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M/s. Nalco Chemicals India Ltd. Versus The Commissioner of Income Tax, Kol-II

2016 (3) TMI 686 - CALCUTTA HIGH COURT

Eligibility of deduction under section 80I - ITAT held that as Industrial Undertaking of the assessee during the assessment year 1989-90 situate at Rishra was not eligible for the benefit under Section 80I - Held that:- The object of introducing section 80I was to encourage the entrepreneurs to set up industry. If the meaning or interpretation given by Mr. Agarwal is to be accepted, that would mean that an industrial undertaking cannot seek to derive the advantage of section 80I by fulfilling th .....

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lity of the assessee to claim deduction. The Tribunal has erroneously denied the benefit of Section 80I to the assessee on the ground that the Industrial Undertaking of the assessee during the assessment year 1989-90 situate at Rishra was not eligible for the benefit under Section 80I. But that ground, according to us, is no reason to deny the benefit in the subsequent years when the assessee has set up a new plant at a different place and also fulfills all the terms and conditions laid down in .....

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ncome-tax Appellate Tribunal B Bench, Kolkata disposing of three several appeals preferred by the revenue challenging orders passed for three several assessment years, viz. the assessment years 1995-96, 1996-97 and 1997-98. All the three appeals were disposed of by the learned Tribunal by a common judgment. The admitted facts and circumstances of the case are as follows:- On 27th September, 1988, the assessee purchased a water treatment chemical plant at Rishra from Indian Explosive Limited at a .....

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8377; 73.24 lakhs were shifted to Konnagar plant. The question arose whether the assessee was entitled to the benefit under section 80I of the Income-tax Act. The Assessing Officer initially allowed deduction under section 80I but he subsequently reopened the proceeding under section 147 and withdrew the benefit. In an appeal preferred by the assessee, the CIT restored the benefit to the assessee. In an appeal preferred by the revenue, the learned Tribunal has set aside the order of the CIT hold .....

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ent years 1995-96, 1996-97 and 1997-98. Therefore, the assessee has come up in appeal. The following question of law has been formulated by consent of the parties after hearing them: Is the deduction under section 80I in the subsequent years dependent upon the initial year of production which, according to the learned Tribunal, in this case is the assessment year 1989-90? In order to answer the question, we have to notice sub-section (1) of section 80I which reads as follows:- (1) Where the gros .....

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eing a company, the provisions of this sub-section shall have effect [in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel] as if for the words 20% , the words 25% had been substituted. The units to which the section applies are to be found in subsection (2) which reads as follows:- (2) This section applies to any industrial undertaking which fulfils all the following conditions namely:- (i) It is not formed by the splitting up, or the reco .....

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ears next following the 31st day of March, 1981, or such further period as the Central Government may, by Notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) In a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of po .....

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y article or thing specified in the list in the Eleventh Schedule had been omitted. Explanation 1. - for the purposes of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, 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) s .....

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y purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purpose of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. Explanation 3. - For the purposes of this sub-section, small scale industrial undertaking shall have the same meaning as in clause (b) of the Explanation b .....

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above which provides that total value of the machinery or the plant so transferred should not exceed 20% of the total value of the machinery or the plant. Admittedly, in this case, the total value of the plant installed at Konnagar was more than ₹ 6 crores and therefore the total value of the machinery or the plant which was transferred from Rishra to Konnagar being ₹ 73 lakhs was less than 20%. It has not been contended that any other clause or any other provision of sub-section (2) .....

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t into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft (such assessment year being hereafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year: Provided that in the case of an assessee, being a cooperative society, the provisions of the sub-section shall have effect as if for the words seven assessmen .....

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nt or plants; or (ii) a ship which is first brought into use: or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990 but before the 1st day of April, 1991, provisions of the sub-section shall have effect as if for the words seven assessment years , the words nine assessment years had been substituted: Provided also that in the case of an assessee, being a co-operative society, deriving profits, and gains from an industrial undertaking or a ship or a hot .....

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vides the time limit during which the assessee can enjoy the benefit of deduction. The limit is seven assessment years following the initial assessment year when the assessee became eligible provided the eligibility is retained. The contention that if the assessee did not qualify for the benefit of deduction under section 80I in the initial year of production, he would not be entitled to the benefit in any subsequent years, according to us, is neither backed by authority nor can the aforesaid co .....

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nitially started production at Rishra which did not qualify for deduction under section 80I, in our view, cannot be a disqualifying factor. The view of the learned Tribunal to this extent is, according to us, wrong. The object of introducing section 80I was to encourage the entrepreneurs to set up industry. If the meaning or interpretation given by Mr. Agarwal is to be accepted, that would mean that an industrial undertaking cannot seek to derive the advantage of section 80I by fulfilling the co .....

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