CLASSY KONTAINERS, MUMBAI V. ACIT 21(1), MUMBAI

ITA 4814/MUM/2012

• Counselvise Citation: 481419914 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 23-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEEPAK KUMAR SINHA
• Assessee Lawyers: VIJAY C KOTHARI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH , MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI R AJENDRA SINGH, A M T A NO. 5420 / MUM / 20 1 0, TA NO. 4813 & 4814 / MUM /20 12 ( ASSESSMENT YEAR S : 2006 - 07, 2004 - 05 & 2005 - 06 ) M/S CLASSY KONTAINERS, 62/63, RATAN JYOT INDUSTRIAL ESTATE, IRLA GAUTHAN, VILE PARLE (WEST), MUMBAI - 400 056. VS. ITO WD 21(1)(1), MUMBAI - 51 PAN/GIR NO. : A ABFC 2548 Q ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. VIJAY C. KOTHARI /REVENUE BY : MR. DEEPAK KUMAR SINHA DAT E OF HEARING : 3 RD S E PTEMBER , 201 3 DATE OF PRONOUNCEMENT : 11 TH SEPTEMBER , 2013 O R D E R P ER SHRI R.K.G UPTA, JM : THIS COMMON ORDER SHALL GOVERN THE DISPOSAL OF THREE APPEALS, WHICH HAVE BEEN FILED BY THE A SSESSEE AGAINST THE ORDER DATED 7 - 5 - 2010, PASSED BY THE LEARNED CIT(A) - 32 , MUMBAI FOR ASSESSMENT YEAR S 2006 - 07, 200 4 - 05 & 2005 - 06 , RESPECTIVELY . 2 . SINCE COMMON ISSUES ARE INVOLVED IN ALL THE CASES, THEREFORE, FOR THE SAKE OF CONVENIENCE, ALL THE CASES H AVE BEEN HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDER. I TA NO S . 5420/10, 4813 & 4814/12 2 3 . WE WILL TAKE FIRST ITA NO. 5420/M/2010 FILED FOR THE ASSESSMENT YEAR 2006 - 07 AND THE OUTCOME OF THE SAME WILL BE APPLICABLE TO OTHER ANALOGOUS APPEALS I.E. ITA NOS.4813&4814/M/2012 FILED FOR AS SESSMENT YEARS 2004 - 05 & 2005 - 06 , RESPECTIVELY, AS THE ADDITION MADE AND SUSTAINED IN THESE TWO CASES ON THE BASIS OF ADDITION MADE FOR ASSESSMENT YEAR 2006 - 07. 4 . GROUND NO. 1 IN APPEAL FOR THE ASSESSMENT YEAR 2006 - 07 IS IN REGARD TO DENIAL OF DEDUCTION C LAIMED UNDER SECTION 80IB AT THE RATE OF 100% BY THE ASSESSEE AS THE AO HAS ALLOWED DEDUCTION AT THE RATE OF 25% OF THE PROFIT OF THE UNIT II. 5 . SUCCINCTLY STATED FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSES SEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB AT THE RATE OF 100% ON THE PROFIT FOR UNIT - II OF RS. 35,27,356/ - . ON VERIFICATION OF COMPUTATION OF TOTAL INCOME THE AO FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB TO THE TUNE OF THE RS. 35,36 ,060/ - IN RESPECT OF UNITS NO.I & II. IN RESPECT OF DEDUCTION UNDER SECTION 80IB FOR UNIT - II , THE AO NOTED THAT THE ASSESSEE HAS CLAIMED 100% DEDUCTION UNDER SECTION 80IB . IN THIS CONNECTION, DETAILS WERE CALLED FOR AND ON PERUSAL OF THE DETAILS FILED, IT WAS REVEALED THAT THE ASSESSEE HAS PURCHASED NEW MACHINERY IN FINANCIAL YEAR 2003 - 04 RELATING TO ASSESSMENT YEAR 2004 - 05 TO THE TUNE OF RS. 39,85,528/ - CONSISTING OF DIFFERENT PARTS. ON I TA NO S . 5420/10, 4813 & 4814/12 3 FURTHER VERIFICATION OF THE SAME, THE AO NOTICED THAT THIS MACHINERY I S AN ADDITION TO THE OLD MACHINERY OR IT CAN BE SAID THAT IT IS EXTENSION OF THE SAID MACHINERY FOR DURABILITY. THE AO ALSO NOTED THAT THE ASSESSEE HAS NOT APPLIED FOR APPROVAL OF THIS NEW MACHINERY NOR ITS ELECTRICITY SUPPLY HAS BEEN CHANGED. THE ASSESSEE IS USING ALL THE OLD ACCESSORIES AND THE MACHINERY. THEREFORE, IN HIS VIEW, THE CLAIM OF DEDUCTION UNDER SECTION 80IB @100% FOR UNIT - II WAS NEGATIV ATED BY THE AO. THE AO ALSO NOTED THAT IN THE DEDUCTION, THE ASSESSEE HAS CLAIMED CERTAIN OTHER INCOME I.E. ON ACCOUNT OF SC R AP AND ON ACCOUNT OF INTEREST, THEREFORE, THEY WERE ALSO EXCLUDED FROM THE COMPUTATION OF DEDUCTION UNDER SECTION 80IB OF THE ACT. 6 . ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) , BEFORE WHOM IT WAS SUBMITTED THAT UNIT - II WAS MAINLY SET U P BY THE ASSESSEE TO FOCUS ON LIFE SAVING DRUGS/ORAL MEDICINES TO CATER TO THE REQUIREMENTS OF ITS PHARMACEUTICAL CLIENTS WHICH INSISTED UPON AUTOMATED PROCESSES, CLEANLINESS AND HYGIENE REQUIREMENTS AND AESTHETIC PRODUCTS. THE UNIT WAS SET UP TOWARDS THE END OF MARCH, 20 0 3 AND THE ACTUAL COMMERCIAL OPERATIONS COMMENCED FROM 17 - 8 - 2003. BEFORE COMMENCEMENT OF THE OPERATION, THE ASSESSEE BUILT A NEW FLOOR FOR CARRYING OUT OPERATIONS OF UNIT - II EXCLUSIVELY. IT WAS CLAIMED THAT THE UNIT - I AND UNIT - II MAKE SEPAR ATE PRODUCTS FOR SEPARATE CLIENTS. THE PURCHASES MADE BY THE TWO I TA NO S . 5420/10, 4813 & 4814/12 4 UNITS ARE ALSO ORDERED AND TRACKED SEPARATELY. THE POWER CONSUMPTION HAS INCREASED SUBSTANTIALLY AFTER OPERANISATION OF UNIT - II, SAY FROM RS. 8,52,747/ - IN THE FINANCIAL YEAR 2002 - 03 TO RS. 14, 66,408/ - IN FINANCIAL YEAR 2003 - 04 AND FURTHER TO RS. 19,26,429/ - IN FINANCIAL YEAR 2004 - 05. SUCH HUGE INCREASE IN THE ELECTRICITY BILL IN THE YEAR OF COMMENCEMENT OF COMMERCIAL OPERATION OF UNIT - II ESTABLISHES THAT THE ASSESSEE HAS TO SET UP A FULL - FLEDGED NEW UNIT AND THE SAME IS NOT MERE EXTENSION OF EXISTING UNIT. THE ASSESSEE HAS EMPLOYED SEPARATE LABOUR FOR UNIT - II. 6.1 REGARDING THE AOS CHARGE THAT THE MACHINERY IN UNIT - II IS AN EXTENSION TO THE OLD MACHINERY, THE LD. AR STATED THAT THE NEW MACHIN ERY ARE FULLY AUTOMATED MACHINES WHICH ARE SPECIFICALLY PURCHASED KEEPING IN MIND THE REQUIREMENTS OF ITS PHARMACEUTICAL CLIENTS. UNIT - I MACHINES REQUIRE LOT OF MANUAL INTERVENTIONS AS AGAINST THE FULLY AUTOMATED MACHINES INSTALLED AT UNIT - II. IN UNIT - I, C ONTAINERS WERE MANUFACTURED TO BE USED MAINLY BY THE PAINTS SECTOR WHEREAS POWDER BOTTLES USED BY THE PHARMACEUTICAL SECTOR WERE MANUFACTURED IN UNIT - II. 6.2 REGARDING AOS CHARGE THAT THE ASSESSEE HAS NOT OBTAINED THE APPROVAL FOR NEW MACHINERY, IT WAS S UBMITTED THAT THE ASSESSEE DID NOT NEED ANY APPROVALS FOR INSTALLATION OF NEW MACHINERY. THEREFORE, THE SAME WAS NOT OBTAINED. WRITTEN SUBMISSIONS WERE FILED BEFORE THE CIT(A) . AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON I TA NO S . 5420/10, 4813 & 4814/12 5 RECORD, LEARNED CIT(A) FOND THAT THE AO WAS CORRECT IN HOLDING THAT THE UNIT - II WAS MERELY AN EXTENSION OF UNIT - I. IT WAS ALSO NOTED BY THE LEARNED CIT(A) THAT THE ASSESSEE MANUFACTURES THE SAME AND SIMILAR ARTICLES IN THE SAID UNDERTAKING AND, THEREFORE, THE AO WAS CORRE CT IN RESTRICTING THE DEDUCTION UNDER SECTION 80IB TO 25% AGAINST 100% CLAIMED BY THE ASSESSEE. 6.3 IN RESPECT TO SCRAP SELLING, THE LEARNED CIT(A) ALLOWED PARTLY IN FAVOUR OF THE ASSESSEE BY HOLDING THAT INCOME ON ACCOUNT OF SALE OF SCRAP IS ALLOWABLE F OR DEDUCTION UNDER SECTION 80IB . HOWEVER, IN RESPECT OF INTEREST INCOME LEARNED CIT(A) OBSERVED THAT INTEREST INCOME IS NOT VERIFIED FROM THE INDUSTRIAL UNDERTAKING, THEREFORE, THE SAME CANNOT BE CONSIDERED FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IB . NOW, THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 7 . L EARNED AR OF THE ASSESSEE REITERATED THE CONTENTION S RAISED BEFORE THE LEARNED CIT(A) . IT WAS FURTHER STATED THAT THE UNIT II WAS A SEPARATE UNIT FOR WHICH SEPARATE BUILDING WAS CONSTRUCTED, SEP ARATE MACHINERY WERE PURCHASED, NEW LABOURS WERE EMPLOYED, DIFFERENT ARTICLE IS PRODUCED FROM THE UNIT - I AS THE ITEM PRODUCED IN BOTH THE UNITS ARE OF DIFFERENT IN NATURE AND OF DIFFERENT USE. IN UNIT - II, THE CONTAINER ARE MANUFACTURED FOR THE USE OF PHARM ACEUTICAL COMPANIES, WHEREAS IN UNIT - I, THE CONTAINER ARE MANUFACTURED FOR THE USE OF PAINT INDUSTRIES. THE ATTENTION OF THE BENCH WAS DRAWN ON PAGE 22, WHERE COPY OF THE WRITTEN SUBMISSION FILED BEFORE THE CIT(A) IS PLACED. I TA NO S . 5420/10, 4813 & 4814/12 6 THEREAFTER VARIOUS PARAS OF THE WRITTEN SUBMISSION WERE READ BY THE LEARNED AR TO SUBSTANTIATE HIS CLAIM. RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF JCIT VS. ASSOCIATED CAPSULES (P) LTD., REPORTED IN (2008) 114 ITD 189 (MUM) AND IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. V. CIT, REPORTED IN (1977) 107 ITR 195 (SC) . 7.1 REGARDING THE INTEREST INCOME, IT WAS SUBMITTED THAT THE NETTING OF F INTEREST HAS TO BE ALLOWED AS HELD BY VARIOUS BENCHES INCLUDING THE SPECIAL BENCH IN THE CASE OF LAL & SONS, 125 ITD . 8. ON THE OTH ER HAND, LEARNED DR READ PARA 3.5 AT PAGE 3 OF LEARNED CIT(A)S ORDER AND HEAVILY PLACED RELIANCE ON THE ORDER OF CIT(A). IN RESPECT OF NETTING OFF, IT WAS SUBMITTED THAT THAT CAN BE ALLOWED, HOWEVER, IF THE INTEREST IS POSITIVE, THEN OF COURSE THE DEDUCTI ON ON THAT AMOUNT CANNOT BE ALLOWED. 9. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS ADVANCED BY THE LEARNED COUNSEL OF THE ASSESSEE AS WELL AS BY LEARNED DR. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE DESERVES TO SUCCEED IN RESPECT O F DEDUCTION CLAIMED AT THE RATE OF 100% UNDER SECTION 80IB FOR UNIT - II . IT IS SEEN THAT UNIT - II WAS STARTED IN THE END OF MARCH, 2003 AND THE ACTUAL OPERATION WAS COMMENCED FROM 17 TH AUGUST, 2003. BEF ORE COMMENCEMENT OF THE OPERATION, IT IS SEEN THAT THE ASSESSEE HAS BUILT UP A NEW FLOOR FOR CARRYING OUT OPERATIONS OF UNIT - II EXCLUSIVELY. IT IS I TA NO S . 5420/10, 4813 & 4814/12 7 FURTHER SEEN THAT IN UNIT - I & II SEPARATE PRODUCTS ARE PRODUCED. IT IS ALSO SEEN THAT CLIENTS OF BOTH THE PRO DUCTS ARE ALSO DIFFERENT. A LIST OF PURCHASES IS PLACED AT APPENDIX G & G - 1, WHERE THE PURCHASE MADE FOR UNIT - 1 & II ARE SHOWN SEPARATELY. UNIT - II WAS STARTED TO FOCUS ON LIFE SAVING DRUGS/ORAL MEDICINES TO CATER TO THE REQUIREMENTS OF ITS PHARMACEUTICAL C LIENTS WHICH INSISTED UPON AUTOMATED PROCESSES, CLEANLINESS AND HYGIENE REQUIREMENTS AND AESTHETIC PRODUCTS. THOUGH THERE WAS ONLY ONE POWER CONNECTION , HOWEVER, T HE POWER CONSUMPTION IN UNIT - I WAS LESS THAN THE CONSUMPTION OF POWER IN UNIT - II AS AFTER INS TALLING UNIT - II, THE CONSUMPTION OF POWER WAS INCREASED SUBSTANTIALLY. EVEN IN OUR VIEW, IF THE SEPARATE UNIT IS INSTALLED, SEPARATE PRODUCTS ARE PRODUCED, BOTH UNITS ARE SEPARATELY IDENTIFIABLE, LABOURS ARE DIFFERENT, THEREFORE, MERELY THAT THERE WAS ONLY ONE POWER CONNECTION , IT CANNOT BE HELD THAT THE UNIT - II SET UP ON A LATER STAGE, WAS NOT A NEW UNIT. IT IS A MATTER OF FACT THAT THE ENTIRE NEW MACHINERY WERE PURCHASED FOR UNIT - II. EVEN THE AO HAS OBSERVED IN HIS ORDER THAT DIFFERENT PLANT & MACHINERY W ERE PURCHASED FOR UNIT - II . THEREFORE, IT CANNOT BE SAID THAT IT WAS AN EXTENSION OF UNIT - I. IT WAS STATED THAT IN UNIT - I, THE CONTAINERS WERE MANUFACTURED FOR PAINT INDUSTRIES, WHEREIN IN UNIT - II, THE CONTAINERS WERE MANUFACTURED FOR PHARMACEUTICAL INDUSTR IES. FOR UNIT - II, THE AUTOMATED MACHINERY WERE PURCHASED, WHEREAS IN UNIT - I, THE MACHINERY WHICH WAS PURCHASED EARLIER WAS MANUALLY OPERATED. I TA NO S . 5420/10, 4813 & 4814/12 8 9.1 ON SIMILAR FACTS IN THE CASE OF JCIT VS. ASSOCIATED CAPSULES (P) LTD., REPORTED IN (2008) 114 ITD 189 (MUM) , WHEREIN THE ASSESSEE HAD BEEN ENGAGED IN THE BUSINESS OF PRODUCTION OF EMPTY HARD GELATIN CAPSULES AND THEIR SALE TO THE PHARMACEUTICAL COMPANIES SINCE 1960. THE MANUFACTURING ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE WITH THE HELP OF CAPSULE MANUFACT URING MACHINES. COMMENSURATE WITH THE GROWTH OF THE BUSINESS, THE ASSESSEE KEPT ON ADDING NEW UNDERTAKINGS TO ITS EXISTING UNDERTAKINGS. IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD SEVENTEEN CAPSULE MANUFACTURING MACHINES INSTALLED IN FOUR SEPARATE U NDERTAKINGS. IT CLAIMED DEDUCTION UNDER SECTIONS 80 - I & 80 - IA IN RESPECT OF ITS FOUR NEW UNITS . THE AO NOTICED THAT THE SOURCE OF POWER FOR ALL THE UNITS WAS ONE INASMUCH AS THERE WAS ONE ELECTRICITY BILL FOR THE FACTORY, THAT AIR - CONDITIONING PLANT FOR AL L THE UNITS WAS COMMON, AND THAT CERTAIN ANCILLARY ACTIVITIES, PRE AND POST MANUFACTURING WERE COMMON. ACCORDINGLY, HE HELD THAT ALL THE FOUR UNDERTAKINGS, WHICH WERE CLAIMED BY THE ASSESSEE TO BE SEPARATE AND INDEPENDENT OF EACH OTHER, WERE ESSENTIALLY ON E UNDERTAKING. HE THEREFORE, CONCLUDED THAT UNDERTAKINGS IN QUESTION COULD NOT BE REGARDED AS SEPARATE AND INDEPENDENT UNDERTAKINGS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 - I AND 80 - IA AND, ACCORDINGLY, DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE. ON APPEAL, THE CIT(A) HELD THAT THOUGH ALL THE MACHINES AND UNDERTAKINGS INVOLVED IN THE MANUFACTURING OF THE SAME ARTICLE, NAMELY, CAPSULES WERE LOCATED IN THE SAME PREMISES, YET THE AREA OF EACH OF THE FOUR UNDERTAKINGS WAS I TA NO S . 5420/10, 4813 & 4814/12 9 CLEARLY DEMARCATED AND SEPARATED FROM EACH OTHER; THAT THOUGH THE MAIN SOURCE OF POWER IN THE ENTIRE FACTORY WAS COMMON, YET THE POWER CONSUMED BY EACH MACHINE IN EACH UNDERTAKING WAS CLEARLY AND SEPARATELY RECORDED; THAT THOUGH CENTRALIZED AIR CONDITIONING FACILITY WAS PROVIDED TO ALL T HE UNDERTAKINGS, YET IT COULD BE SHUT OFF IN ANY UNDERTAKING WITHOUT AFFECTING OTHERS. BY RECORDING THE SAME, THE CIT(A) FOUND THAT THE OPERATION OF ALL THE FOUR UNDERTAKINGS WERE DISTINCT. ACCORDINGLY, HE ALLOWED THE DEDUCTION UNDER SECTION 80 - I & 80 - IA. THEREAFTER DEPARTMENT FILED APPEAL BEFORE THE TRIBUNAL, WHEREIN THE TRIBUNAL AFTER CONSIDERING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. V. CIT, REPORTED IN (1977) 107 ITR 195 (SC) , HELD THAT THE FOUR UND ERTAKINGS COMMENCED DURING THE YEAR UNDER CONSIDERATION, WERE SEPARATE AND DISTINCT, THEREFORE, LEARNED CIT(A) WAS RIGHT IN ALLOWING THE CLAIM OF THE ASSESSEE. 9.2 IN THE PRESENT CASE IN HAND, THE FACTS ARE RATHER ON STRONG FOOTING BECAUSE IN THE CASE OF ASSOCIATED CAPSULES (P) LTD. (SUPRA), THE SAME TYPE OF ITEMS WERE MANUFACTURED AND USAGE OF THE SAME WERE THE SIMILAR, WHEREAS IN THE PRESENT CASE, THE DISTINCT AND SEPARATE ITEMS ARE MANUFACTURED IN UNIT - I & II AND USAGE OF THE MANUFACTURED ITEM IS ALSO D IFFERENT AS IN UNIT - I, THE ITEM WAS USED BY PAINT COMPANIES, WHEREAS THE ITEM MANUFACTURED IN UNIT - II WAS USED IN PHARMACEUTICAL COMPANIES FOR MEDICINES PURPOSES. IN THE CASE IN HAND A SEPARATE FLOOR WAS CONSTRUCTED, SEPARATE NEW MACHINES WERE I TA NO S . 5420/10, 4813 & 4814/12 10 PURCHASED, SEPARATE EMPLOYEES WERE EMPLOYED, SEPARATE RECORD WAS MAINTAINED AND PURCHASERS WERE ALSO DIFFERENT, THEREFORE, IT CAN BE EASILY INFERRED THAT UNIT - II WAS A NEW UNIT, WHICH WAS SET UP FOR A SPECIFIC PURPOSE OF MANUFACTURING THE ITEM USED BY PHARMACEUTICAL COMPANY FOR THEIR LIFE SAVING DRUGS ETC. 9.3 IN THE CASE OF ASSOCIATED CAPSULES (P) LTD. (SUPRA) , THERE WAS ALSO ONE ELECTRIC CONNECTION AND IN THE CASE IN HAND, THERE IS ALSO ONE ELECTRIC CONNECTION, HOWEVER, THE USAGE OF THE ELECTRICITY WAS RECORDED DIFF ERENTLY AS THE CONSUMPTION OF POWER WAS SUBSTANTIALLY INCREASED AFTER SETTING UP OF UNIT - II . THEREFORE, WE ARE OF THE VIEW THAT THE DECISION IN THE CASE OF ASSOCIATED CAPSULES (P) LTD. (SUPRA) , IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. 9. 4 WE FURTHER NOTED THAT THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. (SUPRA ) WAS FOLLOWED IN THE CASE OF ASSOCIATED CAPSULES (P) LTD. (SUPRA) . AFTER FOLLOWING THE AFORESAID DECISION, THE TRIBUNAL HAS HELD THAT T HE INVESTMENT OF SUBSTANTIAL FRESH CAPITAL IN THE INDUSTRIAL UNDERTAKING SET - UP, EMPLOYMENT OF REQUISITE LABOUR THEREIN; MANUFACTURE OF ARTICLES IN THE SAID UNDERTAKING AND A SEPARATE AND DISTINCT IDENTITY OF THE INDUSTRIAL UNIT SET - UP. ALL THE ABOVE TESTS ARE SATISFIED IN THE PRESENT CASE ALSO AS SUBSTANTIAL INVESTMENT WAS MADE FOR PURCHASING OF NEW MACHINERY, SEPARATE LABOURS WERE EMPLOYED AND DIFFERENT ARTICLE IN THE SAID UNDERTAKING WAS MANUFACTURED, EARNING OF PROFIT FROM THE UNIT - II WAS ALSO SHOWN SEP ARATELY ON WHICH THE DEDUCTION HAS BEEN CLAIMED I TA NO S . 5420/10, 4813 & 4814/12 11 AT THE RATE OF 100%. EVEN THE AO DID NOT DOUBT ON THE PROFIT , HE HAS RESTRICTED THE DEDUCTION AT THE RATE OF 25% ON THE PROFIT SHOWN IN THE UNIT - II. THE UNIT - II WAS A SEPARATE AND DIFFERENT IDENTITY OF THE IN DUSTRIAL UNDERTAKING. 9. 5 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF ASSOCIATED CAPSULES (P) LTD. (SUPRA), WHEREIN THE ORDER OF THE CIT(A) HAS BEEN CONFIRMED, FOLLOWING THE DECISION O F THE HON BLE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. (SUPRA) , WE ARE OF THE VIEW THAT THE UNIT - II WAS A SEPARATE AND DISTINCT UNIT FROM UNIT - I AND, THEREFORE, THE DEDUCTION IS ALLOWABLE AT THE RATE OF 100% AS CLAIMED. ACCORDINGLY, W E ALLOW THIS GROUND IN FAVOUR OF THE ASSESSEE. 10 . GROUND NO. 2 RELATES TO DENIAL OF DEDUCTION ON ACCOUNT OF INTEREST RECEIVED ON DEPOSIT FOR THE PURPOSE OF COMPUTING DEDUCTION. 10.1 ON INTEREST, DEDUCTION UNDER SECTION 80IB, CANNOT BE ALLOWED, HOWEVER, IF THE ASSESSEE HAS PAID INTEREST AND HAS EARNED INTEREST THEN OF COURSE NETTING OFF THE INTEREST HAS TO BE ALLOWED, IF THERE IS A DIRECT NEXUS. IF AFTER ALLOWING NETTING OFF INTEREST, THERE I S A LOSS ON ACCOUNT OF INTEREST EXPENDITURE , OF COURSE, DEDUCTION UNDER SECTION 80IB CANNOT BE REDUCED. HOWEVER, IF INTEREST INCOME IS HIGHER THAN THE INTEREST EXPENDITURE, THEN ON THE DIFFERENCE OF THE TWO, THE DEDUCTION UNDER SECTION 80IB CANNOT BE ALLOWED. ACCORDINGLY, WE DIRECT THE AO TO DO THE NEEDFUL IN VIEW OUR OB SERVATIONS MADE ABOVE. THIS GROUND OF THE ASSESSEE IS ALLOWED IN PART. I TA NO S . 5420/10, 4813 & 4814/12 12 11 . SIMILAR ISSUES ARE INVOLVED IN ITA NOS.4813 & 4814/M /2012 (AY 2004 - 05 & 2005 - 06 ) . THEREFORE, ON THE SAME REASONING GIVEN BY US ABOVE WHILE DECIDING THE APPEAL I.E. ITA NO. 5420/M/201 0 FILED FOR ASSESSMENT YEAR 2006 - 07, THE DEDUCTION UNDER SECTION 80IB WILL BE ALLOWED TO THE ASSESSEE AS CLAIMED AND IN RESPECT TO INTEREST INCOME, NETTING OFF INTEREST HAS TO BE ALLOWED AS DISCUSSED ABOVE. ACCORDINGLY, BOTH THE ISSUES ARE DECIDED SIMILARL Y AS DECIDED FOR ASSESSMENT YEAR 2006 - 07 FOR THESE TWO YEARS ALSO. 1 2 . FOR THE REASONS AFOREMENTIONED, WE ALLOW THE ALL THE THREE APPEALS OF THE ASSESSEE IN PART ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPT . 201 3 . SD/ - ( ) ( R AJENDRA SINGH ) SD/ - ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 11 / 09/2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE C I T(A) , MUMBAI . 4. / C I T 5. / DR, ITAT, MUMBAI . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( /ASSTT. REGISTRAR) / ITAT, MUMBAI