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Shri Hari Krishna Papers Pvt. Ltd. Versus The Deputy Commissioner of Income Tax

2016 (3) TMI 145 - ITAT CHENNAI

Revision u/s 263 - reconsider the deduction claimed by the assessee u/s.80-IA - splitting of existing business structure - Held that:- If an assessment order is passed by AO without making requisite enquiries or examining the claim of assessee perse an erroneous order and hence, it is amenable to revisionary jurisdiction u/s.263 of the Act; AO having simply accepted the income declared by the assessee and without any application of mind or enquiry, though the assessee company was not granted wit .....

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evenue, unless the view taken by the ITO is unsustainable in law. In the present case as the facts brought on record suggests that the similar claim of assessee u/s.80-IA for assessment year 2009-10 to held that new unit established by the assessee for manufacturing articles used as intermediate products in the old division, which the assessee was buying from the market earlier, is not reconstruction of business already in existence. To constitute reconstruction, there must be transfer of assets .....

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er And Shri G. Pavan Kumar, Judicial Member For the Appellant : Mr. A. Dhananjayan, C. A For the Respondent : Mr. Pathalavath Peerya ,CIT, D.R ORDER Per Chandra Poojari, Accountant Member This appeal is filed by the Assessee is directed against the order of the Learned Commissioner of Income Tax-3, Coimbatore dated 27.03.2015 passed u/s.263 of the Act pertaining to the assessment year 2010-11. the order of the Commissioner of Income Tax, Madurai. 2. The assessee has raised the grounds in appeal .....

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y, CIT concluded that the assessee claimed deduction u/s.80-IA of the Act and the AO accepted the same, though it was disallowed in the assessment year 2009-10 by the AO. According to the CIT, the claim of assessee u/s.80-IA of the Act requires reexamination by the AO. Further, CIT directed the AO to pass appropriate order on the basis of merit. Against this the assessee is in appeal before us. 4. Before us, ld.A.R submitted that for the assessment year 2009- 10, on the basis of which the CIT ex .....

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e Act. 5. We have heard both the parties and perused the material on record. In our opinion, if an assessment order is passed by AO without making requisite enquiries or examining the claim of assessee perse an erroneous order and hence, it is amenable to revisionary jurisdiction u/s.263 of the Act; AO having simply accepted the income declared by the assessee and without any application of mind or enquiry, though the assessee company was not granted with the similar deduction in earlier assessm .....

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s unsustainable in law. In the present case as the facts brought on record suggests that the similar claim of assessee u/s.80-IA for assessment year 2009-10 was a subject matter of appeal before the Tribunal in ITA No.633/Mds./14 vide order dated 24.07.2015 wherein held as follows:- 7. We have heard both the parties and perused the material on record. The assessee company was engaged in manufacture of paper and production of electricity from windmills upto the assessment year 2003-04. The assess .....

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maintained for the new unit. The unit started operation since September 2004. The year wise power generated from September 2004 to 2009 was provided to the assessing officer. The assessee started claiming deduction u/s 80lA from Assessment year 2008-09 onwards which was accepted by the department. The department allowed 80lA deduction as claimed by the assessee for the assessment years 2010-11 and 2012-13 under scrutiny assessment u/s 143(3). The assessee company filed its return of income for .....

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s not created for generating electricity but to supply steam to paper industry and the assessee has artificially bifurcated a production process in which the older machinery were replaced by a new machinery which was only required for paper industry and not for turbine division for generating power. According to the Assessing Officer the electricity generated was only an incidental mechanism of the paper industry to save the energy from the steam which otherwise would have lost if they continue .....

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paper division of the company. Creating a part of existing paper production process into a separate division squarely amounts to splitting and reconstruction of business already inexistence. Therefore, the Assessing Officer was of the opinion that the assessee was not entitled to claim of deduction u/s.80IA of the Act on its turbine division. In order to decide the above issue, we first proceed to examine the legal position in this regard. 8. Now, we proceed to examine the provision of section 8 .....

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the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park (or develops a special economic zone referred to in clause (iii) of sub-section (4) or generates power or commences transmission or distribution of power (or undertakes substantial renovat .....

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as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose: Provided that nothing contained in this sub-section shall apply in the case of transfer, either in whole or in part, of machinery or plant previously used by a State .....

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, namely :- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant by the asses .....

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0-IA is to grant relief to a new industrial undertaking. Therefore, whenever an assessee claims relief u/s. 80-IA, the assessee will have to establish that a new unit had come into existence which independently produced articles and that this new unit was not dependent upon the old existent unit, in the sense that the new unit could not be equated as an expansion of the old unit. 10. Where an assessee makes a claim for relief u/s. 80-IA the burden lies upon him to produce cogent material in supp .....

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n a broad commercial sense from a commonsense point of view and only in relation to the new industrial undertaking claiming the concession. 12. Further, where the new unit was started by fresh outlay of capital and manufactured or produced articles yielding additional profits having a separate physical independent existence, it was a new industrial undertaking eligible for tax concession. 13. In other words, the establishment of a new industrial unit as a part of an already existing industrial e .....

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ty as of the old business or it may produce some other distinct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in its old business or may be sold in the open market. One thing is certain that the new undertaking must be an integrated unit by itself wherein articles are produced. The industrial unit must be new in the sense that new plant and machinery are erected for producing either the same commodity or some other distinct .....

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under s. 80-IA for assessment year 2009- 2010. (i) Whether the machines costing 1,77,39,233/- and building 36,78,188/-, which were made during the assessment years 2003- 2004 and 2004-2005 (before 31st March, 2005), brought into existence an integrated independent unit, which by themselves, independently of the old unit, were capable of producing the steam and electricity. 16. We find that the assessee company commenced a distinct industrial undertaking for the generation of power. It is an undi .....

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as laid down by the Apex Court, in the case of Textile Machinery Corporation Ltd., Vs. CIT 107 ITR 195, directly and squarely applies to the facts of the case. In the instant case, the true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new an identifiable undertaking separate and distinct from the existing business of the assessee but whether it is all the same a new and identifiable undertaking sep .....

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iness but the expression 'not formed' was construed to mean that the undertaking should not be a continuation of the old but emergence of a new unit. Therefore, even if the undertaking is established by transfer of building, plant or machinery, it is not formed as a result of such transfer, in our considered view; the assessee could not be denied the benefit. We also find that a new undertaking for manufacture of power with steam as by-product was formed out of fresh funds, in separately .....

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