TMI Blog2019 (5) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ot issue any finding thereon, merely stating that there is no splitting or reconstruction of the existing unit. The assessment, is set-aside back to the file of the AO for proper determination, who shall examine the issue in all its aspects, and decide afresh, taking into account the material deemed relevant, including that the assessee may wish to additionally rely upon. This, then, decides the issue as regards deduction u/s. 80-IB. Capital receipt - The only issue is if the same is, as claimed by the assessee, reduced from the cost of the relevant plant and machinery for claim of depreciation. If so, that is the end of the matter. If not, the same would need to be adjusted for computing the depreciation admissible (refer Explanation 8 to s. 43(1)). - Revenue s appeal is allowed for statistical purposes. - I.T.A. No. 614/Asr/2017 - - - Dated:- 24-4-2019 - Sh. Sanjay Arora, Accountant Member And Sh. N. K. Choudhry, Judicial Member For the Appellant : Sh. Charan Dass (D.R.) For the Respondent : Sh. Sanjay Gupta (C.A.) ORDER PER SANJAY ARORA, AM: This is an Appeal by the Revenue aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cline in the sale of Unit I, i.e., being at ₹ 3.52 cr. for the current year as against ₹ 13.85 cr. and ₹ 13.96 cr. for the immediately two preceding years, which was further accompanied by a continuing decline in the profit rate, as under: AY NP(%) Exemption Status 2007-08 31.05 100% 2008-09 16.41 100% 2009-10 15.51 25% 2010-11 7.04 25% 2011-12 (unstated) 25% 2012-13 (loss) 25% 2013-14 (loss) 25% In view of the foregoing, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nits was setup on the same plot of land or from the same premises it was wrong on the part of the AO to conclude that second unit does not exist at all and therefore, not entitled deduction u/s. 80IB of the Act. Now coming to the eligibility of the appellant under section 80IB of the Income Tax Act, it is found that it has fulfilled all the conditions laid down u/s. 80IB of the Income tax Act as the second unit was not formed by a splitting up, reconstruction, of a business already in existence and was not formed as a result of the re-establishment, reconstruction or revival by the assessee of any such industrial undertaking as is referred to in section 33B. Finally, even the JCIT in his directions to the AO u/s. 144A, on the application of the appellant, has stated that the assessee fulfilled all the conditions prescribed u/s. 80IB of the Act. In view of the facts stated above, I hold that the appellant is entitled to get 100% deduction u/s. 80IB of the Income tax Act. Accordingly, the grounds of appeal are allowed. [(*) to be read as 07/04/2005] The capital subsidy of ₹ 136.27 lacs was confirmed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore be drawn from the non-purchase of any additional land for the second unit, which was for manufacture of craft paper, i.e., as against white printing paper being manufactured by Unit I. He would, then, explain the difference in the production process between the two, being essentially in terms of the roller speed. The raw material (in the form of the chemicals used) was also different; the assessee having in fact maintained separate files (of purchase vouchers) for the two Units, which were submitted as such in the assessment proceedings. 3.2 On the Bench observing that the registration of Unit-II also mentioned the various types of papers, viz., white, media, MG, virgin craft, craft/duplex/grey board (at PB pgs. 41, 45, 46, 47), he explained that the same had to be as the Unit was capable of, with minor changes, viz. the chemicals, roller speed, etc. production of all types of paper. He would, on a further query by the Bench, submit that Unit-II is an independent unit, i.e., capable of producing product/s without using any existing plant and machinery, though was unable to show any contention to that effect by the assessee before, much less a finding in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined is if the second Unit independently satisfies the conditions of section 80-IB, and which question stands to be arise only upon the ld. CIT(A) accepting the assessee s claim of the expansion being a separate unit, i.e., vide the impugned order, and not prior thereto. Further, the explanation in respect of the difference (Rs.8.97 lacs) would also be required (refer para 2.1 of this order). 4.3 The principal question is if the additional capacity set up by the assessee is to be regarded as a separate undertaking, i.e., separate and distinct from the first unit, in operation since August, 2003. Units keep adding capacities, removing production bottlenecks as well as internal (capacity) inconsistencies, even introducing new product/s/product lines, with a view to increase both the physical capacity as well as the product range, i.e., qua quality and variety. The new capacity may or may not require additional land, or power or even building, which could in that case be drawn from the existing set-up, as indeed the assessee claims qua land. The only issue in that case would be of the accounts of the second unit bearing an appropriate charge for the resources use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit, it is a new Unit, which can therefore be titled as Unit-I and Unit-II respectively. 4.5 All that was therefore required of the assessee was to give the process details, preferably in the form of a process chart, with the plant and machinery required at each stage, and correlating the same with the new plant and machinery purchased, also stating its production capacity and power rating along with. Here it may be relevant to state that while the capacity as per the DIC certificate is stated at 33,000 MT per annum (PB pg. 41), that by the Pollution Board is at 2,33,000 MT p.a. (PB pg. 46). Is it, then, that the assessee has increased the existing capacity along with setting up of the facility for manufacture of craft paper ? Profiling in the form suggested should resolve this issue. The Revenue, on its part, could then subject the assessee s claim/s to verification, including physical, issuing findings of fact, on that basis, in adjudication of the matter. For example, the production of the new unit is correlated with the power consumption of the separate power connection taken for the purpose. Conjoint with this is the exercise as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. If its operational capacity, even if in terms of working capital, has been impaired, it cannot be said that a separate, independent unit has been set-up, else it has. Further, if the working capital, i.e., as required for its production, stated to be different from that of the new unit, transferred thereto, is subsequently infused by way of borrowed capital, entailing cost, the same is only an indirect reduction and, thus, shift of profit from the existing to the new unit; the former being now subject to tax, i.e., substantially or wholly, which cannot be countenanced in law. In fact, the charge of transfer/ shift of profit is a serious one (refer Ground 1), and would require being clarified. Apart from decline in demand, which is apparently inconsistent with the setting-up of additional capacity, the reduction in the profit rate (refer para 2.1 of this order) has to be on account of external factors. The matter, accordingly, would require being examined in all its aspects. 4.7 The various findings by the AO have not been addressed by the ld. CIT(A) in adjudicating the assessee s appeal, who, rather, ought to either validate or, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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