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2015 (10) TMI 490 - HC - Income TaxRevision u/s 263 - fresh assessment order passed in both the assessment years i.e. 1985-86 and 1987-88 in which the claim of the appellant under Sections 88HH and 80I was allowed - Held that:- Admittedly, the appellant's unit came into existence in the assessment year 1980-81 prior to the insertion of Section 80I of the Act, which came into effect from 1.4.1981. Consequently, we are of the opinion that since the appellant's industry was already existing prior to insertion of Section 80I of the Act, the benefit of the provision of Section 80I could not be given to the appellant as it was not a new industry, which came into existence after 1.4.1981. Consequently, the appellant is not entitled for any deduction under Section 80I of the Act. Section 80 HH was inserted w.e.f.1.4.1974, where incentives were given for establishing a new industrial undertaking in a backward area. Sub-clause (ii) of Section 80HH of the Act laid down certain conditions which were required to be fulfilled before claiming deduction. In this regard, one such condition was that the industrial undertaking has begun or begins to manufacture or produce articles after 31.12.1970. In the instant case, admittedly, the appellant's unit came into existence and started business in the assessment year 1980-81 by doing job works i.e. repair of transformers but started manufacturing activity from the assessment year 1985-86 and, consequently, claimed deduction under Section 80HH of the Act from that assessment year onwards. In our opinion, the reasoning adopted by the Tribunal is patently erroneous. The Tribunal has not considered sub-clause (iv) of Section 80HH of the Act, which only allows the assessee to claim deduction from that assessment year in which the industrial undertaking began to manufacture or produce the articles. From this provision, it is apparently clear that even though the undertaking came into existence from the assessment year 1980-81, but started the manufacturing process in the assessment year 1985-86, it would be entitled for deduction under Section 80HH from that year, namely, 1985-86. The finding that the appellant's unit was not a new unit in the year from which it started manufacturing is erroneous and misconceived. Section 80HH does not provide that the industrial undertaking should be a new undertaking and starts manufacturing from that year itself. The essential requirement is, the year in which the manufacturing activity starts and, consequently, appellant cannot be non-suited on the ground that its unit was not the new unit when it started its manufacturing activity. In the light of the aforesaid, we are of the opinion that the appellant was entitled for deduction under Section 80HH of the Act and the Tribunal as well as the subordinate authorities committed a manifest error in rejecting the claim of the appellant on this aspect. Upon a perusal of the order of the Commissioner of Income Tax, we find that a specific finding has been recorded that the assessment was erroneous and prejudicial to the interest of the revenue. The learned counsel for the appellant could not point out anything to the contrary. Consequently, we are of the opinion that once a specific finding has been recorded by the Commissioner that the assessment order was erroneous and prejudicial to the interest of the revenue, the Commissioner had validly passed an order under Section 263 of the Act. - Decided partly in favour of assessee.
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