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2015 (9) TMI 331 - MADRAS HIGH COURT

2015 (9) TMI 331 - MADRAS HIGH COURT - TMI - Entitlement to relief under Section 80IA in respect of new 650 TPK Kiln - ITAT denied claim - Held that:- There is no denial of the fact that by setting up a new Kiln, the maximum production capacity of the appellant was actually increased from what it was earlier. In other words, the activity undertaken by the appellant can, at best, be termed as one of expansion of an existing facility.

Unfortunately for the Revenue, clause (i) of sub-sec .....

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is covered either by clause (ii) or that the appellant does not satisfy the conditions prescribed in any of the three clauses viz., (iii), (iv) or (v). Therefore, the presumption on the part of the respondent that the benefit under section 80 IA would not apply unless there is a new Undertaking is not traceable to sub-section (2).

Clause (b) of sub-section (2) of section 80 IA defines an industrial undertaking to have the same meaning as assigned to it in the Explanation to section 3 .....

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. P J Rishikesh For the Respondent : Mr. M. Swaminathan assisted by Mr. K. Sureshkumar JUDGMENT (Judgment of the Court was delivered by V. Ramasubramanian, J. ) These appeals arise out of a common order of the Income Tax Appellate Tribunal upholding the orders of assessment and the orders of the Commissioner of Income Tax Appeals in relation to the assessment years 1996-97 and 1994-95 respectively depriving the benefit of section 80 IA of the Income Tax Act. 2. Heard Mr.P.J.Rishikesh, learned co .....

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143(1)(a) and a notice was issued under sub-section (2) of section 143. An order of assessment was passed on 24.3.1997 disallowing the claim for deduction under section 80 IA. 5. The appellant filed a statutory appeal before the Commissioner of Income Tax (Appeals) on 21.4.1997. The appeal was dismissed on 29.8.1997 forcing the appellant to file a further appeal before the Income Tax Appellate Tribunal. 6. When the aforesaid appeal that related to assessment year 1994-95 was pending before the T .....

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he above appeals. 8. It is seen from the order of assessment passed in respect of the assessment year 1994-95 that the assessing officer went into great detail to find out as to whether what was set up by assessee was a new Industrial Undertaking or not. The entire order of assessment dated 24.3.1997 went on the premises that what was set up should have been a new Unit to be qualified for the deduction under section 80 IA. After pre-supposing that the Unit set up by the assessee should have been .....

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ve appeals. 9. On 29.9.2004, TC(A) No.570 of 2004 was admitted and four questions of law were framed. On 28.4.2005, TC(A) No.190 of 2005 was admitted and this Court framed only two questions of law. These two questions of law were exactly the same as the questions of law (1) and (2) framed in TC(A) No.570 of 2004. 10. However, when the appeals were taken up for disposal today, Mr.P.J.Rishikesh, learned counsel for the appellant made an endorsement in TC(A) No.570 of 2004 to the effect that quest .....

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to get under Section 80IA of the Income Tax Act, even though the new Kiln is independent and viable unit? 12. In order to find an answer to these questions, we must have a look at Section 80 IA, which reads as follows:- "Deduction in respect of profits and gains from industrial undertakings, etc. in certain cases -(1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship (such busin .....

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"any profits and gains derived from any business of an industrial undertaking". The word "new" is not prefixed to the expression "industrial undertaking". Sub-section (1) of section 80 IA does not even impose a condition that the industrial undertaking should have been set up or established on or after a particular date. 14. Sub-section (2) of Section 80 IA lists out 5 conditions which, if satisfied, would make an industrial undertaking, eligible for the benefit und .....

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ore cold storage plant or plants in any part of India. (iv) It begins to manufacture or produce articles or things or to operate such plant or plants at any time during the period beginning on 1st April 1991 and ending on 31st March 1995; and (v) The industrial undertaking employs ten or more workers in a manufacturing process carried on with the aid of power or it employs 20 or more workers in manufacturing process carried on without the aid of power. 15. Therefore, it is clear that out of the .....

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. In other words, the activity undertaken by the appellant can, at best, be termed as one of expansion of an existing facility. 18. Unfortunately for the Revenue, clause (i) of sub-section (2) of section 80 IA does not use the expression "expansion". To deny the benefit to the appellant, under clause (i) of sub-section (2), it should fall either under the category of "splitting up of existing unit" or under the category of "reconstruction of the existing unit". Both .....

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here is a new Undertaking is not traceable to sub-section (2). 20. Clause (b) of sub-section (2) of section 80 IA defines an industrial undertaking to have the same meaning as assigned to it in the Explanation to section 33B. The Explanation to section 33B reads as follows:- "In this section, industrial undertaking means any undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the ma .....

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by Mr.M.Swaminathan, learned Standing Counsel for the Department, what fell for consideration before the Division Bench of the Kerala High Court was as to whether a benefit of deduction under section 80J was available to the assessee in that case. But, it is seen that Section 80J very carefully uses the expression "newly established industrial undertaking". On the contrary, Section 80 IA does not use the expression "new" as an adjective to the expression "industrial und .....

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