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TMI Blog2015 (11) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... Manish Borad, Accountant Member This appeal of the assessee is against the order of CIT(A) VIII, Ahmedabad dated 8th July, 2011 passed for AY 2006-07. It emerges out of an assessment order dated 30/11/2007 passed under section 143(3) r.w.s. 250 of the Income-tax Act, 1961(herein after referred to as the Act), by DCIT, Sabarkantha Circle, Himatnagar. The assessee has raised the following grounds of appeal :- 1. The ld. CIT(A) has grossly erred in law and on facts in confirming action of AO in disallowing the claim of the appellant u/s 80I and 80HH of the Act in the proceedings undertaken in the set aside assessment by the order of the Hon'ble Incometax Appellate Tribunal. Both the lower authorities have not appreciated the fact that the matter was set aside for de-novo proceedings to grant opportunity to the appellant to make a schematic representation in respect of production of both the units so as to meet out cause of natural justice. Under the facts and circumstances of the case, ld. CIT(A) ought to have accepted the various submissions and documentary evidence produced to hold that the appellant had set up a new industrial undertaking eligible for deduction u/s 80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill the condition laid down u/s 80I(2) as more than 20% of its plant machinery had been previously used, therefore claim u/s 80I as rejected. Similar it the company also failed to fulfill the condition laid down u/s 80HH(2)(ii) for claim period in respect of old undertaking was already expire in AY 1992-93. Therefore claim u/s 80HH was rejected in AY 1993-94 as assessee company had not fulfill any condition. Assessee company had simply modernization of an old unit and claim that new unit come in existence. Assessee company had claimed depreciation on the additional plant and machinery in the year of installation i.e. in the AY 1988-89 to 1990-91. These new machinery was installed became an integral part of an old industrial undertaking. Assessee's contention that the new unit has come into existence in the year 1990-91 is totally wrong. Assessee company had new machinery as well as old machinery used in claimed new industrial was rejected in AY 1993-94 as old machinery was more than 20%. As per assessment year 1993-94 claim for deduction for deduction u/s 80HH (2)(ii) were rejected. Which was confirmed by the CIT(A)IX, Ahmedabad vide order No.CIT(A)IX, GNR. As per direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision in the cases of Kanaiyalal Rameshwar Das vs. CIT (1985) 156 ITR 463 (Raj) Electronic Corporation of India Ltd. vs. CIT (1985) 151 ITR 381 (AP) are referred in this regard. Thus the evidence on record clearly indicate that new industrial undertaking of the assessee company was set up in the previous year relevant to assessment year 1983-84 and thereafter the company had merely carried out expansion of the existing plant machinery with effect from assessment year 1988-89. The expansion of the existing plant machinery which has introduced new technique of production cannot be considered as new unit as such. As already mentioned in the earlier paras, the initial assessment year for the purpose of deduction u/s 80HH and 80I in the case of assessee company was AY 1983-84 and thus the period of 10 year and 8 year had already expired in AY 1992-93 and 1990-91 respectively for the purpose of deductions under sections 80HH and 80I. The assessee company was therefore not eligible or entitled for deductions u/s 80HH and 80I for AY 1996-97. 3. Aggrieved, the assessee went in appeal before CIT(A) who also confirmed the addition made by the AO after giving proper opportunity to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disqualify from being an eligible unit for the purpose of Section 80!. 3.4 When the aforesaid is considered vis-a-vis the facts and circumstances of the appeal under consideration; it is abundantly clear that the set of the plant and machinery installed in the A. Ys. 1988-89, 89- 90 and 90-91 are not capable to function on its own. Thus, so called new unit had the machinery of old unit and the plant and machinery installed subsequently in the A. Ys. 1988-89 to 90-91. It is a fact that the total gross value of the plant and machinery as on 31,03.1990 was of ₹ 23.73.169/- which includes old plant and machinery installed up to A. Y. 1987-88 of ₹ 9,97,0757- which is more than 20% of the total plant and machinery of so called new unit. Consequently, the so called new unit violates the condition of explanation - 2 to section 80! (2). Further it is also a fact that the appellant has claimed benefit u/s. 80HH and 80! in respect of the entire profit of the business. The concept of the old unit and the new unit was thought of afterwards when the appellant came to know that from the A. Y. 1991-92 it would not be entitled to the benefit of section 80! as eight years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1995-96. The Tribunal has set aside this issue again to the file of ld. AO He placed on copy of the Tribunal order dated 19/9/2014 passed in ITA Nos.2629/Ahd/2010 to 2632/Ahd/2010. 5. On the other hand, the ld. DR supported the orders of authorities below and also submitted that the assessee in order to take benefit of the provisions of law termed the usage of new plant and machinery as TRIAL PRODUCTION which actually was regular production only. 6. We have heard the rival contentions, gone through the material available on record. Similar grounds of appeal in assessee's own case for AY 1991-92, 1993-94, 1994-95 and 1995-96 were heard by the ITAT C Bench, Ahmedabad. The relevant portion of the Tribunal's observations vide its order in ITA Nos. - Sl.No. ITA Nos. Assessment Year Appeal(s) by Appellant vs. Respondent Appellant Respondent 1 2629/Ahd/2010 1991-92 M/s Controlled Acoustic Ind.(P) Ltd. 32 Manoj Ind.Estate 40A, G.D.Ambed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988-89 - 559710 714943 1989-90 35820 521677 _ 1990-91 - 294707 20975 5.3. It is also not disputed that the depreciation was claimed by the assessee on these machinery and building during the above period on the basis that the machinery was put to use. This Tribunal in its order dated 31/10/2007(supra) observed that the nonITA utilization of the plant and machinery purportedly purchased for the new unit during the previous years relevant to AYs 1988-89 to 1990-91, otherwise than for its purposes, in the relevant years; the same being set up only in AY 1991-92. This becomes material as depreciation stood claimed (and also allowed) for the said years, so that, undeniably, there has been a user of the said machinery for the purposes of the assessee's business for each of the relevant years. And user for any purpose prior to its user for the eligible undertaking (new unit) would invalidate the assessee's claim u/s 80HH(2)(ii)/s.80I(2)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red view that the issue to be restored to the file of AO for verification, whether there was only trial run of the machinery as claimed by the assessee or the assessee carried out any commercial production from New Unit during AYs 1988-89 to 1990-91. In case, the assessee is able to prove its claim of trial run in that event the AO would allow the claim of deduction as made by the assessee. Thus, ground Nos. l to 3 of the assessee's appeal is allowed for statistical purposes in the terms indicated above. On due consideration of the facts and circumstances, we are of the view that the distinction between the commercial production and trial run needs to be established. This distinction has to be proved by the assessee to the satisfaction of AO. We do not find any disparity on facts. Therefore, following the order of the ITAT Ahmedabad in earlier A.Y. on identical issues, we are of the considered view that the issue be restored to the file of AO for verification so as to whether there was only trial run of the machinery as claimed by the assessee or the assessee carried out any commercial production from the new unit during AY 1988-89, 1990-91. Ld. AO shall decide the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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