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TMI Blog2005 (11) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Divisional Level Committee, it was found that the applicant has purchased one mixer machine worth ₹ 1,500/- from M/S Mahavir Enterprises vide invoice no. 1932 dated 3rd March, 1994. That mixture machine was found old and, therefore, the Divisional Level Committee though recognized the unit of the applicant as new unit initially established but allowed the exemption only for the period 27th October, 1992 to 2nd March, 1994 and disallowed the claim of exemption for the subsequent period on the ground that the old mixer machine have been used in the unit. The claim of the applicant was that the mixer machine was used in the laboratory for the purposes of mixing and was not essentially required in the manufacturing of paints and adhesives. The certificate of S.K. Ahuja and Associates, consultant was filed explaining the process of manufacturing. In the certificate, it was also certified that small kitchen mixer is used in the laboratory for mixing purposes and the mixer was no way was the part of the production. Divisional Level Committee however has not accepted the plea of the applicant. Being aggrieved by the order of the Divisional Level Committee, the applicant filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; during the period ending with 31st March, 1990, means an industrial undertaking set-up by a dealer on or after October 1, 1982 but not later than March 31, 1990-- (a) .... (b) (i) .... (ii) .... (iii) .... (c) .... (d) Using machinery, accessories or components not already used, or acquired for use, in any factory or workshop in India. (e) .... And includes on industrial undertaking fulfilling the conditions laid down in Clauses (a) to (e) set up by a dealer. (i) .... (ii) .... (i) .... (ii) .... (i) .... (ii) .... (iii) .... (iv) .... (2) "New Unit" after 31st March, 1990 means a factory or workshop set up by a dealer after such date and satisfying the conditions laid down under this Act or Rules or Notification made thereunder with regard to such factory or workshop and includes an industrial unit manufacturing the same goods at any other place in the State or an industrial unit manufacturing any other goods on or adjacent to the site of an existing factory or workshop, but does not include-- (a) any factory or workshop using machinery, plant, equipment, apparatus, or components already used or acquired for use in other factory or workshop in India o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till the maximum amount of tax relief by such exemption from or reduction in rate of tax as specified in column 5 of Annexure I is achieved, whichever is earlier, on the turnover of sales: (a) of the quantity of goods manufactured in excess of the base production in the case of units undertaking expansion or modernization: and (b) of goods manufactured by the unit which are of a nature different from those manufactured earlier by such unit in the case of units undertaking diversification. 1 (C) ..... 2. .... 3. .... 4. .... 5. ''Fixed Capital Investment' or, as the case may be, additional fixed capital investment may, unless otherwise established, be determined in the case of an industrial undertaking financed by a term loan advanced by a public financial institution or a Scheduled Bank according to the certificate to that effect issued by such institution or the Bank and in any other case, according to--- (a) the value of the land certified by the Collector in accordance with the procedure laid down for determination of the value of land for the purpose of payment of stamp duty under the Indian Stamp Act, 1899. (b) the value of building certified by an evaluat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be the additional fixed capital investment. 2 (i) The districts of Azamgarh, Baharaich, Ballia, Barabank, Basti, Budaun, Bulandshahr, Deoria, Etah, Etawah, Faizabad, Farrukhabad, Ghazipur, Gonds, Hardoi, Jhansi, Lalitpur, Mainpuri, Mathura, Mau, Moradabad, Padrauna, Pilibhit, Pratapgrah, Raebareli, Rampur, Shahjahanpur, Sidharthnagar, Sitapur and Unnao.(ii) The area of Allahabad.Districts in south of the river Jamuna and confluent Ganga (excluding the area included under Municipal Corporation. Allahabad).(iii) The Taj Trapezium area.(iv) Greater NOIDA Industrial Development area. Ten Years 1st year 100% 100%2nd year 100% 100%3rd year 100% 100%4th year 100% 75%5th year 100% 75%6th year 100% 75%7th year 100% 50%8th year 100% 50%9th year 100% 25%10th year 100% 25% 200% of the fixed capital investment or, as the case may be the additional fixed capital investment. 3. The districts of Agra (excluding Taj Trapezium Area), Aligarh (excluding Taj Trapezium Area), Allahabad (excluding the area in south of rivers Jamuna and confluent Ganga but including the area included under Municipal Corporation, Allahabad), Bareilly,Bhadohi, Bijnor, Firozabad (excluding Taj Trapesium Area). Ghaziaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means an industrial undertaking set-up by a dealer on or after 31.03.1990 using machinery, accessories or components not already used, acquired for use in any other factory or workshop in India. Explanation-II defines new unit after 31.03.1990 means a factory or workshop set up but does not include any factory or workshop using machinery, plant, equipment, apparatus or components already used or acquired for use in any other factory or workshop in India other than boilers, generators, moulds and dyes and other than any machinery, plant, equipment, apparatus or component sold to it by any Government Company or any corporation owned or controlled by the Central or State Government. In the definition of the new unit prior to 31.03.1990 all the machines, accessories or component should be new. In the definition of new unit after 31.03.1990 "accessories" has been excluded and was not required to be new and those unit using old boilers, generators, moulds and dyes have also been included in the new unit. As per the notification the benefit of exemption to the new unit established prior to 31.03.1990 was on the total turn over of the manufactured product in a specified period. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1992 UPTC, 857, as against the total investment of ₹ 1,04,104/- towards machine, one machine worth ₹ 1,453/- was old. Apex Court held that the exemption can not be denied. "The section, read as a whole, was a provision, directed towards encouraging industrialization by permitting an assessee setting up a new undertaking to claim benefit of not paying tax to the extent of six per cent in a year o the capital employed. But the legislature took care to restrict such benefit only to those undertakings which were new in form and substance, by providing that the undertaking should not be, ''formed' in any manner provided in Clause (i) of sub-section (2) of Section 15-C. Each of these requirements, namely, formation of the undertaking by splitting up or reconstruction of an existing business or transfer to the undertaking of building, raw material or plant in any previous business results in denial of the benefit contemplated under sub-section (1). Since a provision intended for promoting economic growth has to be interpreted liberally the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thia Rice and Oil Mills, 82 ITR (1971) 778 (Cal) did not find any reason to deny the benefit to the assessee where the undertaking was formed by acquisition of part of machinery in second hand from open market. But the decision which became the leading decision on transfer of machinery was rendered by Delhi High Court in Commissioner of Income Tax Vs. Ganga Sugar Corporation Ltd., 92 ITR (1973) 173 (Delhi). It has been followed in nearly all the decisions, given subsequently as it was approved by this Court. It was held that use of scrap and material of the old unit of the value of a small fraction of the expenditure involved in the setting up of the new unit did not attract the concluding words of clause (i) of Section 15 (2). The Calcutta High Court in Commissioner of Income Tax, West Bengal-I Vs. Electric Construction and Equipment Company Ltd. (Cal.), 104 ITR (1976), was of view that where machinery previously used was ''very small compared to the value of the machinery installed' the assessee was well within sub-section (1) of Section 15-C. Same view was taken by the Bombay High Court in Commissioner of Income Tax, Bombay City-I v. Asbestos, Magnesia & Friction Mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs on account of the respondent becoming the owner of land and building to which the unit was shifted. If the construction sought to be placed by the appellant is accepted, the very purpose and object of the grant of exemption will be defeated. After all, the respondent had only shifted the unit to its own premises which made it much more convenient and easier for the respondent to carry on the production of the goods undisturbed by the vagaries of the lessor and without any necessity to spend a part of its income on rent. It is not the case of the appellant that there was any mala fides on the part of the respondent in obtaining exemption in the first instance as a unit with a capital investment below ₹ 3 lakhs and increasing the capital investment subsequently to an amount exceeding ₹ 3 lakhs with a view to defeat the provisions of any of the relevant statutes. The bona fides of the respondent have never been questioned by the appellant." In the case of H.M. Industries and another Vs. STO and another, reported in 2003 NTN (Vol.22), 354, the exemption application under section 4-A was rejected on the ground that the petitioner used old crucible. The Division Be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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