DY.C.I.T. RG.5(3), MUMBAI v. M/S. UNIGLOBE PACKAGING P LTD., MUMBAI

ITA 2669/MUM/2009 | 2005-2006
Pronouncement Date: 31-12-2010 | Result: Dismissed

Appeal Details

RSA Number 266919914 RSA 2009
Assessee PAN AAACU3694D
Bench Mumbai
Appeal Number ITA 2669/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 3 day(s)
Appellant DY.C.I.T. RG.5(3), MUMBAI
Respondent M/S. UNIGLOBE PACKAGING P LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 31-12-2010
Date Of Final Hearing 01-12-2010
Next Hearing Date 01-12-2010
Assessment Year 2005-2006
Appeal Filed On 27-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI RAJENDRA SINGH ACCOUNTANT MEMBER I T A NO: 2669/MUM/2009 AND 5431/MUM/2009 (ASSESSMENT YEAR: 2005-06 AND 2006-07) DEPUTY COMMISSIONER OF INCOME TAX APPELLANT RANGE 5(3) MUMBAI VS M/S UNIGLOBE PACKAGING P. LTD. MUMBAI RESPONDENT (PAN: AAACU3694D) APPELLANT BY: SHRI SURENDRA KUMAR RESPONDENT BY: SHRI HIRO RAI O R D E R R V EASWAR PRESIDENT: BOTH THE APPEALS ARE BY THE REVENUE AND THEY RELAT E TO THE ASSESSMENT YEARS 2005-06 AND 2006-07. RESPONDENT ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE MANUFAC TURE OF PACKING MATERIALS. THE APPEALS ARISE OUT OF THE ASSESSMENT ORDERS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 O N 11 TH DECEMBER 2007 AND 29 TH DECEMBER 2008 RESPECTIVELY. 2. THE ONLY GROUND TAKEN BY THE REVENUE WHICH IS C OMMON TO BOTH THE YEARS IS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THA T THE NEW UNIT IS ENTITLED TO DEDUCTION UNDER SECTION 80-IB AT THE RA TE OF 100% WITHOUT APPRECIATING THE FACT THAT THE NEW UNIT IS NOTHING BUT THE EXTENSION OF THE FIRST UNIT . 3. THE BRIEF FACTS GIVING RISE TO THE APPEALS ARE A S FOLLOWS. THE ASSESSEES UNIT NO. I WAS SITUATED AT NO. 36 SI LVER INDUSTRIAL ESTATE BHIMPORE DAMAN. THERE IS NO DISPUTE THAT THIS UNIT WAS ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 2 ENTITLED TO THE DEDUCTION UNDER SECTION 80-IB. DUR ING THE YEAR ENDED 31.03.2004 RELEVANT TO THE ASSESSMENT YEAR 2 004-05 THE ASSESSEE STARTED UNIT II ON THE SECOND FLOOR OF THE AFORESAID BUILDING AND MADE A CLAIM FOR DEDUCTION UNDER SECTI ON 80-IB IN RESPECT OF THE PROFITS DERIVED FROM THE SAID UNIT. IN THE ASSESSMENT ORDER PASSED ON 27 TH DECEMBER 2006 FOR THE ASSESSMENT YEAR 2004-05 UNDER SECTION 143(3) THE ASSESSING OFFICER HELD THAT UNIT II WAS ACTUALLY AN EXPANSION OF THE EXISTING M ANUFACTURING FACILITIES OF UNIT I AND THEREFORE WAS NOT ELIGIB LE FOR THE DEDUCTION UNDER SECTION 80-IB FROM THE ASSESSMENT YEAR 2005-0 6. FOR THE ASSESSMENT YEAR 2004-05 HOWEVER THE DEDUCTION UND ER SECTION 80-IB WAS ALLOWED BECAUSE THAT WAS THE FIFTH AND LA ST YEAR FOR CLAIMING THE DEDUCTION IN RESPECT OF UNIT I. APPAR ENTLY THE DEDUCTION FOR BOTH UNIT I AND UNIT II WAS ALLOWED I N THE ASSESSMENT YEAR 2004-05 BECAUSE THE ASSESSING OFFICER HAD CONS IDERED UNIT II TO BE ONLY AN EXPANSION OF UNIT I. HOWEVER IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 HE WOULD APPE AR TO HAVE GIVEN A SORT OF AN ADVANCE RULING FOR THE ASSESSMEN T YEAR 2005-06 TO THE EFFECT THAT THE PROFITS OF UNIT II WILL NOT BE ELIGIBLE FOR THE DEDUCTION FROM THE ASSESSMENT YEAR 2005-06 ONWARDS. 4. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 200 4-05 WAS TAKEN UP IN APPEAL BY THE ASSESSEE TO THE CIT(A). THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER WAS WRONG IN H OLDING THAT THE ASSESSEE HAD NOT SET UP ANY NEW UNDERTAKING DURING THE YEAR ENDED 31.03.2004 AND CONSEQUENTLY WAS NOT ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80-IB IN RESPECT OF THE PRO FITS OF THE NEW ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 3 UNIT. BY ORDER DATED 22 ND DECEMBER 2008 THE CIT(A) ACCEPTED THE ASSESSEES APPEAL AND HELD THAT THE UNIT II WAS ELI GIBLE FOR THE DEDUCTION. BRIEFLY STATED HE RECORDED THE FOLLOWI NG FINDINGS: - (1) THE NEW UNIT WAS SITUATED IN A SEPARATE SECTION OF THE BUILDING. (2) IT EMPLOYED NEW TYPE OF TECHNOLOGY AND PRODUCED NEW PRODUCTS BY EMPLOYING NEW RAW MATERIALS WHICH WERE NOT USED IN THE OLD UNIT. (3) THE ASSESSEE HAD TAKEN LOANS FOR THE PURPOSE OF SETTING UP THE NEW UNIT. (4) THE PROCESS OF MANUFACTURE IN BOTH THE UNITS WAS DIFFERENT. IN VIEW OF THE AFORESAID FINDINGS HE HELD THAT UNIT II WAS AN INDEPENDENT UNDERTAKING AND DEDUCTION UNDER SECTION 80-IB HAS TO BE ALLOWED. HE ALSO HELD THAT EVEN IF IT IS ASSUME D THAT THE ASSESSEE WAS MANUFACTURING THE SAME PRODUCTS IN BOT H THE UNITS UNIT II WOULD BE ELIGIBLE FOR THE DEDUCTION IN THE LIGHT OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TEXTILE MACHINE RY CORPORATION LTD. VS. CIT (1977) 107 ITR 195 (SC) WHERE IT WAS HELD THAT THE FACT THAT BOTH THE UNITS PRODUCED THE SAME PRODUCT WAS NOT RELEVANT. 5. THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 WAS NOT APPEALED AGAINST BY THE REVENUE SINCE THERE WAS NO TAX EFFECT AND A LETTER DATED 30 TH JUNE 2010 WAS FILED TO THIS EFFECT BEFORE US. 6. IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSING OFFICER TOOK THE SAME STAND WITH REGA RD TO THE CLAIM OF THE ASSESSEE THAT THE PROFITS OF UNIT II WERE EN TITLED TO THE ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 4 DEDUCTION UNDER SECTION 80-IB. IN FACT HE RELIED O NLY ON THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 AN D REPRODUCED THE RELEVANT PORTIONS THEREFROM AND HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR THE DEDUCTION. THE P ORTIONS OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 RE PRODUCED IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-0 6 REVEAL THAT THE ASSESSING OFFICER HAD REJECTED THE ASSESSEES C LAIM ON THE GROUND THAT THE NEW UNIT DID NOT SATISFY THE TESTS OF (A) PHYSICAL SEVERANCE (B) TECHNICAL SEVERANCE AND (C) FINANCI AL SEVERANCE. IT IS SEEN THAT THE ASSESSING OFFICER WHILE DISCUSSING THE ASPECT OF TECHNICAL SEVERANCE IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 HAD NOTED THAT THE NEW UNIT WAS SET UP WITH NEW SET OF PLANT AND MACHINERY AND HAD ALSO ATTRIBUTED THE INCREASE IN THE MANUFACTURING CAPACITY TO THE ADDITION OF NEW MACHI NERY IN UNIT II. WHILE DISCUSSING THE ASPECT OF FINANCIAL SEVERANCE HE HAD ALSO CONCEDED THE POSSIBILITY OF THE NEW FUNDS HAVING BE EN TAKEN BY THE ASSESSEE FOR THE PURCHASE OF NEW MANUFACTURING FACI LITY. IN SHORT HE DID NOT QUESTION THE ASSESSEES CLAIM THAT THE U NIT II WAS SET UP WITH THE HELP OF NEW MACHINERY AND PLANT FOR THE A CQUISITION OF WHICH THE ASSESSEE HAD TAKEN FRESH FUNDS. NEVERTHE LESS HE OBSERVED THAT THE CLAIM BASED ON TECHNICAL SEVERANC E WOULD HAVE BEEN ACCEPTED IF THE ASSESSEE HAD STARTED MANUFACTU RING AN ENTIRELY DIFFERENT PRODUCT IN THE NEW UNIT USING EN TIRELY DIFFERENT RAW MATERIAL AND SUPPLYING THE PRODUCTS TO AN ENTIRELY DIFFERENT MARKET. 7. IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 THE ASSESSING OFFICER HAD ALSO MENTIONED THAT THE A SSESSEE DID NOT ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 5 GET A SEPARATE REGISTRATION DONE FROM THE LOCAL AUT HORITIES OF DAMAN IN RESPECT OF THE UNIT II WHICH WOULD HAVE BEEN TH E CASE IF THE SAID UNIT WAS A NEW INDUSTRIAL UNDERTAKING. HE ALSO NOT ICED THAT THE CERTIFICATE ISSUED BY THE POLLUTION CONTROL COMMITT EE OF THE AREA SHOWED THAT THERE WAS NO CHANGE IN THE MANUFACTURIN G PROFILE OF THE ASSESSEE AND THUS IT WAS ONLY A CASE OF EXPANSION O F THE EXISTING MANUFACTURING FACILITY AS OTHERWISE THE ASSESSEE W OULD HAVE OBTAINED A FRESH CERTIFICATE OR LICENSE FROM THE AF ORESAID COMMITTEE. ALL THESE REASONS WERE ADOPTED BY THE ASSESSING OFF ICER WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2 005-06 AND WHILE NEGATIVING THE ASSESSEES CLAIM UNDER SECTION 80-IB IN RESPECT OF UNIT II. 8. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 200 6-07 IS ALSO ON THE SAME LINES. 9. THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YE AR 2005-06 CAME TO BE DISPOSED OF BY THE CIT(A) BY ORD ER DATED 26 TH FEBRUARY 2009 WHICH WAS FOLLOWED BY HIM IN THE ORD ER PASSED BY HIM ON 24 TH JULY 2009 FOR THE ASSESSMENT YEAR 2006-07. IN THE ORDER PASSED FOR THE ASSESSMENT YEAR 2005-06 THE C IT(A) HAS RELIED MAINLY ON HIS ORDER DATED 22 ND DECEMBER 2008 PASSED IN THE APPEAL FOR THE ASSESSMENT YEAR 2004-05. WE HAVE AL READY ADVERTED TO HIS FINDINGS IN THE ORDER FOR THE ASSES SMENT YEAR 2004-05. ACCORDINGLY HE ALLOWED THE ASSESSEES CLA IM IN RESPECT OF UNIT II. THUS FOR BOTH THE YEARS UNDER APPEAL THE ASSESSEES CLAIM WAS ALLOWED. ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 6 10. THE REVENUE IS IN APPEAL CHALLENGING THE FINDIN GS OF THE CIT(A). THE MAIN ARGUMENT OF THE REVENUE WAS THAT THE CIT(A) HAS NOT PROPERLY CONSIDERED THE FINDINGS AND REASONS GI VEN IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 AN D HAS OVERLOOKED THAT UNIT II WAS NOT SEPARATELY REGISTER ED WITH THE LOCAL AUTHORITIES; THAT NO NEW PRODUCT WAS MANUFACTURED I N THE SAME; THAT THE NEW UNIT WAS LOCATED IN THE SECOND FLOOR OF THE SAME BUILDING AND THAT THE PRODUCTS WERE SOLD TO THE SAME CUSTOME RS AND THUS THERE WAS NO QUESTION OF CONSIDERING IT TO BE A NEW INDUSTRIAL UNDERTAKING. IT WAS CONTENDED THAT IT IS ONLY A CA SE OF EXPANSION WHICH WAS NOT ELIGIBLE FOR THE DEDUCTION UNDER SECT ION 80-IB. RELIANCE IS PLACED ON THE FOLLOWING ORDERS / JUDGME NTS: - (1) VIDESH SANCHAR NIGAM LTD. VS. CIT (2008) 111 ITD 190 (MUM) (SB) (2) PERIYAR CHEMICALS LTD. VS. CIT (1997) 226 ITR 467 (KER) (3) CIT VS. NAYA SAHITYA (1972) 84 ITR 567 (DEL) 11. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED STR ONGLY ON THE FINDINGS RECORDED BY THE CIT(A) IN HIS ORDER FOR TH E ASSESSMENT YEAR 2004-05 AND POINTED OUT THAT THESE FINDINGS WERE NO T CHALLENGED BY THE REVENUE BY FILING AN APPEAL TO THE TRIBUNAL AND THEREFORE THE FINDINGS CONTINUED TO PREVAIL AND SHOULD BE GIVEN D UE WEIGHT. ON THE MERITS OF THE ASSESSEES CLAIM HE SUBMITTED TH AT EVEN IF THE ASSESSEE MANUFACTURES THE SAME ITEMS IN UNIT II IT WILL BE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80-IB IN VIEW OF TH E JUDGMENT OF THE SUPREME COURT IN TEXTILE MACHINERY CORPORATION LTD. VS. CIT ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 7 (SUPRA) AS ALSO THE JUDGMENT OF THE SUPREME COURT I N THE CASE OF CIT VS. INDIAN ALUMINIUM CO. LTD. (1977) 108 ITR 36 7 (SC). HE ALSO STRONGLY RELIED ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ASSOCIATED CEMENT COMPANIES LTD . (1979) 118 ITR 406 (BOM). HE AGREED THAT THE PRODUCT MANUFACT URED IN UNIT II FALLS IN THE SAME EXCISABLE ITEM UNDER WHICH THE PR ODUCTS MANUFACTURED IN UNIT I ALSO FALL BUT CONTENDED THA T IT IS IRRELEVANT IN THE LIGHT OF THE AFORESAID JUDGMENTS. IT WAS FURTH ER CONTENDED BY HIM THAT THE PRODUCT TURNED OUT BY UNIT II IS PRICE D MORE WHICH INDICATED THAT IT IS AN INDEPENDENT VERSION FROM TH E PRODUCT MANUFACTURED BY UNIT I. A SAMPLE BILL WAS PRODUCED BEFORE US TO SUPPORT THE CLAIM. THE LEARNED COUNSEL FOR THE ASS ESSEE ALSO SUBMITTED THAT THE ASSESSING OFFICER HAD ACCEPTED T HE CLAIM THAT THE MACHINERY AND PLANT OF UNIT II WAS NEW AND THEY WERE PURCHASED BY INTRODUCTION OF FRESH FUNDS AND THUS I T WAS ESTABLISHED THAT BOTH TECHNICALLY AND FINANCIALLY UNIT II WAS S EPARATE AND INDEPENDENT OF UNIT I. 12. AS REGARDS THE AUTHORITIES CITED ON BEHALF OF T HE REVENUE THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MUMBAI SPECIAL BENCH (SUPRA) WAS NOT CONSIDERING THE CASE OF A FUNCTIONALLY INDEPENDENT UNIT WHEREAS IN THE PRESE NT CASE UNIT II WAS FUNCTIONALLY AND FINANCIALLY SEPARATE FROM THE UNIT I. SO FAR AS THE JUDGMENT OF THE KERALA HIGH COURT IS CONCERNED HE POINTED OUT THAT IN THAT CASE THE FINDING WAS THAT THE FUNCTION ING OF THE OLD AND NEW UNITS WERE INSEPARABLE LEADING TO THE CONCLUSIO N THAT IF ONE UNIT WAS CLOSED THE OTHER UNIT WOULD HAVE TO FOLLOW SUIT . AS REGARDS THE ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 8 JUDGMENT OF THE DELHI HIGH COURT (SUPRA) CITED BY T HE REVENUE THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HIS JUDGMENT WAS EXPRESSLY DISAPPROVED BY THE SUPREME COURT IN T HE CASE OF TEXTILE MACHINERY CORPORATION LTD. VS. CIT (SUPRA). 13. IN HIS BRIEF REPLY THE REVENUE REITERATED ITS EARLIER SUBMISSIONS AND PLACED STRONG RELIANCE ON THE ORDER OF THE MUMBAI SPECIAL BENCH (SUPRA). 14. ON A CAREFUL CONSIDERATION OF THE FACTS AND THE RIVAL CONTENTIONS WE ARE SATISFIED THAT THE CIT(A) HAS R IGHTLY HELD THAT THE UNIT II WAS ELIGIBLE FOR THE DEDUCTION UNDER SECTIO N 80-IB. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF SUPERIOR QUALITY FLEXIBLE PACKAGING MATERIALS SUCH AS MONOLAYER FILMS MULTIL AYER FILMS AND VARIOUS TYPES OF LAMINATES WHICH ARE USED FOR PACKI NG A WIDE RANGE OF PRODUCTS SUCH AS DETERGENTS SHAMPOOS SOAPS AG RICULTURAL PRODUCE TEA FOOD PRODUCTS AGROCHEMICALS EDIBLE OIL CONSTRUCTION MATERIAL CHEMICALS ETC. THE CIT(A) HAS RECORDED A FINDING IN HIS ORDER FOR THE ASSESSMENT YEAR 2004-05 THAT IN THE Y EAR ENDED 31.03.2003 THE ASSESSEE HAD STARTED INSTALLATION OF UNIT II AND IN THAT YEAR HAD MADE AN INVESTMENT OF ` 1 82 30 047/- IN PLANT AND MACHINERY. FOR THE PURPOSE OF MAKING THE INVESTMEN T THE ASSESSEE TOOK ADDITIONAL TERM LOAN OF ` 1 20 00 000/-. THUS THE FUNDS OR ACCRUALS GENERATED IN UNIT I WERE NOT UTILIZED IN T HE UNIT II WHICH WAS A FINANCIALLY SEPARATE AND VIABLE PROPOSAL. TH E CIT(A) HAS ALSO RECORDED TWO IMPORTANT FINDINGS IN THE AFORESA ID ORDER NAMELY (I) THAT IN THE NEW UNIT THE ASSESSEE WAS MANUFACTU RING FLEXIBLE LAMINATED PACKAGING MATERIAL WHEREAS IN THE OLD UNIT IT WAS ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 9 MANUFACTURING MONOLAYER POLY FILMS ; AND (II) THAT THE PROCESS OF MANUFACTURING IN BOTH THE UNITS WAS DIFFERENT AS EX PLAINED BY THE ASSESSEE WITH THE HELP OF A PROCESS FLOW CHART. IT ALSO APPEARS TO US FROM THE SPECIMEN INVOICES FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US THAT THOUGH THE PRODUCTS MANUFAC TURED BY BOTH THE UNITS FELL UNDER THE SAME EXCISABLE GOODS NAME LY PLASTIC PLAIN & PRINTED BAGS AND THE TARIFF WAS ALSO THE SAME T HE QUALITY WAS DIFFERENT AS CAN BE SEEN FROM THE FACT THAT THE PRO DUCT MANUFACTURED BY UNIT I WAS PRICED AT ` 408.14 PER UNIT WHEREAS THE PRODUCT MANUFACTURED BY UNIT II WAS PRICED AT ` 696.89 PER UNIT. IT IS NOTEWORTHY THAT THE INVOICE RELATING TO UNIT I S HOWN BEFORE US IS DATED 1 ST MARCH 2004 WHEREAS THE INVOICE OF UNIT II SHOWN BE FORE US IS DATED 28 TH DECEMBER 2003 AN EARLIER DATE. THUS IT SEEMS TO US THAT EVEN QUALITATIVELY THE ITEMS PRODUCED BY UN IT II WERE DIFFERENT OR SUPERIOR TO WHAT WAS PRODUCED IN UNIT I. WE MAY HASTEN TO ADD THAT IT IS NOT NECESSARY THAT THE NEW UNIT SHOULD MANUFACTURE AN ENTIRELY DIFFERENT ITEM FROM WHAT WA S BEING MANUFACTURED BY THE OLD UNIT. THIS IS SO BECAUSE O F THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TEXTILE MACHINE RY CORPORATION LTD. (SUPRA) AS ALSO THE JUDGMENT OF THE SUPREME CO URT IN THE CASE OF INDIAN ALUMINIUM CO. LTD. (SUPRA). A PERUSAL OF THE FACTS IN THESE CASES SHOWS THAT THE NEW UNITS WERE ALSO SET UP FOR THE PURPOSE OF PRODUCING THE SAME ITEMS WHICH WERE BEING PRODUCED IN THE OLD UNITS. FOR INSTANCE IN THE CASE OF INDIAN ALUMINI UM CO. LTD. (SUPRA) THE MANUFACTURING CENTRES AT BELUR KALWA ALUPURAM AND HIRAKUD WERE MANUFACTURING ALUMINIUM INGOTS FROM OR E AND THE NEW ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 10 UNIT SET UP AT MURI ALSO MANUFACTURED ALUMINIUM ING OTS FROM ORE. IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. (SUP RA) THE NEW UNITS MANUFACTURED FORGINGS AND CASTINGS WHICH WERE SUPPLIED TO THE OLD UNIT WHICH WERE MANUFACTURING BOILERS WAGO NS ETC. THUS IN THIS CASE THE ASSESSEE WAS MANUFACTURING ITEMS W HICH CONSTITUTED COMPONENT PARTS OF ANOTHER ITEM MANUFAC TURED IN THE OLD UNIT. THE SUPREME COURT HELD THAT USE BY THE A SSESSEE OF THE ARTICLES PRODUCED IN ITS EXISTING BUSINESS OR THE C ONCEPT OF EXPANSION ARE NOT DECISIVE TESTS IN CONSTRUING IN S ECTION 15C OF THE 1922 ACT. BOTH THE JUDGMENTS SHOW THAT THE DECISIV E TEST IS THAT THE INDUSTRIAL UNITS SET UP MUST BE NEW IN THE SENSE TH AT NEW PLANT AND MACHINERY SHOULD BE INSTALLED FOR PRODUCING EITHER THE SAME COMMODITIES OR SOME DISTINCT COMMODITIES. IT HAS F URTHER BEEN HELD THAT THE NEW UNDERTAKING SHOULD NOT BE FORMED BY TH E RECONSTRUCTION OF THE OLD BUSINESS. IN THE PRESENT CASE WE HAVE ALREADY SEEN THAT EVEN THE ASSESSING OFFICER HAS AC CEPTED THE ASSESSEES CLAIM THAT UNIT II WAS SET UP WITH THE H ELP OF NEW PLANT AND MACHINERY FOR ACQUIRING WHICH THE ASSESSEE HAD TO INCUR ADDITIONAL TERM LOAN OF ` 1 20 00 000/-. THERE IS NO EVIDENCE TO SHOW THAT ANY PLANT OR MACHINERY USED IN UNIT I WAS DISMANTLED AND INSTALLED IN UNIT II. THE ONLY ARGUMENT OF THE ASS ESSING OFFICER WAS THAT THE PRODUCT TURNED OUT BY UNIT II WAS THE SAME PRODUCT WHICH WAS TURNED OUT BY UNIT I. AS WE HAVE ALREADY SEEN THIS IS NOT A DECISIVE TEST AS HELD BY THE SUPREME COURT IN THE T WO JUDGMENTS CITED ABOVE. ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 11 15. IN THE LIGHT OF THE FACTUAL FINDINGS RECORDED B Y THE CIT(A) WITH WHICH WE AGREE AND IN THE ABSENCE OF ANY MATER IAL OR EVIDENCE CONTRARY TO THE SAME BEING PRODUCED BEFORE US WE A RE UNABLE TO SAY THAT THE CIT(A) WAS WRONG IN HOLDING THAT UNIT II WAS A SEPARATE AND INDEPENDENT UNIT ELIGIBLE FOR THE DEDUCTION UND ER SECTION 80-IB. THE MUMBAI SPECIAL BENCH WAS CONCERNED WITH AN UNIT WHICH WAS NOT FUNCTIONALLY INDEPENDENT WHEREAS THE KERALA HIG H COURT (SUPRA) WAS CONCERNED WITH AN UNIT WHICH SHARED A COMMON PI PELINE AND A COMMON BOILER HOUSE WITH THE OLD UNIT AND CONSEQUEN TLY THE CLOSURE OF THE OLD UNIT AUTOMATICALLY LED TO THE CL OSURE OF THE NEW UNIT. THE JUDGMENT OF THE DELHI HIGH COURT (SUPRA) AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE HAS BEEN EX PRESSLY DISAPPROVED BY THE SUPREME COURT IN THE CASE OF TEX TILE MACHINERY CORPORATION LTD. (SUPRA). 16. FOR THE ABOVE SAID REASONS WE ARE OF THE VIEW T HAT THE ORDERS OF THE CIT(A) FOR BOTH THE YEARS DO NOT REQU IRE ANY INTERFERENCE. THEY ARE UPHELD AND THE APPEALS FILE D BY THE REVENUE ARE DISMISSED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER 2010. SD/- SD/- (RAJENDRA SINGH) ( R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 31 ST DECEMBER 2010 SALDANHA ITA NO: 2669/MUM/2009 ITA NO: 5431/MUM/2009 12 COPY TO: 1. M/S UNIGLOBE PACKAGING P. LTD. 2B COSMOS L D RUPAREL MARG MALABAR HILL MUMBAI 400 026 2. DCIT- RANGE 5(3) 3. CIT-5 4. CIT(A) -V 5. DR F BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI