COMMISSIONER OF INCOME TAX Vs. MAHAAN FOODS LTD

JUDGEMENT

(1.) BY way of this common judgment, all the above five appeals are being disposed of since the common question of law is involved in all these case.

(2.) BRIEF facts leading to dispute are that the Assessee is engaged in the business of manufacturing of dairy whitener and skimmed milk powder. The Assessee claimed deduction under Section 80 -IA of the Income Tax Act, 1961 (for short as ,,Act) from assessment year 1995 -96 onwards. The Assessees claim of deduction was initially not objected to for the assessment year 1995 -96 as no scrutiny assessment under Section 143(3) of the Act was made and only processing of the return of income was done under Section 143(1)(a) of the Act. During the course of the assessment proceedings under Section 143(3) of the Act for assessment year 1996 -97, the Assessing Officer asked the Assessee to justify its claim of deduction under Section 80 -IA of the Act. The Assessee submitted that during the period relevant to assessment year 1995 -96 and thereafter he had set up a new project with the state of art technology for multiplying the production capacity and enhancing the product quality. The new technology was aimed at improving the productivity, operational efficiency, saving in energy cost and significant improvement in the product quality. As a result, the output increased substantially and there was a better product mix with more value added products. The Assessee stated that for this purpose it had entered into arrangements for acquiring new technology know -how as well as plant and machinery from M/s Rotacom Industries BV, Netherlands and M/s Seppo Ralli OY, Finland, who were the pioneer in providing technology for dryer and evaporators, which were main process equipments in the manufacture of dairy whitener and milk As a result, on 31st December, 1994 the powder. Assessees plant and machinery was of the value of Rs.125.74 lacs as against the old plant and machinery of Rs.20.86 lacs. Thus, old plant and machinery was less than 20% permissible under provisions of Section 80 -IA of the Act.

(3.) THE Assessing Officer held that the Assessee was engaged in the production of dairy whitener and milk powder. Prior to 1st January, 1995 also the Assessee was manufacturing the same products. All that the Assessee had done was to undertake a modernization -cum -expansion programme of the existing undertaking. For this, the Assessing Officer relied upon the extract from the Directors report for the year 1993 -94. It was further held by the Assessing Officer that no separate and independent industrial unit came into existence and it was only absorption of the old business and so -called new industrial undertaking was nothing but modernization of the existing unit and as such the Assessees case was hit by the provisions of Section 80 -IA(2)(i) of the Act. The Assessing Officer, therefore, disallowed the claim of the Assessee under Section 80IA of the Act.