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TMI Blog2011 (9) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the I.T. Act overruling the AO s objection that such unit was not carrying out any independent manufacturing activity which was essential for claiming such deduction. In A.Y. 2003-04 and 2004-05 another ground raised is against allowance of depreciation @ 60% on computer peripherals and accessories. 2. Brief facts are that the assessee company was incorporated on 11-10- 1989 and started production since 1990 at its Sector 8, Noida unit, which is called as Unit I. Thereafter, assessee opened a new factory at Sector-59, Noida calling Unit II, which started commercial production in September 1997. Both the units were engaged in the manufacturing and fabrication of steel and other metal accessories, easy air distribution products, air c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed submissions were made, raising following issues: (a) Unit no. II was established even when Unit I was in operation by way of a new and distinct unit which included plant and machinery and deduction u/s 80-I and 80I(1A) was independently allowed to both the units, therefore, it cannot be held that Unit no. II was established by reconstruction of existing business or by transfer of old plant machinery. Unit no. II was an integrated and independently functioning unit, distinct and separate from Unit I and independently fulfilled all the conditions for such deduction. Reliance was placed on the ratio of decision of Hon ble Supreme Court in the case of Textile Machinery Corporation Ltd. vs. CIT (1997) 107 ITR 195(SC), where the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved, revenue is in appeals before us. 3. Learned DR reiterated the facts and contends that assessee devised the mechanism to get tax advantages by shifting job work activities to Unit I as the latter was not eligible for any deduction on profits; Unit II is enjoying the benefit of deduction u/s 80-IAon manufacturing activities which are actually carried out by Unit I. Thus the plant machinery of Unit I is indirectly transferred to Unit II in the garb of job work to claim the benefits u/s 80-IA. It was further contended that the assessee has not furnished proper documents as pointed out by AO to demonstrate the details of job work and services provided by Unit I to Unit II. Order of AO was relied on. 4. Learned counsel for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 181 (SC), has observed as under: 1. A perusal of S. 80-I and S. 80-IA establishes that the notion of undertaking is a core jurisdictional element for the application of S. 80-I and S. 80-IA. The other conditions stipulated can be satisfied only when there is an undertaking . The undertaking should be new, in the sense that it should have begun to manufacture or produce specified articles or things after the prescribed time schedule. 2. Application of S. 80-I/S. 80-IA to new industrial undertakings started for the first time by the assessee is usually devoid of any difficulties. Controversies arise where the old business is being carried out by the assessee and the new activity is launched by him establishing new plants and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the CIT(A) had decided the issue correctly. Therefore, the appeal filed by the Revenue was liable to be dismissed. 4.2. Once it is established that the business of new unit was independent, fully integrated, started by new plant machinery, subsequent help by an associated concern for part of its manufacturing units on job work basis, will not lead to a conclusion that the independent status of the new unit gets extinguished. Both the units were independent and continue to be independently working. The same has not been doubted by AO in any manner. 4.3. The Hon ble Supreme Court in the case of Textile Machinery Corpn. Ltd. (supra) has clearly held that merely because a unit gets some part of its manufacturing activities c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. It cannot be held that what was new and independent business stands transformed into a reconstructed old business, because of job work. Therefore, independent status of Unit II cannot be altered as proposed by AO due to job work executed by Unit I. Various authorities have clearly held that business of manufacturing is sum total of various activities including procurement of order, design, specifications and manufacturing of goods as per their designs, supply, dispatch as per the satisfaction of customer and activities of completion of sales etc. Merely because the assessee gets the fabrication work done as per its design from Unit I, it will not tantamount to a finding that assessee has not carried out the manufacturing activities. Our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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