TMI Blog1991 (7) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... king order should be passed in regard to the assessee's claim for relief under section 80-I. The ITO, in pursuance of that appellate order, passed order dated 5-8-1985 rejecting the assessee's claim by mentioning that the items manufactured continued to be the same as in the past and therefore, the manufacturing activities of the company were the same as that of the exsting unit only. The CIT(Appeals) in his detailed order dated 14-10-1986 considered the assessee's contentions but ultimately rejected them. Assessee is in appeal before us. 3. Before us, learned Chartered Accountant for the assessee contended that the old unit was manufacturing only paper, cotton and silk covered wires and strips, while a new unit was set up to manufacture copper bus bars and copper profile sections, etc. He drew our attention to the new licence obtained for manufacture of new items, vide letters from the Ministry of Industry, kept on pages 22 and 23 of the paper-book. He gave us facts and figures to show that plant and machinery newly installed was really substantial and the old plant and machinery did not constitute 20 per cent of the total plant and machinery used in the new undertaking. He subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised the same building, licence, tenancy rights, trade name and the existing set up with further additions thereto in order to carry on manufacturing operations with the help of the newly installed capacity. . . . . " Actually, this position is quite clear even from pages 22 and 23 of the assessee's paper-book to which our attention was drawn. It appears that there were two licences, one dated 10-7-1957 and the other dated 2-3-1961. Presumably, the first mentioned licence was in the name of the firm M/s. Devidayal Rolling Mills and the second mentioned was in the name of the assessee-company. From the letters of 2-9-1983 kept on pages 22 and 23 of the paper-book, it is further obvious that the four items which are claimed to be such for which new licences were granted, were deleted from the licence dated 10-7-1957 and were added to the licence dated 2-3-1961. It means that those four items were included in the licence of the firm and subsequently they were deleted from the licence of the firm and added to the licence of the assessee-company. It was otherwise also natural because the manufacturing unit of the firm was taken over by the assessee-company. So, it is not a case of new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not formed by the transfer to a new business of machinery or plant previously used for any purpose ; " This statutory condition has to be read with Explanation (2) below that sub-section, which is in the following terms :-- " Explanation 2 : Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any 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 purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. " For showing that the old plant and machninery was less than 20 % of total plant and machinery, the assessee has furnished statements on three sheets. On page 16 of the paper-book, there are Annexures-A B in the following terms :-- ANNEXURE " A " Details of old machinery transferred to the new unit Value (Rs.) 1. Plant Machinery of old unit 3,43,251 2. DPC - Plant Machinery 55,577 3. Electrical Installations 14,034 --------------- 4. Factory equipments 41,727 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 35), the written down value of the plant and machinery should be taken at 'Nil' and hence it should be excluded from the total book value of the plant and machinery. In our opinion, this is not an acceptable position. In the decisions cited on behalf of the assessee, it is held that for the purposes or section 80J, while applying this condition of 20 per cent, written down value should be adopted. This is a principle of common sense and practical approach. This cannot be extended to the extent that for R D machinery, the total value should be excluded only because the total cost was allowed as deduction by way of an incentive in quantification of total income. Therefore, this item of Rs. 1,43,518 cannot be excluded. 10. The assessee has yet another problem. This is in respect of the figure of Rs. 1,20,556 shown as value of machinery scrapped, in the second statement furnished by the assessee and extracted above. A reference to the final accounts and Schedule A of the fixed assets appearing on pages 14 and 15 of the printed balance-sheet shows that from the gross block at cost, deductions during the year are of Rs. 1,29,323. It means that the original cost of the ite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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