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In the circumstances, it was obvious that the assessee was engaged in the business of manufacture of sugar and tea machinery and was accordingly qualified for relief u/s 80-I".

ITA Nos. 541 & 558 of 2005 Nirma Ltd. Vs ACIT, Central Cir.-1(1), Ahd For A.Y. 2001-02

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He also relied on the decision of the Delhi Bench of the Tribunal in the case of Claas India Limited Vs. ACIT (2008) 21 SOT 580 (Delhi) wherein it was held that "Sub-section (2) of section 80IB provides certain conditions to be fulfilled by an industrial undertaking to claim deduction u/s 80IB. Admittedly, these conditions were fulfilled, in the instant case, in respect of manufacture and sale of harvester combine and the deduction had been granted. Sub-section (3) of section 80IB provides that amount of deduction in the case of an industrial undertaking shall be 25% of the profits and gains derived from such industrial undertaking. Therefore, the question for consideration arose as to whether the sale of spare parts and the components was due to the same being manufactured by the assessee or was simply a trading transaction so as to be excluded from reckoning for computing deduction as profits derived from such industrial undertaking. The assessee had supplied documents to suggest as to in respect of sale of various items of these spare parts and components of the further processes were being applied so as to finish the production process and to make it marketable. What were the various manufacturing processes to be applied to the various outsourced material, were filed in the form of instruction sheet being given by the management to the shop floor workers. Thus it was incorrect to say that the sale of spares/components was merely trading of goods and not sale of the goods manufactured by the assessee. Though the assessee might be outsourcing some of the spare parts by getting them manufactured, elsewhere after receiving the same, the assessee was applying further process so as to render them marketable as per the required standard. Thus, though various processes were being applied, the same was mistakenly treated as sale of trading goods and not of goods manufactured by the assessee. In the instant case, the lower authorities had explicitly accepted the position that the assessee was an industrial undertaking and fulfilled the 3 conditions contained in section 80IB(2) for deduction u/s 80IB. Once, the lower authorities accepted the fact that the industrial undertaking of the assessee manufactured or produced harvester combines, there was no justification of rational basis for denying deduction for manufacture or production of intermediate products like spare parts components or sub-assemblies. Admittedly, these spare parts were either produced by carrying out the various processes inside the factory or these were caused to be produced on the basis of drawings, designs and specifications supplied by the undertaking to the outside fabricators and after receipt of such components, the undertaking carried out further processes like painting, welding, salt hardening, tempering etc. on such components. The activity of manufacturing the components is thus an integral part of the activity of the industrial undertaking and there is no justification whatsoever to say that components are merely subjected o trading activity of the assessee. Spares and components are unquestionably the goods of the undertaking. These are being manufactured on the basis of the imported technology which is a capital asset of the industrial undertaking. The undertaking had adopted the technology and modified the designs and drawings so as to suit the Indian conditions. The drawing, designs and specifications, prepared by the industrial undertaking formed the very basis for production or manufacturing of the components. These components were either produced inside the factory or they were fabricated from outside under supervision and control of the industrial ITA Nos. 541 & 558 of 2005 Nirma Ltd. Vs ACIT, Central Cir.-1(1), Ahd For A.Y. 2001-02