Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: form 3cd :: TDS :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: empanelment :: due date for vat payment :: VAT Audit :: VAT RATES :: cpt :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: Central Excise rule to resale the machines to a new company
 
 
From the Courts »
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a
  Vatsala Shenoy vs. JCIT (Supreme Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
 Arshia Ahmed Qureshi Vs. Pr. Commissioner Of Income Tax-21

COMMISSIONER OF INCOME TAX Vs. M/S DELHI PRESS PATRA PRAKASHAN LTD
June, 01st 2013
                 THE HIGH COURT OF DELHI AT NEW DELHI
%                                            Judgment delivered on: 31.05.2013


+                 ITR 49-50/1996
COMMISSIONER OF INCOME TAX                                            ..... Appellant
                                    versus
M/S DELHI PRESS PATRA PRAKASHAN LTD                                   ..... Respondent


+                 ITA 151/2002
COMMISSIONER OF INCOME TAX-IV                                         ..... Appellant
                                    versus
DELHI PRESS PATRA PRAKASHAN LTD                                       ..... Respondent


+                 ITA 302/2002
COMMISSIONER OF INCOME TAX-IV                                         ..... Appellant
                                    versus
DELHI PRESS PATRA PRAKASHAN LTD                                       ..... Respondent


+                 ITA 480/2005
COMMISSIONER OF INCOME TAX-IV                                         ..... Appellant
                                    versus
DELHI PRESS PATRA PRAKASHAN LTD                                       ..... Respondent

Advocates who appeared in this case:
For the Appellant       : Mr N.P. Sahni.
For the Respondent      : Mr O.P. Dua, Sr. Adv. with Ms Babita

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE VIBHU BAKHRU



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                  Page 1 of 45
                                            JUDGMENT

VIBHU BAKHRU, J

1.       These are three appeals and a reference which involve similar issues and
thus have been taken up together. ITR Nos. 49-50/1996 are cross references, one
made by the assessee and the other preferred on behalf of the revenue against the
order of the Income Tax Appellate Tribunal dated 26.04.1995. ITA No.
151/2002, ITA No. 302/2002 and ITA No. 480/2005 are appeals filed under
Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the "Act")
filed on behalf of the revenue, inter alia, challenging the orders passed by the
Income Tax Appellate Tribunal wherein the assessee has been allowed the
benefit of deductions under Section 80-I of the Act. Whereas ITR
No. 49-50/1996 relates to the assessment year 1991-92, ITA Nos.151/2002,
302/2002 and 480/2005 are with respect to previous years relevant to the
assessment years 1992-93, 1993-94 and 1994-95 respectively.





2.       In ITR 49-50/1996 the following questions were framed by the Tribunal
and have been referred for our consideration:-

         "1.      Whether on facts and in the circumstances of the case, the
                  ITAT was right in holding that requisite conditions of sec.
                  80-I are to be satisfied not only in first or the initial year but
                  in all the assessment years in which the deduction under
                  sect. 80-I is claimed by the assessee?"

         "2.      Whether on the facts and in the circumstances of the case,
                  the ITAT was right in law in holding that Unit Nos. 2 & 3
                  are industrial undertakings for purposes of Sec. 80-I of the
                  IT Act, 1961?"

         Whereas the first question has been referred on behalf of the assessee.
The second question has been referred at the instance of the revenue.




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                   Page 2 of 45
3.       The questions framed in ITA no.151/2002 and ITA no.480/2005 are
similarly worded. The question framed in the said two appeals is as under:-


                  "Whether on the facts and in the circumstances of the case
                  the Tribunal was correct in law in holding that the activity
                  of printing carried out by the assessee in its Units no.2 & 3
                  constituted profits and gains derived by the assessee from
                  an industrial undertaking within the meaning of section 80-I
                  of the Income Tax Act, 1961?"

4.       The question framed in ITA No. 302/2004 also relates to the question
whether the assessee is entitled to the deduction under Section 80-I of the Act
and is to the same effect as the question framed in ITA no. 151/2002 and ITA no.
480/2005.


5.       The assessee is a company and is engaged in printing and publishing
newspapers and periodicals in English, Hindi, Marathi and Kannada. The
assessee company was set up sometime in 1973 and has its head office situated
in New Delhi. The assessee company established a Unit in Sahibabad, District
Ghaziabad, (U.P.) namely Unit No. 2 for carrying on the work of high speed
printing. Unit No. 2 was set up during the year ending 30.09.1985 relevant to the
assessment year 1986-87. Unit No. 2 consisted of a printing press which was
imported by the assessee. During the first year of the operation, there was a loss
and no deduction under Section 80-I of the Act was allowed to the assessee with
respect to Unit No. 2 and the return filed by the assessee was processed under
section 143(1) of the Act on 13.05.1989.


6.       The assessee filed a return for the subsequent assessment year, i.e., AY
1988-89, claiming a sum of `13,50,000/- as deduction under Section 80-I of the
Act. The return filed by the assessee was taken up for scrutiny. During the
assessment proceeding, the Assessing Officer examined the claim of the assessee



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005              Page 3 of 45
with respect to deduction under Section 80-I of the Act which was recomputed at
`12,80,044/- as against the initial deduction of `13,50,000/- claimed by the
assessee. The relevant extract from the assessment order dated 28.02.1990 for
the assessment year 1988-89 is quoted below:-


         "Deduction u/s 80-I has been claimed in the computation chart at
         `13,50,000/-. When confronted about the correctness of the claim,
         the assessee has filed a revised chart according to which the
         deduction under Section 80-I works out to `12,88,044/-. This
         deduction shall be allowed because it pertains to Unit No. 2, the
         profit of which works out to `1,80,43,064/-."

7.       The assessee claimed a deduction of `18,45,800/- under Section 80-I of
the Act for the assessment year 1989-90 with respect to Unit No. 2 as well as
Unit No. 3 which was established in 1987 and housed in the building adjacent to
the building where Unit No. 2 had been set up earlier. The return filed by the
assessee was taken up for scrutiny and an assessment order dated 31.01.1991
was framed by the Assessing Officer allowing deduction under Section 80-I of
the Act.


8.       The assessee filed a return for the subsequent assessment year AY 1990-
91 wherein the assessee claimed a deduction of `38,02,747/- under Section 80-I
with respect to the profits from Unit 2 & 3. The claim of the assessee was
examined by the Assessing Officer who passed the assessment order dated
31.01.1992 allowing the deduction under Section 80-I of the Act, but computing
the same at `37,82,816/-. The relevant extract from the assessment order dated
31.01.1992 is quoted below:-


         "The assessee has claimed a sum of Rs.38,02,747/- u/s 80-I of the
         I.T. Act. The deduction u/s 80-I has been claimed in r/o Unit-2
         and Unit-3 receipts against which have been shown at




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005          Page 4 of 45
         Rs.1,54,96,624/- and Rs.1,33,04,340/-. After appropriating
         expenses under various heads profits from these Units has been
         shown at Rs.1,31,77,889/- and Rs.20,33,099/- respectively. The
         receipts from these two Units do not include interest income or
         misc. Income. However, the assessee has not appropriated
         expenses such as paper, printing and binding, magazine
         contribution, postage and forwarding charges', contribution to
         Provident Fund etc. The assessee has vide its letter dt. 31.1.91
         submitted that Unit-I in r/o of which deduction u/s 80-I is not
         allowable, is mainly engaged in this publication of magazines,
         whereas the other Units are doing printing work as veb fed offset
         processes. The assessee has further submitted that the abovesaid
         expenses are entirely attributable to Unit-I only as it is engaged in
         the publication of magazines. Assessee's plea is tenable with
         regard to these expenses except the expenses pertaining to
         contribution to provident fund as the assessee has appropriated
         expenses under the head salary and bonus to Unit-2 and Unit-3
         also. Out of total expenses of Rs.1,67,946/- a sum of Rs.79,774/-
         will be appropriated against the profits of Unit-2 and Unit-3 in
         proposition of the expenses attributed to these Units under the head
         salary. Deduction u/s 80-I will be worked out to Rs.37,82,816/- on
         total profits of Rs.1,51,31264/- from new industrial units."


9.       For the previous year ended 1991 relevant to the assessment year 1991-
92, the assessee company furnished a return of income of ` 44,44,203/-. The
assessee also claimed deduction of ` 44,58,681/- under Section 80-I of the Act
being 25% of the profits from Unit Nos. 2 & 3 disclosed by the assessee.


10.      The Unit No. 2 comprises of a computerized four colour heat set web
offset printing machine which has the capacity to print on both sides of paper
simultaneously at a speed of 35,000 sheets per hour. The said Unit included an
oven for drying ink and a chiller to cool the printed paper and coat silicon on
paper before folding the paper in the specified combination as required. In
addition to the colour printing machine, Unit No. 2 also has other machines such
as plate processing, exposing, not heat set web offset to perform non-colour



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005             Page 5 of 45
printing. Unit No. 3 consists of a colour heatset offset printing press which has
the capacity to print 40,000 sheets per hour. The printing press is coated with
alcohol dumping system to improve the colour printing quality and also to
provide sheen to the ink. Unit No. 3 also consisted of several other machines like
scanner, densitometer, metal halide unit to supplement the work of the offset
printing press.


11.      Both the Units, namely Unit Nos. 2 & 3 were established in Sahibabad in
separate buildings situated adjacent to one another. The electricity connection,
telephone connections as well as senior managerial staff were common for both
the Units. The assessee contended that Unit Nos. 2 & 3 were independent
printing houses and the income of these Units was accounted on the basis of
printing done by them at specified rates.


12.      The Assessing Officer framed an assessment order dated 25.03.1994 for
the Assessment year 1991-92 wherein the claim of the assessee for deduction
under Section 80-I of the Act with respect to Unit Nos. 2 & 3 was disallowed.
The Assessing officer observed that printing machines were highly sophisticated
and computerized and could be operated and managed without employing more
than two or three persons. The expenses incurred by the assessee with regard to
Unit Nos. 2 & 3 were mainly payments made for purchase of ink and
consumables. The workers employed in operating Unit Nos. 2 & 3 were
employees of another company Vinapur (P) Ltd. which was a sister concern of
the assessee company. Vinapur (P) Ltd. did not carry on any other business but
was involved solely in engaging workers for the assessee. The Assessing Officer
concluded that the assessee company did not qualify for a deduction under
Section 80-I of the Act with respect to Unit Nos. 2 & 3 for the following
reasons:-




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005          Page 6 of 45
        (A) Unit Nos. 2 & 3 did not employ any person in the manufacturing
                process as the persons engaged in the printing press were not
                employees of Unit Nos. 2 & 3 but of another company which was
                distinctly different from Unit Nos. 2 & 3.


        (B) Unit Nos. 2 & 3 were not manufacturing any article or thing as
                printing on paper could not be construed to be manufacturing.


        (C) Unit Nos. 2 & 3 had sophisticated computerized printing
                machines which did not require more than 2 or 3 persons to
                operate the press and hence, the condition under Section 80-
                I(2)(iv) of the Act which required that the industrial undertaking
                employ 10 or more persons was not satisfied.


        (D) Unit Nos. 2 & 3 were only carrying on job work and were not
                selling any goods. The said Units were also not paying any sales
                tax for the job work charged.


        (E) Publication of a magazine could be termed as manufacture,
                however, the magazines were being published by Unit No.1 of the
                assessee company and not exclusively by Unit Nos. 2 & 3. The
                assessee, as a company would be eligible to claim deduction
                under Section 80-I of the Act since it was engaged in publishing
                magazines. However, since the assessee company was established
                in 1973 and eight years had elapsed, deduction under Section 80-I
                of the Act was not available for the relevant assessment year.


13.      Aggrieved by the assessment order dated 25.03.1994, the assessee
preferred an appeal before CIT (Appeals). It was contended on behalf of the



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005              Page 7 of 45
assessee before CIT (Appeals) that the claim for deduction under Section 80-I of
the Act had been examined by the Assessing Officer and had been allowed in the
earlier years and thus, the same could not be denied to the assessee for the
assessment year 1991-92. The assessee also contested the findings of the
Assessing Officer that Unit Nos. 2 & 3 did not employ more than 10 workers.
While the CIT (Appeals) accepted the contention of the assessee that it employed
more than 10 workers in Unit Nos. 2 & 3, the CIT (Appeals) nonetheless upheld
the decision of the Assessing Officer that deduction under Section 80-I of the
Act was not allowable to the assessee as Unit Nos. 2 & 3 could not be construed
as separate Units but were wholly dependent on Unit No. 1. The CIT(Appeals)
upheld the decision of the Assessing Officer that Units Nos. 1, 2 & 3 were
together engaged in publishing and printing and since the assessee company was
more than 8 years old, deduction under Section 80-I of the Act would not be
available to the assessee company. Whilst the CIT (Appeals) did not accept the
contention of the assessee that Unit Nos. 2 and 3 were industrial undertakings
independent of Unit No.1, the CIT(Appeals) accepted the contention that Unit
Nos. 2 & 3 did produce `articles' or `things' as the printed material was different
from the raw material used in producing them, namely, paper and ink. Thus, the
condition that an industrial undertaking should manufacture or produce an article
or thing was held to be satisfied.


14.      The assessee preferred an appeal against the order dated 19.09.1994
passed by the CIT (Appeals) before the Income Tax Appellate Tribunal. Cross
objections were also filed on behalf of the revenue against the finding of the CIT
(Appeals) that Unit Nos.2 & 3 of the assessee company satisfied the condition of
manufacturing an article or thing. The assessee also urged before the Tribunal
that the question relating to the satisfaction of the conditions of section 80-I of
the Act were to be examined in the initial year and once the claim of the assessee



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 8 of 45
under Section 80-I of the Act has been examined and allowed, it would not be
open for the Assessing Officer to revisit the same during the subsequent years.
The assessee also assailed the decision of the CIT (Appeals) that Unit Nos. 1, 2
& 3 were inter-dependent Units and thus could not be considered as separate
industrial undertakings. The entire company was liable to be treated as one
undertaking and not separate Units.


15.      The Tribunal rejected the contention of the assessee that once the
deduction under Section 80-I of the Act had been allowed to the assessee the
same could not be examined in subsequent years. The Tribunal held that the
principle of estoppel and res judicata were not applicable to the assessment
proceedings under the Act and although Income Tax Authorities should be
consistent in their approach and analysis but since the claim regarding eligibility
of Unit No. 2 & 3 had not been examined earlier, the same could be examined in
later years. The Tribunal held that the conditions of eligibility for claiming
deductions under Section 80-I of the Act were required to be satisfied, not only
for the first or initial year but were also required to be satisfied for subsequent
years as well. Accordingly, the Tribunal rejected the contention of the assessee
that claim for deduction under section 80-I of the Act could not be denied to the
assessee on the ground of consistency. The Tribunal accepted the contention of
the assessee that Unit Nos.2 & 3 were separate industrial undertakings and
further held that although Unit Nos.2 & 3 were carrying on the printing activity
for Unit No.1 these units could also exist independent of Unit No.1 and could
carry on printing activity for other persons also. The Tribunal thus set aside the
finding of the CIT (Appeals) that Unit Nos. 2 & 3 could not be treated as
separate industrial undertakings.


16.      The challenge on behalf of the revenue, to the conclusion of CIT




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 9 of 45
(Appeals) that the Unit Nos. 2 & 3 complied with the condition of Section 80-I
in respect of carrying on manufacturing activity, was rejected by the Tribunal
and the decision of the CIT (Appeals) in this respect was upheld.


17.      In regard to the question of the number of workers employed by the Unit
Nos. 2 or 3, the Tribunal accepted the contention of the assessee that employees
of the sister concern M/s Vinapur (P) Ltd. who were directly employed in
operating Units Nos.2 & 3 and were working permanently for carrying on the
activities of Unit nos.2 and 3, were required to be taken into consideration as
persons employed in the industrial undertaking for the purposes of qualifying for
deduction under Section 80-I of the Act. However, since, there was no finding
by the Assessing Officer in respect of the number of workers who were
permanently employed in operating Unit Nos.2 and 3, the Tribunal remanded
the matter to the Assessing Officer for the limited purposes of making the
necessary enquiries to determine the number of persons who were directly
employed in carrying on the activities of Unit Nos.2 and 3 irrespective of
whether the workers were employees on the rolls of the assessee or on the rolls
of M/s Vinapur (P) Ltd.


18.      Pursuant to the directions of the Tribunal, the Assessing Officer made the
necessary enquiries as to the number of workers employed in Unit Nos.2 & 3 for
the purpose of Section 80-I of the Act and concluded that more than 10 workers
were engaged in Unit Nos.2 & 3 of the assessee. Accordingly, the Assessing
Officer passed an order dated 29.12.1995 under Section 254 of the Act re-
computing the taxable income and allowing the assessee, deduction under
Section 80-I of the Act in respect of profits of Unit Nos. 2 & 3.


19.      The question whether the profits from Unit Nos.2 & 3 qualify for




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 10 of 45
deduction under Section 80-I of the Act continued to be the subject matter of the
proceedings for the subsequent three assessment years also. While, the Assessing
Officer rejected the claim of deduction made by the assessee, the Tribunal
following its earlier decision in ITA No.6698/Del/94 relating to Assessment
Year 1991-92 has held that the deduction under Section 80-I of the Act would be
available to the assessee in respect to the profits of Unit nos. 2 and 3.


20.      It is contended by Mr Sahni, appearing on behalf of the revenue, that the
assessee is not entitled to claim any deduction under section 80-I of the Act in
respect of Unit Nos.2 & 3 as the said Units did not fulfill the conditions as
specified under Section 80-I(2) of the Act. It is contended that Unit nos. 2 & 3 do
not qualify as Industrial undertakings to which Section 80-I of the Act applies
for the following reasons:


          A.      It is contended that the assessee did not employ 10 or more workers
          on its rolls who were involved in the activity of the newly established
          printing Units. Although, it is admitted that more than 10 workers were
          directly engaged in carrying out the operation of Unit Nos.2 & 3,
          admittedly, the said employees were not on the rolls of the assessee but
          were on the rolls of another concern. It is, thus, contended that the
          condition as contemplated in Section 80-I(2)(iv) of the Act would not be
          satisfied.


          B.      It is contended that the Unit Nos.2 & 3 established by the assessee
          were not independent Units and were doing job work for Unit No.1. It is
          contended that undertakings which perform only job works would not
          qualify for deduction under Section 80-I of the Act.




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                 Page 11 of 45
          C.      It is contended that the activity being carried on in Unit Nos.2 & 3
          was merely printing of paper and printing did not alter the character of
          paper so as to constitute manufacture or production. In order to qualify
          for deduction under Section 80-I of the Act, it is necessary that the
          industrial undertaking "manufacture or produce any article or thing."
          According to Mr Sahni, the manufacturing activity was carried out by
          Unit No.1 who published the periodicals and newspapers which were the
          final products. It is contended that although periodicals could be stated to
          be manufactured by the assessee, the same were the products
          manufactured by the assessee as a cohesive Unit and not by Unit Nos.2
          or 3. It was submitted that the magazines published by the assessee
          would be a new commodity distinct from the paper on which it was
          printed and this product could not be stated to be manufactured by Unit
          Nos.2 & 3 but by the assessee which included Unit No.1 also. It was
          strongly urged that Unit Nos.2 & 3 were merely printing paper and
          further activities such as binding and cutting were not carried out by Unit
          Nos.2 & 3 and hence Unit Nos. 2 or 3 could not be considered as
          manufacturing any article or thing.


          D.      Unit No.1 was established much earlier and was engaged in
          publishing as well as printing periodicals in the portfolio of the assessee.
          It is contended that as Unit Nos.2 & 3 carried on the same activity which
          is performed by Unit No.1, the same would amount to splitting up of the
          existing business of the assessee and thus would disqualify the assessee
          from claiming any benefit under Section 80-I of the Act in respect of
          Unit nos.2 & 3.


21.      Mr Sahni has relied on the judgment of the Supreme Court in the case of




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005              Page 12 of 45
Union of India v. Delhi Cloth & General Mills : 1963 SCR Supplementary (1)
586. Mr Sahni has drawn our attention to page No.596 wherein it had been held
that the word "manufacture" is understood to mean brining into existence a new
substance and not merely to produce some change in the substance. It was
contended on behalf of the revenue that the paper processed by Unit Nos. 2 & 3
by carrying on printing upon it would not result in a substance which is known in
the market as a substance different from paper. It was, thus, contended that Unit
Nos.2 & 3 were not involved in manufacturing or producing any article or thing.


22.      Mr Sahni has also contended that the decision of the Gujarat High Court
in the case of CIT v. Ajay Printers Pvt. Ltd: (1965) 58 ITR 811 (Guj), which
was relied upon by the assessee before the Tribunal, was inapplicable on the
facts of the present case as in that case the Court was considering whether the
business carried out by the assessee of printing balance sheets, profit & loss
accounts, dividend, pamphlets, share certificates, etc., would be a business which
consists wholly of manufacture. It was argued that the facts of the said case were
distinguishable from the facts of the present case as balance sheets, profit & loss
accounts, dividend, pamphlets and share certificates could be considered as final
products but printed periodical without binding would not be a marketable
product.





23.      Mr Sahni relied strongly on the decision of the Calcutta High Court in the
case of Additional Commissioner of Income Tax v. A. Mukherjee and Co. Pvt.
Ltd: (1978) 113 ITR 718 (Cal) and has drawn our attention to the following
passage:-


            "10. In order that a publisher of books should be a
            manufacturer of books it is wholly unnecessary for him either
            to be an owner of a printing press or to be a book-binder



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 13 of 45
            himself. A paper is not a book, though it is printed on papers. A
            publisher may get the books printed from any printer but the
            printer is not the manufacturer but a mere contractor. The
            findings of the Tribunal in our opinion conclusively show that
            the assessee was carrying on the activity of manufacturing and
            also of processing of books which are also goods.

            11. The argument, namely, that the assessee was not mainly
            carrying on manufacturing or processing activities in view of
            the Tribunal's finding that " the assessee's activity cannot be
            called purely a trading activity " does not appeal to us. The
            assessee did not purchase any books from market or sell them
            at a profit. The assessee published books and sold them in the
            market.

                 We also agree with the finding of the Tribunal that the
            assessee was also carrying on the processing activity inasmuch
            as the assessee had to do many things as stated in its order."

24.      Mr Sahni submitted, that since the publisher of books is held to be a
manufacturer, the same would mean that the printer could not be considered to
be a manufacturer. Since it is admitted that Unit Nos. 2 & 3 were only carrying
on the job of printing, by this analogy they could not be considered to have
satisfied the condition as specified in Section 80-I (2)(iii) of the Act.


25.      Mr Dua appearing on behalf of the assessee has contested the contentions
raised on behalf of the revenue. It has been argued on behalf of the assessee that
there is now no dispute that the number of workers employed in Unit 2 & 3
exceed 10 and thus the condition as laid down in Section 80-I of the Act is met.
Section 80-I(2)(iv) of the Act does not specify whether the workers to be
employed in industrial undertaking must necessarily be on the rolls of the
assessee.


26.      It is also contended on behalf of the assessee, printing activity carried on



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                 Page 14 of 45
in Unit Nos.2 & 3 does produce a distinct and different article. A printed
periodical is completely different and distinct from the raw materials used
namely paper and ink. In order to support his contention, Mr Dua has cited the
decision of the Supreme Court in the case of CIT v. Oracle Software India Ltd.:
(2010) 320 ITR 546 (SC) wherein the Supreme Court has held that the process
of duplicating computer discs which involve recording software on a blank disc
would amount to `manufacture'. A recorded CD where upon a software had been
embedded would be an article completely distinct from a blank Disc. Using the
same analogy, the learned counsel has contended that a printed paper on which
periodical has been printed could not be equated with blank paper and was a new
article or thing which is different from the raw material from which it is
manufactured or produced.


27.      Mr Dua has also disputed the contention on behalf of the revenue that
since binding of printed material was not done by Unit Nos. 2 & 3 in all cases,
the printed material would not be a product which was marketable. Mr Dua
handed over the products resulting from the activity carried on by Unit Nos.2 &
3. Some of the printed material only required to be stapled along the line of
centre fold and the same were ready to be dispatched to the subscribers or sold in
the market. These periodicals were stapled by Unit Nos.2 & 3 and were complete
in all respects. However in the case of certain other magazines, the printed paper
required to be bound and binding of such magazines was carried out by an
another independent third party. In either case, it was contended that the printed
material was distinct from the raw material. It is further contended on behalf of
the assessee that even industrial undertakings, where intermediatory products are
manufactured or produced, qualify for deduction under Section 80-I of the Act.
In support of this contention, the learned counsel for the assessee has cited the
decision of full Bench of Kerala High Court in the case of Midas Polymar



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005          Page 15 of 45
Compounds Pvt. Ltd. v. Assistant Commissioner of Income Tax: (2011) 331
ITR 68 (Ker) [FB].


28.      The learned counsel for the assessee has also cited the decisions in the
cases of CIT v. Hindustan Times Ltd.: (2000) 241 ITR 509 (Del), CIT v. Balaji
Hotels & Enterprises Ltd.: (2009) 311 ITR 389 (Mad), and Ajay Printers
(supra). In support of the contention that an industrial undertaking carrying on
printing activity would qualify as an industrial undertaking which "manufactures
or produces any article or thing".


29.      It was also contended on behalf of the assessee that Unit Nos. 2 & 3 were
independent industrial undertakings. Whereas Unit No. 1 is a publishing house,
Unit Nos. 2 & 3 were printing houses. It was further submitted that the
contention on behalf of the revenue that Unit Nos. 2 & 3 had been formed by
splitting up of businesses was erroneous and had not been urged before either the
CIT(Appeals) or the Tribunal. It was pointed out that it is an admitted case that
no machinery or equipment had been transferred from Unit nos. 1 to Unit Nos.2
& 3. Unit Nos. 2 & 3 had been established by importing new machinery from
overseas and were in addition to the facilities already existing in Unit No.1. The
learned counsel for the assessee relied on the decision of the Supreme Court in
the case of Textile Machinery Corporation Ltd. v. CIT: (1977) 107 ITR 195
(SC) in support of his contention that in order for a new industrial undertaking to
be established, there must be an emergence of a physically separate industrial
Unit which may exist on its own as a viable Unit. It was submitted that this
condition was fulfilled as Unit Nos.2 & 3 were capable to carry on their activity
independent of Unit No. 1.


30.      In the present case, it is not disputed that operations in Unit No.1




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 16 of 45
continued even after Unit Nos.2 & 3 were established. It is contended that in
these circumstances, it could not be said that Unit Nos. 2 & 3 had been formed
by splitting up of business of the assessee, so as to disqualify the assessee
claiming benefit under Section 80-I of the Act. The learned counsel for the
assessee has also cited the decision of the Supreme Court in the cases of CIT v.
Orient Paper Mills Ltd.: (1989) 176 ITR 110 (SC) and CIT v. Indian
Aluminium Co. Ltd.: (1977) 108 ITR 367 (SC) in support of his contention.


31.      The next contention urged on behalf of the assessee was in respect of the
principle of consistency. It was contended that the Assessing Officer once having
accepted that Unit Nos. 2 & 3 were eligible for deduction under Section 80-I of
the Act could not disallow the same in subsequent years. In this regard, Mr Dua
has cited the decisions in the cases of Radhasoami Satsang v. CIT: (1992) 193
ITR 321 (SC), CIT v. Lagan Kala Upwan: (2003) 259 ITR 489 (Del),
Saurashtra Cement & Chemical Industries v. CIT: (1980) 123 ITR 669 (Guj),
Commissioner of Income Tax v. Paul Brothers: (1995) 216 ITR 548 (Bom)
and Commissioner of Income Tax v. Modi Industries Limited: [2010] 327 ITR
570.


32.      We have heard the counsel for the parties at length.


33.      Before proceeding to address the questions that have been raised, it would
be relevant to examine the provisions of Section 80-I of the Act. The relevant
extract of Section 80-I of the Act is quoted below:-


            "80-I - Deduction in respect of profits and gains from
            industrial undertakings after a certain date, etc.- (1) Where
            the gross total income of an assessee includes any profits and
            gains derived from an industrial undertaking or a ship or the
            business of a hotel or the business of repairs to ocean-going



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 17 of 45
            vessels or other powered craft to which this section applies, 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 twenty per cent thereof:
            Provided that in the case of an assessee, being a company, the
            provisions of this sub-section shall have effect in relation to
            profits and gains derived from an industrial undertaking or a ship
            or the business of a hotel as if for the words "twenty per cent",
            the words "twenty-five per cent" had been substituted."

                           xxxxx             xxxxx            xxxxx   xxxxx

            "(2) This section applies to any industrial undertaking which
            fulfils all the following conditions, namely:
                 (i)     it is not formed by the splitting up, or the
                         reconstruction, of a business already in existence;
                 (ii) it is not formed by the transfer to a new business of
                      machinery or plant previously used for any purpose;
                 (iii) 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, and begins
                        to manufacture or produce articles or things or to
                        operate such plant or plants, at any time within the
                        period of ten years next following the 31st day of
                        March, 1981, or such further period as the Central
                        Government may, by notification in the Official
                        Gazette, specify with reference to any particular
                        industrial undertaking;
                 (iv) in a case where the industrial undertaking manufactures
                      or produces articles or things, the undertaking employs
                      ten or more workers in a manufacturing process carried
                      on with the aid of power, or employs twenty or more
                      workers in a manufacturing process carried on without
                      the aid of power:"

                           xxxxx             xxxxx            xxxxx   xxxxx




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                   Page 18 of 45
         "(5) The deduction specified in sub-section (1) shall be allowed in
         computing the total income in respect of the assessment year relevant to
         the previous year in which the industrial undertaking begins to
         manufacture or produce articles or things, or to operate its cold storage
         plant or plants or the ship is first brought into use or the business of the
         hotel starts functioning or the company commences work by way of
         repairs to ocean-going vessels or other powered craft (such assessment
         year being hereafter in this section referred to as the initial assessment
         year) and each of the seven assessment years immediately succeeding the
         initial assessment year:"

                           xxxxx             xxxxx            xxxxx   xxxxx

34.      The first controversy to be addressed is whether the assessee could claim
deduction under Section 80-I of the Act in respect of Unit Nos. 2 & 3, even
though it did not employ 10 or more workers on its rolls.


35.      The condition that an industrial undertaking must employ 10 or more
workers in the manufacturing process carried on with the power is specified in
section 80-I(2)(iv) of the Act. In order to qualify as a new industrial undertaking
in respect of which deduction is available under Section 80-I of the Act, an
industrial undertaking must fulfill the condition of employing "10 or more
workers in a manufacturing process carried on with the aid of power".


36.      A plain reading of the language of Section 80-I (2)(iv) of the Act indicates
that the qualification of employing of 10 or more workers is not used in the
context of persons employed by an assessee but in the context of the
manufacturing process. This clearly means that the manufacturing process,
which is carried on by an industrial undertaking, with the aid of power, must
employ 10 or more workers to carry on the manufacturing process. The word
`employs' has not been used in the context of an employer and employee
relationship between the assessee and the workers carrying on the manufacturing




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                   Page 19 of 45
process, but in the sense of quantifying the number of persons to be deployed in
the manufacturing process.


37.      The expression "workers" is not defined in the Act and there is no reason
to limit the expression "workers" as occurring in section 80-I(2)(iv) of the Act to
only mean such workers as are employed directly by the assessee and ignore the
workers who are engaged in the manufacturing process carried on by the
industrial undertaking albeit employed through another agency. In the case of
Commissioner v. Nanda Mint and Pine Chemicals Ltd.: (2012) 345 ITR 60
(Del) this court has, while considering the question of qualification as to the
number of workers to be employed for availing deduction under section 80-IB of
the Act, held that casual and contractual workers are to be included while
calculating the number of employees who are engaged in an Industrial
undertaking. While deciding the controversy, this court adopted the reasoning of
the Bombay High Court in the case of CIT v. Jyoti Plastic Works Pvt. Ltd.:
(2011) 339 ITR 491 (Bom) and reproduced the following passage from the said
decision.


         "The expression 'worker' is neither defined under section 2 of the
         Act nor under section 80-IB(2)(iv) of the Act. As per Black's Law
         Dictionary, the expression 'worker' means a person employed to
         do work for another. Under section 2(l) of the Factories Act, 1948,
         the expression 'worker' means a person employed directly or by or
         through any agency (including a contractor) with or without the
         knowledge of the principal employer, whether for remuneration
         or not in any manufacturing process, or in any other kind or work
         incidental to or connected with the manufacturing process.
         Therefore, in the absence of the expression 'worker' defined under
         the Act, it would be reasonable to hold that the expression
         'worker' in section 80-IB(2)(iv) of the Act is referable to the
         persons employed by the assessee directly or by or through any
         agency (including a contractor) in the manufacturing activity
         carried on by the assessee. In the present case, though the workers



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 20 of 45
         employed by the assessee directly were less than ten, it is not in
         dispute that the total number of workers employed by the
         assessee directly or hired through a contractor for carrying on the
         manufacturing activity exceeded ten and, therefore, the Tribunal
         was justified in holding that the assessee complied with the
         condition set out in section 80-IB(2)(iv) of the Act."


38.      In the case of Nanda Mint and Pine Chemicals (supra), this court has
held that an undertaking employs a worker when it has control over him not only
with regard to the work done by him but also over the manner in which work is
performed. In the present case, it is an admitted position that more than 10
workers were permanently involved in carrying on the activities in Unit Nos. 2 &
3. We are, thus, unable to accept the contention on behalf of the revenue that
Unit Nos. 2 & 3 did not fulfill the criteria as set out in Section 80-I(2)(iv) of the
Act merely because the persons who were deployed in carrying out the activities
of Unit Nos. 2 & 3 were engaged through the sister concern of the assessee.


39.      In our view, the Tribunal was correct in not accepting the contention of
the revenue that the workers in an industrial undertaking must be on the rolls of
assessee for availing the benefit under Section 80-I of the Act.


40.      The next issue that needs to be considered is whether Unit Nos.2 & 3 are
engaged in manufacture or production of an article or thing. The contention on
behalf of the revenue is that Unit Nos.2 & 3 cannot be stated to manufacture or
produce any article or thing as the said Units were completely dependent upon
Unit No.1. It is further contended that printing carried on by Unit Nos.2 & 3 of
the assessee company only amounted to processing and the same could not be
equated to manufacturing as manufacturing required that the product of the
manufacturing process be a marketable product distinct from the raw materials
used. It is also contended on behalf of the revenue that Unit Nos.2 & 3 were



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005             Page 21 of 45
involved merely in job work and this according to the counsel for the revenue,
did not amount to manufacture.


41.      The arguments urged on behalf of the revenue with regard to Unit Nos.2
& 3 fulfilling the condition as specified in Section 80-I(2)(iii) of the Act are two-
fold. The first contention being that Unit Nos.2 & 3 are involved in job work
and, therefore, the said Units cannot be considered as industrial undertakings
which are involved in manufacture or production of articles or things. The
second aspect is that the resultant printed material is required to be subjected to
further process of binding in order for the same to be marketed and sold and,
therefore, the printing process does not amount to manufacture as contemplated
in section 80-I(2)(iii) of the Act.


42.      We are unable to appreciate the contention that the industrial undertaking
which undertakes job work would not be entitled to claim deduction under
Section 80-I of the Act. The language of Section 80-I(2) of the Act does not
indicate in any manner that an industrial undertaking which instead of
purchasing raw material, acquires raw material from a third party in order to
subject it to the activity carried on by the industrial undertaking and sends the
resultant product back to the entity from which the raw material had been
procured, would be disqualified from availing benefits under Section 80-I of the
Act. There is nothing in the language of Section 80-I(2)(iii) of the Act to suggest
that the assessee claiming the benefit of Section 80-I of the Act must structure
his business in any particular form. Carrying on job work is only a method of
structuring one's business. An assessee owning an industrial undertaking may
either choose to purchase raw material on its own and process the same or it may
acquire raw material on job work basis and utilize the same for carrying on the
industrial activity. In either event so long as the industrial undertaking owned by




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005             Page 22 of 45
the assessee fulfills the conditions as specified under Section 80-I(2) of the Act,
the benefit of Section 80-I of the Act cannot be denied to the assessee.


43.      It is settled law that a statute must be construed as per the plain meaning
of the language. In the case of Polestar Electronic P. Ltd. v. Additional
Commissioner, Sales Tax: AIR 1978 SC 897 it has been held as under:


        "A statutory enactment must ordinarily be construed according to the
        plain natural meaning of its language and no words should be added,
        altered or modified unless it is plainly necessary to do so in order to
        prevent a provision from being unintelligible, absurd, unreasonable,
        unworkable or totally irreconcilable with the rest of the statute."

44.      The rule of literal construction has been followed by courts in various
decisions and the language of a section is the best guide for its interpretation. In
the case of Assessing Authority-cum-Excise and Taxation Officer v. East India
Cotton Mfg. Co. Ltd.: [1981] 48 STC 239, the Supreme Court held as under:-


         "A statute must be construed according to its plain language and
         neither should anything be added nor should anything be subtracted
         unless there are adequate grounds to justify the inference that the
         Legislature clearly so intended."

45.      We are unable to read the condition that an industrial undertaking must
not carry on the manufacturing process on job work basis in order to avail the
benefit of section 80-I of the Act in the language of 80-I(2) of the Act.


46.      The reliance placed by the revenue on the decision of the Calcutta High
Court in the case of A. Mukherjee & Co. (supra) is also, in our view, misplaced.
In the said case, the question before the Court was whether a publisher was
carrying on manufacturing activity. In that case, it was contended on behalf of
the revenue that the assessee did not own a printing press and the job of printing



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 23 of 45
had been outsourced, the job of binding the books was also outsourced to a third
party and therefore a publisher would not qualify as a manufacturer. The Court
analyzed the business carried on by the assessee which included getting the
manuscript for publication, deciding on a suitable format for the book for
printing and thereafter, sell the publication in the market. The assessee played an
active role in coordinating all activities from the stage of the acquisition of the
manuscript to the stage of marketing the books. The Court held that the activities
of the assessee amounted to carrying on the activity of manufacturing and also
processing of books. It is in this context that the Court observed that the
publisher was a manufacturer and the printer was a contractor. We do not think
that we can read in this observation of the Calcutta High Court, a decision that
printing activity carried on by a press does not amount to manufacturing or
producing an article or thing. The fact that activities carried on by a publishing
house may amount to manufacture does not ipso facto exclude the activity of
printing from the scope of the expression "manufacture or produce an article or
thing" as occurring in Section 80-I(2)(iii) of the Act. The contention of Mr Sahni
that an assessee who is engaged on job work basis cannot be considered as a
manufacturer is also premised on the observations made by the Calcutta High
Court in the case of A. Mukherjee & Co.(supra) and as stated earlier, we do not
find that the language of Section 80-I of the Act supports this contention.


47.      This Court has in the case of CIT v. Sadhu Forging Ltd.: (2011) 336 ITR
444 (Del) considered the issue whether deduction under Section 80-IB of the Act
would be available to an assessee who was carrying on job work. The conditions
as specified in Section 80-I(2)(iii) of the Act are identical with the language of
Section 80-IB(2)(iii) of the Act. In that case, the court was concerned with an
industrial undertaking which was carrying on the activity of providing heat
treatment to metal parts for toughening the parts to be used in automobiles, on a



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 24 of 45
job work basis. This Court held as under:-


        "9. ............The issue was also that the assessee was doing these
        works on job basis for other undertakings, by getting the raw
        material from them. When the assessee was entitled to claim
        exemption in respect of income derived from such processes doing
        for itself, we do not see any reason as to why he would not be
        entitled to so merely because the raw material component was
        being supplied by other customers and for whom the assessee was
        doing the job. In fact, deduction under section 80IB is given on
        the profits derived from the manufacturing process, being
        undertaken by the assessee which qualify for deduction.


        10. The heat treatment is one of the processes through which the
        forgings are given the desired temperature and then cooled in a
        different manner which results in changing the mechanical
        properties desired by the customers. We are given to understand
        that there are various industrial undertakings which are specialized
        only in the heat treatment processes. Learned counsel for the
        assessee informed us, without refutation from the Revenue, that
        the forging involves heating to a desired temperature and then
        soaking the material at that temperature until the structure become
        uniform throughout the section and then cooled in a different
        manner to achieve the desired mechanical and molecular bonding
        properties. The cooling of the material at some predetermined
        rates causes the formation of desired structure within the metal for
        the desired properties with the aim (i) to improve the mechanical
        property such as tensile strength, hardness, deductibility, shock
        resistance, etc., (ii) improve machinability, (iii) increase resistance
        to heat and corrosion (iv) relieve stresses developed due to hot and
        cold working, (v) modify electrical, magnetic and molecular
        bonding properties, etc. The heat treatment toughens the forged
        part for being used as automobile parts. The process of heat
        treatment is absolutely essential for rendering them marketable.
        Without the heat treatment, the material is not fit for automobile
        industry. The learned counsel relied upon CIT v. Tamil Nadu Heat
        Treatment and Fetting Services (P) Ltd. (No. 2) [1999] 238 ITR
        540 (Mad) wherein the activity carried out by the assessee
        consisted of receiving from its clients untreated crankshafts,
        forgings, castings, etc., and subjecting them to heat treatment in



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005               Page 25 of 45
        order to toughen them to the requisite standards, so that they could
        be sold in the market. The activity was held to be manufacturing
        and entitled to claim deductions. Similarly in the case of CIT v.
        Tamil Nadu Heat Treatment and Fetting Services (P) Ltd. (No. 1)
        [1999] 238 ITR 529 (Mad), it was held that the process of heat
        treatment to crankshaft, etc., were absolutely essential for
        rendering it marketable. Automobile parts, as crankshafts, need to
        be subjected to heat treatment to increase the wear and tear
        resistance to remove the inordinate stress and increased tensile
        strength. The raw untreated crankshafts and the like can never be
        used in an automobile industry. Thus, in the crankshafts subjected
        to the process of heat treatment, etc., a qualitative change is
        effected, to be fit for use in automobiles, although there is no
        physical change in them. In such state of affairs, it cannot at all be
        stated that the crankshaft, subjected to heat treatment, etc., cannot
        at all change the status of new products of different quality for a
        different purpose altogether. In this view of the matter, the
        activities of the assessee in relation to raw or untreated crankshafts
        being subjected to heat treatment, etc., is definitely a
        "manufacturing activity" entitling it to claim "investment
        allowance" under section 32A."
                                                              (emphasis supplied)


48.      In the case of Midas Polymer Compounds P. Ltd. (supra) a full bench of
the Kerala High Court held that an assessee who was engaged in mixing rubber
with chemicals, process oil etc. to make compound rubber for tyre manufacturing
companies on job work basis was entitled to deduction under section 80-IB of
the Act.


49.      The idea that carrying on job work necessarily excludes carrying on an
activity of manufacture or production is in our view without any basis. The ratio
of the decision in the case of Forging Ltd. (supra) is applicable to the facts of
the present case and we accordingly hold that carrying on job work does not
disentitle Unit Nos.2 & 3 from being considered as industrial undertaking for the
purposes of section 80-I of the Act.



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                         Page 26 of 45
50.      The next aspect which has been addressed at length by the counsel for the
parties is whether Unit Nos.2 & 3 would fulfill the conditions as specified in
Section 80-I(2)(iii) of the Act. It has been contended on behalf of the revenue
that printing does not alter the character of raw materials and cannot constitute
manufacture. It has been further contended that as the printed material which
results from the activities carried on in Unit Nos. 2 and 3 is also not known to the
market as a distinct product as the same cannot be dealt with without subjecting
the printed material to a binding process which is not carried on by Unit Nos.2 &
3.


51.      Mr Sahni has relied strongly on the decision of the Supreme Court in the
case of Delhi Cloth & General Mills (supra) in support of his contention. We
do not think that the decision is of much assistance in the facts of the present
case. In that case, the respondents were engaged in manufacturing "vanaspati"
and had challenged the levy of excise duty on the manufacture of vanaspati from
raw oil. The Excise Authorities had levied excise on manufacture of vanaspati as
"vegetable non-essential, oils, all sorts or in relation to the manufacture of which
any process is ordinarily carried on with the aid of power". The Court examined
the processes carried on in conversion of raw oils to vanaspati and held that the
same do not amount to manufacture. The Court held that the word manufacture
is understood to mean bringing into existence a new substance. The Court drew a
distinction between processing and manufacturing and held that whereas
manufacture implied a change, every change could not be construed as
manufacture. The relevant extract from the said decision in the case of Delhi
Cloth & General Mills (supra) is quoted below:-


        "According to the learned counsel "manufacture" is complete as
        soon as by the application of one or more processes, the raw
        material undergoes some change. To say this is to equate



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 27 of 45
        "processing" to "manufacture "and for this we can find no warrant
        in law. The word "manufacture" used as a verb is generally
        understood to mean as "bringing into existence a new substance"
        and does not mean merely "to produce some change in a
        substance", however, minor in consequence the change may be.
        This distinction is well brought about in a passage thus quoted in
        Permanent Edition of Words and Phrase. Vol.26 from an American
        judgment. The passage runs thus"- `Manufacture' implies a change
        but every change is not manufacture and yet every change of an
        article is the result of treatment, labour and manipulation. But
        something more is necessary and there must be transformation; a
        new and different article must emerge having a distinctive name,
        character or use.

52.      In the present case, Unit Nos.2 & 3 are engaged in printing. The raw
materials used are paper, ink and other consumables which are completely
distinct from the printed paper that results from the activity on in Unit Nos.2 &
3. We are unable to accept the contention that the printing does not alter the
character of the paper used and there is no distinction between the raw paper and
the resultant product. The purpose and usage of a blank paper is completely
different from the use and purpose of a printed magazine or periodical. Once the
blank paper undergoes a process of printing, the character of blank paper
changes completely and the content of the printed material now becomes the
identity of a printed paper. No one can say that blank paper and printed article
are one and the same and in our opinion it can hardly be said that printing carried
out in an industrial undertaking would not amount to manufacturing. A printed
magazine or periodical even if it is not bound has a definite identity and its usage
is completely different from a blank paper on which it is printed.


53.      Having stated above we must add that the expression used in Section 80-I
(2)(iii) of the Act is "manufacture or produce any article or thing". The word
`produce' has wider meaning than the word "manufacture". The meaning of the




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 28 of 45
word `produce' is similar to the word "production" and it has been held by the
Supreme Court in the case of CIT v. N.C. Budharaja & Co.: (1993) 204 ITR
412 (SC) that while every manufacture can be characterized as production, every
production need not amount to manufacture. The quoted passage from the said
decision of the Supreme Court is as under:


            "The word `production' has a wider connotation than the word
            `manufacture'. While every manufacture can be characterized
            as production, every production need not amount to
            manufacture........

            The word `production' or `produce' when used in
            juxtaposition with the word `manufacture' takes in bringing
            into existence new goods by a process which may or may not
            amount to manufacture. It also takes in all the by-products,
            intermediate products and residual products which emerge in
            the course of manufacture of goods".


54.      The expression used in Section 80-I(2)(iii) of the Act is much wider and,
thus, would take in its sweep any article that may be manufactured or produced.
The house of lords in the case of Long Hurst v. Gild Ford Godalming &
District, Wider Board: [1961] 3 AIIER 545 had held that water in filter beds is
an article. The Court in that case was considering the definition of factory which
was defined to mean "any premises in which, or within the close or curtilage or
precincts of which, persons are employed in manual labour in any process for or
incidental to any of the following purposes, namely: (a) the making of any
article or of part of any article; or (b) the altering, repairing, ornamenting,
finishing, cleaning, or washing, or the breaking-up or demolition of any article;
or (c) the adapting for sale of any article; being premises in which, or within the
close or curtilage or precincts of which, the work is carried on by way of trade
or for purposes of gain and to or over which the employer of the persons
employed therein has the right of access or control".



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 29 of 45
55.      The Shorter Oxford English Dictionary defines `article' to mean "A
particular material thing (of a specified class); a commodity; a piece of goods or
property". The meaning of the word "thing" is wider and the meanings ascribed
to the word "thing" by the shorter Oxford English Dictionary includes "an
inanimate material object", "a material substance", "That which one possesses:
property, wealth".


56.      It is apparent that the expression "article or thing" is extremely wide. The
question thus arises is whether the printed paper which is produced in Unit Nos.2
& 3 falls within the sweep of the expression 'article' or 'thing'. We are unable to
think of any reason to exclude the printed paper produced by the assessee in Unit
Nos.2 & 3 from the ambit of the expression `article' or `thing'. The language of
Section 80-I (2)(iii) of the Act, thus clearly, indicates that Unit Nos.2 & 3 do
"manufacture or produce an article or thing".


57.      The Supreme Court in the case of Commissioner of Income Tax v. SESA
Goa Limited: (2004) 271 ITR 331 (SC) considered the question whether
extraction and processing of iron ore amounted to manufacture or not in the
context of availability of investment allowance under section 32(A) of the Act in
respect of machinery used in the mining activity. In that case, revenue contended
that processing of iron ore did not produce any new product and thus the benefit
of Section 32(A) of the Act was not available to the assessee. As per section
32(A)(2)(b)(iii) of the Act, deduction on account of investment allowance is
available to the assessee in respect of a plant owned by the assessee which is
wholly used for the purpose of assessee's business in an industrial undertaking
for the purposes of the business of "construction or manufacture or production of
any article or thing". The Supreme Court noted that the meaning of the word
production was defined only in the Oxford English Dictionary as "amongst other




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005             Page 30 of 45
things that which is produced; a thing that results from any action, process or
effort, a product; a product of human activity or effort" and this definition has
been accepted by the Supreme Court in an earlier decision in the case of
Chrestian Mica Industries Ltd. v. State of Bihar: [1961] 12 STC 150. The
Court further held that the definition of the word `production' was wide enough
to include the production of mineral ores and ores would fall within the
expression "a thing". Having held that the word "production" was much wider
than manufacture, the Supreme Court felt that it was not necessary to examine
the question whether the mined ore was commercially a new product. In the
present context also, although we have held that in the facts of this case
producing printed paper does amount to manufacture as a new article or a thing
known to market comes into existence. It is not necessary that an industrial
undertaking must manufacture a commercially new product in order to fulfill the
condition as specified in Section 80-I(2)(iii) of the Act. Since, in any event
production of any article or thing by an industrial undertaking would be
sufficient to entitle the industrial undertaking to claim that the condition under
Section 80-I(2)(iii) of the Act was fulfilled. Indisputably, printed paper falls
within the meaning of the expression "an article or thing" and whether the same
is marketable as new product is not relevant. The Supreme Court has also held in
the case of N. C. Budharaja & Co. (supra) that by products, intermediate
products and residual products that emerge in the case of manufacture are also to
be included in the word `production' or `produce'. Thus, even if the printed
material as produced by Unit Nos.2 & 3 is taken as an intermediate product
which requires to be further bound for making it marketable, the word produce
occurring in Section 80-I(2)(iii) of the Act would include it within its ambit.


58.      The decision of the Supreme Court in the case of N. C. Budharaja & Co.
(supra) and Sesa Goa Limited (supra) have been followed by the Supreme Court



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 31 of 45
in the later decision of India Cine Agencies v. Commissioner of Income Tax:
(2009) 308 ITR 98. In this case the Supreme Court accepted that the meaning of
the word "production" or "produce" was wide enough to include conversion of
jumbo rolls of photographic films into small flats and rolls in the desired sizes
and held that the benefits of section 80-I of the Act would be available in respect
of an industrial undertaking engaged in such activity.


59.      We, accordingly, reject the contention of the revenue that Unit Nos.2 & 3
fail to fulfill the conditions as specified in Section 80-I(2)(iii) of the Act.


60.      The next issue which has been raised on behalf of the revenue is that the
benefit of Section 80-I of the Act should be denied to the assessee as Unit Nos.2
& 3 have been formed by splitting up of the business of the assessee and thus,
the condition under Section 80-I(2)(i) of the Act has not been met.


61.      The contention that Unit Nos.2 & 3 do not qualify the condition under
Section 80-I(2)(i) of the Act has not been urged before any of the authorities and
has been argued for the first time before us. However, we find that before the
CIT (Appeals) and the Tribunal it was urged on behalf of the revenue that Unit
Nos.2 & 3 were not independent Units and were functioning cohesively with the
Unit No. 1 as the raw material of paper was procured by Unit No.1 which was
given on job work to Unit Nos.2 & 3 for carrying on the printing activity. The
other activities were carried on by Unit No.1 and the binding of periodicals was
outsourced to another concern. On the basis of this it was contended on behalf
of the revenue that Unit Nos.2 & 3 could not be considered as industrial
undertakings on account of the interdependence on Unit No.1.


62.      Mr Sahni has cited the decision of this Court in the case of Commissioner
of Income Tax v. Hindustan General Industries Limited: [1982] 137 ITR 0851



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                Page 32 of 45
and drawn our attention to the following passage from the said judgment in
support of his contention that since Unit No.1 also carried out printing activity
and Unit Nos.2 & 3 also carrying on same activity for Unit No.1, the duly
established industrial undertaking failed the condition as specified under Section
80-I(2)(i) of the Act:-


          "This leaves us with the question as to whether the new
          undertaking can be said to have been formed by splitting up or the
          reconstruction of a busi-ness already in existence. We do not think
          that the present case comes within the words, "splitting up of the
          business already in existence." This expression indicates a case
          where the integrity of a business earlier in existence is broken up
          and different sections of the activities previously conducted are
          carried on independently. In the present case, there is no finding
          that the Unity and integrity of the business or undertaking which
          had been established at Qutab Road factory suffered in any
          manner as a result of the establishment of the new Unit."

63.      We are unable to accept the contention as raised on behalf of the revenue
that there is no material to indicate that the integrity of the business carried out
by Unit No.1 or the integrity of Unit had been broken in any manner.
Admittedly, Unit No.1 continues to function and carry on the business even after
Unit Nos.2 & 3 were established. As stated earlier, it is not disputed that Unit
Nos.2 & 3 were established in addition to the existing Unit and were not formed
by transfer of any asset from Unit No.1. Unit Nos.2 & 3 contained highly
sophisticated machines capable of carrying on printing at enormous speeds. This
facility of high speed printing of the quality and the kind of which Unit Nos.2 &
3 are capable of were not available in Unit No.1. Unit No. 1was mainly engaged
in publication and also carried on the job of composing, processing and printing
of sheet fed presses. Merely, because the activity of printing was carried on by
Unit No.1 also and the Unit No.1 was utilising the capabilities of Unit Nos.2 & 3
by getting job work done from them does not lead to the conclusion that Unit



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 33 of 45
Nos.2 & 3 had been formed by splitting of the business of Unit No.1. The test
whether industrial undertaking fulfills the condition as imposed under Section
80-I(2)(i)of the Act is not whether some part of the business of an assessee is
carried on by the newly established undertaking but whether the newly
established undertakings are formed by splitting up or reconstruction of the
business of the existing Unit.


64.      In the case of Textile Machinery Corporation Ltd. (supra), the Supreme
Court held that the answer whether a new industrial undertaking was stated to be
formed by splitting up or reconstruction of the existing business would depend
upon the facts of each case. In that case, the Supreme Court was considering the
exemption from tax liabilities as available to an assessee under Section 15C of
the Income Tax Act, 1922. The condition imposed under Section 15C(2)(i) of
the Income Tax Act, 1922 is similar to the language of Section 80-I2(i) of the
Act. The Section 15C of the Income Tax Act, 1922, inter alia, applied to
industrial undertakings which were "not formed by splitting up, or reconstruction
of, business already in existence or by transfer to a new business of building,
machinery of plant previously used in any other business ." In the said case the
Supreme Court has held as under:-


        "There is great scope for expansion of trade and industry. The fact
        that an assessee by establishment of a new industrial undertaking
        expands his existing business, which he certainly does, would not,
        on that score, deprive him of the benefit under Section 15-C. Every
        new creation in business is some kind of expansion and
        advancement. The true test is not whether the new industrial
        undertaking connotes expansion of the existing business of the
        assessee but whether it is all the same a new and identifiable
        undertaking separate and distinct from the existing business. No
        particular decision in one case can lay down an inexorable test to
        determine whether a given case comes under Section 15-C or not.
        In order that the new undertaking can be said to be not formed out



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005          Page 34 of 45
        of the already existing business, there must be a new emergence of
        a physically separate industrial Unit which may exist on its own as
        a viable Unit."

65.      The Supreme Court further held that if the new industrial undertaking
could survive even after cessation of the principal business of the assessee the
same cannot be but new separate industrial undertakings which would qualify for
an appropriate exemption under Section 15C of the Income Tax Act, 1922.
Whether the new industrial undertaking produces the same commodities or
different ones or whether the products of the new industrial undertakings were
consumed by the assessee in the old business was not considered by the Court as
relevant. The essential test that was laid down was whether the new industrial
Unit in the true sense represented industrial undertakings independent from the
existing one inasmuch as they can independently stand and function as separate
Units. The relevant extract from the decision of the Supreme Court in the case of
Textile Machinery Corporation Ltd. (supra) is quoted below:-


                  "Section 15-C partially exempts from tax a new
          industrial Unit which is separate physically from the old one,
          the capital of which and the profits thereon are ascertainable.
          There is no difficulty to hold that Section 15-C is applicable to
          an absolutely new undertaking for the first time started by an
          assessee. The cases which give rise to controversy are those
          where the old business is being carried on by the assessee and a
          new activity is launched by him by establishing new plants and
          machinery by investing substantial funds. The new activity may
          produce the same commodities of the old business or it may
          produce some other distinct marketable products, even
          commodities which may feed the old business. These products
          may be consumed by the assessee in his old business or may be
          sold in the open market. One thing is certain that the new
          under-taking must be an integrated Unit by itself wherein
          articles are produced and at least" a minimum of ten persons
          with the aid of power and a minimum of twenty persons
          without the aid of power have been employed. Such a new



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 35 of 45
          industrially recognisable Unit of an assessee cannot be said to
          be reconstruction of his old business since there is no transfer
          of any assets of the old business to the new undertaking which
          takes place when there is reconstruction of the old business. For
          the purpose of Section 15-C the industrial Unite set up must be
          new in the sense that new plants and machinery are erected for
          producing either the same commodities or some distinct
          commodities."


66.      In the case of Indian Aluminium Co. Ltd. (supra), the Supreme court was
considering the case of an assessee who was engaged in producing aluminum
ingots from ore at four different manufacturing centres. During the relevant
previous year, the assessee established another manufacturing centre at a
different location and further undertook expansion of the existing centres by
setting up additional undertakings at two of the existing centres adjacent to the
existing Units. The Supreme Court upheld the decision of the Tribunal in
allowing the benefit of section 15C of the Income Tax Act, 1922 by applying
their decision in the case of Textile Machinery Corporation Ltd. (supra). Thus,
even in cases where an assessee augments its capacities by establishing new
industrial undertakings to carry on the same business, the benefit of section 80-I
of the Act would be available to the assessee in respect of the newly established
undertakings.


67.      Keeping in view the ratio of the aforementioned, we are unable to find
any material from the records to support the contention that Unit Nos.2 & 3 have
been formed by splitting up of the business of the assessee and thus, the
condition under Section 80-I(2)(i) of the Act has not been met. It is recorded in
the assessment order that the assessee had explained that Unit No.1 (for which
deduction under Section 80-I of the Act has not been claimed) is "primarily
engaged in publishing of magazines/newspapers as well as in printing on sheet




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005            Page 36 of 45
fed presses, composing and processing". Admittedly, the activities being carried
on by the assessee in Unit No.1 have not been discontinued and the Unit Nos.2
& 3 were established in addition to Unit No.1. It has been admitted before us that
neither any machinery nor any equipment were transferred from Unit No. 1 to
Unit Nos.2 & 3.


68.      In order to qualify under Section 80-I(2)(i) of the Act, the newly
established industrial undertaking should not be formed by splitting, or
reconstruction of a business already in existence. The key word in the condition
imposed under section 80-I(2)(i) of the Act is "formed". Thus, what is to be
considered is whether formation of new industrial undertaking was a result of
splitting up of business. We are unable to agree that a new undertaking would be
disqualified under section 80-I(2)(i) of the Act simply for the reason that the
activity carried on in a new undertaking was of a similar nature to one of the
activities being carried on in the existing undertaking even though the new
industrial undertaking is established in addition to the existing one without
transfer of any assets to the newly formed undertaking. In our view, the test to
be applied is whether the new undertaking has been formed as an undertaking
independent of the existing undertaking and is capable of carrying on its activity
independent of the existing Unit. In this regard, we agree with the view taken by
the Tribunal that the test of whether Unit Nos.2 & 3 were independent
undertakings or not is not to be adjudged on the basis whether the said Units
were carrying on printing work for Unit No.1 but whether the Units were capable
of independently carrying on the business for which they were formed. The
assessee had contended that whereas Unit No.1 was publishing house Unit Nos.2
& 3 were printing houses and the work of printing carried out by through high
speed printing machines was a business which could be carried out independent
of Unit No.1. The assessee had also been given examples of entities who were



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005          Page 37 of 45
engaged in carrying on the printing activity on a standalone basis and were not
involved in publication. Indisputably, printing activity can be carried out by an
entity for any person who may have a requirement for the same and it is not
necessary that every person who engages in the business of printing should
necessarily also be involved in publishing. In view of the same, we are not
inclined to entertain the contention raised on behalf of the revenue that Unit
Nos.2 & 3 fail to fulfill the condition under Section 80-I(2)(i) of the Act.


69.      The next controversy that needs to be addressed is whether it was open for
the Assessing Officer to deny the benefit of Section 80-I of the Act to the
assessee having allowed benefit to the assessee in the preceding three years. It is
contended on behalf of the assessee that it was necessary for the Assessing
Officer to be consistent with the assessment for the earlier years. The question as
to the qualification of Unit Nos. 2 & 3 as industrial undertakings arose in the
earlier years and the Assessing Officer had accepted that Unit Nos.2 & 3
qualified for a deduction under Section 80-I of the Act in the earlier years. By
virtue of section 80-I(5) of the Act deduction under section 80-I of the Act was
available to an assessee in the assessment year relevant to the previous year in
which the industrial undertaking begins to manufacture or produce articles or
things (such assessment year being the initial assessment year) and each of the
seven assessment years immediately succeeding the initial assessment year. This
necessarily implied once the issue as to eligibility under section 80-I of the Act
was examined and allowed in the initial assessment, the same was allowable in
the subsequent years also unless there was any material change in the succeeding
years.


70.      It is well settled law that the principles of res judicata do not apply to
income tax proceedings and assessment for each year is an independent




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005             Page 38 of 45
proceeding. It is now equally well established that issues that have been settled
and accepted over a period of time should not be revisited in subsequent
assessment years in absence of any material change which would justify the
change in view.


71.      The Supreme Court in the case of Radhasoami Satsang (supra) has held
that unless there is a material change in justifying the revenue to take a different
view the earlier view which has been settled and accepted of a several years
should not be disturbed. The relevant extract from the said judgment is quoted
below:-


                 "We are aware of the fact that strictly speaking res judicata
              does not apply to income-tax proceedings. Again, each
              assessment year being a Unit, what is decided in one year may
              not apply in the following year but where a fundamental aspect
              permeating through the different assessment years has been
              found as a fact one way or the other and parties have allowed
              that position to be sustained by not challenging the order, it
              would not be at all appropriate to allow the position to be
              changed in a subsequent year.

                  On these reasonings in the absence of any material change
              justifying the Revenue to take a different view of the matter- and
              if there was not change it was in support of the assessee- we do
              not think the question should have been reopened and contrary to
              what had been decided by the Commissioner of Income-Tax in
              the earlier proceedings, a different and contradictory stand
              should have been taken. We are, therefore, of the view that these
              appeals should be allowed and the question should be answered
              in the affirmative, namely, that the Tribunal was justified in
              holding that the income derived by the Radhasoami Satsang was
              entitled to exemption under ss. 11 and 12 of the Income Tax Act
              of 1961."

72.      The decision of the Supreme Court in the case Radhasoami Satsang
(supra) was on the facts where the question as to the entitlement for exemption



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005             Page 39 of 45
under Section 4(3)(i) of the Income Tax Act, 1922 had not been granted for the
assessment year 1939-40. The assessee had challenged the assessment order
which was accepted by the Appellate Assistant Commissioner who upheld the
assessee's claim for exemption. This view was consistently followed by the
successive Assessing Officers till 1963-64. In these circumstances, the Supreme
Court held that the view that had been settled and accepted over a period of years
should not be allowed to be disturbed.


73.      This court in the case of CIT v. Lagan Kala Upvan (supra), following the
decision of the Supreme Court in the case of Radhasoami Satsang (supra) has
also held that where a particular view has been accepted by the Assessing Officer
to several years the same cannot be permitted to be departed from unless there is
some material facts that justified such a change. Similar view has been expressed
by this court in the case of Modi Industries Limited (supra). In this case, while
considering a claim of deduction made by an assessee under section 80J of the
Act, this High Court held as under:-


                "The second question relates to the claim of the assessee
            for deduction under Section 80J of the Income Tax Act in
            respect of its new unit namely 10 ton Furnance Division and
            Steel Unit 'B'. This case pertains to the assessment year 1976-
            77. A perusal of the order of the Assessing Officer would
            reveal that for the first time, claim under Section 80J of the
            Act was made by the assessee in the assessment year 1973-74.
            The assessee was denied that claim by the Assessing Officer.
            For this reason, the Assessing Officer denied the claim in this
            assessment year as well, taking note of the fact that the matter
            pertaining to 1973-74 was pending before the Income Tax
            Tribunal.

                It is a matter of record that the appeal filed by the
            assessee for the assessment year 1973-74 was allowed by the
            Income Tax Appellate Tribunal. The effect thereof was that



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005             Page 40 of 45
            the assessee was granted the requisite deduction under Section
            80J of the Act for the assessment year 1973-74. The
            Department has sought reference under Section 256(1) of the
            Act which reference application was also rejected by the
            Tribunal. Likewise, for the assessment years 1974-75 and
            1975-76, the claims of the assessee were allowed. The
            assessee, once given the deduction under Section 80J of the
            Act is entitled to such a deduction for a period of 5 years. If
            the assessee has been allowed the benefit of Section 80J in the
            last three preceding years, there is no reason to deny the same
            for the instant assessment year. We, therefore, answer this
            issue also in favour of the assessee and against the revenue."

74.      In the present case, the claim of the assessee under section 80-I of the Act
was examined and allowed by the Assessing officer for three years preceding the
assessment year 1991-1992. It is relevant to note that assessments in the earlier
years i.e relating to assessment years 1988-89, 1989-1990 and 1990-1991 has not
been disturbed by the Assessing Officer and there has been no change that could
justify the Assessing officer adopting a different view in the assessment years
1991-92 and thereafter. As stated hereinbefore, in certain cases where the issues
involved have attained finality on account of the subject matter of dispute having
been finally adjudicated, the question of reopening and revisiting the same issue
again in subsequent years would not arise. This is based on the principle that
there should be finality in all legal proceedings. The Supreme Court in the case
of Parashuram Pottery Works Co. Ltd. v. ITO: [1977] 106 ITR 1 had held as
under:-


          "that the policy of law is that there must be a point of finality in
          all legal proceedings, that stale issues should not be reactivated
          beyond a particular stage and that lapse of time must induce
          repose in and set at rest judicial and quasi-judicial controversies
          as it must in other spheres of human activity."

75.      In the facts of the present case, where although the Assessing officer has



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005              Page 41 of 45
allowed the assessee deduction under section 80-I of the Act in the preceding
years, one may still have certain reservations as to whether the issue of eligibility
of Unit nos. 2 and 3 fulfilling the conditions has been finally settled, since the
question has not been a subject matter of any appellate proceedings in the years
preceding the assessment year 1991-92. However, there is yet another aspect
which needs to be considered. By virtue of section 80-I(5) of the Act, deduction
under section 80-I of the Act is available to an assessee in respect of the
assessment year (referred to as the initial assessment year) relevant to the
previous year in which the industrial undertaking begins to manufacture or
produce articles or things, or to operate its cold storage plant or plants or the ship
is first brought into use or the business of the hotel starts functioning or the
company commences work by way of repairs to ocean-going vessels or other
powered craft. Such deduction is also available for the seven assessment years
immediately succeeding the initial assessment year. Surely in cases where an
assessee is held to be eligible for deduction in the initial assessment year, the
same cannot be denied in the subsequent assessment years on the ground of
ineligibility since the set of facts which enable an assessee to claim to be eligible
for deduction under section 80-I of the Act occur in the previous year relevant to
the initial assessment year and have to be examined in the initial assessment
year. In such cases, where the facts on the basis of which the deductions are
claimed are subject matter of an earlier assessment year and do not arise in the
current assessment year, it would not be possible for an Assessing Officer to take
a different view in the current assessment year without altering or reopening the
assessment proceedings in which the eligibility to claim the deduction has been
established.


76.      In cases where deduction is granted under Section 80-I of the Act, the
applicability of the Section is determined in the year in which the new industrial



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005              Page 42 of 45
undertaking is established. The qualification as to whether any industrial
undertaking fulfills the condition as specified under Section 80-I of the Act has
to be determined in the year in which the new industrial undertaking is
established. Although the deduction under Section 80-I of the Act is available for
the assessment years succeeding the initial assessment year, the conditions for
availing the benefit are inextricably linked with the previous year relevant to the
assessment year in which the new undertaking was formed. In such
circumstances, it would not be possible for an Assessing Officer to reject the
claim of an assessee for deduction under Section 80-I of the Act on the ground
that the industrial undertaking in respect of which deduction is claimed did not
fulfill the conditions as specified in Section 80-I(2) of the Act, without
undermining the basis on which the deduction was granted to the assessee in the
initial assessment year. This in our view would not be permissible unless the past
assessments are also disturbed.


77.      The Assessing Officers over a period of three years being assessment
years 1988-89, 1989-1990 and 1990-1991 have consistently accepted the claim
of the assessee for deduction under 80-I of the Act and it would not be open for
the Assessing Officer to deny the deduction under Section 80-I of the Act on the
ground of non fulfillment of the conditions under 80-I(2) of the Act without
disturbing the assessment for the assessment years relevant to the previous year
in which the Unit Nos.2 & 3 were established.


78.      This view has also been accepted by a Division Bench of Gujarat High
Court in the case of Saurashtra Cement & Chemical Industries (supra). In that
case, the Gujarat High Court held that where relief of a tax holiday had been
granted to an assessee in an initial assessment year in which the conditions for
grant of tax holiday had to be examined, denial of relief in the subsequent years




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005           Page 43 of 45
would not be permissible without disturbing the assessment in the initial
assessment year. The relevant extract from the decision of the Gujarat High
Court in Saurashtra Cement & Chemical Industries (supra) is quoted below:-


        "The next question to which the Tribunal addressed itself, and no
        our opinion rightly, was whether the Tribunal was justified in
        refusing to continue the relief of tax holiday granted to the
        assessee-company for the assessment year 1968-69, in the
        assessment year under reference, that is, 1969-70, without
        disturbing the relief granted for the initial year. It should be stated
        that there is no provision in the scheme of s. 80J similar to the one
        which we find in the case of development rebate which could be
        withdrawn in subsequent years for breach of certain conditions. No
        doubt, the relief of tax holiday under s. 80J can be withheld or
        discontinued provided the relief granted in the initial year of
        assessment is disturbed or changed on valid grounds. But without
        disturbing the relief granted in the initial year, the ITO cannot
        examine the question again and decide to withhold or withdraw the
        relief which has been already once granted."



79.      The Division Bench of the Bombay High Court in the case of Paul
Brothers (supra) has also adopted the view expressed by the Gujarat High Court
in the case of Saurashtra Cement & Chemical Industries (supra).


80.      Following the aforesaid decisions, we hold that in facts of the present case
Unit Nos. 2 & 3 cannot be stated to have been formed by splitting up or in
reconstruction of existing business.


81.      For the reasons stated above, we answer the first question referred in ITR
Nos.49-50/1996 in the negative and against the revenue. The second question in
ITR Nos.49-50/1996 as well as the questions framed in ITA Nos.151/2002,
480/2005 and 302/2004 are answered in the affirmative and in favour of the
assessee. ITR Nos.49-50/1996 are disposed of as above and the appeals preferred



ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005              Page 44 of 45
on behalf of the revenue in ITA Nos.151/2002, 302/2004 and 480/2005 are
dismissed. No order as to costs.




                                                              VIBHU BAKHRU, J




                                                              BADAR DURREZ AHMED, J

MAY 31, 2013
MK/RK




ITR Nos. 49-50/1996, ITA Nos. 151/2002, 302/2002 & 480/2005                Page 45 of 45
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
System Testing Solution Manual Software Testing Solutions Automation Software Testing Solutions System Workflow Testing System Manual Testing

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions