G.V.G. Paper Mills Private Limited, Udamalpet V. DCIT, Coimbatore

ITA 2153/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96565 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 12-12-2013
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A DHANANJAYAN
• Keywords: Depreciation; Additional evidence; Reasonable cause
• Section: 234B; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , . ! ' , # '$ % [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NOS.2153 TO 2156/MDS/2013 / ASSESSMENT YEARS : 2007-08 TO 2010-11 M/S G.V.G PAPER MILLS PVT. LTD 168/2 SIKKANDAR BATCHA STREET GANDHI NAGAR UDUMALPET 642154 VS. THE DY. COMMISSIONER OF INCOME-TAX SALARY CIRCLE I COIMBATORE [PAN AABCG 1438 N ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI A DHAN AN JAYAN, CA /RESPONDENT BY : SHRI A V SREEKANTH, JCIT / DATE OF HEARING : 01 - 12 - 2015 / DATE OF PRONOUNCEMENT : 18 - 1 2 - 2015 * / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, COIMBATORE, FOR ASSESSMENT YEARS 2007-08 TO 2010-11 . SINCE THE ISSUES INVOLVED IN ALL THESE APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER AND DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.2153/13 ETC :- 2 -: 2. FIRST WE TAKE UP THE APPEALS IN I.T.A.NOS.2155 & 2156/MDS/2013 FOR ASSESSMENT YEARS 2009-10 AND 2010 -11. THE GROUNDS RAISED IN I.T.A.NO.2155/MDS/2013 READ AS UN DER: 2.1 THE CIT(A) IS ERRED IN CONFIRMING THE ADDITIO N OF ` 1,57,13,431/- (DEDUCTION CLAIMED U/S 80IA OF THE I T ACT. 2.2 THE CIT(A) IS ERRED IN CONFIRMING THE ADDITIO N OF ` 4,73,205/- (EXPENSES ON FOREIGN TRAVEL). 2.3 THE CIT(A) IS ALSO ERRED IN CONFIRMING THE ADD ITION OF ` ` 4,78,977/- (EXPENSES INCURRED ON VEHICLES) 3. THE CIT(A) IS ALSO ERRED IN CONFIRMING THE LEV Y OF INTEREST U/S 234A, 234B AND 234C OF THE IT ACT. 3. BEFORE US, THE ASSESSEE HAS FILED ADDITIONAL EVIDE NCE WITH PETITION TO ADMIT THE SAME AS FOLLOWS: (1) CERTIFICATE FROM CHARTERED ENGINEER (2) FLOW CHART THE ABOVE ADDITIONAL EVIDENCE WAS ADMITTED AS THERE WAS REASONABLE CAUSE FOR NOT PLACING THE SAME BEFORE THE LOWER AUT HORITIES AS EXPLAINED IN ITS PETITION. 4. AT THE TIME OF HEARING, THE LD. REPRESENTATIVE HAS NOT PRESSED GROUND NOS.2.2 AND 2.3. ACCORDINGLY, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 5. COMING TO GROUND NO.2.1 WITH REGARD TO ALLOWABILITY OF DEDUCTION U/S 80IA OF THE ACT, THE FACTS ARE THAT THE ASSESSEE ITA NOS.2153/13 ETC :- 3 -: STARTED ITS PAPER DIVISION IN THE YEAR 1986. THE M ANUFACTURING OF PAPER INVOLVES VARIOUS PROCESSES. ONE OF THE PROCE SSES INVOLVES PRODUCTION OF STEAM WHICH WAS REQUIRED FOR HEATING OF DRYER CYLINDERS OF THE PAPER FACTORY. THE ASSESSEE-COMPANY WAS USIN G BOILERS AND PRESSURE REDUCTION VALVES TO HEAT THE DRYER CYLINDE RS OF THE PAPER FACTORY. DURING THE YEAR 2003, THE ASSESSEE-COMPA NY STARTED USING FBC BOILERS AND STEAM TURBINES INSTEAD OF NORMAL BO ILERS AND PRESSURE REDUCTION VALVES BASICALLY TO RECOVER THE ENERGY FROM THE STEAM THROUGH GENERATION OF POWER. THE POWER (I.E. RECOVERED ENERGY FROM STEAM) THUS PRODUCED FROM THE STEAM WAS RECYCLED TO THE PAPER DIVISION RESULTING IN LESS CONSUMPTION OF POWER BY THE FACTORY. THE COMPANY CONSTITUTED THESE FBC BOILERS AND STEAM TURBINE (STEAM PRODUCTION PROCESS OF THE PAPER INDU STRY) INTO A NEW UNDERTAKING VIZ. TURBINE DIVISION AND STARTED CLAIM ING DEDUCTION U/S 80LA OF THE IT ACT. THE COMPANY VALUED THE POWER T HUS CLAIMED TO BE PRODUCED FROM STEAM AT E.1,98,16,873/- (@ RS. 3 .67 PER UNIT) AND CHARGED THE SAME TO THE PAPER DIVISION OF THE COMPANY. ACCORDINGLY, THE PROFITS OF THE PAPER DIVISION WE RE REDUCED BY E1,98,16,873/- AND CORRESPONDINGLY ARRIVED AT THE P ROFITS OF E1,57,13,431/- IN STEAM TURBINE DIVISION AFTER CLAI MING DEPRECIATION OF E41,03,442/- AND CLAIMED THE SAME AS DEDUCTION U/S 80LA OF THE IT ACT FOR THE ASSESSMENT YEAR 2009-10. ACCORDINGL Y, THE ASSESSEE ITA NOS.2153/13 ETC :- 4 -: CLAIMED TURBINE DIVISION HAS A SEPARATE INDEPENDENT DIVISION WHICH WAS CONSTITUTED WITH THE USE OF FBC BOILERS AND ST EAM TURBINE INSTEAD OF OLD BOILERS AND PRESSURE REDUCTION VALUE TO RECOVER THE ENERGY IN THE STEAM. 5.1 ACCORDING TO THE ASSESSING OFFICER STEAM WAS REQUIRED FOR PAPER INDUSTRY. THUS STEAM PRODUCTION WAS SINE QUA NON FOR PAPER PRODUCTION. ALL ALONG PAPER DIVISION WAS USING BOI LERS AND PRESSURE REDUCTION VALVES FOR PRODUCTION OF STEAM. THERE WA S CONSIDERABLE LOSS OF ENERGY FROM THE STEAM. IN ORDER TO AVOID S UCH ENERGY LOSSES, COMPANY OPTED A NEW SYSTEM WHERE NEW FBC BOILERS IN COMBINATION WITH STEAM TURBINE WERE USED TO PRODUCE STEAM AS W ELL AS THE RECOVER ENERGY IN THE STEAM BY WAY OF ELECTRICITY G ENERATION FOR REUSE. THUS, THE NEW SYSTEM HAS REPLACED THE OLD S YSTEM PRIMARILY TO SUPPLY STEAM TO THE PAPER INDUSTRY AND IN THE PR OCESS ENERGY WAS RECOVERED AND REUSED. THEREFORE, ACCORDING TO THE ASSESSING OFFICER THE NEW SYSTEM WAS VERY MUCH A PART AND PARCEL OF T HE PAPER PRODUCTION AND CONSTITUTION OF FBC BOILER AND STEAM TURBINE WHICH WAS REQUIRED FOR EXISTING PRODUCTION PROCESS INTO A SEPARATE UNDERTAKING (TURBINE DIVISION) AMOUNTS TO SPLITTING UP OR THE RECONSTRUCTION OF THE BUSINESS ALREADY IN EXISTENCE AND THEREFORE THE ASSESSEE NOT ENTITLED FOR DEDUCTION U/S.80IA OF TH E ACT. FURTHER, THE ITA NOS.2153/13 ETC :- 5 -: ASSESSING OFFICER OBSERVED THAT TURBINE WAS NOT A N EW UNIT, IT WAS SPLITTING UP OR RECONSTRUCTION OF THE EXISTING PAPE R DIVISION. THEREFORE, IT CANNOT BE CONSIDERED AS INDEPENDENT DIVISION SO AS TO GRANT 80IA DEDUCTION. ACCORDING TO THE ASSESSING OF FICER FOR PAPER MANUFACTURING PROCESS, COMPANY CREATED THE SAME INT O A NEW UNDERTAKING. WITH THE RESULT OF NEW UNDERTAKING CRE ATED BY THE ASSESSEE, A PART OF THE ORIGINAL BUSINESS UNDERTAKI NG OF THE ASSESSEE I.E. PAPER INDUSTRY CEASED TO EXIST. THE STEAM GENE RATION SYSTEM OF THE OLD ONE IS NOT REQUIRED WHEN TURBINE DIVISION F UNCTIONS. IF FOR ANY REASON, PAPER INDUSTRY HAS TO BE RELOCATED TO A DIF FERENT PLACE, THE TURBINE DIVISION ALSO HAS TO MOVE TO THE LOCATION O F PAPER DIVISION AS IT CANNOT EXIST INDEPENDENTLY. ACCORDING TO THE ASS ESSING OFFICER THE TECHNICAL PERSONS EXAMINED UNDER OATH HAVE ADMITTED THAT THE STEAM TURBINE DIVISION CANNOT EXIST INDEPENDENTLY WITHOUT PAPER DIVISION INDICATING THAT TURBINE DIVISION WAS NOT CREATED FO R GENERATING ELECTRICITY BUT TO SUPPLY STEAM TO PAPER INDUSTRY. THUS, THE COMPANY HAS ARTIFICIALLY BIFURCATED A PRODUCTION PROCESS IN WHICH THE OLD MACHINERY WAS REPLACED BY A NEW MACHINERY WHICH W AS ONLY REQUIRED FOR PAPER INDUSTRY AND NOT FOR TURBINE DIV ISION FOR GENERATING POWER. THUS THE ELECTRICITY GENERATED WA S ONLY AN INCIDENTAL MECHANISM OF THE PAPER INDUSTRY TO SAVE THE ENERGY FROM THE STEAM WHICH OTHERWISE WOULD HAVE LOST IF THEY C ONTINUE TO USE ITA NOS.2153/13 ETC :- 6 -: OLD BOILERS AND PRESSURE REDUCTION VALVE. THEREFORE , THE ASSETS ACQUIRED UNDER SO CALLED TURBINE DIVISION ARE PRIMA RILY MEANT FOR PRODUCTION OF STEAM AND RECOVER THE ENERGY LOSS FRO M SUCH STEAM SO AS TO MAKE THE PAPER INDUSTRY MORE ENERGY EFFICIENT . THE STEAM TURBINE DIVISION CAN WORK ONLY WHEN STEAM FOR PAPER INDUSTRY RUNS. IF FOR ANY REASON, IF PAPER DIVISION STOPS, TURBINE DI VISION ALSO HAS TO BE STOPPED. THUS TURBINE DIVISION CANNOT EXIST WITHOUT THE PAPER DIVISION OF THE COMPANY. CREATING A PART OF EXISTING PAPER P RODUCTION PROCESS INTO A SEPARATE DIVISION SQUARELY AMOUNTS TO SPLITTING AND RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. T HEREFORE, ASSESSEE WAS NOT ENTITLED TO CLAIM OF DEDUCTION U/S 80LA OF THE IT A CT ON ITS TURBINE DIVISION . ACCORDING TO THE ASSESSING OFFICER THE STEAM TURBIN E DIVISION USED FUELS COSTING AN AMOUNT OF E6,79,78,7 55/- TO PRODUCE STEAM. THEREFORE THE COST ON THESE FUELS SHOULD BE EXPENDITURE IN THE HANDS OF THE TURBINE DIVISION. HOWEVER, THE ENT IRE EXPENDITURE ON FUELS USED BY THE TURBINE DIVISION WAS CHARGED TO P APER DIVISION AND THE ELECTRICITY RECOVERED FROM STEAM AND SUPPLIED T O THE PAPER DIVISION WAS ALSO CHARGED TO THE PAPER DIVISION. TH US COMPANY HAS CREATED A SITUATION WHERE IN THE STEAM THAT COMES OUT OF TURBINE DIVISION AS 'WASTE' (SINCE IT HAS NO N MARKETABLE VALUE TO THIRD PARTIES)WAS SUPPLIED TO PAPER DIVISION AND THE ENTIRE COST OF FUELS WERE CHARGED TO PAPER DIVISION IN THE GUISE O F EXCHANGE OF ITA NOS.2153/13 ETC :- 7 -: STEAM WHICH GO AS WASTE FROM THE TURBINE DIVISION. IF ENTIRE FUEL COST WAS CHARGED TO THE PAPER DIVISION, THE RESULTA NT STEAM ENERGY PRODUCED OUT OF THOSE FUELS ALSO SHOULD NATURALLY B ELONG TO THE PAPER DIVISION AND THEREFORE PART OF THE STEAM ENERGY REC OVERED THROUGH GENERATION OF STEAM ALSO SHOULD BELONG TO THE PAPER DIVISION. THEREFORE ELECTRICITY THUS GENERATED ALSO SHOULD NA TURALLY BELONG TO THE PAPER DIVISION AND ACCORDINGLY PAPER DIVISION S HOULD NOT BE MADE TO PAY FOR ITS OWN ENERGY. ACCORDINGLY, THE ASSESSI NG OFFICER REJECTED THE CLAIM OF 80IA DEDUCTION ON THE INCOME DERIVED FROM TURBINE DIVISION. AGGRIEVED, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 6. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT GENERATION OF ELECTRICITY WAS CONSEQU ENT ON THE SPLITTING OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE AND THEREFORE THE ASSESSEE WOULD NOT QUALIFY FOR THE DE DUCTION U/S.80IA OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT T HE ASSESSEE WAS A MANUFACTURER OF PAPERS AND CARDBO ARDS ETC. ONE OF THE MAJOR COMPONENT OF THE MACHINERY WA S A BOILER UNIT WHICH THE ASSESSEE REPLACED BY A MORE SOPHISTICATED SYSTEM WHICH ENABLED IT TO RECOVER TH E LOST HEAT AND PRODUCE ELECTRICITY. IT WAS OBSERVED BY THE COM MISSIONER OF INCOME TAX (APPEALS) THAT THE BOILER AND THE TUR BINE ITA NOS.2153/13 ETC :- 8 -: PRODUCING THE ELECTRICITY SUB SERVE THE MAIN BUSINE SS OF THE ASSESSEE I.E. PRODUCTION OF PAPER. THE REPLACEMENT OF OLD BOILER BY A NEW BOILER WHICH COULD MAKE USE OF THE WASTED HEAT ENERGY DOES NOT BECOME A DISTINCT ENTITY. IN O THER WORDS THE TURBINE UNIT HAS NO INDEPENDENT EXISTENCE OF IT S OWN. THEREFORE, THE COMMISSIONER OF INCOME TAX (APPEALS) IN AGREEMENT WITH ASSESSING OFFICERS FINDINGS THAT TH E STEAM TURBINE DIVISION CANNOT EXIST INDEPENDENTLY WITHOUT PAPER DIVISIONS INDICATING THAT THE TURBINE DIVISION WAS NOT CREATED FOR GENERATING ELECTRICITY TO SUPPLY STEAM TO THE P APER INDUSTRY. SO, THE COMPANY HAS ARTIFICIALLY BIFURCA TED A PRODUCTION PROCESS IN WHICH THE OLD MACHINERY WAS R EPLACED BY A NEW MACHINERY WHICH WOULD REQUIRE FOR PAPER IN DUSTRY. THIS WAS NOT A NEW TURBINE DIVISION CREATED FOR GEN ERATING POWER. THUS, THE ELECTRICITY GENERATED WAS ONLY AN INCIDENTAL MECHANISM OF PAPER INDUSTRY TO SUPPLY ENERGY FROM S TEAM GENERATOR WHICH WOULD OTHERWISE HAD GONE WASTE. IT ONLY MAKES USE OF THE HEAT WHICH WAS AN INCIDENTAL PRODU CT. IF THIS FACT WAS CONSIDERED, THE STIPULATION THAT THE OLD MACHINERY USED SHOULD NOT EXCEED 20% OF THE VALUE O F THE MACHINERY USED IN NEW BUSINESS REQUIRED UNDER EXPLA NATION (2) TO SECTION 80IA(3) WILL NOT BE SATISFIED. TO P RODUCE THE ITA NOS.2153/13 ETC :- 9 -: STREAM, NOT ONLY THE BOILER BUT THE WHOLE INCIDENTA L MACHINERY EMPLOYED IN THE PLANT FOR SUCH PURPOSE HAS TO BE RE CKONED FOR COMPUTING THE VALUE OF OLD MACHINERY USED. SINCE T HE TURBINE DIVISION CANNOT EXIST WITHOUT PAPER DIVISION, THE C REATION OF TURBINE DIVISION ON EXISTING PAPER PRODUCTION PROCE SS WOULD NOT BE A SEPARATE DIVISION BUT AMOUNTS TO SPLITTING UP AND RESTRUCTURING OF BUSINESS ALREADY IN EXISTENCE. ACC ORDINGLY, THE COMMISSIONER OF INCOME TAX (APPEALS) DISALLOWED THE CLAIM OF THE ASSESSEE U/S. 80IA OF THE ACT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE COMPANY OPTED A NEW SYSTEM WHERE NEW FBC BOILERS IN COMBINATION WITH STEAM TURBINE WERE USED TO PRODUCE STEAM AS WELL AS TO RECOVER ENERGY IN THE STEAM BY WAY OF ELECTRICITY GENERATION FOR REUSE. THE COMPANY HAD I NVESTED E2,09,42,345/- TOWARDS THE ABOVE PROJECT. THE SYSTE M WAS AN INTEGRATED UNIT BY ITSELF AND IT FUNCTIONS I NDEPENDENTLY. THE FINDING OF THE CIT(A) THAT THE STEAM TURBINE DIVISI ON CANNOT EXIST INDEPENDENTLY WITHOUT PAPER DIVISION WAS TOTALLY AG AINST FACT. THE FINDING OF THE AUTHORITIES THAT THE TECHNICAL PERS ONS EXAMINED UNDER OATH HAVE ADMITTED THAT THE STEAM TURBINE DIV ISION CANNOT EXIST INDEPENDENTLY WITHOUT PAPER DIVISION WAS ALSO TOTALLY INCORRECT ITA NOS.2153/13 ETC :- 10 -: AND AGAINST FACT. NO PERSON WAS EXAMINED BY THE AUT HORITIES AT ALL. NO PART OF THE EXISTING UNDERTAKING WAS TRANSFERRED TO THE NEW UNDERTAKING. THE ENTIRE INVESTMENT OF E2,09,42,345/ - WAS NEW PURCHASES AND EXPENSES INCURRED TOWARDS THE NEW UND ERTAKING ONLY. IT WAS ALL A NEW AND IDENTIFIABLE UNDERTAKING SEPARATE AND DISTINCT FROM THE EXISTING BUSINESS. RECONSTRUCTIO N OF BUSINESS INVOLVES THE CARRYING ON SUBSTANTIALLY THE SAME BUS INESS. BUT IN THIS CASE THE EXISTING UNIT WAS FOR PRODUCTION OF PAPER WHEREAS THE NEW UNDERTAKING WAS PRODUCTION OF POWER. IT WAS ALS O NOWHERE EVIDENT THAT THE OLD INDUSTRIAL UNIT WAS SPLIT UP O R DAMAGED OR DESTROYED THAT WAS SUPPOSEDLY RECONSTRUCTED AS A NE W UNIT BY THE ASSESSEE. THE EXISTING PAPER DIVISION CONTINUES ITS ACTIVITIES AS BEFORE. THE TERM SPLIT UP OF THE BUSINESS ALREADY I N EXISTENCE INDICATED A CASE WHERE THE INTEGRITY OF A BUSINESS EARLIER IN EXISTENCE WAS BROKEN UP AND DIFFERENT SECTIONS OF T HE ACTIVITIES PREVIOUSLY CONDUCTED ARE CARRIED ON INDEPENDENTLY. IN THIS CASE THERE WAS NO FINDING BY THE AUTHORITIES THAT THE E XISTING BUSINESS WAS BROKEN UP INTO DIFFERENT SECTIONS AND CARRIED O N INDEPENDENTLY. 7.1 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE RELI ED ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD VS. CIT 107 ITR 0195 WHEREIN IT WAS HELD THAT IF ANY UNDERTAKING IS NOT FORMED BY RECONSTRUCTIO N OF ITA NOS.2153/13 ETC :- 11 -: THE OLD BUSINESS THAT UNDERTAKING WILL NOT BE DENIE D THE BENEFIT OF SEC. 15C SIMPLY BECAUSE IT GOES TO EXPAN D THE GENERAL BUSINESS OF THE ASSESSEE IN SOME DIRECTIONS . AS IN THE INSTANT CASE, ONCE THE NEW INDUSTRIAL UNDERTAKINGS ARE SEPARATE AND INDEPENDENT PRODUCTIO N UNITS IN THE SENSE THAT THE COMMODITIES PRODUCED OR THE RESULTS ACHIEVED ARE COMMERCIALLY TANGIBLE PRODUCTS AND THE UNDERTAKINGS CAN BE CARRIED ON SEPARATELY WITHOUT COMPLETE ABSORPTION AND LOSING THEIR IDENTI TY IN THE OLD BUSINESS, THEY ARE NOT TO BE TREATED AS BEI NG FORMED BY RECONSTRUCTION OF THE OLD BUSINESS. 7.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE FUR THER RELIED ON THE JUDGMENT IN THE CASE OF CIT VS. MADRAS RUBBER FACTORY LTD 149 ITR 405 WHEREIN IT WAS HELD THAT ON THE FACTS OF THE PRESENT CASE, THERE IS ABSOLUTE LY NO EVIDENCE TO INDICATE THAT ANY ASSET OF THE EXISTING UNDERTAKING HAD BEEN TRANSFERRED TO THE NEW UNIT AT KOTTAYAM. IT IS ALSO SEEN THAT THE KOTTAYAM UNIT WA S SET UP WITH NEW PLANTS AND MACHINERY FOR PRODUCING MASTICATED RUBBER. THOUGH A SUBSTANTIAL PORTION OF THE MASTICATED RUBBER PRODUCED BY THE KOTTAYAM UNIT IS USED UP BY THE EXISTING UNDERTAKING OF THE ASSESSEE - COMPANY, IT CANNOT BE SAID THAT THE KOTTAYAM UNIT W AS ESTABLISHED IN THE PROCESS OF RECONSTRUCTION OF THE EXISTING BUSINESS OR ESTABLISHMENT. THE DECISION OF THE SUPREME COURT REFERRED TO ABOVE, THEREFORE, SQUAREL Y APPLIED TO THE FACTS OF THIS CASE. THE DECISION OF THE TRIBUNAL IN THIS CASE IS QUITE IN ACCORD WITH THE V IEW EXPRESSED BY THE SUPREME COURT IN THE ABOVE CASE . 7.3 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT IN THE CASE OF CIT VS. HINDUSTHAN GENERAL INDUSTRIES LTD. 137 ITR 851 WHEREIN IT WAS HELD THAT THE PRESENT CASE DOES NOT COME WITH THE WORDS, 'SPLITTING UP OF THE BUSINESS ALREADY IN EXISTENCE. ' THIS EXPRESSION INDICATE A CASE WHERE THE INTEGRITY OF A BUSINESS EARLIER IN EXISTENCE IS BROKEN UP AND DIFF ERENT SECTIONS OF THE ACTIVITIES PREVIOUSLY CONDUCTED ARE CARRIED ON INDEPENDENTLY. IN THE PRESENT CASE, THER E IS NO FINDING THAT THE UNITY AND INTEGRITY OF THE BUSI NESS OR ITA NOS.2153/13 ETC :- 12 -: UNDERTAKING WHICH HAD BEEN ESTABLISHED SUFFERED IN ANY MANNER AS A RESULT OF THE ESTABLISHMENT OF THE NEW UNIT .. THERE IS NOTHING TO SHOW THAT AS A RESULT OF THE SETTING UP OF THIS UNDERTAKING, THE INTEGRITY, UNI TY OF THE CONTINUITY OF THE BUSINESS TRANSACTION THE EARL IER UNDERTAKING WERE IN ANY MANNER ADVERSELY AFFECTED. THIS WAS A NEW, INDEPENDENT AND VIABLE UNIT WHICH PRODUCED SIMILAR, IF NOT THE SAME, COMMODITIES AS WERE PRODUCED BY THE EARLIER FACTORY. THE MERE FACT THAT WHILE SETTING UP THIS FACTORY, A SMALL AMOUNT OF PLANT AND MACHINERY WAS TRANSFERRED FROM THE PREVIOUS BUSINESS CANNOT BE CONCLUSIVE TO COME TO THE CONCLUSION THAT IT IS A RECONSTRUCTION . THE CONCEPT OF RECONSTRUCTION SHOULD BE LOOKED AT FROM A SUBSTANTIAL POINT OF VIEW AND FOR THE REASON S ALREADY STATED THE PRESENT CASE CANNOT BE SAID TO B E ONE OF RECONSTRUCTION . 7.4 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE F URTHER SUBMITTED THAT IN THE CASE OF CIT VS. MAHAAN FOODS LTD 216 CTR 148 WHEREIN IT WAS HELD THAT AS FOR 'RECONSTRUCTION' OF THE BUSINESS, IT IS NOWH ERE EVIDENT THAT THE OLD INDUSTRIAL UNIT WAS SPLIT UP O R DAMAGED OR DESTROYED THAT WAS SUPPOSEDLY RECONSTRUCTED AS A NEW UNIT BY THE ASSESSEE. WHAT THE ASSESSEE HAS DONE IS TO SET UP AN INDUSTRIAL UNDERTAKING WITH LATEST TECHNOLOGY AND WITH INCREASED CAPACITY AND OF COURSE, WITH A FAIRLY GOO D AMOUNT OF FRESH INVESTMENT 7.5 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE F URTHER PLACED RELIANCE IN THE CASE OF J CIT VS. ASSOCIATED CAPSULE (P) LTD. 114 ITD 189 WHEREIN IT WAS HELD THAT HELD THAT SOME POST MANUFACTURING ACTIVITIES ARE COMMON OR THERE ARE COMMON SOURCE OF PRODUCTION, THE BENEFIT OF DEDUCTION OF 80LA CANNOT BE DENIED T O THE UNDERTAKING. SO LONG THERE IS NO RECONSTRUCTION OF ITA NOS.2153/13 ETC :- 13 -: EXISTING UNDERTAKING AND SO LONG AS THE UNDERTAKING IS INDEPENDENTLY FORMED WITH A NEW PLANT AND MACHINERY AND SUCH AN UNDERTAKING IS NEW AND THE DEDUCTION CANNOT BE DENIED. AND ACCORDINGLY PRAYED FOR ALLOWING THE CLAIM U/S.8 0IA OF THE ACT. 8. ON THE OTHER HAND, THE DEPARTMENTAL REPRESENT ATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE MATERIAL ON RECORD. THE ASSESSEE COMPANY WAS ENGAGED IN MAN UFACTURE OF PAPER AND PRODUCTION OF ELECTRICITY FROM WINDMILLS UPTO THE ASSESSMENT YEAR 2003-04. THE ASSESSEE COMPANY CONSTRUCTED CO-G ENERATION BUILDING DURING FINANCIAL YEARS 2003-04 TO HOUSE T HE NEW TURBINE CUM BOILER UNIT TO PRODUCE STEAM AND ELECTRICITY. THE C OMPANY INVESTED E2,09,42,345/- TOWARDS CO-GEN MACHINERY AND ALSO IN VESTED - IN CO- GEN BUILDING TOTALLING TOWARDS NEW UNIT. THE COMP ANY ALSO RECEIVED TERM LOAN ASSISTANCE FROM LAKSHMI VILAS BANK, UDUMA LPET BRANCH, FOR A SUM OF E1,20,00,000/- FOR NEW INVESTMENTS. SEPARA TE BOOKS OF ACCOUNTS WERE MAINTAINED FOR THE NEW UNIT. THE UNIT STARTED OPERATION SINCE MARCH 2003. THE YEAR WISE POWER GENERATED WAS PROVIDED TO THE ASSESSING OFFICER. THE ASSESSEE STARTED CLAIMING DE DUCTION U/S 80LA FROM ASSESSMENT YEAR 2004-05 ONWARDS WHICH WAS ACCE PTED BY THE DEPARTMENT. THE DEPARTMENT ALLOWED 80LA DEDUCTION AS CLAIMED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-06 TO 20 08-09 UNDER ITA NOS.2153/13 ETC :- 14 -: SCRUTINY ASSESSMENT U/S 143(3). THE ASSESSEE COMPA NY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 28/09/ 2009, DECLARING TOTAL INCOME OF E6,17,71,290/- UNDER NORMAL PROVISI ONS OF THE ACT. FORM NO. 10CCB - AUDIT REPORT U/S 80LA DATED 28.9.2 009 WAS ALSO SUBMITTED. HOWEVER, DEDUCTION U/S 80IA WAS NOT GRA NTED TO THE ASSESSEE ON THE REASON THAT IT WAS SPLITTING UP OR RECONSTRUCTION OF EXISTING BUSINESS AND THE ASSESSEE HAS NOT ESTABLIS HED ANY NEW INDUSTRIAL UNDERTAKING. ACCORDING TO THE ASSESSING OFFICER THE STEAM TURBINE DIVISION WAS NOT CREATED FOR GENERATING EL ECTRICITY 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 GENERATIN G 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 TO USE OLD BOILERS AND PRESSURE REDUCTION VALVE. THEREFORE, THE ASSETS AC QUIRED UNDER SO CALLED TURBINE DIVISION ARE PRIMARILY MEANT FOR PRO DUCTION OF STEAM AND RECOVER THE ENERGY LOSS FROM SUCH STEAM SO AS T O MAKE THE PAPER INDUSTRY MORE ENERGY EFFICIENT. THE STEAM TURBINE DIVISION CAN WORK ONLY WHEN STEAM FOR PAPER INDUSTRY RUNS. IF FOR AN Y REASON, PAPER DIVISION STOPS, TURBINE DIVISION ALSO HAS TO BE STO PPED. ACCORDING TO ITA NOS.2153/13 ETC :- 15 -: THE ASSESSING OFFICER THE TURBINE DIVISION CANNOT E XIST WITHOUT THE PAPER DIVISION OF THE COMPANY. CREATING A PART OF EXISTING PAPER PRODUCTION PROCESS INTO A SEPARATE DIVISION SQUAREL Y AMOUNTS TO SPLITTING AND RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. THEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE A SSESSEE 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 FI RST PROCEED TO EXAMINE THE LEGAL POSITION IN THIS REGARD. 10. NOW, WE PROCEED TO EXAMINE THE PROVISION OF SECTIO N 80- IA OF THE ACT WHICH WAS AMENDED BY THE FINANCE ACT, 1999 W.E.F. 1ST APRIL, 2000. THE DEDUCTION UNDER S. 80-IA WAS AVAIL ABLE TO AN ASSESSEE WHOSE GROSS TOTAL INCOME INCLUDED ANY PROFITS OR GA INS DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING WHICH FUL FILLED ALL THE CONDITIONS LAID DOWN IN THAT BEHALF IN SUB-S. (2) O F THE SECTION. THE SUB-S. (2) OF S. 80-IA, AS APPLICABLE TO THIS ASSES SMENT YEAR 2009- 2010,INTER ALIA, READS AS UNDER : (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY, AT 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 ITA NOS.2153/13 ETC :- 16 -: SUBSTANTIAL RENOVATION AND MODERNIZATION OF THE EXISTING TRANSMISSION OR DISTRIBUTION LINES (OR LAY S AND BEGINS TO OPERATE A CROSS COUNTRY NATURAL GAS DISTRIBUTION NETWORK))). (3) THIS SECTION APPLIES TO AN UNDERTAKING REFERRED TO IN CLAUSE (II) OR CLAUSE (IV) OF SUB-SECTION (4) WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF AN UNDERTAKING WHICH IS FORMED 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 ELECTRICITY BOARD REFERRED TO IN CLAUSE (7) OF SECTION 2 OF THE ELECTRICITY ACT, 2003 (36 OF 2003), WHETHER OR NOT SUCH TRANSFER IS IN PURSUANCE OF THE SPLITTING UP OR RECONSTRUCTION OR REORGANISATION OF THE BOARD UNDER PART XIII OF THAT ACT. EXPLANATION 1.FOR THE PURPOSES OF CLAUSE (II), 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; ITA NOS.2153/13 ETC :- 17 -: (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 ASSESSEE. EXPLANATION 2.WHERE IN THE CASE OF AN 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. 11. THE PRIMARY PURPOSE OF U/S. 80-IA IS TO GRANT RELIEF TO A NEW INDUSTRIAL UNDERTAKING. THEREFORE, WHENEVER AN ASSE SSEE CLAIMS RELIEF U/S. 80-IA, THE ASSESSEE WILL HAVE TO ESTABLISH THA T A NEW UNIT HAD COME INTO EXISTENCE WHICH INDEPENDENTLY PRODUCED AR TICLES AND THAT THIS NEW UNIT WAS NOT DEPENDENT UPON THE OLD EXISTE NT UNIT, IN THE SENSE THAT THE NEW UNIT COULD NOT BE EQUATED AS AN EXPANSION OF THE OLD UNIT. 12. WHERE AN ASSESSEE MAKES A CLAIM FOR RELIEF U/S. 80- IA THE BURDEN LIES UPON HIM TO PRODUCE COGENT MATERIAL IN SUPPORT OF HIS CLAIM . IN ORDER TO AVAIL TAX CONCESSION U/S. 80-IA, EMPLOY MENT OF FRESH CAPITAL IN THE NEW UNIT IS IMPERATIVE. BUT IT DOES NOT MEAN THAT FOR THE ITA NOS.2153/13 ETC :- 18 -: EMPLOYMENT OF THE CAPITAL, IT SHOULD HAVE BEEN NEWL Y RAISED. IF SURPLUS/RESERVE CAPITAL IS AVAILABLE WITH AN ASSESS EE IN ITS EXISTING BUSINESS, THE ASSESSEE CAN UTILIZE SUCH CAPITAL FOR THE PURPOSE OF PLANT, MACHINERY, ETC., FOR THE NEW UNIT. 13. IN OUR OPINION THE SPLITTING OF OR RECONSTRUCT ION OF THE EXISTING BUSINESS SHOULD BE UNDERSTOOD IN A BROAD C OMMERCIAL SENSE FROM A COMMONSENSE POINT OF VIEW AND ONLY IN RELATI ON TO THE NEW INDUSTRIAL UNDERTAKING CLAIMING THE CONCESSION. 14. FURTHER, WHERE THE NEW UNIT WAS STARTED BY FRE SH OUTLAY OF CAPITAL AND MANUFACTURED OR PRODUCED ARTICLES YIELD ING ADDITIONAL PROFITS HAVING A SEPARATE PHYSICAL INDEPENDENT EXIS TENCE, IT WAS A NEW INDUSTRIAL UNDERTAKING ELIGIBLE FOR TAX CONCESSION. 15. IN OTHER WORDS, THE ESTABLISHMENT OF A NEW IN DUSTRIAL UNIT AS A PART OF AN ALREADY EXISTING INDUSTRIAL ESTABLISHM ENT MAY RESULT IN AN EXPANSION OF THE INDUSTRY OR THE FACTORY, BUT IF TH E NEWLY ESTABLISHED UNIT IS ITSELF AN INTEGRATED INDEPENDENT UNIT IN WH ICH NEW PLANT AND MACHINERY ARE PUT UP AND ARE THEMSELVES, INDEPENDEN TLY OF THE OLD UNIT, CAPABLE OF PRODUCTION OF GOODS THEN IT CAN BE CLASSIFIED AS A NEWLY ESTABLISHED INDUSTRIAL UNDERTAKING. ITA NOS.2153/13 ETC :- 19 -: 16. THE NEW INDUSTRIAL UNIT BROUGHT INTO EXISTENCE BY ESTABLISHING NEW PLANT AND MACHINERY AND BY INVESTING SUBSTANTIA L FUNDS MAY PRODUCE THE SAME COMMODITY AS OF THE OLD BUSINESS O R IT MAY PRODUCE SOME OTHER DISTINCT MARKETABLE PRODUCTS, EVEN COMMO DITIES WHICH MAY FEED THE OLD BUSINESS. THESE PRODUCTS MAY BE CONSUM ED 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 A N INTEGRATED UNIT BY ITSELF WHEREIN ARTICLES ARE PRODUCED. THE INDUSTRIA L UNIT MUST BE NEW IN THE SENSE THAT NEW PLANT AND MACHINERY ARE ERECTED FOR PRODUCING EITHER THE SAME COMMODITY OR SOME OTHER DISTINCT CO MMODITY. THE BENEFIT CANNOT BE DENIED MERELY BECAUSE THE NEW UND ERTAKING GOES TO EXPAND THE GENERAL BUSINESS OF THE ASSESSEE IN SOME DIRECTION. 17. AFTER CONSIDERING THE FACTS OF THE CASE AND THE LE GAL POSITION ENUNCIATED IN THE ABOVE PARAS, WE ARE OF T HE OPINION, THAT THE CRUCIAL QUESTION THAT HAS TO BE ANSWERED IS WHETHER , ON THE FACTS OF THE CASE, THE NEW INDUSTRIAL UNIT CAN BE SAID TO HA VE COME INTO EXISTENCE WITHIN THE MEANING OF SUB-S. (2) OF S. 80 -IA, SO AS TO BE ELIGIBLE FOR DEDUCTION UNDER S. 80-IA FOR ASSESSMEN T YEAR 2009-2010. (I) WHETHER THE MACHINES COSTING 2,09,42,345/- AND BUILDING WHICH WERE MADE DURING THE ASSESSMENT YEAR 2004-2005 (BEFORE 31 ST MARCH, 2004), BROUGHT INTO EXISTENCE AN INTEGRATED INDEPENDENT UNIT, WHICH BY THEMSELVES, INDEPENDENTLY OF THE OLD UNIT, WERE CAPABLE OF PRODUCING THE STEAM AND ELECTRICITY. ITA NOS.2153/13 ETC :- 20 -: 18. WE FIND THAT THE ASSESSEE COMPANY COMMENCED A DIST INCT INDUSTRIAL UNDERTAKING FOR THE GENERATION OF POWER. IT IS AN UNDISPUTED FACT THAT THE PREMISES OF THIS UNDERTAKING ARE DIST INCT FROM THE PAPER UNIT AS SEPARATE BUILDING WAS CONSTRUCTED VIDE APPR OVAL NO.TM/9997/6 DATED 4.4.2001 ISSUED BY THE CHIEF INSPECTOR OF IND USTRIES, CHENNAI, AT S.F.NO.279, 277, 278 AND 276 AT NALLUR VILLAGE, PU SHPATHUR PANCHAYAT, PALAN TALUK, DINDIGUL DISTRICT. SEPARAT E TECHNOLOGY IS USED AND LOAN WAS ALSO OBTAINED FROM LAKSHMI VILAS BANK, UDUMALPET BRANCH. THE LOWER AUTHORITIES ARE NOT CORRECT IN H OLDING THAT THE POWER PLANT WAS NOT A DISTINCT UNIT. THE TRUE PRINC IPLE 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 T HE NEW INDUSTRIAL UNDERTAKING CONNOTES EXPANSION OF THE EXISTING BUSI NESS OF THE ASSESSEE BUT WHETHER IT IS ALL THE SAME A NEW AN IDENTIFIABLE UN DERTAKING SEPARATE AND DISTINCT FROM THE EXISTING BUSINESS OF THE ASSESSEE BUT WHETHER IT IS ALL THE SAME A NEW AND IDENTIFIABLE UNDERTAKING SEPARATE AN D DISTINCT FROM THE EXISTING BUSINESS. FOR THE ASSESSMENT YEARS 2007-08 AND 2008-2009, TH E LOWER AUTHORITIES FOR CO-GENERATION PLANT GRANTED D EDUCTION U/S.80IA OF THE ACT. THEY IMPLIEDLY AGREED THAT THE NEW MACHINERY A ND PLANT HAVE BEEN INSTALLED UNDER SEPARATE PREMISES AND IT IS NOT APP ROPRIATE TO DENY THE SAME DEDUCTION FOR THE ASSESSMENT YEAR 2009-2010. ITA NOS.2153/13 ETC :- 21 -: 19. EVEN THOUGH THE DECISION OF TEXTILE MACHINERY COR PORATION LTD [SUPRA] WAS CONCERNED WITH THE CLAUSE DEALING WITH RECONSTRUCTION OF EXISTING BUSINESS BUT THE EXPRESSION 'NOT FORMED' W AS CONSTRUED TO MEAN THAT THE UNDERTAKING SHOULD NOT BE A CONTINUAT ION OF THE OLD BUT EMERGENCE OF A NEW UNIT. THEREFORE, EVEN IF THE UND ERTAKING IS ESTABLISHED BY TRANSFER OF BUILDING, PLANT OR MACHI NERY, IT IS NOT FORMED AS A RESULT OF SUCH TRANSFER, IN OUR CONSIDERED VIE W; 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 F ORMED OUT OF FRESH FUNDS, IN SEPARATELY IDENTIFIABLE PREMISES, U NDER A SEPARATE LICENSE/APPROVALS WITH MANIFOLD INCREASE IN CAPACIT Y WITH NEW MACHINERY AND BUILDINGS WITHOUT TRANSFER OF ANY POR TION OF THE OLD BUILDINGS OR MACHINERY WHICH PRE-EXISTED. THE POWER AND STEAM PRODUCED EARLIER WAS PART OF THE PAPER UNIT AND COU LD SERVICE ONLY THE PAPER UNIT AND HENCE WAS AT BEST BY-PRODUCT OF THE PAPER UNIT MANUFACTURING FACILITY. THE NEW UNIT HAD POWER AS T HE MAIN PRODUCT AND APART FROM SERVICING THE CAPTIVE CONSUMPTION IN THE PAPER UNIT ALSO COULD SERVICE THE OTHER POWER REQUIREMENTS. TH E PRICING OF POWER IS ALSO SUBJECTED TO THE VARIOUS POWER TARIFF PRESC RIPTIONS. IT CAN BE CLEARLY SEEN THAT THE NEW UNDERTAKING IS THEREFORE NOT FORMED BY THE SPLITTING UP OF THE OLD UNDERTAKING. THERE IS NO CA SE ALSO MADE OUT BY ITA NOS.2153/13 ETC :- 22 -: THE LOWER AUTHORITIES THAT THE NEW UNDERTAKING IS F ORMED BY THE SPLITTING UP OF THE EXISTING BUSINESS. FURTHER, THE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION (CITED SUPRA) WHEREIN THE SUPREME COURT CATEGORICALLY HELD THAT NEW UNIT ESTA BLISHED BY THE ASSESSEE FOR MANUFACTURING ARTICLES USED AS INTERME DIATE PRODUCTS IN THE OLD DIVISION, WHICH THE ASSESSEE WAS BUYING FRO M THE MARKET EARLIER, IS NOT RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. TO CONSTITUTE RECONSTRUCTION, THERE MUST BE TRANSFER O F ASSETS OF THE EXISTING BUSINESS TO THE NEW INDUSTRIAL UNDERTAKING . IN OUR OPINION, GENERATION OF POWER UNIT IS SEPARATE AND DISTINCT U NDERTAKING FOR WHICH SEPARATE APPROVAL WAS OBTAINED AND IT CANNOT BE SAI D THAT SPLITTING OF EXISTING BUSINESS STRUCTURE. THEREFORE, IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES ARE NOT CORRECT IN DENYING TH E DEDUCTION UNDER SECTION 80IA OF THE ACT. IT IS ALSO PERTINENT TO ME NTION THEREIN THAT THE TRIBUNAL IN FOLLOWING CASES CONSIDERED THIS ISSUE A ND DECIDED IN FAVOUR OF THE ASSESSEE: (1) I.T.A.NO. 633/MDS/2014 IN THE CASE OF SHRI HARI KRI SHNA PAPERS PVT. LTD VS ACIT, ORDER DATED 24.7.2015. (2) I.T.A.NOS.328, 329, 330 & 331/MDS/2011 IN THE CASE OF M/S TAMILNADU NEWSPRINT AND PAPERS LTD VA ACIT, ORD ER DATED 13.5.2011 HENCE, WE DECIDE THIS ISSUE IN FAVOR OF THE ASSESSE E COMPANY AND AGAINST THE REVENUE. ITA NOS.2153/13 ETC :- 23 -: 20. THE NEXT GROUND IS WITH REGARD OF CHARGING OF INTEREST U/S 234A, 234B AND 234C OF THE ACT. 21. CHARGING OF INTEREST U/S 234A, 234B AND 234C IS CONSEQUENTIAL AND MANDATORY IN NATURE AND TO BE COMPUTED BY THE A SSESSING OFFICER IN ACCORDANCE WITH LAW. ORDERED ACCORDINGLY. 22. IN THE RESULT, I.T.A.NO. 2155 AND 2156/MDS/20 13 ARE PARTLY ALLOWED. I.T.A.NO.2153 AND 2154/MDS/2013 A.Y 2007-08 AND 2008-09. 23. THE FIRST ISSUE IS WITH REGARD TO REOPENING O F ASSESSMENT U/S 147 OF THE ACT. 24. IN THESE ASSESSMENT YEARS, THE ASSESSING OFF ICER REOPENED THE ASSESSMENT ON THE BASIS OF THE ASSESSMENT ORDER PAS SED FOR ASSESSMENT YEAR 2009-10. SINCE, WE HAVE HELD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT FOR THE ASSESSMENT YEAR 2009-10, THE BASIS ON WHICH ASSESSMENT WAS REOPEN ED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION IS NOT SURVIVI NG. BEING SO, THE RE-ASSESSMENT ORDERS FOR ASSESSMENT YEARS 2007-08 A ND 2008-09 ARE QUASHED. ITA NOS.2153/13 ETC :- 24 -: 25. SINCE WE HAVE QUASHED THE RE-ASSESSMENT ORDE RS, WE DO NOT DEEM IT FIT TO ADJUDICATE THE OTHER GROUNDS RAISED IN THESE APPEALS. ACCORDINGLY, THE APPEALS OF THE ASSESSEE FOR ASSES SMENT YEARS 2007- 08 AND 2008-09 ARE ALLOWED. 26. TO SUMMARIZE THE RESULT, I.T.A.NOS.2153 AND 2 154/MDS/2013 ARE ALLOWED WHEREAS I.T.A.NOS.2155 AND 2156/MDS/201 3 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ' ) (G. PAVAN KUMAR) # / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 18 TH DECEMBER, 2015 RD $%&& '(&)( / COPY TO: & 1 . / APPELLANT 4. & * / CIT 2. / RESPONDENT 5. (+,& - / DR 3. & *&./ / CIT(A) 6. ,0&1 / GF