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TMI Blog2002 (7) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case a valid charge or mortgage was created by the deed of hypothecation trust dated April 1, 1979? (ii) Whether, on the facts and in the circumstances of the case, the disallowance of interest of Rs. 83,292 in the assessment year 1980-81 and of Rs. 1,14,807 in the assessment year 1981-82 under section 40A(8) of the Income-tax Act, 1961 are justified in law?" The questions of law referred at the instance of the Revenue: "(i) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee-company is entitled to a deduction of Rs. 1,60,699 for the assessment year 1979-80, Rs. 3,47,944 for the assessment year 1980-81 and Rs. 7,74,846 for the assessment year 1981-82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, he disallowed a sum of Rs. 83,292 for 1980-81 and Rs. 1,14,807 for 1981-82. The Commissioner of Income-tax (Appeals), on appeal, took a different view and held that a floating charge was created by the hypothecation of the properties of the assessee-company and security was created in favour of the deposit holders and the said charge was also registered with the Registrar of Companies as provided under the Companies Act, 1956. He therefore held that the security was available to the deposit holders and the disallowance of interest was not sustainable as per section 40A(8) of the Act. However, he held that a sum of Rs. 42,173 should be disallowed in any event for the assessment year 1981-82 on the score that the security created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein this court has held that the registration of the charge with the Registrar of Companies under section 125 of the Companies Act, 1956, is sufficient to create a valid charge over the immovable properties of the company and once there is a valid charge which was registered under the relevant provisions of the Companies Act, the assessee-company would be satisfying the requirements of sub-clause (ix) of clause (b) of section 40A(8) of the Act. There is no dispute that there was a hypothecation deed and there was a registration of the charge with the Registrar of Companies. We are of the view that the absence of registration under the Registration Act is immaterial as the assessee had created a charge on its plant and machinery by ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Commissioner of Income-tax (Appeals) was confirmed by the Appellate Tribunal. The brief facts to consider the eligibility of deduction under section 80J of the Act are that the assessee had established a unit at Kirikera, Hindupur District, Andhra Pradesh, and it was found on materials available on record that there was a substantial expansion of the unit and a new industrial undertaking separate and distinct from the existing unit was established by the assessee. There was a fresh capital inflow in the establishment of the new unit and there was a substantial expansion in the manufacturing capacity of the assessee and it was found on the facts that a separate industrial unit has come into existence. The only objection of Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new industrial undertaking with fresh capital, investment, employment of labour and manufacture or production of articles. We find that a separate and new industrial unit was formed by the establishment of a new unit at Kirikera, Hindupur District, Andhra Pradesh. We therefore hold that the Tribunal has come to a correct conclusion in holding that the assessee is entitled to the deduction under section 80J of the Act. Accordingly, we answer the first question of law against the Revenue and in favour of the assessee. As far as the second question is concerned, we find that the issue raised is directly covered against the Revenue by the decision of this court in McDowell and Co. Ltd. v. CIT [2000] 246 ITR 529. Further, this court in CIT v. P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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