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TMI Blog2012 (10) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appellate Tribunal dated 16 August 2007. The Appeal pertains to Assessment Year 1994-95. The questions of law raised by the Revenue, as reframed by the learned counsel are as follow:- (1) Whether on the facts and circumstances of the case and in law the Tribunal was justified in not accepting the allocation of expenses made by the Assessing Officer to the Urse-1 Unit, which was eligible for deduction u/s 80IB, even though the Assessing Officer had given detailed reasons to show that the allocation of expenses to the Urse-1 Unit was kept proportionally low to increase the profit of the Urse-1 Unit for the purpose of computation of deduction u/s 80IB? (2) Whether on the facts and circumstances of the case and in law the Tribunal was justified in holding that the Urse Unit-II was a separate identifiable integrated unit by itself even though the Annual Report of the Assessee Company mentions Urse II Unit as an expansion of the existing Urse 1 Unit? (3) Whether on the facts and circumstances of the case and in law the Tribunal was justified in not allowing depreciation amounting to Rs.1,00,14,550/- on plant machinery pertaining to the Urse-II Unit to be adjusted against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the Assessing Officer, was required to be considered for working out the profit of Unit-I while computing the deduction under Section 80I. 8. In Appeal, the Commissioner of Income Tax (Appeals) accepted the claim of the Assessee by holding that (i) The Assessee had submitted a flow chart showing various stages involved in manufacturing of Jelly Filled Cables; and (ii) The Assessee had also filed details of investments made in the plant and machineries for the years ending 1994 and 1997. The Commissioner entered a finding of fact that the machinery, which was installed at the Unit which was described as Unit-II, is working independently and that a considerable amount has been spent to install ancillary machineries to increase production capacity there. The Commissioner held that the new Unit could be sustained as an independent viable unit by itself. 9. In Appeal, the Tribunal confirmed the decision of the Commissioner. The Tribunal noted that (i) The entire process of manufacturing including the stages and machineries required at each of the stages was explained to it; (ii) The Tribunal had scrutinized the details of the plant and machineries installed in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, have been fulfilled. 12 . The issue which arises before the Court in the appeal is not res-integra. In Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195 (SC) the Supreme Court considered the ambit of the exemption that was available under the provisions of Section 15C(2) (i) of the Income Tax Act, 1922. The Supreme Court held that Section 15C had both a negative and a positive connotation. Negatively, a new industrial undertaking should not be formed either by splitting up or reconstruction of a business already in existence or transferring to a new business, the building, plant and machinery which was used in the business carried out earlier. Positively, a new industrial undertaking must produce a result. The five tests which have been laid down by the Supreme Court are as follows:- "(1) investment of substantial fresh capital in the industrial undertaking set up; (2) employment of requisite labour therein; (3) manufacture or production of articles in the said undertaking; (4) earning of profits clearly attributable to the said new undertaking; and (5) above all, a separate and distinct identity of the industrial unit set up." 13. The followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction though the new unit was involved in the production of the same goods. The test was that a new unit was a separate industrial undertaking by itself. 15. In a decision of a Division Bench of this Court in CIT v. Associated Cement Companies Ltd. [1979] 1 Taxman 256/118 ITR 406 (Bom.) the Assessee had installed new kilns at each of its four factories. The Division Bench while allowing the claim of the Assessee under Section 15C of the Income Tax Act, 1922 held as follows:- "There can be no doubt that the construction of each of the new kilns at each of the four factories has resulted in an expansion of the factory itself. That by itself would, however, not disentitle the assessee to the relief under S. 15C. Establishment of a new industrial unit as a part of an already existing industrial establishment may no doubt result in an expansion of the industry or the factory, but if the newly established unit is itself an integrated independent unit in which new plant and machinery is put up and is itself, independently of the old unit, capable of production of goods, then, in our view, it could be classified as a newly established industrial undertaking." 16 . The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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