TMI Blog1981 (11) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... a new industrial undertaking established by itself, in its assessment for 1971-72. It was disallowed on the ground that it was only an expansion of an existing business and not a new industrial undertaking. The AAC directed allowance following the decision of the Calcutta High Court in CIT v. Indian Aluminium Co. Ltd. [1973] 88 ITR 257. He followed his own decision for two succeeding years also. All the three assessments for the assessment years 1971-72, 1972-73 and 1974-75 became the subject-matter of a common order of this Tribunal in IT Appeal Nos. 1886 and 1887 (Mds.) of 1975-76 and IT Appeal No. 1950 (Mds.) of 1976-77 dated 26-7-1978. The revenue's appeals were mainly based on its reliance on the decision of the Calcutta High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first appeal in ordinary course and there are other issues for this year other than the common question relating to relief under section 80J in respect of bonded expansion department. 3. The Commissioner (Appeals) dealt with the claim of the assessee in great detail. We will only briefly summarise them. The assessee's business is manufacture of abrasives. The assessee got a licence for substantial expansion of its installed capacity from 700 tons to 2500 tons for manufacture of grinding wheels and other bonded abrasive vide licence L/8(C-3)(ii) LEI(B)/65 dated 2-7-1965. In pursuance of the same, substantial expansion was undertaken and a separate and viable bonded expansion unit came into existence. In the year ended 31-8-1969, machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the new plant for production of new type of abrasives manufactured from October 1969. Bonded expansion department was separate notwithstanding its proximity to the older manufacturing unit in terms of space. It was pointed out by the first appellate authority that the assessee could be entitled to relief under section 80J on facts of the case even if it had merely continued to produce the same old products. The assessee is in a much better position in view of its manufacture of products of different qualities. He also took the view that the two defects mentioned before the Tribunal did not stand in the way of relief. The assumption that there was opening stock as at the beginning of the year for the bonded expansion department was wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only common trading and profit and loss account. 5. The assessee's counsel, in reply, relied on the orders of authorities below. He claimed that the decisions relied upon by the department actually supported his case. He pointed out that it is the conclusion of the first appellate authority on facts that there has been a distinct, separate and viable unit manufacturing new qualities of the product notwithstanding the proximity of newly set up units of machinery in the bonded expansion department. He pointed out that the Calcutta High Court itself in CIT v. Rohtas Industries Ltd., relied upon by the department, found that separate accounts need not necessarily be maintained for eligibility for relief under section 80J following its own ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is in a much stronger position as newer varieties of goods are manufactured by the new unit. Mere proximity to old machinery could not disentitle the assessee to relief. New unit does not become old by being close to old unit. There is no material at all, to justify an inference of reconstruction. A statistical comparison of installed capacity, consumption of raw materials, labour, the production, etc., and the installation of 1000 KVA transformer sub-station to energize the new machinery clearly indicate the substantial expansion of the assessee's business by adding a separate, viable and distinct new industrial undertaking to the existing business. A further physical separation as in a different place altogether is certainly not requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allegedly newly produced even before the industrial undertaking allegedly started working. This objection is easily met. The assessee in working out average capital, on which it claimed relief, averaged the stock as between nil opening stock and closing stock of Rs. 3,41,174 to arrive at Rs. 1,70,587 which was wrongly assumed by the ITO to be an admitted opening stock. It was only average stock. The fact that such average is half of closing stock itself shows that opening stock was nil. Hence, this objection is based on a misunderstanding of the records. The second objection is that the assessee claimed depreciation on some of the machinery now claimed to be part of the new industrial undertaking even in the assessment year 1970-71. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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