PRAKASH KRISHNA, J. - (1.) THE Tribunal, Delhi Bench 'B', New Delhi, has referred the following two questions relating to the asst. yr. 1987 -88 for the opinion of this Court : "1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the deduction is allowable under s. 80HHA with regard to the income derived from industrial undertaking before setting off such income against loss from a non -industrial unit in terms of s. 80AB and s. 71 of the IT Act, 1961 ? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the plant and machinery of the menthol unit, Rampur, was put to use for purposes of business during the relevant accounting year for the asst. yr. 1987 -88 and was entitled to depreciation in the said assessment year specially relying on the decision in CIT vs. Suhrid Geigy Ltd. (1981) 25 CTR (Guj) 280 : (1982) 133 ITR 884 (Guj)
(2.) THE assessee is a private limited company engaged in the business of manufacture and sale of basic drugs with its income of Rs. 12,32,860. In the assessment proceedings it claimed deductions under s. 80HHA as also depreciation amounting to Rs. 1,91,280 in the menthol unit (Rampur). The claim under s. 80HHA was allowed in part by the AO 1990, allowed the appeal by following his own order in the assessee's case for the asst. yrs. 1982 -83 and 1986 -87. The matter was carried in second appeal by the Department before the Tribunal. The Tribunal allowed the appeal of the Department in part and restored the assessment order. However, on the question of deduction under s. 80HHA the direction given by the first appellate authority not to adjust the losses of other units while computing the deduction under s. 80HHA was upheld. As regards question No. 2 is concerned, the Tribunal has held that the trial run of the plant by the appellant constitutes use thereof and the assessee is entitled for depreciation in the relevant assessment year accordingly.
(3.) HEARD Sri Shambhu Nath Chopra, learned standing counsel for the Department, and Shri Piyush Agrawal, learned counsel for the respondent -assessee. Taking the first question first, it may be noted that the Tribunal in para 8 of its order has confirmed the directions issued by the CIT(A) to the AO not to adjust the losses of other unit while computing deduction under s. 80HHA of the Act. It may be noted that identical controversy in the case of the assessee was there in respect of the asst. yrs. 1982 -83 and 1986 -87. The matter relating to the asst. yr. 1982 -83 came up before this Court in IT Ref. No. 115 of 1992, Mentha distinguishing the judgment of the apex Court in the case of CIT vs. Kotagiri Industrial Co -operative Tea Factory Ltd. (1997) 139 CTR (SC) 359 : (1997) 224 ITR 604 (SC), has followed a Division Bench decision of the Andhra Pradesh High Court in the case of CIT vs. Visakha Industries Ltd. (2001) 171 CTR (AP) 300 : (2001) 251 ITR 471 (AP) wherein it was held as follows : "The benefit of deduction is intended only to certain specified industrial undertaking, which fulfils the conditions specified in the respective provisions. Take another case where an assessee has established an industrial undertaking in respect of which it is entitled for deduction from the profits and gains of that unit. The said unit may not contribute any profits and gains but the assessee derives huge income from non -industrial activity. In such case, if the Department's contention is accepted the assessee is entitled for deduction even though there are no profits from the industrial undertakings. The intention of the legislature is not to create such a situation, but to provide the benefit of deduction from the profits and gains of an industrial undertaking, which fulfils the conditions specified in the respective provisions of the Act. The said benefit is an incentive intended to boost the industrial activity. Hence, the proper interpretation is that the deduction shall be in respect of the profits and gains of an industrial undertaking, specified in the provisions of the Act and not with reference to the total profits of the assessee. This view is also supported by the decision of the apex Court in the case of CIT vs. Canara Workshops (P) Ltd. (1986) 58 CTR (SC) 108 : (1986) 161 ITR 320 (SC)." ;