JCIT SPECIAL RANGE 47 Vs. ASSOCIATED CAPSULES PVT LTD
INCOME TAX APPELLATE TRIBUNAL
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(1.) MOST of the issues involved in the present bunch of appeals filed by the Department and the memoranda of cross-objections filed by the assessee are common. We therefore find it convenient to dispose off all of them together by a consolidated order.
(2.) We shall first take up the Department's appeal for AY 1995-96 as the learned CIT(A) has passed speaking order for the said assessment year which he has followed in other years.
ITA No. 193/M/2000: A Y 1995-96: Department's Appeal
Ground No. 1 taken by the Department reads as under:
1. (i) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the A.O. to allow deduction of Rs. 65,76,300/- Under Section 801 of the I.T. Act in respect of Undertaking II and Rs. 55,17,158/- Under Section 80-IA of the I.T. Act in respect of Undertaking III.
(ii) Without prejudice to the above and on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the A.O. has erred in denying the deduction Under Section 80-I/80-IA to the assessee and further erred in holding that the assessee satisfies all the 4 requisites stipulated for eligibility for deduction Under Section 80I/80-IA without appreciating the facts of the case that capsule manufacturing process involving various steps is to be treated as one integrated process and accordingly, feeding of gelatin sorting, printing, processing etc. should have been independent of old unit.
(iii) Without prejudice to the above and on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that undertaking II/III are separate, independent undertaking entitled to deduction Under Section 80-I/80-IA of the Income Tax Act without fully appreciating the facts of the case that the capsule manufacturing machine may be the most important part of an integrated process, but it is not the whole.
(iv) Without prejudice to the above and on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that it is legally permissible and factually possible for the same company to have a number of undertaking and the fact of having a common licence for the company/factory cannot detract the independent and separate existence of the undertakings functioning under one and the same company.
(v) Without prejudice to the above and on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that even though the electricity bill have been discharged together and there are some common brief manufacturing and post manufacturing activities the same is not germane to the issue of granting deduction Under Section 80-I/80-IA of the Act.
(3.) BRIEFLY stated, the facts of the case are that the assessee has been engaged in the business of production of empty hard gelatine capsules and their sale to the pharmaceutical companies since 1960. The manufacturing activities are carried out by the assessee with the help of capsule manufacturing machines. Commensurate with the growth of the business, the assessee kept on adding new undertakings to its existing undertakings. In the assessment year under appeal, the assessee had 17 capsule manufacturing machines installed in 4 separate undertakings. Machine Nos. 1 to 5 were installed in Undertaking No. I set up in 1978-79, Machine Nos. 6 to 9 were installed in Undertaking No. II set up in 1987-88, Machine Nos. 10 to 13 were installed in Undertaking No. Ill set up in 1992-93, and Machine Nos. 14 to 17 were installed in Undertaking No. IV set up in 1994-95 at the factory of the assessee-company. The assessee did not claim any relief Under Section 801 in the year under appeal in respect of Undertaking No. I as the statutory period up-to which relief was admissible had already expired. The assessee, however, claimed relief Under Section 801 in respect of Undertaking No. II as it had commenced production in the previous year relevant to AY 1988-89 and was thus eligible for deduction up-to AY 1995-96. The assessee claimed relief in respect of Undertaking No. Ill also as it had commenced production in the previous year relevant to AY 1993-94 and was thus eligible for relief Under Section 80IA up-to AY 2003-04. The relief sought for by the assessee Under Section 801 and 80IA was however turned down by the AO this year mainly for the reason that since the product manufactured by the assessee in all the four undertakings was capsules and that too in the units located in the same premises and hence all the four undertakings would constitute one undertaking and not four separate undertakings as claimed by the assessee.;
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