Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.80-IB
(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to 15[(11), (11A) and (11B)] (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section.
(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely: —
- it is not formed by splitting up, or the reconstruction , of a business already in existence:
- Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;
- it is not formed by the transfer to a new business of machinery or plant previously used for any purpose;
- it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India :
Deduction under section 80-IB not deniable to new unit merely because it has common Central Excise/Sales Tax Registrations Number, common excise records, common power connection and same location as 2 existing units
• The assessee was having three industrial undertakings (Unit-1, Unit-2 and Unit-3) at a common place having common statutory registration from Excise Department, Sales Tax Deptt., Pollution Deptt. etc. and having common record.
• The assessee was having one power connection and all the purchase and sale invoices are in the name of the assessee and not in the name of separate Unit-2 & Unit-3.
• However, assessee had maintained separate accounts for Unit-2 and Unit-3 and obtained separate audit reports for Unit-2 and Unit-3.Assessee claimed deduction under section 80-IB for Unit-2 and Unit-3. Unit-1 was not eligible for deduction since it was in 11th year of operation.
• AO disallowed deduction for Unit-3 holding that it was only extension of existing industrial undertaking since it did not have separate statutory registration from Excise Department, Sales Tax Deptt., Pollution Deptt. etc. and had no separate power connection.
• Expansion of an industrial undertaking is not a bar for claim of deduction under section 80-IB of the Act.
• The same product or same location, common procurement, manufacturing and common employees cannot be the basis to hold that the Unit-3 was not an industrial undertaking viable and separate undertaking.
• What is important is that there must be a set up of independent and separate viable undertaking. In the instant case, the assessee had placed on record that it has made separate investment in the plant & machinery account and the building which was evident from the separate financial statements placed on record by the assessee alongwith return of income.
• Result, Unit-3 held entitled to section 80-IB deduction. -  23 taxmann.com 61 (Amritsar - Trib.)
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