence, which was clearly eligible for deduction under ss. 80HH and 80-I qua each expansion. 10. Learned Departmental Representative, on the other hand, vehemently argued that ss. 80HH and 80-I for eligibility distinctly exclude units formed by splitting upon reconstruction of a business already in existence. Expansion of capacity of production is not included in the eligible category of industries. Since the assessee's original unit came into existence in the year 1978 and as per the relevant provisions, an assessee was eligible for deduction under s. 80-I for the period of 8 years and under s. 80HH for 10 years therefrom, no new benefits can be given. Period of eligibility of original unit having expired no further deduction can be allowed to such unit on each expansion by treating the same to be setting up of new industrial undertaking corresponding to each expansion. It was contended by learned Departmental Representative that as per the diagrams, the increased capacity equipments were connected to an old machinery set up only, rotary gas producer was common, the raw material passed thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) CIT vs. Kalpetta Estates Ltd. (1994) 122 CTR (Ker) 410 : (1995) 211 ITR 635 (Ker); (v) Periyar Chemicals Ltd. vs. CIT (1997) 139 CTR (Ker) 309 : (1997) 226 ITR 467 (Ker); (vi) CIT vs. A.R.J. Security Printers; (vii) Ashok Leyland Ltd. vs. CIT (1995) 83 Taxman 482 (AP); (viii) Novapan India Ltd. vs. CCE 1994 (73) ELT 769 (SC); (ix) Delhi Admn. vs. Nand Lal Pant AIR 1997 SC 3068. 11. We have heard the rival contentions, perused the material on record and gone through the case laws relied upon. Facts have been narrated above. It is undisputed that assessee's process of manufacture after expansion continues on the same. Assessee was eligible for deduction under ss. 80HH and 80-I qua initial setting up of industrial undertaking. Case of the Revenue is that after the lapse of 10 years from 1978 the assessee is no more eligible for deduction under ss. 80HH and 80-I qua each subsequent expansion of capacity. Apropos assessee's case is, by each expansion it has substantially changed its machinery and in effective terms, with each expansion a new industrial undertaking has come into existence eligible in terms of deduction under ss. 80HH and 80-I; each expansion will be elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther case relied upon by the assessee is the decision of the Tribunal, Delhi Bench in the case of Rajasthan Petro Synthetics Ltd. In that case, a separate unit was established being unit No. 2 having a different technology than the old technology capable of producing much finer and more quantity than unit No. 1. The ultimate finding of the Tribunal was that it was independent of the old unit. 18. The other cases relied on by the assessee's counsel are also distinguishable in as much as we hold that the assessee is carrying on same business and process on same plant set up, all other cases are in respect of new units, hence not applicable to assessee's facts. 19. The perusal of all the judgments will show that the true test is, there must emerge a new and identifiable undertaking, separate and distinct from the existing unit. In all these cases, it has been found as a fad that such units were set up in different buildings or sheds without having any connection with the existing unit and were capable of producing goods independently. In the present case, there is no dispute that so-called expanded new plant and machinery were installed in the existing building, on same process li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one additional furnace and two crucibles of the existing units for increasing the capacity from 1,500 MT to 3,000 MT. The claim of the assessee under s. 80J was initially allowed by the AO. However, the CIT under s. 263 held that such expansion did not result in any new industrial undertaking. The Tribunal on physical inspection of the premises and material on record, concluded that the additions did not and could not result in any independent separate industrial undertaking. On reference under s. 256(2), the High Court, following the decision of the Supreme Court in the case of Textile Machinery Corporation Ltd. held that no question of law arose from the findings of the Tribunal. 22. In view thereof, we are unable to agree with the propositions made by the learned counsel for the assessee. Learned counsel has further taken a proposition that rule of consistency should be followed for which various case laws have been cited including Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC). Since the Department has accepted the Tribunal order for asst. yr. 1991-92, in our view, there emerges no consistent view held by Department in favour of the assessee in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under s. 80HH of the IT Act, 1961 should be allowed. 3. The assessee contends that the AO should have given the appeal effect in accordance with the directions of the Tribunal and had no powers to review the matter afresh and disallow the deduction under s. 80HH by following some other order of the Tribunal in asst. yr. 1992-93 when specifically the Tribunal has directed to follow order of Tribunal for asst. yr. 1991-92 in favour of assessee. 4. The CIT(A) has erred in not appreciating the fact that apart from asst. yr. 1991-92, the Hon'ble Tribunal has for asst. yr. 1994-95 dismissed the Department's appeal in ITA No. 4871/Del/2000, dt. 12th Jan., 2005 without even assessee's presence; being ex parte order. The miscellaneous application of the Department has also been dismissed in MA No. 477/Del/2005 [in ITA No. 4871/Del/2000, dt. 28th April, 2006]. Therefore, following the consistency principle, the CIT(A) should have allowed the deduction to the assessee. 5. Without prejudice to the above, the learned CIT(A) has erred in law and on facts in not appreciating that where two views are possible, one in favour of the assessee and one against, then the view beneficial to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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