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2008 (2) TMI 445 - AT - Income TaxDeduction under section 80-I/80-IA - Undertaking II and Undertaking III - Worked out the profits and gains of each of its undertakings - treated undertakings as separate and independent - whether the unit in question is engaged in the production or manufacture of specified articles or things in its own right - HELD THAT:- In our view, the term 'undertaking' has to be approached teleologically focusing on the subject-matter the unit in question is concerned with. In order to constitute an 'undertaking', the unit must undertake the specified task. In the context of section 80-I or section 80-IA, the obligation or task to be undertaken by a unit is the manufacture or production of articles or things specified in that section. The 'undertaking' envisaged by the aforesaid provisions is the one which undertakes to manufacture or produce the articles or things in its own right and consequently derives the profits or gains therefrom. In our view, a unit qualifies to be called an 'undertaking' when it undertakes the production or manufacture of articles or things in its own right and produces such articles or things by itself as a separate and independent unit. It should not only be a separate and independent unit but a well integrated unit capable of undertaking the manufacturing or production of articles or things. As held in Textile Machinery Corporation Ltd.'s case [1977 (1) TMI 3 - SUPREME COURT], an undertaking claiming deduction must be a new integrated unit by itself where articles or things are manufactured or produced. The findings recorded by the learned CIT(A) that the unit in question is separately and independently engaged in the production of capsules on its own have not been shown to be incorrect or based on no material. It is also not in dispute that each undertaking has not only produced the capsules but also derived the profits and gains from them. The Department has also not rebutted the assessee's submission that it has treated each undertaking as separate and independent in its accounts. It is also not the case of the Department that any of the negative tests laid down in section 80-I(2) is attracted in the case before us. We therefore endorse the findings recorded as also the order passed by him in this behalf and consequently dismiss Ground No. 1 taken by the Department.
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