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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 ..... 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 profits of the Urse-1 Unit for the purpose of computation of deduction u/s 80IB even though the Urse-II Unit was merely an extension of the Urse-1 Unit? 2. Leave is granted to the Revenue to amend the memo of appeal so as to incorporate the questions of law in terms of the draft tendered to the Court, which is marked "X" for identification. 3. Insofar as the first question is concerned, the order of the Tribunal indicates that the allocation of expenses made by the Assessing Officer to Urse Unit-I was decided by the Tribunal in the case of the Assessee for Assessment Year 1993-94 in a decision dated 31 July 2007. The facts relating to the appeal for Assessment Year 1994-95, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stall 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 to bring into existence a new unit and the costs incurred for that purpose; (iii) The process chart showing different stages of manufacturing in the new Unit indicating material inputs and machineries required, was on record; (iv) The machineries installed in the new Unit from Assessment Year 1994-95 and thereafter as well as the value of machineries installed is on record; and (v) The Tribunal was apprised of the funds which were invested for the purposes of the new Unit. During Assessment Year 1994-95, an amount of Rs.7.44 crores was invested. After considering this record, the Tribunal held that a new Unit, called Urse Unit-II, was brought into existence during the previous year relevant to Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 following principles of law clearly emerge from the decision of the Supreme Court:- (i) There must be a new undertaking where substantial investment of fresh capital is made in order to enable earning of profit attributable to that new capital; (ii) The manufacturing or production of articles yielding additional profit attributable to a new outlay of capital in a separate and distinct unit is the heart of the matter; (iii) The true test is not whether a new industrial undertaking connotes expansion of the existing business, but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business; (iv) If an undertaking can exist even after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5C. 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 facts on the basis of which this conclusion was arrived at were dealt with by the Division Bench in the following extract:- "The facts which we have referred to earlier clearly establish that the new kilns are a completely integrated unit which could be put into production independently of the other units or production therefrom can cease without affecting the production from the other kilns. There is also no doubt that all these four kilns at the four different factories have been established with the plant and machinery newly purchased and required exclusively for the purposes of these new kilns. Thus, even though the business or the industrial establishment as a whole has been expanded by the addition of a new klin, each n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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