ZF Steering Gear (India) Limited Vs DCIT (ITAT Delhi)
A New Unit Need Not Reinvent the Wheel — Independent Manufacturing Unit Entitled to Deduction u/s 80-IA/80-IB Despite Same Product, Phased Expansion & Some Commonality with Old Unit: Delhi ITAT
Summary: The assessee established a new manufacturing unit at Pune for manufacture of Hydraulic Power Steering Gears & claimed deduction u/s 80-IA beginning from AY 1995-96. The original assessment was subjected to revision u/s 263 on the premise that the AO had not properly examined whether manufacturing activity had actually commenced before 31.03.1995. In the consequential assessment, deduction u/s 80-IA was denied & depreciation on certain machinery was also disallowed. The dispute ultimately travelled through several rounds of proceedings, with the Tribunal earlier remanding the matter to CIT(A) for determining whether a genuinely new, integrated & independent industrial undertaking had come into existence before 31.03.1995.
The CIT(A), in the latest remand proceedings, again rejected the assessee’s claim. According to him, no new integrated & independent undertaking had come into existence by 31.03.1995. Consequently, deduction u/s 80-IA for AYs 1995-96 to 1999-2000 & u/s 80-IB for AYs 2000-01 to 2004-05 was denied.
The Delhi ITAT, however, found substantial contemporaneous evidence supporting the assessee. A new factory building had been constructed; industrial approvals had been obtained; finance had been raised through a rights issue & ICICI loan; additional electricity load was sanctioned; fresh employees were appointed; & the audited financial statements reflected the installation of plant & machinery. Significantly, photographs attached to the audited accounts showed inauguration of the new unit on 24.02.1995, while an advertisement in the Economic Times provided independent contemporaneous corroboration. The installed capacity & actual production had also increased.
