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TMI Blog2015 (10) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... ard, one such condition was that the industrial undertaking has begun or begins to manufacture or produce articles after 31.12.1970. In the instant case, admittedly, the appellant's unit came into existence and started business in the assessment year 1980-81 by doing job works i.e. repair of transformers but started manufacturing activity from the assessment year 1985-86 and, consequently, claimed deduction under Section 80HH of the Act from that assessment year onwards. In our opinion, the reasoning adopted by the Tribunal is patently erroneous. The Tribunal has not considered sub-clause (iv) of Section 80HH of the Act, which only allows the assessee to claim deduction from that assessment year in which the industrial undertaking began to manufacture or produce the articles. From this provision, it is apparently clear that even though the undertaking came into existence from the assessment year 1980-81, but started the manufacturing process in the assessment year 1985-86, it would be entitled for deduction under Section 80HH from that year, namely, 1985-86. The finding that the appellant's unit was not a new unit in the year from which it started manufacturing is erroneous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal and remanded the matter to the Assessing Officer to make a fresh assessment. Based on the said direction, a fresh assessment order was passed in both the assessment years i.e. 1985-86 and 1987-88 in which the claim of the appellant under Sections 88HH and 80I of the Act was allowed. Subsequently, the Commissioner of Income Tax issued a notice under Section 263 of the Act and, after considering the objection, passed an order setting aside the assessment order and directed the Assessing Officer to make a fresh assessment order. The assessee, being aggrieved, filed an appeal before the Tribunal, which was dismissed. 2. For the assessment years 1987-88, 1988-89 and 1990-91 the assessing authority disallowed the claim under Section 80HH and 80I of the Act, against which an appeal was preferred, which was allowed by the Commissioner of Income Tax (Appeals) and the appellant was granted a deduction under Sections 80HH and 80I of the Act. Against the appellate order, the Department filed a second appeal before the Tribunal, which was allowed and the order of the Commissioner was set aside. The assessee, being aggrieved, has filed the present appeals before this Court. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (ii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of [fourteen] years next following the 31st day of March, 1981, or such further period as the Central Government may, by notification in the Official Gazette,specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power : Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in industry. At the same time, the fiscal system should not lead to a bias in favour of capital-intensive techniques. Keeping these twin objectives in view, I propose to continue the tax holiday in respect of new industrial undertakings, ships and hotels, but in a modified form. Under my proposal, tax holiday will be available in respect of new industrial undertakings, ships or approved hotels with reference to a specified percentage of the income derived from these sources. In the case of companies, 25 percent of the profits derived from these sources will be exempt for a period of seven years. In the case of non-corporate taxpayers, the percentage of exempted profits will be 20 percent. In the case of co-operative societies, the tax holiday will be available for a period of ten years as against seven years in the case of other categories of taxpayers. This concession will be available in the case of all small-scale industrial undertakings which go into production after 31st March, 1981, but, before Ist April, 1985, that is, till the end of the new Five-Year Plan period For other industrial undertakings, the concession will apply only where they do not produce articles or things ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. (2) This Section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970 [but before the 1st day of April, 1990], in any backward area; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence in any backward area : Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area; (iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case, admittedly, the appellant's unit came into existence and started business in the assessment year 1980-81 by doing job works i.e. repair of transformers but started manufacturing activity from the assessment year 1985-86 and, consequently, claimed deduction under Section 80HH of the Act from that assessment year onwards. The Tribunal including the authorities rejected the claim of the assessee-appellant on the ground that the appellant's undertaking was not a new undertaking in the year of claim of deduction and was a old undertaking. The Tribunal and the subordinate authorities rejected the claim of the appellant on the presumption that the establishment of the industrial undertaking and the manufacturing activity are required to start simultaneously in the same assessment year. The Tribunal also gave a finding that since the appellant had carried on repair works for more than one year they were not entitled for deduction. 11. In our opinion, the reasoning adopted by the Tribunal is patently erroneous. The Tribunal has not considered sub-clause (iv) of Section 80HH of the Act, which only allows the assessee to claim deduction from that assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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