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2006 (6) TMI 187 - AT - Income TaxDisallowing the claim of the assessee for deduction under section 80-IA - non-fulfilment of the condition regarding the ratio of the cost of old machinery to the cost of total machinery in the initial year - deduction disallowed on the ground that since this condition was not satisfied in the initial year of production, the assessee is not entitled to claim of deduction in this year also. The case of the appellant-assessee was that the assessee's undertaking was not formed with the old machinery and in the alternative the condition regarding satisfaction of the aforesaid ratios should be examined from year-to-year. HELD THAT:- The learned counsel has taken a totally new plea before us that the business of the assessee could have been carried on without use of machinery and, therefore, the undertaking was not formed by transfer to it any machinery or plant previously used for any purpose. The learned DR has pointed out that the aforesaid position is factually incorrect as the value of machinery has been increasing from year-to-year. On consideration of facts, we are of the view that it was necessary for the assessee to use machinery for efficient production of its goods - Without the existence of the machinery, the assessee might have worked as a cottage industry, working its processes manually. However, that was not the intent of the assessee when the undertaking was set up, as it bought old and new machinery, which at the end of the relevant previous year amounted to Rs. 88,59,423 in value terms. Thus, the assessee intended to use mechanized process and that is why it bought old machinery from Sanjay Ghodawat, HUF also. This view is strengthened further by the fact that the assessee had purchased and installed machinery of the value of Rs. 11,67,282 when the production was started on 24-6-1994. Coming to the satisfaction of the condition of the ratio of the old machinery to total machinery, we have two decisions of Hon'ble Bombay High Court in the matter. The decision of the Court in the case of ADDITIONAL COMMISSIONER OF INCOME-TAX VERSUS SUESSIN TEXTILE BALL BEARINGS LIMITED [1985 (9) TMI 32 - BOMBAY HIGH COURT] is in favour of the revenue - However, the decision of the Hon'ble Court in the case of ADVANI OERLIKON (P.) LTD. VERSUS COMMISSIONER OF INCOME-TAX [1984 (1) TMI 342 - BOMBAY HIGH COURT] favours the assessee. The case of the learned counsel was that in the case of Suessin Textile Ball Bearings Ltd., the question was not finally answered by the Hon'ble Court as it was mentioned in the judgment that since the Tribunal had given a finding of fact in an earlier year that the value of the building used by the assessee did not exceed 20 per cent of the total value of machinery, plant and building, the assessee would be entitled to deduction under section 84(1). The case of the learned counsel was that in view thereof, the aforesaid judgment represented merely the observations of the Hon'ble Court which cannot override the decision in the case of Advani Oerlikon (P) Ltd. in view of the decision of Hon'ble Bombay High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS THANA ELECTRICITY SUPPLY LIMITED [1993 (4) TMI 37 - BOMBAY HIGH COURT]. It may be mentioned here that the Hon'ble Court had clearly held that the conditions have to be examined with reference to first year of operation and, therefore, the assessee was not entitled to partial exemption claimed by it. Such a judgment cannot be said to be merely an observation. There is no reason for us to cancel the levy of additional tax also. Appeal dismissed.
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