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TMI Blog2014 (9) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... in confirming action of A.O. 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 Income Tax 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 the 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 of the act and ought to have quashed the order passed by AO. [2] The Ld.CIT(A) has erred in law and on the facts in holding that the appellant's case was of expansion/modification of old unit and not of setting up of new industrial undertaking and thus making it ineligible for claim of deduction u/s.80I of the act. Both the lower authorities gravely erred in holding that due to violation of the provisions of explanation 2 to section 80I(2), even while setting u a ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)(ii); the said machinery exceeding twenty per cent in value of the total machinery acquired for the setting-up of the new Unit. 4.3 There has, thus, to be a positive indication by the assessee of the user of the said plant and machinery for the relevant years, and which should not pose much of a problem as it is it who has deployed the same to some use during the relevant years. In fact, on the basis of the material on record, including the arguments as led by both sides, even the nature of the said machinery is not clear, or to what possible uses the same could be put to; the matter being argued and decided on the basis of inferences, while, as afore-stated, the assessee having actually put the said machinery to use during the relevant years, should be able to state and show the how and/or where of it. Perhaps a schematic representation of the production of both the Units, i.e., with reference to the processes involved and machinery installed and operated for the years since AY 1988-89;the product manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n.com 764 (Guj.) ::: (350 ITR 94). 4.1. On the contrary, ld.Sr.DR submitted that this Tribunal had restored the issue back to the file of AO with specific directions. He submitted that in the assessment years 1998-89 and 1989-90 the assessee has claimed depreciation on the machinery and building pertaining to the claim of new Unit. He submitted that it is not disputed that machinery purchased in the year 1998-89 and the substantial production was carried out. The assessee now in order to take the benefit of the provisions of law termed that usage of the machinery as "trial production". He submitted that the case-laws relied upon by the ld.counsel for the assessee do not help to the assessee since the facts and circumstances of the present case are distinguishable. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by the ld.counsel for the assessee. We find that this Tribunal (ITAT 'C' Bench Ahmedabad) in earlier round of litigation in ITA Nos.2873, 2874, 2555 & 2556/Ahd/2002 for AYs 1994-95, 1995-96, 1991-92 & 1993-94 vide order dated 31/10/2007 had restored t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing aluminum false ceiling panels which was its own old business out of aluminum sheets which did not even involve change in state of metal, forming of material by welding etc or their assembly. The assessee is attempting to mislead by terming actual production to be trial production. c. The assessee has agreed that depreciation on these machines was claimed in their year of installation. He states in his submission that "nobody other than the assessee has claimed the depreciation before installation of machinery or plant by the assessee." d. While the assessee's observation that old machines could not be used for new production is correct (para 5 of his submission), vice versa is not true. The new machines could definitely be used for production of old items with better quality by using these machines in their year of installation. In fact, the production from old machines (categorized by the assessee itself) shows marked increase on account of such factors inspite of the fact that there was no demand for the old products. The following table supports this averment. AY Production value with new machine Rs. Production value with old machine Rs. 1991-92 8227794.98 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an eligible unit for the purpose of section 80I. 9. Order of the CIT(A) is being also relied here because all the issues being raised by assessee's authorized representative have already been discussed in detail by CIT(A). 10. Assessee has tried to justify his claim to avail benefit of deduction u/s.80I of the IT Act based on numerous judgments of Hon'ble High Courts and Tribunals only but has not been able to establish beyond doubt establishment of new industrial undertaking which should be an integrated independent unit in which new plant and machinery should be put up and the same should be independent of the old nits. 11. In this case, it is very important to mention that at present neither old not (allegedly) new unit is in existence. Assessee sold both the unit long back and at present even no machinery is in existence so as to verify the claim of the assessee physically. Assessee has tried to substantiate his claim regarding establishment of new unit within the meaning of sec.80I with the help of diagrams and photographs but still has not been able to prove his claim. In fact, the submissions made by him post-ITAT decision lead to an clear inference of old machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is changing the purpose for which it was used. Assessee is taking a new stand that purpose was "trial production" and not "commercial production" but this stand also fails. Vide letter dated 25.08.2009 assessee submitted details of production turnover in A.Y. 1987-88 to 1990-91 which are as under: A.Y. 1987-88 Rs. 87,14,813/- A.Y. 1988-89 Rs.1,27,63,220/- (20 months) A.Y. 1989-90 Rs.1,53,09,991/- A.Y. 1990-91 Rs.2,00,46,759/- Above figures of production in three earlier assessment years can in no sense be termed as trial production because trial production cannot be in crores as in evident. In A.Y. 1987-88 the production was Rs. 87 lacs which increase to Rs. 1.27 crores in A.Y. 1988-89 and to Rs. 1.53 crores in A.Y. 1989-90. This huge production is clearly commercial production and not trial production hence assessee's explanation is not found correct. On going through case records it is seen that new industrial undertaking actually came into existence in A.Y. 1983-84 and assessee can claim deduction u/s.80I for 8 years i.e. upto A.Y. 1990-91 only. It can claim deduction u/s.80HH for 10 years i.e. A.Y. 1992-93. Therefore deduction u/s.80HH is allowable and deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.80-I(2)(ii); the said machinery exceeding twenty per cent in value of the total machinery acquired for the setting-up of the new Unit. In this factual background, we have to examine whether the AO was justified in rejecting the claim of the assessee. The contention of the assessee is that during the period AYs 1988-89 to 1990-91 the machineries were put to use and no "commercial production" was made except the 'trial run". The case of the Revenue is that there was no requirement for making "trial run" and in fact, the so-called explanation of "trial run" is an afterthought and just to take advantage of the deduction available u/s.80I and 80HH of the Act. As per the observation of the AO as taken from the submissions of the assessee itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2630, 2631 & 2632/Ahd/2010 for AYs 1993-94, 1994-95 and 1995-96. 8.1. In all these three appeals, the assessee has raised the identical grounds as were raised in ITA No.2629/Ahd/2010 for AY 1991-92. There is no change into the facts and circumstances, the respective representative of the parties have adopted the arguments addressed in ITA No.2629/Ahd/2010 for AY 1991-92(supra). After hearing both the parties, Ground Nos.1 to 3 raised in ITA Nos.2630,2631 & 2632/Ahd/2010 for AYs 1993-94, 1994-95 & 1995-96 are also decided in the terms as indicated in paras-5 to 5.4 of our order passed in ITA No.2629/Ahd/2010 for AY 1991-92 and the relevant portion is reproduced hereinbelow for the sake of clarity. "5.4. Under these facts, the onus was on the assessee to demonstrate the quantum of input used in all three years when the depreciation is claimed and also the quantity of production produced in the "trial run". Since the "trial run" has been made in all the three years, it was incumbent upon the assessee to explain that how many days "trial run" was carried out and how much electricity was consumed, whether raw-material was used or not, whether any finished products were produced and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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