M/s. Leo Fasteners, CHENNAI V. Addl. CIT, Pondicherry

ITA 736/CHNY/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6214 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G VARDHINI KARTHICK
• Section: 133A; 80IB; 27; 12; 28; 15

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI SANJAY ARORA , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUD ICIAL MEMBER ./ I.T.A.NO. 736/MDS/2012 / ASSESSMENT YEAR :20 08 - 09 M/S. LEO FASTENERS, REP. BY ITS PARTNER, A - 27A, INDUSTRIAL ESTATE, THATTANCHAVADY, PONDICHERRY 605 009. [PAN: A A B FL0652J ] VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX , PONDICHERRY R ANGE , PONDICHERRY . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : S MT. G. VARDHINI KARTHICK , A DVOCATE / RESPONDENT BY : S HRI ASHISH TRIPATHI , J CIT / D ATE OF HEARING : 0 2 . 0 8 .201 7 / DATE OF P RONOUNCEMENT : 31 . 0 8 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) XII , C HENNAI , DATED 23 . 03 .201 2 RELEVANT TO THE ASSESSMENT YEAR 20 08 - 09 , WHERE IN , THE ASSESSEE HAS CHALLENGED CONFIRMATION OF DISALLOWANCE OF DEDUCTIONS CLAIMED UNDER SECTION 80IB AS WELL AS 80IA OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. I . T . A . NO S . 736 /M/ 1 2 2 2. BRI EF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF POWER GENERATION AND MANUFACTURING AND SELLING OF FASTENERS. T HE ASSESSEE FILED ITS RETURN OF INCOME ON 19 . 09 .200 8 ADMITTING NIL INCOME AND CLAIMED DEDUCTION UNDER CHAPTER VI - A TO THE EXTENT OF .33,85,35,179/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 20.04.2009. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 08.09.2009. 2.1 FROM TH E DETAILS AVAILABLE IN THE RECORDS, THE CRUX OF THE ISSUE WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IS THAT THE ASSESSEE FIRM CLAIMS TO HAVE TW O UNITS I.E. UNIT - I & UNIT - IL. UNIT - I WAS THE OLD UNIT EXISTING FROM THE FINANCIAL YEAR 1997 - 98 AN D WA S CLAIMING DEDUCTION UNDER SECTION 80 - IB OF THE ACT @ 100%, FROM THE ASSESSMENT YEAR 1998 - 99 TO 2002 - 03. THE ASSESSEE, DURING THE FINANCIAL YEAR 2003 - 04, CLAIMED TO HAVE FORMED A NEW UN IT (UNIT - IL ) ON 23.10.2003, AT A DIFFERENT LOCATION (FR OM THAT OF UNIT - I). FOR THIS UNIT - I THE ASSESSEE OBTAINED A SEPARATE LICENCE, SEPARATE EL ECTRICITY CONNECTION AND SEPARATE EXCISE REGISTRATION. UNDER THIS BACKGROUND, THE ASSESSEE CLAIMED THE UNIT - II AS SEPARATE 'INDUSTRIAL UNDERTAKING' AND STARTED CLAIMIN G A FRESH DEDUCTION UNDER SECTION 80 - IB OF THE ACT @ 100% STARTING FROM THE ASSESSMENT YEAR 2004 - 05 . 2.2 THERE WAS A SURVEY UNDER SECTION 133A OF THE ACT ON 18.11.2004 IN THE CASE O F ASSESSE E AND ITS GROUP, WHEREIN , IT WAS NOTICED THAT THE ACTIVITIES I . T . A . NO S . 736 /M/ 1 2 3 CAR RIED OUT BY THE ASSESSEE DO NOT CONSTITUTE MANUFACTURING AND PROCESSING ACTIVITY AND HENCE, IT WAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE F OR CLAIMING DEDUCTION U NDER SECTION .80 - IB OF THE ACT WITH REGARD TO THE UNIT II . 2.3 FURTHER, THE ASSESSING OFFICER ALSO NOTICED THE SO CALLED UNIT - IL CLAIMED TO HA VE BEEN STARTED BY THE ASSESSEE ON 23.10.2003 (I.E. DURING THE FINANCIAL YEAR 2003 - 04) IS NOT A NEW OR INDEPENDENT MANUFACTURING UNIT. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE, IN ORDER T O CLAIM DEDUCTION UNDER SECTION 80 IB OF ACT , THE NEW UNIT (I.E. UNIT II) PROJECTED THE UNIT - I AND UNIT - II AS IF THEY ARE TWO SEPARATE AND INDEPENDENT UNITS. THE ASSESSING OFFICER ALSO OBSERVED THAT EVEN THE ACTIVITIES U N DERTAKEN BY T HE ASSESSEE IN THE SO CALLED UNIT - IL ARE NOT INDEPENDENT. THESE ACTIVITIES ARE INTRINSICALLY INTERLINKED WITH UNIT - I AND OTHER GROUP CONCERNS. THE DIFFERENT STEPS THE NUT MANUFACTURING PROCESS ARE SHARED/DISTRIBUTED AMONG THE UNIT - IL, UNIT - I A ND OTHER GROUP CONCERNS. IN OTHER WORDS, U NIT - I, UNIT - II AND OTHER GROUP CONCERNS ARE COLLECTIVELY ENGAGED IN THE PROCESS OF MANUFACTURING THE NUTS. HOWEVER, THE ASSES SEE WAS CLAIMING THE ENTIRE SALES OF THE MANUFACTURED NUTS IN THE HANDS OF UNIT - IL ONLY. T HE ASSESSEE WA S SHOWING THE WORK DONE BY THE UNIT - I AND THE OTHER GROUP CONCERNS AS THE JOB WORK DONE BY THEM FOR THE UNIT - IL, IN THE MANUFACTURING PROCESS. FURTHER , THE ASSESSING OFFICER HAS ALSO NOTICED THAT ASSESSEE WAS SHOWING HUGE PROFIT IN THE UNIT - IL, AND THE JOB WORK CHARGES PAID TO THE U NIT - I AND THE GROUP CONCERNS ARE FRAMED IN SUCH A I . T . A . NO S . 736 /M/ 1 2 4 WA Y THAT PROFIT IN THEIR (UNIT - I & GROUP CONCERN) HANDS IS VERY NOMINAL, AS INCOME OF UNI T II WAS CLAIMED EXEMPT U NDER SECTION 80 IB OF THE ACT @100%, WHEREAS , OTHERS ARE NOT ELIGIBLE FOR DEDUCTI ON. BY OBSER VING THE ABOVE DISCREPANCIES AND ANOMALIES, THE ASSESSING OFFICER , IN THE ASSESSMENTS OF ASSESSMENT YEARS 2004 - 05 TO 2007 - 0 8 , DISALLOWED THE ASSESSEE'S CLAIMS OF 10 0% DEDUCTION UNDER SECTION 80 IB OF THE ACT. SIMILARLY, FOR THE ASSESSMENT YEAR UNDER CONSIDE RATION, I.E., 2008 - 09 ALSO, THE FACTS INVOLVED ARE SAME TO THAT OF EARLIER ASSESSMENT YEARS, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS FACTS OF THE CASE AND BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80IB OF THE ACT. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY FILING COPY OF THE JUDGEMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2004 - 05 TO 2007 - 08, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND THE SAME SHOULD BE FOLLOWED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ON THE OTHER HAND, THE LD. DR FAIRLY CONCEDED THE SUBMISSIONS OF THE LD. COUNSEL WITH REGARD TO THE CLAIM OF DEDUCTION UNDER I . T . A . NO S . 736 /M/ 1 2 5 SECTION 80IB OF THE ACT. HOWEVER, WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT, THE LD. DR HAS SUBMITTED THE DEPARTMENT HAS PREFERRED FURTHER APPEAL BEFORE THE HON BLE APEX COURT AGAINST THE DECISION IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD. V. ACIT 340 ITR 477 AND THE SAME IS PENDING. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ON PERUSAL OF THE ORDERS OF AUTHORITIE S BELOW, IT IS EVIDENT THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS DONE IN CONSISTENT WITH THE ASSESSMENTS DONE FOR THE ASSESSMENT YEARS 2004 - 05 TO 2007 - 08 BY DISALLOWING ASSESSEE'S CLAIMS OF 10 0% DEDUCTION UNDER SECTION 80 IB OF THE ACT FOR THE INCOME OF UNIT I I ON THE GROUND THAT BOTH UNIT I AND UNIT II WERE FORMED BY SPLITTING AND RECONSTRUCTION OF EXISTING UNDERTAKINGS. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND DISMISSED THE ASSESS EE S APPEALS IN ALL THE ASSESSMENT YEARS 2004 - 05 TO 2007 - 08. AGAINST THE SAID ASSESSMENTS, ON APPEAL, T HE CIT(A) HA S PARTLY ALLOWED THE APPEALS. THE ORDER DATED 31.07.2008, PASSED BY THE LD. CIT(A) HAS BEEN FOLLOWED IN SUBSTANCE BY THE OTHER CIT(A), WHICH PASSED THE ORDER DATED 29.04.2010. IN DOING SO, THE CIT(A) HA S ALLOWED THE A SSESSEE TO CLAIM DEDUCTION, AS WAS SOUGHT FOR, AT THE RATE OF 25%, VIS - - VIS PROFITS GENERATED QUA UNIT - I AND, IN SO FAR AS UNIT - II IS CONCERNED, DEDUCTION CLAIMED HAS BEEN SCALED DOWN FROM I . T . A . NO S . 736 /M/ 1 2 6 100% TO 25%, BASED ON THE BROAD REASONING THAT IT IS NOT AN INDEPENDENT UNIT, I.E., WHICH CAN EXIST ON ITS OWN. AGAINST THE APPELLATE ORDER, BOTH THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL AND VIDE ITS CONSOLIDATED ORDER DA TED 12.11.2010, THE TRIBUNAL HAS HELD THAT THE ASSESSEE S SO CALLED UNIT II IS NOTHING BUT A COLOURABLE DEVICE FORMED BY SPLITTING UP OF THE EXISTING OLD UNIT (UNIT I) AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. SINCE THE FACTS AND CIRCUMSTANCES EXISTING IN THE EARLIER ASSESSMENT YEARS 2004 - 05 TO 2007 - 08 ARE ALSO CONTINUING IN THE CURRENT ASSESSMENT YEAR 2008 - 09, BY FOLLOWING THE ORDER OF THE TRIBUNAL FOR EARLIER ASSESSMENT YEARS DATED 12.11.2010, THE LD. CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE. IT IS, ON ACCOUNT OF THIS, BOTH THE A SSESSEE AND THE REVENUE ARE AGGRIEVED AND PREFERRED FURTHER APPEALS BEFORE THE HON BLE JURISDICTIONAL HIGH COURT. AFTER CONSIDERING THE SUBMISSIONS OF BOTH PARTIES, VIDE ITS ORDER DATED 10.07.201 7 IN T.C.(A) NOS. 533 TO 538 OF 2010, 1217 TO 1220 OF 2010 AND 787 & 788 OF 2014, THE HON BLE MADRAS HIGH COURT HAS OBSERVED AND HELD AS UNDER: 26. IN THE INSTANT CASE ALSO, TO EXAMINE WHETHER THERE IS AN SUBSTANTIAL EXPANSION, ONE WOULD HAVE TO LOOK AT THE FOLLOWING INDICES: (I) IS THERE AN INVESTMENT TO SUBSTANTIATE FRESH CAPITAL IN THE CONCERNED INDUSTRIAL UNDERTAKING. (II) IS THERE EMPLOYMENT OF REQUISITE LABOUR. (III) WHETHER OR NOT, THE UNDERTAKING MANUFACTURES OR PRODUCES ARTICLES OR THING S. I . T . A . NO S . 736 /M/ 1 2 7 (IV) WHETHER OR NOT, IT HAS PROFITS, WHICH ARE CLEARLY ATTRIBUTABLE TO THE INDUSTRIAL UNDERTAKING QUA WHICH DEDUCTION IS SOUGHT. (V) WHETHER OR NOT, IT HAS THE INDUSTRIAL UNDERTAKING QUA WHICH DEDUCTION IS SOUGHT HAS A SEPARATE OR DISTINCT IDENTIT Y. 26.1. WHEN THESE TESTS ARE EMPLOYED, IT IS QUITE CLEAR THAT IN SO FAR AS UNIT II IS CONCERNED, THE ASSESSEE HAS EMPLOYED A SUBSTANTIAL AMOUNT OF FRESH CAPITAL. 26.2. IN THIS BEHALF, THE CIT(A)S HAVE HELD THAT THE INVESTMENT MADE BY THE PARTNERS BY WAY OF CAPITAL CONTRIBUTION AND LOAN HAS BEEN SPLIT AND/OR DIVERTED FROM UNIT I. 26.3. TO OUR MINDS, THIS OBJECTION LOSES SIGHT OF THE FACT THAT WHAT IS REQUIRED TO BE EXAMINED IS THAT SEPARATE AND DISTINCT INVESTMENT HAS BEEN MADE TO EXPAND OR SET UP A NEW INDUSTRIAL UNDERTAKING. THE FACT THAT THE SOURCE OF INVESTMENT, I.E., ARE COMMON TO UNITS I AND II, BY ITSELF, WOULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING DEDUCTION QUA UNIT II ON THIS SCORE. FURTHERMORE, CIT(A)S ORDERS ITSELF SHOW THAT MONEYS HAV E ALSO BEEN BORROWED FROM BANKS, SUCH AS, SBI AND HDFC, TO FUND UNIT II. 26.4. THEREFORE, THIS OBJECTION, TO OUR MINDS, IS COMPLETELY, MISCONCEIVED. 26.5. FURTHERMORE, THE ASSESSEE HAS ENGAGED SEPARATE LABOUR AND IS ENGAGED IN MANUFACTURE AND PRODUCTI ON OF ARTICLES. 26.6. THE OBJECTION TAKEN BY THE AUTHORITIES BELOW, THAT THE ARTICLE PRODUCED AND/OR MANUFACTURED BY THE ASSESSEE IS COMMERCIALLY NO DIFFERENT FROM WHAT UNIT I MANUFACTURED, ACCORDING TO US, IS NOT A GROUND ON WHICH DEDUCTION CLAIMED UNDER SECTION 80 IB CAN BE DENIED TO THE ASSESSEE. 26.7. THE ONLY CONDITION THAT THE ASSESSEE, IN THIS BEHALF, IS REQUIRED TO FULFILL IS THAT, THEY SHOULD MANUFACTURE AND PRODUCE AN ARTICLE OR THING. SUB - CLAUSE (III) OF SUB - SECTION (2) OF SECTION 80IB OF THE 1961 ACT DOES NOT REQUIRE THAT, IN ORDER TO CLAIM DEDUCTION, THE ARTICLE OR ANY MANUFACTURE MUST BE COMMERCIALLY DIFFERENT FROM THAT WHICH IS MANUFACTURED UNDER THE AEGIS OF THE EXISTING BUSINESS. 26.8. EMPLOYING SUCH A TEST WOULD, IN OUR VIEW, RESULT I N ALTERING THE SCOPE, AND THE EFFECT OF SUB - CLAUSE (III) OF SECTION 80IB(2) OF THE 1961 ACT AND ADDING A CONDITION, WHICH IS NOT PROVIDED FOR BY THE LEGISLATURE. 27. IN SO FAR AS THE ASPECT OF TRANSFER OF MACHINERY IS CONCERNED QUA UNIT I, THE CIT(A)S A ND THE TRIBUNAL HAVE ACCEPTED THE FACT THAT THE MACHINERY, IF TRANSFERRED IS BELOW THE PERMISSIBLE LIMIT OF 20% OF THE TOTAL VALUE OF PLANT AND MACHINERY, IT CANNOT BE VIEWED AS VIOLATION OF THE CONDITIONS PRESCRIBED I . T . A . NO S . 736 /M/ 1 2 8 UNDER SECTION 80IB OF THE 1961 ACT FOR CLAIMING DEDUCTION. HOWEVER WHEN IT CAME TO PUTTING TO TEST THE SAID PROPOSITION, VIS - - VIS UNIT II, THE AUTHORITIES BELOW CONSTRUED SUCH TRANSFER AS MANIPULATION, ONLY TO CLAIM DEDUCTION UNDER SECTION 80IB OF THE 1961 ACT, BY KEEPING THE VALUE OF THE TRAN SFERRED MACHINERY BELOW THE PERMISSIBLE LIMIT OF 20% OF THE TOTAL VALUE OF THE PLANT AND MACHINERY OF THE RECIPIENT UNIT, I.E . , UNIT II. 27.1. ACCORDING TO US, THIS OBJECTION IS WITHOUT ANY BASIS. THERE IS NO DISCUSSION, EITHER IN THE ORDER OF THE TRIBU NAL, OR IN THE ORDER OF THE CIT(A)S, AS TO HOW THIS WOULD AMOUNT TO MANIPULATION, AS LONG AS THE MACHINERY TRANSFERRED TO UNIT II WAS WITHIN THE PERMISSIBLE LIMIT OF 20%, AS SET OUT IN EXPLANATION 2 TO SUB - SECTION (2) OF SECTION 80IB. THIS COULD NOT, IN OU R VIEW, FORM THE BASIS FOR DECLINING THE DEDUCTION CLAIMED BY THE ASSESSEE. 27.2. IN RAISING THIS OBJECTION, THE AUTHORITIES BELOW HAVE IGNORED THE FACT THAT THE CONDITION STIPULATED IN SUB - CLAUSE (II) OF SUBSECTION (2) OF SECTION 80IB DISENTITLE THE AS SESSEE FROM CLAIMING A DEDUCTION, ONLY, IF, THE FORMATION OF THE NEW BUSINESS TAKES PLACE VIA TRANSFER OF MACHINERY AND/OR PLANT, PREVIOUSLY USED FOR ANY PURPOSE. THEREFORE, IT IS NOT A MERE TRANSFER OF PLANT AND MACHINERY, WHICH IS USED PREVIOUSLY FOR SOM E PURPOSE, BUT THE FACT THAT TRANSFER IS OF SUCH NATURE THAT IT ENABLES THE FORMATION OF THE UNDERTAKING QUA WHICH DEDUCTION IS SOUGHT BY AN ASSESSEE. IT IS NOT THE REVENUE'S CASE THAT THE TRANSFERRED MACHINERY ENABLED THE FORMATION OF UNIT II. 27.3. AS INDICATED HEREIN ABOVE, FOUR (4) NUT FORMER MACHINES WERE IMPORTED SPECIFICALLY FOR SETTING UP UNIT II. FURTHERMORE, THE RECORD SHOWS THAT THE VALUE OF THE TRANSFERRED MACHINES WERE BELOW 20%. THEREFORE, WE FIND NO BASIS FOR DECLINING THE CLAIM FOR DEDUCT ION MADE BY THE ASSESSEE UNDER SECTION 80IB ON THE GROUND THAT IT HAD MANIPULATED THE TRANSFER OF MACHINERY IN SUCH A MANNER THAT ITS VALUE WAS KEPT BELOW 20% OF THE TOTAL VALUE OF THE PLANT AND MACHINERY INSTALLED IN UNIT II. 28. THIS ISSUE CAME UP FOR CONSIDERATION BEFORE THE SUPREME COURT IN THE MATTER OF: BAJAJ TEMPO LTD. V. COMMISSIONER OF INCOME TAX (1992) 196 ITR 188. 28.1. THIS CASE WAS AGAIN DECIDED UNDER THE PROVISIONS OF SECTION 15C OF THE 1922 ACT. NOTABLY, SECTION 15C OF THE 1922 ACT DID NOT HAVE APPENDED TO IT A PROVISION SIMILAR TO EXPLANATION 2 TO SECTION 80IB(2) OF THE 1961 ACT, DESPITE WHICH, THE SUPREME COURT MADE THE FOLLOWING APPOSITE OBSERVATIONS: ' WORDS OF A STATUTE ARE UNDOUBTEDLY THE BEST GUIDE. BUT IF THEIR MEANING GETS CLO UDED THEN THE COURTS REQUIRED TO CLEAR THE HAZE. SUB - SECTION (2) ADVANCES THE OBJECTIVE OF SUB - SECTION (1) BY INCLUDING IN IT EVERY UNDERTAKING EXCEPT IF IT IS COVERED BY CLAUSE (I) FOR WHICH IT IS NECESSARY THAT IT SHOULD NOT BE FORMED BY TRANSFER OF BUIL DING OR I . T . A . NO S . 736 /M/ 1 2 9 MACHINERY. THE RESTRICTION OR DENIAL OF BENEFIT ARISES NOT BY TRANSFER OF BUILDING OR MATERIAL TO THE NEW COMPANY BUT THAT IT SHOULD NOT BE FORMED BY SUCH TRANSFER. THIS IS THE KEY TO THE INTERPRETATION. THE FORMATION SHOULD NOT BE BY SUCH TRANSFER . THE EMPHASIS IS ON FORMATION NOT ON USE. THEREFORE IT IS NOT EVERY TRANSFER OF BUILDING OR MATERIAL BUT THE ONE WHICH CAN BE HELD TO HAVE RESULTED IN FORMATION OF THE UNDERTAKING. ' 28.2. IN THIS CASE, THE SUPREME COURT WAS CALLED UPON TO RULE WHETHER CARRYING ON BUSINESS BY A NEW UNDERTAKING IN A PREMISES LEASED FROM ANOTHER BUSINESS WOULD DISENTITLE THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTION 15 C OF THE 1922 ACT. THE SUPREME COURT, AS INDICATED ABOVE, RULED IN FAVOUR OF THE ASSESSEE BY STRESSING O N THE FACT THAT IT IS NOT A MERE TRANSFER OF MACHINERY AND PLANT, WHICH WAS USED, PREVIOUSLY, FOR OTHER PURPOSE, THAT WOULD DEPRIVE AN ASSESSEE FROM CLAIMING DEDUCTION, BUT WHAT WOULD, IN FACT, DISENTITLE THE ASSESSEE FROM CLAIMING DEDUCTION, IF, TRANSFER ENABLES THE FORMATION OF NEW BUSINESS QUA WHICH DEDUCTION IS CLAIMED. THE COURT HELD THAT THE PROVISIONS OF THE LIKE NATURE, WHICH ARE INCORPORATED IN THE STATUTE BY THE LEGISLATURE TO GIVE A FILLIP TO INDUSTRIALIZATION, SHOULD, IN CASE OF DOUBT AND/OR AMB IGUITY, BE INTERPRETED IN A MANNER, WHICH FAVOURS THE ASSESSEE. IN OTHER WORDS, SUCH PROVISIONS SHOULD LIBERALLY CONSTRUED. 29. THE SECOND OBJECTION, WHICH THE AUTHORITIES BELOW HAVE TAKEN QUA ASSESSEE VIS - - VIS HIS CLAIM FOR DEDUCTION IN RESPECT OF UNI T II IS THAT, IT HAD PURCHASED NUT BLANKS FROM UNIT I. IN THIS CONTEXT, ONE MAY NOTE THAT IN RESPECT OF FINANCIAL YEAR 2003 - 04, NUT BLANKS, WORTH RS.3,14,26,875/ - WERE PURCHASED, WHILE IN FINANCIAL YEAR, 2004 - 05, NUT BLANKS, WORTH RS.8,98,39,763/ - WERE PUR CHASED. BASED ON THIS, IT WAS CONCLUDED BY THE CIT(A)S THAT THE WHOLE IDEA WAS, TO SHIFT THE ACTIVITIES FROM UNIT I TO UNIT II. HOWEVER, IT IS NOT SUGGESTED BY THE AUTHORITIES BELOW THAT UNIT II HAD NOT PURCHASED THE NUT BLANKS FOR A TRUE VALUE FROM UNIT I . 29.1. ONCE AGAIN, IN OUR OPINION, THE MERE FACT THAT NUT BLANKS WERE PURCHASED FROM UNIT I CANNOT BE A REASON TO DENY DEDUCTION UNDER SECTION 80IB, VIS - - VIS UNIT II. THE DEDUCTION IS MADE AVAILABLE TO THE ASSESSEE, VIS - - VIS UNIT II, AS IT FITS THE ATTR IBUTES OF AN INDUSTRIAL UNDERTAKING AND NOT TO THE ASSESSEE PER SE. AS LONG AS THE ASSESSEE HAS INVESTED A SUBSTANTIAL AMOUNT IN SETTING UP AN INDUSTRIAL UNDERTAKING, WHICH IS SEPARATE AND DISTINCT, IT IS ENTITLED TO CLAIM THE SAID DEDUCTION. 29.2. AS I NDICATED ABOVE, THE SUBSTANTIAL EXPANSION OF UNIT I OR EVEN, IF, UNIT II IS CONCERNED AS AN EXPANDED FORM OF UNIT I, WHICH, FOR THE REASONS GIVEN ABOVE, IS CLEARLY SUBSTANTIAL, IT CANNOT BE DENIED DEDUCTION UNDER SECTION 80IB OF THE 1961 ACT. THE FACT THAT IT HAS USED RAW MATERIAL, I .E., NUT BLANKS, WHICH HAVE BEEN SUPPLIED BY UNIT I, CANNOT COME IN THE WAY OF ONE REACHING A CONCLUSION THAT IT IS A SEPARATE AND INDEPENDENT UNIT. THIS PROPOSITION CAN BE BETTER EXPLAINED BY THE FOLLOWING ILLUSTRATION. SAY FOR I . T . A . NO S . 736 /M/ 1 2 10 EXAMPLE, THE ASSESSEE HAD ESTABLISHED UNIT II, IN ANOTHER COMPANY OR ENTITY, WOULD THE REVENUE, THEN, BE ABLE TO DEPRIVE SUCH AN ENTITY OF EXEMPTION UNDER SECTION 80IB OF THE 1961 ACT. THE DISTINCTION, SEPARATENESS AND INDEPENDENCE OF AN INDUSTRIAL UNDERT AKING CANNOT BE MADE DEPENDENT ONLY ON THE ATTRIBUTE OF OWNERSHIP. 29.3. THEREFORE, FOR ALL THESE REASONS, WE ARE OF THE VIEW THAT BOTH CIT(A)S AS WELL AS THE TRIBUNAL WERE WRONG IN CONCLUDING THAT THE ASSESSEE COULD NOT CLAIM DEDUCTION UNDER SECTION 80 IB OF THE 1961 ACT VIS - - VIS UNIT II. 6. RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENT OF HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO AL LOW THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF UNIT II OF THE ASSESSEE IN THE ASSESSMENT YEAR 2008 - 09 AND THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED . 7. SO FAR AS CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT IS CONCER NED, THE SAID ISSUE IS, EVEN THOUGH, SQUARELY COVERED BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD. V. A CIT (2012) 340 ITR 477, WHILE CONSIDERING THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTIO N 80IB OF THE ACT, THE HON BLE MADRAS HIGH COURT ALSO CONSIDERED THE ABOVE ISSUE ONCE AGAIN. BY RELYING ON VARIOUS JUDGEMENTS OF HON BLE SUPREME COURT AND OTHER COURTS AND FURTHER AFFIRMING THE DIVISION BENCH DECISION IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD. V. ACIT (SUPRA) , IN ASSESSEE S OWN CASE, THE HON BLE MADRAS HIGH COURT HAS HELD AS UNDER: I . T . A . NO S . 736 /M/ 1 2 11 38.1. FURTHERMORE, WE HAVE ALSO CONCLUDED IN FAVOUR THE ASSESSEE THAT THE COMPUTATION OF DEDUCTION, UNDER SECTION 80IA OF THE 1961 ACT, BY THE ASSE SSING OFFICER, IN RESPECT OF A.YS.2006 - 07 AND 2007 - 08 VIDE ASSESSMENT ORDERS DATED 29.12.2008 AND 18.12.2009, HAS TO BE CARRIED OUT KEEPING IN MIND THE LEGAL PRINCIPLES SET FORTH BY THE DIVISION BENCH OF THIS COURT IN THE MATTER OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD. V. ASSISTANT COMMISSIONER OF INCOME TAX (2012) 340 ITR 477 (MADRAS). 38.2. IN THIS BEHALF, AS NOTED ABOVE BY US, THE DECISION OF THE DELHI HIGH COURT IN THE MATTER OF DEWAN KRAFT SYSTEMS PRIVATE LIMITED, WITH WHICH, WE HAVE AGREED, WOULD ALSO BE APPLICABLE. ACCORDINGLY, THESE APPEALS ARE ALLOWED. THE QUESTIONS OF LAW RAISED THEREIN ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO RE - COMPUTE THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IA OF THE 1961 ACT, VIS - - VIS A.YS.2006 - 07 AND 2007 - 08, KEEPING IN MIND THE FOREGOING DISCUSSION. 39. IN SUM, WHILE, T.C.(A)NOS.533 TO 538 OF 2010, 787 AND 788 OF 2014, PREFERRED BY THE REVENUE, ARE DISMISSED; T.C.(A) NOS.1217 TO 1220 OF 20 10, PREFERRED BY THE ASSESSEE, ARE ALLOWED. HOWEVER, THERE WILL BE NO ORDER AS TO COSTS. 8. M ERE FILING OF THE SLP BEFORE THE HON BLE APEX COURT IS NOT A VALID GROUND FOR NOT FOLLOWING THE JUDGMENT OF THE HON BLE MADRAS HIGH COURT. FURTHER, IT IS NOT TH E CASE OF THE REVENUE THAT THE JUDGMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE VELAYUDHA SWAMY SPINNING MILLS P. LTD (SU P R A) IS STAYED BY THE HON BLE APEX COURT. IT IS PERTINENT TO MENTION THAT IN THE ABSENCE OF ANY STAY GRANTED BY THE HON BLE APEX COURT AGAINST THE OPERATION OF THE JUDGMENT OF THE HON BLE MADRAS HIGH COURT, ALL THE LOWER JUDICIARIES AS WELL AS QUASI JUDICIAL AUTHORITIES ARE BOUND TO FOLLOW THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT. THUS, R ESPECTFULLY FOLLOWING THE DECIS IONS OF HON BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD. V. ACIT (SUPRA) AS WELL AS IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE I . T . A . NO S . 736 /M/ 1 2 12 CLAIM OF DEDUCTION UNDER SECTION 80IA OF T HE ACT AS WELL IN THE ASSESSMENT YEAR UNDER CONSIDERATION . THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON THE 31 ST AUGUST , 201 7 AT CHENNAI. SD/ - SD/ - ( SANJAY AROR A ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 31 . 0 8 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.