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TMI Blog2011 (2) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds 2.1 and 2.2. the Revenue has challenged the action of the learned CIT(A) in directing the Assessing Officer to allow additional depreciation on windmill. It was fairly agreed by both the sides that the issue was squarely covered by the decision of the co-ordinate Bench of this Tribunal in the assessee s own case in ITA No. 2151/Mds/2008 dated 4-12- 2009 wherein the co-ordinate Bench of this Tribunal following the decision of the jurisdictional High Court in the case of Hi Tech Arai reported in 321 ITR 477 (Mad) had held that the assessee is entitled to the additional depreciation on the windmill installed during the period under consideration. Even though the learned DR has specifically submitted that the decision in the case of the assessee in ITA No. 2151/Mds/2008 has not become final, as it is noticed that the co-ordinate Bench of this Tribunal had decided the issue by following the decision of the Hon'ble jurisdictional High Court in the case of Hi Tech Arai, the finding of the learned CIT(A) on this issue stands confirmed. 5. In regard to grounds 3.1 to 3.5 of the Revenue s appeal, the Revenue has challenged the action of the learned CIT(A) in holding that the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her drew our attention to the annual report and the accounts for the year ended 31.3.1997 wherein in the Notes annexed forming part of the accounts for the year 31.3.1997 also the details of the machinery and the machinery spares consumed did not show much usage of any of the imported machinery. He further drew our attention to the annual report and the accounts for the year 31.3.1998 and the Notes annexed and forming part of the statement thereto, wherein the details of the raw materials consumed during the year clearly showed that imported machinery and spares and raw materials of nearly ₹ 5.7 crores had been used. It was the submission by the learned authorised representative that the machineries installed in 31-3-1997 and 31-3- 1998 which were the main machineries required for the new unit of Plant-II were imported and they were put into operation only during the assessment year 1998-99. It was thus the submission that it was only during the assessment year 1998-99 the new unit of the assessee went into manufacturing and just because some parts of the new unit were tested on delivery during the earlier years did not even mean trial production. It was the submission that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supports the fact that the machinery came into India only during the assessment year 1998-99. The claim of the assessee that though minor machineries were received in the earlier years, no manufacturing could have been done with them in the new Unit is also found acceptable insofar as the list which the Revenue is relying upon shows the 2.5 ton press to have been used for manufacturing only a few items of the identical variety. The 6 ton hammer used only for 39 door hinges. These obviously can be considered only as a testing. 9. In regard to the question of trial production, obviously, when the unit has been fully established can a trial production be done. Testing of independent machinery does not amount to trial production. We also appreciate the fact that when testing the independent machineries they cannot be put into integration with the main machineries as if any of the machineries in the line do not perform to the required levels the whole system could brake down. In the circumstances, we are of the view that the first year of the manufacture in regard to the new unit of Plant II is to be taken as the assessment year 1998-99. It is further noticed that the Revenue has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA. The object of the section would properly serve only by confining the applicability of the provisions of section 80-IA to the profit and gain of a single unit. It is not the intention of the legislature that the benefit accrued to the unit should be diminished because of the loss suffered by the other unit. The co-existence of more than one units under a single ownership does not affect the benefit available to one unit to be diminished due to the loss suffered by another unit. If the assessee is having only one unit which is entitled for deduction u/s 80-IB and subsequently a new unit is established for the same purpose of generating power, then the second unit will be separately and independently entitled for deduction u/s 80-IA, irrespective of results of the first unit and vis-versa. 24. In view of the above discussions, various judgements of Hon'ble Supreme Court, Hon'ble High Courts and this Tribunal, it is clear that while computing the deduction u/s 80-IA of the Income Tax Act, the profits and gains of a particular unit in respect of which the assessee has claimed the deduction shall be computed if such eligible business of the said unit is the only source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) No. 7A 3869-IT(A-II) dated 23.7.1967. He also placed reliance on the decision of the Hon'ble Supreme Court in the case of G.E. India Technology Centre P. Ltd. v. CIT reported in 327 ITR 456. 15. We have considered the rival submissions. A perusal of the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre P. Ltd., referred to supra, shows that the Hon'ble Supreme Court under similar circumstances has held as follows :- 9. One more aspect needs to be highlighted. Section 195 falls in Chapter XVII which deals with collection and recovery. Chapter XVII-B deals with deduction at source by the payer. On analysis of various provisions of Chapter XVII one finds use of different expressions, however, the expression sum chargeable under the provisions of the Act is used only in Section 195. For example, Section 194C casts an obligation to deduct TAS in respect of any sum paid to any resident . Similarly, Sections 194EE and 194F inter alia provide for deduction of tax in respect of any amount referred to in the specified provisions. In none of the provisions we find the expression sum chargeable under the provisions of the Act , which as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t TAS when he pays any income chargeable under the head salaries . Similarly, Section 195 imposes a statutory obligation on any person responsible for paying to a non-resident any sum chargeable under the provisions of the Act , which expression, as stated above, do not find place in other Sections of Chapter XVII. It is in this sense that we hold that the I.T. Act constitutes one single integral inseparable Code. Hence, the provisions relating to TDS applies only to those sums which are chargeable to tax under the Income-tax Act. If the contention of the Department that any person making payment to a non-resident is necessarily required to deduct TAS then the consequence would be that the Department would be entitled to appropriate the moneys deposited by the payer even if the sum paid is not chargeable to tax because there is no provision in the Income-tax Act by which a payer can obtain refund. Section 237 read with Section 199 implies that only the recipient of the sum, i.e., the payee could seek a refund. It must therefore follow, if the Department is right, that the law requires tax to be deducted on all payments. The payer, therefore, has to deduct and pay tax, even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Income Tax Act for the said sum as an expenditure . Under Section 40(a)(i), inserted vide Finance Act, 1988 with effect from April 1, 1989, payment in respect of royalty, fees for technical services or other sums chargeable under the Income Tax Act would not get the benefit of deduction if the assessee fails to deduct TAS in respect of payments outside India which are chargeable under the Income-tax Act. This provision ensures effective compliance of Section 195 of the Income-tax Act relating to tax deduction at source in respect of payments outside India in respect of royalties, fees or other sums chargeable under the Income-tax Act. In a given case where the payer is an assessee he will definitely claim deduction under the Income-tax Act for such remittance and on inquiry if the AO finds that the sums remitted outside India comes within the definition of royalty or fees for technical service or other sums chargeable under the Income-tax Act then it would be open to the AO to disallow such claim for deduction. Similarly, vide Finance Act, 2008, with effect from April 1,1989 sub-Section (6) has been inserted in Section 195 which requires the payer to furnish information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text that the Supreme Court stated, If no such application is filed, income-tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such`sum' to deduct tax thereon before making payment. He has to discharge the obligation to TDS . If one reads the observation of the Supreme Court, the words such sum clearly indicate that the observation refers to a case of composite payment where the payer has a doubt regarding the inclusion of an amount in such payment which is exigible to tax in India. In our view, the above observations of this Court in Transmission Corporation case (1999) 239 ITR 587 (SC) which are put in italics have been completely, with respect, misunderstood by the Karnataka High Court to mean that it is not open for the payer to contend that if the amount paid by him to the non-resident is not at all chargeable to tax in India , then no TAS is required to be deducted from such payment. This interpretation of the High Court completely loses sight of the plain words of Section 195(1) which in clear terms lays down that tax at source is deductible only from sums chargeable under the provisions of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 80-IA. He re-iterated his submissions made in the Revenue s appeal in ITA No. 722/Mds/2010 in regard to grounds 3.1 to 3.5, supra. The learned DR also re-iterated his submissions to be identical to his submissions in regard to the Revenue s appeal in ITA No. 722/Mds/2010 inn respect of grounds 3.1 to 3.5. 20. We have considered the rival submissions. As we have already held in ITA No. 722/Mds/2010 in the Revenue s appeal in regard to grounds 3.1 to 3.5 that the first year of eligibility for deduction under section 80-IA in the case of the assessee is the assessment year 1998-99, we are of the view that the assessee is entitled to the claim under section 80-IA for the assessment years 2005-06 and 2006-07. Consequently, we are of the view that the orders of the learned CIT passed under section 263 of the Act are not on a right footing and consequently the same are quashed. In the circumstances, the appeals of the assessee are allowed. 21. In the result, the appeal of the Revenue in ITA No. 722/Mds/2010 is partly allowed for statistical purposes and the appeals of the assessee in ITA Nos. 731 and 1168/Mds/2010 are allowed. 22. The order was pronounced in the court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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