9911796707
TMI Blog2006 (7) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... case, in brief, are these: The assessee company, incorporated on 21st Jan., 1981, was manufacturing mechanical and power steering gears. The mechanical steering gears are indigenous products and did not require imported components/parts, whereas the power steering gears are based on hydraulic operation system and have about 50-60 per cent imported components: It decided to establish a new undertaking to manufacture exclusively power steering gears-8043 (302 Type), for light and medium commercial vehicles like Tata 407, Tempo-Traveller, Tempo Trax, Tata 608, Tata Sierra and off-road vehicles. The construction of a new shed for the new unit commenced in April, 1994. During the accounting year relevant to asst. yr. 1995-96 nine machines costing about Rs. 90 lacs were installed. In the return filed for asst. yr. 1995-96 on 29th Nev., 1995 the assessee claimed deduction under s. 80-IA of the Act in respect of the new undertaking. The AO while dealing with the assessee's claim in the assessment order for asst. yr. 1995-96 dt. 2nd Jan., 1998 made a cryptic observation as under: "During the year company has established new industrial undertaking. The details of the shade undertaking alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of splitting up and reconstruction of the old unit and therefore, assessee was not entitled for deduction under s. 80-IA, and hence the claim for deduction was denied. 8. The original assessment order for asst. yr. 1995-96 dt. 2nd Jan., 1998 was set aside by the CIT, Pune vide his order under s. 263 dt. 9th Feb., 2000. In para 4 of his order under s. 263 the CIT, inter alia observed, that during the assessment proceeding for asst. yr. 1996-97 the AO made detailed inquires and came to the conclusion that the new unit did not start functioning before 31st March, 1995, but while framing the assessment for asst. yr. 1995-96, this important issue was not properly examined by the AO and no proper finding was recorded, and therefore on that ground the assessment was erroneous as well as prejudicial to the interest of Revenue. The CIT accordingly set aside the assessment order for asst. yr. 1995-96 and directed the AO to examine the issue afresh after considering the relevant facts and the legal position and to record proper finding. 8.1 The consequential assessment order for asst. yr. 1995-96 was passed by the AO on 28th March, 2002, which was confirmed by the CIT(A) vide his ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpo Trax, Tata 608, Tata Sierra and off-road vehicles. During the accounting year relevant to asst. yr. 1995-96 nine machines costing Rs. 90,32,912 were installed as under: ------------------------------------------------- S. No. Name of machine Cost (Rs.) ------------------------------------------------- 01. CNC Vertical Machines Centre 27,26,163 (Hard Ford Type) ------------------------------------------------- 02. CNC ACE Auto Lathe 9,84,303 ------------------------------------------------- 03. Grinding Machine (2 Nos.) 20,57,716 ------------------------------------------------- 04. Gear Hobing Machine 10,73,856 ------------------------------------------------- 05. Air Receiver 27,320 ------------------------------------------------- 06. Lubro System 9,024 ------------------------------------------------- 07. Testing Machine 20,05,487 ------------------------------------------------- 08. Micron Conveyor Machine 1,49,043 ------------------------------------------------- Total Rs. 90,32,912 ------------------------------------------------- 12. In the second year pew machinery costing Rs. 2,74,52,116 was installed. Also old machinery was transferred at WDV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dently produced articles and that this new unit was not dependent upon the old existent unit, in the sense that the new unit could not be equated as an expansion of the old unit. 17. Where an assessee makes a claim for relief under s. 80-IA the burden lies upon him to produce cogent material in support of his claim. Canara Wire & Wire Products Ltd. vs. CIT (1993) 109 CTR (Kar) 82 : (1992) 196 ITR 426 (Kar), CIT vs. Anil Hardboards Ltd. (1993) 114 CTR (Bom) 230 : (1994) 207 ITR 802 (Bom). In order to avail tax concession under s. 80-IA, employment of fresh capital in the new unit is imperative. But it does not mean that for the employment of the capital, it should have been newly raised. If surplus/reserve capital is available with an assessee in his existing business, the assessee can utilize such capital for the purpose of plant, machinery, etc., for the new unit. 18. In the case of CIT vs. Orient Paper Mills Ltd. (1974) 94 ITR 73 (Cal), it was held by the Calcutta High Court that the splitting of or reconstruction of the existing business should be understood in a broad commercial sense from a commonsense point of view and only in relation to the new industrial undertaking clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d independent unit, which by themselves, independently of the old unit, were capable of producing the product-8034 (Type 302)? (ii) Whether the new machinery costing Rs. 2,74,52,116 installed, and the old machinery of WDV of Rs. 64,21,458 transferred from the old unit, in the subsequent year, were needed to make the impugned unit integrated and independent? (iii) Whether the product-8034 (Type 302) was also being manufactured in the old unit during the period 1st April, 1994 to 31st March, 1995? (iv) Whether the product-8034 (Type 302), was shown to have been manufactured simultaneously, in the old unit, as well as in the new unit independently of the old unit during the months of February and March, 1995? (v) Whether there is any evidence, from the relevant contemporaneous production records maintained in the factory, to prove that the 890 units of the product-8034 (Type 302) were actually manufactured/produced in the new unit, independently of the old unit? 23. We find that in none of the orders for asst. yrs. 1995-96 and 1996-97, the AO and the CIT(A) examined the matter on the above lines. In the circumstances, therefore we remit the case for asst. yr. 1995-96 back to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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