JUDGMENT : Girish Chandra Gupta, J. The subject matter of challenge in the appeal is a judgment and order dated 11th August, 2005 passed by the learned Income-tax Appellate Tribunal “B” Bench, Kolkata disposing of three several appeals preferred by the revenue challenging orders passed for three several assessment years, viz. the assessment years 1995-96, 1996-97 and 1997-98. All the three appeals were disposed of by the learned Tribunal by a common judgment. The admitted facts and circumstances of the case are as follows:- On 27th September, 1988, the assessee purchased a water treatment chemical plant at Rishra from Indian Explosive Limited at a sum of Rs.54.55 lakhs. The assessee also purchased new machinery worth Rs.18.69 lakhs and commenced the water treatment plant at Rishra and continued operation thereof during the accounting year 1988-89 corresponding to assessment year 1989-90. In the next financial year, that is to say, in the year 1989-90 corresponding to assessment year 1990-91, the assessee installed a plant at Konnagar at a cost of Rs.6.78 crores. The plant at Rishra was dismantled and the machinery worth Rs.73.24 lakhs were shifted to Konnagar plant. The question arose whether the assessee was entitled to the benefit under section 80I of the Income-tax Act. The Assessing Officer initially allowed deduction under section 80I but he subsequently reopened the proceeding under section 147 and withdrew the benefit. In an appeal preferred by the assessee, the CIT restored the benefit to the assessee. In an appeal preferred by the revenue, the learned Tribunal has set aside the order of the CIT holding that the assessee is not entitled to deduction under section 80I for the following reasons:- “The initial year for new industrial undertaking is the assessment year 1989-90 only and since the machinery which was used was old and more than 20% of the total plant & machinery, it clearly violates one of the conditions which is required to be fulfilled to be entitled for deduction u/s.80I. Accordingly, we hold that the assessee is not entitled for deduction u/s.80I in any of the three assessment years 1995-96, 1996-97 and 1997-98.” Therefore, the assessee has come up in appeal. Accordingly, we hold that the assessee is not entitled for deduction u/s.80I in any of the three assessment years 1995-96, 1996-97 and 1997-98.” Therefore, the assessee has come up in appeal. The following question of law has been formulated by consent of the parties after hearing them: “Is the deduction under section 80I in the subsequent years dependent upon the initial year of production which, according to the learned Tribunal, in this case is the assessment year 1989-90?” In order to answer the question, we have to notice sub-section (1) of section 80I which reads as follows:- “(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 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 20% 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 “20%” the words “25%” had been substituted.” The units to which the section applies are to be found in sub-section (2) which reads as follows:- “(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: Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section:- Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the words “not being any article or thing specified in the list in the Eleventh Schedule” had been omitted. Explanation 1. – for the purposes of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2. – Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purpose of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. Explanation 3. – For the purposes of this sub-section “small scale industrial undertaking” shall have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA.” From clause (ii) of sub-section (2) of section 80I quoted above, it would appear that the industrial undertaking should not have been formed by the transfer to a new business of machinery or plant previously used for any purpose. In the case of the assessee, admittedly, plants worth Rs.73 lakhs approximately used at Rishra were installed in the new plant at Konnanagar. But the rigour of the aforesaid clause has been relaxed by the Explanation-II quoted above which provides that total value of the machinery or the plant so transferred should not exceed 20% of the total value of the machinery or the plant. Admittedly, in this case, the total value of the plant installed at Konnagar was more than Rs.6 crores and therefore the total value of the machinery or the plant which was transferred from Rishra to Konnagar being Rs.73 lakhs was less than 20%. Admittedly, in this case, the total value of the plant installed at Konnagar was more than Rs.6 crores and therefore the total value of the machinery or the plant which was transferred from Rishra to Konnagar being Rs.73 lakhs was less than 20%. It has not been contended that any other clause or any other provision of sub-section (2) of section 80I has not been complied with by the assessee. Mr. Agarwal, learned counsel appearing for the revenue, drew our attention to Sub-section (5) which reads as follows:- “(5) The deduction specified in sub-section (i) 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: Provided that in the case of an assessee, being a co-operative society, the provisions of the sub-section shall have effect as if for the words “seven assessment years” the words “nine assessment years” had been submitted: Provided further that in the case of an assessee carrying on the business of repairs to ocean-going vessels or other powered craft, the provisions of the sub-section shall have effect as if for the words “seven assessment years” the words “four assessment years” had been substituted. Provided also that in the case of:- (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants; (ii) a ship which is first brought into use; (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990 but before the 1st day of April, 1991, provisions of the sub-section shall have effect as if for the words “seven assessment years” the words “nine assessment years” had been substituted: Provided also that in the case of an assessee, being a co-operative society, deriving profits, and gains from an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that proviso shall have effect as if for the words “nine assessment years” the words “eleven assessment years” had been substituted.” Mr. Agarwal contended that from a plain reading of sub-section (5)(i) it would appear that unless the assessee qualified for the benefit in the initial year of production, the assessee can have no claim for deduction under section 80I. We are unable to accept this submission. According to us, sub-section 5(i) provides the time limit during which the assessee can enjoy the benefit of deduction. The limit is seven assessment years following the initial assessment year when the assessee became eligible provided the eligibility is retained. The contention that if the assessee did not qualify for the benefit of deduction under section 80I in the initial year of production, he would not be entitled to the benefit in any subsequent years, according to us, is neither backed by authority nor can the aforesaid conclusion be reached by construing the section to which our attention has been drawn by Mr. Agarwal learned Advocate for the revenue which we have quoted above. The assessee in this case is admittedly an industrial undertaking to which section 80I applied once the Konnanagar plant was commissioned and put into production. The finding of the learned Tribunal that the assessee is not entitled to the benefit of deduction from out of the profits made by the Konnanagar plant because the assessee had initially started production at Rishra which did not qualify for deduction under section 80I, in our view, cannot be a disqualifying factor. The view of the learned Tribunal to this extent is, according to us, wrong. The view of the learned Tribunal to this extent is, according to us, wrong. The object of introducing section 80I was to encourage the entrepreneurs to set up industry. If the meaning or interpretation given by Mr. Agarwal is to be accepted, that would mean that an industrial undertaking cannot seek to derive the advantage of section 80I by fulfilling the conditions set out in sub-section (2) of section 80I; whereas the object according to us is that the benefit shall be given to an industrial undertaking which fulfills the conditions set out in sub-section (2). The assessee in this case does fulfill that condition and there is no dispute with regard thereto. Reference can be made to the judgment in the case of Bajaj Tempo Ltd. Vs. Commissioner of Income Tax, reported in (1992) 196 ITR 188 , wherein question arose whether in view of transfer of tools and implements worth Rs.3500/- the assessee fell within the mischief of the following prohibition:- “(I) is not formed by the splitting up, or the reconstruction, of business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business.” Their Lordships after considering various judgments held as follows:- “Use of the negative before the word “formed” further strengthens it. In other words, building, machinery or plant used previously in other business should not result in the undertaking being formed by it. The transfer, to take the new undertaking out of the purview of sub-section (1), must be such that, but for the transfer, the new undertaking could not have come into being.” In the present case, the transfer is less than 20% of the total value of the machinery installed in the Konnagar plant. Therefore the prohibition does not operate against eligibility of the assessee to claim deduction. The Tribunal has erroneously denied the benefit of Section 80I to the assessee on the ground that the Industrial Undertaking of the assessee during the assessment year 1989-90 situate at Rishra was not eligible for the benefit under Section 80I. But that ground, according to us, is no reason to deny the benefit in the subsequent years when the assessee has set up a new plant at a different place and also fulfills all the terms and conditions laid down in sub-section (2) of Section 80I. But that ground, according to us, is no reason to deny the benefit in the subsequent years when the assessee has set up a new plant at a different place and also fulfills all the terms and conditions laid down in sub-section (2) of Section 80I. For the aforesaid reason, the question formulated above is answered in the negative and in favour of the assessee. In the result, the order under challenge is set aside. The appeal is allowed. Since the order under challenge was a common order for three several years as indicated above, three several appeals have been preferred. All the three appeals stand allowed by this order.