Abb Limited v. Iv.the Tribunal Grossly

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO.691 OF 2008 ABB Limited ..Appellants Vs. The Commissioner of IncomeTax Bangalore and Anr.Mr.Pardiwalla, Senior Advocate a/w.Ms.Vasanti B.Patelfor the Appellants.Mr.B.M.Chatterji a/w.Mrs.Anamika Malhotra for theRespondents. ..Respondents CORAM :- DR.S.RADHAKRISHNAN &S.J.KATHAWALLA,JJ.DATE : 4TH AUGUST,2008 P.C. .Heard the learned Counsel for the parties. Inthe above Appeal, Mr.Pardiwalla, the learned SeniorCounsel appearing for the Appellant is seeking toraise the following four substantial questions of law;i. The Tribunal was correct in holding thatthe Appellant’s Anta project did notconstitute a new industrial undertaking withinthe meaning of Section 80-I of the Act?ii. The Tribunal’s observation that theAppellant had failed to establish on recordthat it had established a separaterecognizable new industrial unit is perverseas being wholly contrary to the facts andmaterials brought on record ?iii. The Tribunal’s observation that theRevenue authorities had recorded a finding offact that already existing machineries hadbeen used by the Appellant in carrying out itsproject and that contrary to this finding offact except arguments, nothing was brought toits notice from the Appellant’s side isequally perverse in the face of the materialplaced before the Tribunal ? iv.The Tribunal grossly distinguishing the ruling of the Tribunal inthe case of Degremont India Ltd. reported in59 ITD 423 on wholly extraneous groundswhereas that was also a similar case ofsetting up an effluent treatment plant for acustomer being construed as an new industrialunit? 2. We have perused the judgment and order of the Income Tax Appellate Tribunal dated 25th September,2006 in the above. The Tribunal has clearly held asunder in paragraph Nos.63 to 65: 63. We have duly considered the rivalcontentions and gone through the recordcarefully. We are conscious of the fact thatthe provisions of section 80-I are intended toencourage the setting up of new industrialenterprise which can generate more employment.Thus we do not have dispute with theproposition of ld.Counsel for the assesseethat being incentive provision should beconstrued liberally while applying on theclaim of assessee. Let us see, how the factsbrought on record do exhibit the admissibilityor denial of the Assessee’s claim. Deductionunder Section 80-I us is available to anassessee whose gross total income includes anyprofits and gain derived from an industrialundertaking which fulfil all the conditionslaid down in that behalf in sub-section (2) ofsection 80-I. Thus for appreciating thecontroversy it is necessary to take note ofall those conditions which an industrialundertaking must fulfil before claiming thededuction. Such conditions read as under: (iii) It manufactures or produces any articleor thing not being any article or thingspecified in the list in the Eleventh Scheduleto 1961 Act. (iv) In a case where industrial undertaking (iii) It manufactures or produces any articleor thing not being any article or thingspecified in the list in the Eleventh Scheduleto 1961 Act. (iv) In a case where industrial undertaking manufactures or produces articles or things,the undertaking employ 10 or more workers in amanufacturing process carried on with the aidof power or employs 20 or more workers in amanufacturing process carried on without theaid of power."In the light of above conditions we have gonethrough the facts brought on the record andthe finding of the revenue authorities belowon that facts. That Section 80-I pre-supposesthat there should a separately identifiablenew industrial undertaking. The assesseefailed to establish on the record that it hadestablished a separate recognizable newindustrial unit. The alleged Anta Project isonly separate contract entered into by theassessee with NTPC to supply and installcertain material/machinery in collaboration ofWest German Company as per the specificationof NTPC. The assessee also accepted that ithas entered into numerous such contracts inthe course of its existing business and thatexecution of project is thus an integral partof the already established business of theassessee. If the assessee was already havingsuch contracts in the course of its existingbusiness and it is executing such contractduring the course of its regular business thenhow the set up of Anta Project which is infurtherance of execution of one its numerouscontracts can be held as setting up of a newindustrial undertaking as contemplated bysection 80-I of the Act.64. During the course of arguments ld.Counselfor the assessee pointed out that forrejecting the assessee’s claim ld.Commissioner has recorded a finding thatassessee has not advanced any argumentsexhibiting its stand that Anta Project is notformed by the transfer of the machineries orplant previously used for this purpose by theassessee in its business. In this connectionhe invited our attention towards para-3 of thenote filed in support of its claim andsubmitted that assessee has purchased newplant and machinery and also recruitedskilled, semiskilled and unskilled employees.We do not find force in this contention of theassessee because both the revenue authoritieshave recorded a finding of fact that alreadyexisting machineries have been used by theassessee in carrying out this project.Contrary to this finding of fact except thisarguments nothing was brought to our notice.It has been established by the A.O. that forexecution of the project in question the assessee company has utilized the assets i.e.Plant and Machinery, technical and nontechnical staff and capital available with it.No doubt on account of increase in the volumeof work assessee might have engaged fewskilled or unskilled labourers as pointed outby ld.D.R. that, that does not indicate thesetting up of new unit at all.65. That as far the decision of ITAT renderedin the case of Degremont India Ltd. (supra)we find that deduction under Section 80 wasdenied in that case on the basis that assesseeis not engaged in manufacturing activity. TheTribunal on re-appreciation of the facts andcircumstances has held that assessee isengaged in the manufacturing activity. Inthat connection, the Tribunal has high lightedthe various steps taken right from designingto erection of Effluent Treatment Plant.These steps have been taken note of at Page458 to 460 of the report. Thus it is adecision on the peculiar facts of that case.The assessee could not draw much support fromthis decision. From the arguments of theassessee we do not find differences betweenits undertaking i.e. alleged Industrial unitvis-a-vis its product. According to theassessee the Anta Project is finished productproduced by it and simultaneously it is itsunit also. We are of the view that theassessee has just erected a Gas based CyclePower Plant, which is part of its mainactivity. The main concern is not entitledfor deduction under section 80-I. Thus takinginto consideration the reasonings assigned bythe ld. revenue authorities we do not findany merit in this ground of appeal, it isrejected.3.In view of the aforesaid categorical findingsof fact, there is no substantial questions of law involved in the above. The Appeal is totally devoid of merit, hence the same stands dismissed. (S.J.KATHAWALLA,J.) (DR.S.RADHAKRISHNAN,J.)