TMI Blog1998 (11) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Divisions namely Die-Casting, and Forging Division, Tool Room and Machine Shop. The main business was carried on in the Die-Casting and Forging Shop wherein the rough castings and forgings were produced after melting various matters. These rough castings and forgings were further processed in Tool Room Machine Shop for giving them in the final shape. 4. The previous year adopted by the assessee was the calendar year. In 1978, the assessee prepared a plan to increase its production capacity in order to meet the demand of its customers, who were mainly Oil Companies (Govt. of India Undertakings). To implement the plan, the assessee constructed the additional floor space of 356 Sq. Mtrs. in 1978 and 254 Sq. Mtrs. in 1979. In the calendar year 1979 relevant to assessment year 1980-81, the assessee installed a new machinery in the Forging and Die-Casting Shop which was valued at Rs. 12,99,500. This machine was a very sophisticated machine for producing the improved variety of pressure regulator. Besides this, some other machines worth Rs. 32,281 and Rs. 7,82,770 were also installed in Tool Room and Machine Shop respectively. In the subsequent years, no other machine was installed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering the same, the CIT(A) allowed the claim of the assessee vide his order dated 29th October, 1986. 8. As far as assessment years 1981-82 to 1983-84 are concerned, revisionary jurisdiction was invoked by the Commissioner of Income-tax, Pune under section 263 inasmuch as he was of the view that orders of Assessing Officer were erroneous and prejudicial to the interest of Revenue, as according to him no new unit had come into existence. The notices under section 263 were issued on 20th March, 1987 i.e., few days before the time barring limit. After considering the submissions of the assessee, the CIT was of the view that increase in the production was not possible without the dependence of the old machines in the Tool Room and Machine Shop. He also held that no section was capable of producing of any article of its own, and therefore, it could not be said that any new industrial undertaking had come into existence despite the fact that substantial investment was made in the expansion. According to the learned CIT, it was a case of simple addition of the plant and machinery without bringing into existence separate industrial unit in any of the assessment years. The CIT al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessment year 1979-80 to 9.66 lakhs in assessment year 1980-81 and 16.07 lakhs in assessment year 1982-83. He also drew our attention to the fact that number of employees increased from 446 to 681. He also drew our attention to various photographs of the machineries installed in various sections. He also referred to the layout of the factory to show that Machinery was installed in a separate building it was contended by him that in the course of the assessment proceedings for assessment year 1981-82, the Assessing Officer had visited the factory premises of the assessee and found that machine was installed in the new premises. At this stage, the Bench wanted to know whether there was any report of the Assessing Officer regarding the visit to the factory of the assessee. The learned counsel for the assessee was unable to point out any discussion about this fact. It was also submitted by him that article produced by the new machine was entirely different one from the old article and therefore, the sales of such article was identifiable. In support of his contention, he relied on the decisions of the Supreme Court in the case of Textile Machinery Corpn. Ltd. and Indian Aluminium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . has supported the order of Commissioner of Income-tax under section 263 by submitting that it is not necessary that there must be new material for invoking the revisionary jurisdiction. Regarding the merger, it was submitted by him that merger was only for assessment year 1980-81 and therefore, it could not affect the subsequent years. It was also submitted by him that decision of this Bench in the case of Desai Bros. Ltd. was not applicable to the facts of the case inasmuch as the dispute was still pending before the ITAT. 14. Rival submissions of the parties have been considered carefully. First we shall take up the issue arising out of the appeal of the Revenue. The issue to be considered is whether a new unit came into existence in assessment year 1980-81, so that the assessee could claim deduction under section 80J. The material placed before us has been considered carefully and on perusal of the same, the factual position emerges as under:-- 1. There is no material on the record to show that new Forging Machine was installed in a premises separate from the existing premises. The submission of Mr. Vora, learned counsel for the assessee, that Assessing Officer verified th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the new machine was different and identifiable. 9. That production increased considerably i.e., 4.32 lakhs regulators in assessment year 1979-80 to 9.66 lakhs in assessment year 1980-81 and 16.0 lakhs in assessment year 1982-83. 10. That there was common arrangement for the Finance and Accounts. 15. As far as legal position is concerned, it is settled by the decision of Supreme Court in the case of Textile Machinery Corpn. Ltd. The relevant portions of the observations of their Lordships which are necessary to dispose of this issue are set out as under:-- "(i) Even if a new business is carried on by piercing the veil of the new business, it is found that there is employment of the assets of the old business, the benefit will not be available. (ii) The true trust is not whether the new Industrial undertaking connotes expansion of the existing business of the assessee, but whether it is of the same, a new and identifiable undertaking separate and distinct from the existing business....there must be a new emergence of a physically separate industrial unit which may exist on its own as a viable unit. An undertaking is formed out of the existing business if the physical i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer category, the assessee is not entitled to the said deduction. 17. The contention of the learned counsel for the assessee that claim of the assessee under section 80J should be allowed as facts of the present case are similar to the facts before the Supreme Court in the case of Indian Aluminium Co. Ltd. cannot be accepted. We find that full facts in the aforesaid case have been given in the judgment of the Calcutta High Court in CIT v. Indian Aluminium Co. Ltd. [1973] 88 ITR 257. The facts of that case are reported at page 271 of the report which for the benefits of our order are being reproduced as under:-- "The facts of the present case, however, would show that there were substantial expansions to such an extent that the subsequent undertakings can be said to be virtually new industrial undertakings. Firstly, with respect to the subsequent establishment at Belur it appears that the capital employed exceeded Rs. 50 lakhs. It was established in six different buildings, the total accommodation of which is comprising an area of 27,560 sq. ft. It contained 12 different categories of machinery. The Government of India granted import licences and released foreign exchange in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er house, common purchase of raw-material and sale of finished product and nobody was assigned specific duty to any particular plant, deployment of workers was common to both the plants, common catering facilities and common workshop for both the units and there was common licence and the electricity bill. On the basis of these facts, the Tribunal disallowed the claim of the assessee under section 80J. The said decision of the Tribunal was affirmed by the High Court after following the decision of the Supreme Court in the case of Textile Machinery Corpn. Ltd. 20. The second case is Canara Wire Wire Products Ltd. In this case, the assessee had installed a new transformer, a new furnace and a new motor in the existing factory premises which involved heavy investment. The licenced capacity increased from 5000 to 6200 M.T. per annum. The claim of the assessee was rejected by the Assessing Officer as the assessee had not been able to establish that a new unit of manufacture was set up. This view was found by the High Court after considering the Supreme Court's decisions to which we have already referred. 21. The third decision is of Andhra Pradesh High Court in the case of Ashok L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be erroneous if it is passed not in accordance with the law or the conclusion of the Assessing Officer is such which could not have been arrived at by a quasi-judicial authority on the basis of available material. Admittedly, the Assessing Officer rejected the claim of the assessee under section 80J in respect of assessment year 1980-81. Therefore, the Assessing Officer could not have allowed such claim in subsequent years unless fresh materials were brought on record to show that earlier decision was wrong. We have gone through the material placed before the Assessing Officer in the proceeding for assessment year 1981-82 and we do not find any new material except the layout of the factory. We have already discussed about this material and hold that this material itself cannot prove the emergence of new physically separate and distinct industrial unit. We have also observed that there was no material on the record to establish that Assessing Officer visited the factory and verified the fact that new machines were installed in a separate and distinct premises. Therefore, in the absence of any fresh concrete material, the Assessing Officer was not legally justified in departing from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking became final in the earlier years and therefore, it was held that said controversy could not be challenged in the subsequent years by CIT under section 263. But, in the present case, the issue regarding the setting up of a new industrial undertaking had not become final as the revenue had challenged the order of CIT(A) for assessment year 1980-81 before the tribunal which we have now decided in favour of the revenue. Therefore, it cannot be said that parties had allowed the position to be sustained by not challenging the order as held by the Supreme Court. Therefore, the said decision cannot be applied to the present case. For the similar reasons, it is held that decision of Gujarat High Court in the case of Saurashtra Cement Chemical Industries Ltd. is distinguishable on facts. 26. According to the amended provision of section 263, the CIT could assume the jurisdiction on the basis of material available before him. The fact that order of CIT(A) was subject-matter of further appeal before the Tribunal was very much available before the CIT and therefore, the CIT being representative of the revenue was bound to consider the error committed by the Assessing Officer wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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