M/s. Vinbros & Co., CHENNAI V. DCIT, Pondicherry

CO 152/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8213 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-01-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR ANITA SUMANTH
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 234B; 14A; 80IB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 1581/MDS/2012 ASSESSMENT YEAR : 2009-10 & C.O. NO. 152/MDS/2012 [IN I.T.A. NO. 1581/MDS/2012] THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I, D.P. THOTTAM, MUTHIALPET, PUDUCHERRY 605 003. VS. M/S. VINBROS & CO., NO. 23, ROMAIN ROLLAND STREET, PONDICHERRY 605 010. [PAN: AAAFV0610R] (APPELLANT) (RESPONDENT/ CROSS OBJECTOR) APPELLANT BY : SHRI GURU BASHYAM, JCIT RESPONDENT BY : DR. ANITA SUMANTH, ADVOCATE DATE OF HEARING : 17.01.2013 DATE OF PRONOUNCEMENT : 29.01.2013 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE AND CROSS OBJECTIONS AT THE BEHEST OF THE ASSESSEE, EMANATE FROM THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS) XII, CHENNAI DATED 23.05.2012 IN ITA NO. 326/2011-12 FOR ASSESSMENT YEAR 2009-10. THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE AC T]. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THE APPEAL: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 2 1. THE L EARNED CO MMI S SI O N E R OF INCOME TAX ( APPEALS ) H AS ER R ED I N LAW A ND FACT S OF T H E CASE IN HOLD I N G TH AT T HE ASSESSEE I S E NT I T L ED F O R DE D U C T I O N U / S 8 0L B O F THE I .T . ACT. 2. T H E LE A R NE D CO MMIS S I O NER OF I N COME TA X ( APPE A LS ) HAS E RR ED IN L AW AND F ACTS OF THE CASE I N NOT AP PR E CI ATING THE FACT THAT THE ASSESSEE CLAIMING TO BE A S M A LL SCALE INDUSTRIAL UNDERTAKING HAS TO SATISFY ALL THE COND I TIONS LAID DOWN IN THE IDR ACT FOR BEING CATEGOR I SED AS A SMALL SCALE INDUSTRIAL UNDERTAKING. 3. THE LEARNED COMMISS I ONER OF INCOME TAX ( APPEALS ) HAS ERRED IN LA W AN D F ACTS OF THE CASE IN NOT APP R ECIATING THE FACT THAT THE ASSES SE E COULD NOT BE HEL D TO BE A S M ALL SCALE INDUST R IAL UNDERTAKING UNDE R THE IDR A CT AS I T HAS NOT SAT I SF I E D A L L T HE C ONDITIONS L A I D D O WN F OR IT I N THE IDR A CT . 4. T HE L EARNE D C O MMI SS I O N E R OF INCOME TA X ( APP EA L S ) H AS E RR ED I N L A W A ND FACTS O F T HE CASE I N N O T A P P R EC I AT I NG THE FA C T THA T T H E D ED UCTION U/ S 80 L B I S TO BE A L LOWED TO T HE ASSESSEE ON THE BAS I S OF THE DEC L A RATI ONS MADE BY IT IN FO RM NO.10 CCB FILED BY I T. 5. THE LEARNED COMMISS I ONER OF INCOME TAX ( APPEALS ) HAS ERRED IN LAW AN D FA C T S OF THE CASE IN NOT APPRECIAT I NG THE FACT THAT THE ASSESSEE HAS AVAILED ALL TH E BENEFITS GRANTED BY THE STATE GOVERNMENT TO SMA L L S C A L E INDUSTRIAL UNDE R TAK ING L OCATED I N T HE STATE ON THE BASIS OF ITS CLA I M OF BE ING A SMALL SCALE I N DUSTRIAL UNDE RT A KING . 6. THE L EA RN E D CO MMI SS I O N E R OF I N COME T AX ( A P PEA L S ) H AS E RR ED I N L AW AN D FACTS OF THE CASE IN NOT APP R EC I AT IN G THE FACT THAT AS THE ASSESSEE H AS NOT SATISF IED THE COND IT IONS LAID DOW N IN THE IDR ACT FO R BE I NG A S M ALL SCALE IN DU S TRIAL UNDERTAK I NG , THE I TE M M A N UFACTU R ED BY I T BE I NG COVE R ED BY THE E LEV E N T H SCHEDULE DI SENTIT L ES THE ASSESSEE FROM BEING GRANTED DE DU CTION U/ S 80IB O F THE I.T. ACT. 7 T HE LEARNED COMMISSIONER O F INCOME T AX ( AP PEA LS ) HAS E RRED IN LAW A ND F AC T S OF THE CASE IN N O T APP RECI ATI N G TH E R ATI O O F THE H ON'BLE S UPR EME COURT LA ID DOWN I N 114 STC 7 , 8 ( SC ) . 8 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACTS OF T HE CASE IN NOT APPRECIATING THE RATIO OF THE HON'BL E SUPREME COURT L AID DOWN IN 2 1 7 ITR 746 ( SC ) , 234 ITR 472 (SC) AND 256 ITR 177 ( SC ). I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 3 9. THE LEARNED COMMISSIONER OF I NCOME TAX ( APPEALS ) HAS ERRED IN LAW AN D FACT S O F T H E C ASE I N NOT APP R ECIA T ING THE F ACT THA T THE A CT O F THE ASSE S SEE IN TAKIN G D IFFERENT POSIT I ONS BEFORE DIFFERENT AUTHORITIES HAS RESULTED IN 'UNJUST ENRICHMENT ' TO I T WHICH IS NOT PERMISSIBLE IN LAW . 10 . FO R THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE T I ME OF HEARING , T HE O RD ER OF THE COMM I SSIONER OF INCOME-TAX ( APPEALS ) MAY BE SET ASIDE AND THAT OF T HE ASSESSING OFFICER RESTORED . WHEREAS, ASSESSEES CROSS OBJECTIONS READ AS UNDER: ( I) TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 23.05 . 2012 IS CONTRAR Y TO L AW , FACTS AND CIRCUMSTANCES OF THE CASE AND OPPOSED TO THE PRINCIPLES OF NATURAL JU STICE . ( II ) T HE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN MA KING THE DISALLOWANCE U/S 1 4 A NOTWITHSTANDING THE FACT THAT THE INVESTMENT HAS NOT YIELDED ANY INCOME DURING THE CUR R ENT YEAR . SEC.14A IS ATTRACTED ONLY IN A SITUATION WHERE THE TOTAL INCOME OF AN ASSESS E E INCLUDES INCOME THAT IS EXEMPT . IN SO FAR AS THE INVESTMENT HAS NOT YIELDED ANY I N COME , THERE IS NO EXEMPT INCOME INCLUDED IN THE TOTAL INCOME OF TH E APPELLANT . ACCO R DINGLY , THE PROVISIONS OF SEC.14A WOULD NOT APPLY . ( I I I ) T H E COMM I SSIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE CASE OF DY . CIT VS. JINDA L PHOTO LTD WHICH HELD THAT THE PROVISIONS OF RULE 80 CANNOT BE I NVOKED MECHANICALLY BY THE AUTHORITIES , HENCE THE ADDITION IS LIABLE TO BE CANCELLED . ( IV ) T H E COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REL YING ON THE DECISION OF THE SPE CI AL BENCH OF THE ITAT IN MAKING THE DISALLOWANCE U/S 14A . THE DECISION IS NOT APPLICAB L E TO THE FACTS AND LEGAL POSITION INVOLVED IN THE PRESENT CASE. ( V ) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN A RBITRARILY DISALLOW I NG A SUM OF RS . 4 , 8 3 , 414/ - U/S 14A OF THE ACT R/W RULE 8A OF THE RULES . IN FACT , NO EXPENDITURE HAS BEEN I N CU R RED BY THE APPELLANT ON EARNING THE DIVIDEND. ( V I) L EVY OF INTEREST UNDER SEC . 234B , 234C IS LIABLE TO BE CANCELLED AS THE SAME IS ARBITRARY , HIGH AND CONTRARY TO LAW. ( VI I) ANY OTHER GROUND R AISED AT THE TIME OF PERSONAL HEARING . I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 4 3. ON BEHALF OF THE REVENUE, IT HAS BEEN VEHEMENTL Y ARGUED THAT THE CIT(A) HAS WRONGLY INTERFERED IN THE FINDINGS OF TH E ASSESSING OFFICER QUA DISALLOWANCE OF ASSESSEES CLAIM UNDER SECTION 80I B OF THE ACT. IN SUPPORT OF THE ARGUMENTS, THE DR HAS ALSO REITERATED THE SU BMISSION RAISED IN THE GROUNDS AND PRAYED FOR ACCEPTANCE OF THE APPEAL. 4. OPPOSING THE REVENUE, THE ASSESSEE HAS CONTENDE D THAT THE CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEES CLAIM UNDER SE CTION 80IB IS LIABLE TO BE ACCEPTED. IN ADDITION TO THIS, THE AR REPRESENTING THE ASSESSEE HAS ARGUED THAT SO FAR AS THE CIT(A) ORDER QUA DISALLOWANCE UN DER SECTION 14A IS CONCERNED, THE SAME HAS WRONGLY CONFIRMED THE FIND INGS OF THE ASSESSING OFFICER. 5. IN REBUTTAL, THE REVENUE ARGUES ON THE ONE HAND WITH ITS PRAYER IS LIABLE TO BE ACCEPTED QUA DISALLOWANCE CLAIMED UNDE R SECTION 80IB, ON THE OTHER HAND, IT HAS STRONGLY SUPPORTED THE ORDER OF THE CIT(A) QUA DISALLOWANCE UNDER SECTION 14A WHICH WAS MADE BY TH E ASSESSING OFFICER AND CONFIRMED IN APPEAL. 6. WE HAVE HEARD BOTH PARTIES AT LENGTH AND PERUSE D RELEVANT FINDINGS OF THE ASSESSING OFFICER AS WELL AS CIT(A) AND ALSO CR OSS OBJECTIONS OF THE ASSESSEE. UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN MANUFACTURE AND SALE OF IMFL [INDIAN MAD E FOREIGN LIQUOR]. ON I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 5 29.09.2009, IT HAD E-FILED ITS RETURN AND DECLARE D TOTAL PROFITS AND GAINS FROM THE BUSINESS IN QUESTION AS ` .8,11,70,927/-. THE ASSESSEE HAD ALSO CLAIMED DEDUCTION UNDER SECTION 80IB OF ` .2,02,92,732/- @ 25%. THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM BY HOLDING THAT THE ASSESSEE HAD BEEN MANUFACTURING IMFL WHICH WAS AN ITEM INCLUDED IN TH E SCHEDULE II OF THE LICENSING NOTIFICATION NO. S.O. 477(E) DATED 25.07. 1991 ISSUED UNDER INDUSTRIES [DEVELOPMENT AND REGULATION] ACT, 1951 A ND UNDER THE PROVISIONS OF THE SAID ACT SMALL SCALE INDUSTRY ALIKE THE AS SESSEE IS PROHIBITED FROM MANUFACTURING IMFL FALLING UNDER SCHEDULE XI OF THE ACT. SIMILARLY, THE ASSESSING OFFICER ALSO HELD IN THE ASSESSMENT ORDER DATED 16.12.2011 THAT THE ASSESSEE WAS NOT EVEN A SMALL SCALE INDUSTRY UN DER IDR ACT (SUPRA) FOR A SMALL SCALE INDUSTRY, THE CAP ON INVESTMENT AMOUN T WAS FIXED AT ` .1 CRORE AND THE ASSESSEES INVESTMENT STOOD MORE THAN THAT. IN THE LIGHT OF THE OBSERVATIONS, THE ASSESSING OFFICER DISALLOWED ASSE SSEES CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT AND ADDED THE AMOUNT OF ` .2,02,92,732/- IN ASSESSEES TOTAL INCOME. 7. SIMILARLY, IN THE ASSESSMENT PROCEEDINGS, THE A SSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED DIVIDEND INCO ME OF ` .10,61,830/- AS EXEMPT INCOME UNDER SECTION 10(35) OF THE ACT. THEREFORE, THE ASSESSING OFFICER INVOKED SECTION 14A READ WITH RULE 8D. ON T HIS, THE ASSESSEE IS STATED TO HAVE ITSELF WORKED OUT THE DISALLOWANCE A T ` .4,83,414/- WHICH WAS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 6 ADDED BY THE ASSESSING OFFICER IN THE ASSESSMENT OR DER. ACCORDINGLY, THE ASSESSEES TOTAL INCOME WAS COMPUTED AT ` .8,60,32,030/-. 8. AGGRIEVED BY BOTH ABOVE DISALLOWANCES, THE ASSE SSEE CARRIED THE MATTER IN APPEAL. ON THE GROUND OF DEDUCTION UNDER SECTION 80IB OF THE ACT, THE CIT(A) HAS ACCEPTED ASSESSEES CONTENTIONS. PER REVENUE, THE CIT(A) HAS HELD AS UNDER: (I) FROM THE ABOVE PROVISIONS. IT IS CLEAR THAT C LAIMING THE DEDUCTIONS, ONE HAS TO FULFIL THE REQUIREMENTS LAID DOWN IN SUB- SECTION (2) OF SECTION 80-IB OF THE ACT. ONCE THE S AID CONDITIONS LAID DOWN IN THE SUB-SECTION (2) ARE FULFILLED THE ASSES SEES ARE ELIGIBLE FOR DEDUCTION UNDER VARIOUS SUB-SECTIONS(3 ) TO (11B) OF SEC.801B OF THE ACT, BASED ON THE ACTIVITIES CARRIE D OUT BY THEM. (II) ONCE THE INDUSTRIAL UNDERTAKING IS LOCATED IN AN INDUSTRIALLY BACKWARD STATE, ALL UNITS (WHETHER SSI OR NON-SS I) ARE EQUALLY ELIGIBLE FOR DEDUCTION U/S 80LB OF THE ACT. (III) THUS, THE ASSESSEES WHOSE INDUSTRIAL UNDERTA KINGS ARE RECOGNISED AS 'SMALL SCALE INDUSTRIES' OR 'LOCATED IN AN INDUS TRIALLY BACKWARD STATE' ARE ELIGIBLE FOR DEDUCTION U/S 80-1 B OF THE ACT, EVEN IF THEY MANUFACTURE 'ARTICLE OR THING SPECIFIE D IN THE LIST IN THE ELEVENTH SCHEDULE'. (IV) ONCE, THE INDUSTRIAL UNDERTAKING IS LOCATED I N AN INDUSTRIALLY BACKWARD STATE, THE ASSESSEE IS ELIGIBLE FOR DEDUCT ION U/S 80IB(4) OF THE ACT. IN SUCH A SITUATION, THERE IS NO NEED T O FULFIL THE REQUIREMENTS OF 'SSI' NATURE. IF THE ASSESSEE WANTS TO CLAIM DEDUCTION U/S 80-IB OF THE ACT, BEING IN THE NATURE OF 'SSI' {I.E., IF WANTS TO CLAIM EXCEPTION AS PER THE FIRST LIMB OF P ROVISO OF CLAUSE (III)}, THEN ONLY THE ASSESSEE HAS TO PROVE THAT IT IS RECOGNISED AS A SSI AND ALL THE RELEVANT CONDITIONS ARE FULFILLED. (V) IN THE INSTANT CASE, AS THE ASSESSEES INDUSTRIAL U NDERTAKING IS 'LOCATED IN AN INDUSTRIALLY BACKWARD STATE' OF POND ICHERRY, THERE IS NO NEED TO FULFILL THE REQUIREMENTS OF SSI. THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 7 (VI) IN ANY CASE, AS THE ASSESSEE IS ALSO ELIGIBLE FOR DEDUCTION U/S 80-IB(4) OF THE ACT, BEING 'LOCATED IN AN INDUSTRIALLY BACKW ARD STATE' OF PONDICHERRY, THERE IS NO NEED TO FULFIL THE REQUIREMENTS OF SSI. AT THE SAME TIME, WE FIND THAT THE CIT(A) HAS UPHOL D THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT (SUPRA). IN THIS BACKGROUND OF THE FACTS, THE REVENUE IS AG GRIEVED AGAINST THE ORDER OF THE CIT(A) QUA ASSESSEES CLAIM OF DEDUCTI ON UNDER SECTION 80IB OF THE ACT. SIMILARLY, THE GRIEVANCE OF THE ASSESSEE IS THAT THE DISALLOWANCE UNDER SECTION 14A HAD WRONGLY BEEN AFFIRMED BY THE CIT(A). 9. SO FAR AS THE REVENUES APPEAL IS CONCERNED, IT IS NOTICED THAT THE CIT(A) HAS HELD THAT THE ASSESSEES ENTITLED FOR CL AIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT [PROVIDING DEDUCTION IN R ESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKING OTHER THAN INFR ASTRUCTURAL DEVELOPMENT UNDERTAKING] BEING A SMALL SCALE INDUSTRIAL UNDERTA KING UNDER THE PROVISIONS OF THE ACT AND ALSO BECAUSE IT IS CARRYING ITS BU SINESS FROM PONDICHERRY I.E. INDUSTRIALLY BACKWARD STATE UNDER SECTION 80IB(4) O F THE ACT. WE DEEM IT APPROPRIATE TO REPRODUCE THE PROVISIONS ITSELF WHIC H READS AS UNDER: 80-IB. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS (3) TO 41[(11), (11A) AND (11B)] (SUCH BUSINESS BEING HERE INAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS O F AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 8 (2) THIS SECTION APPLIES TO ANY INDUSTRIAL UNDERTAK ING WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : (I ) IT IS NOT FORMED BY SPLITTING UP, OR THE RECO NSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF A N INDUSTRIAL UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-E STABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN TH AT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUS INESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE; (III) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR T HING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHE DULE, OR OPERATES ONE OR MORE COLD STORAGE PLANT OR PLANTS, IN ANY PART O F INDIA : PROVIDED THAT THE CONDITION IN THIS CLAUSE SHALL, IN RELATIO N TO A SMALL SCALE INDUSTRIAL UNDERTAKING OR AN INDUSTRIAL UNDER TAKING REFERRED TO IN SUB-SECTION (4) SHALL APPLY AS IF THE WORDS NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDUL E HAD BEEN OMITTED. EXPLANATION 1.FOR THE PURPOSES OF CLAUSE (II), ANY MACHINERY OR PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OT HER THAN THE ASSESSEE SHALL NOT BE REGARDED AS MACHINERY OR PLAN T PREVIOUSLY USED FOR ANY PURPOSE, IF THE FOLLOWING CONDITIONS ARE FU LFILLED, NAMELY : (A) SUCH MACHINERY OR PLANT WAS NOT, AT ANY TIME P REVIOUS TO THE DATE OF THE INSTALLATION BY THE ASSESSEE, USED IN I NDIA; (B) SUCH MACHINERY OR PLANT IS IMPORTED INTO INDIA FROM ANY COUNTRY OUTSIDE INDIA; AND (C) NO DEDUCTION ON ACCOUNT OF DEPRECIATION IN RES PECT OF SUCH MACHINERY OR PLANT HAS BEEN ALLOWED OR IS ALLOWABLE UNDER THE PROVISIONS OF THIS ACT IN COMPUTING THE TOTAL INCOM E OF ANY PERSON FOR ANY PERIOD PRIOR TO THE DATE OF THE INST ALLATION OF THE MACHINERY OR PLANT BY THE ASSESSEE. EXPLANATION 2.WHERE IN THE CASE OF AN INDUSTRIAL U NDERTAKING, ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TO TAL 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 U SED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-S ECTION, THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMP LIED WITH; I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 9 (IV) IN A CASE WHERE THE INDUSTRIAL UNDERTAKING MAN UFACTURES OR PRODUCES ARTICLES OR THINGS, THE UNDERTAKING EMPLOYS TEN OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF PO WER, OR EMPLOYS TWENTY OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITHOUT THE AID OF POWER. (3) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDUS TRIAL UNDERTAKING SHALL BE TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY), OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECU TIVE ASSESSMENT YEARS WHERE THE ASSESSEE IS A CO-OPERATIVE SOCIETY) BEGIN NING WITH THE INITIAL ASSESSMENT YEAR SUBJECT TO THE FULFILMENT OF THE FO LLOWING CONDITIONS, NAMELY: (I) IT BEGINS TO MANUFACTURE OR PRODUCE, ARTICLES OR THINGS OR TO OPERATE SUCH PLANT OR PLANTS AT ANY TIME DURING THE PERIOD BEGINNING FROM THE 1ST DAY OF APRIL, 1991 AND ENDING ON THE 31ST DAY O F MARCH, 1995 OR SUCH FURTHER PERIOD AS THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY WITH REFERENCE TO ANY PARTICULAR UNDERTAKING; (II) WHERE IT IS AN INDUSTRIAL UNDERTAKING BEING A SMALL SCALE INDUSTRIAL UNDERTAKING, IT BEGINS TO MANUFACTURE OR PRODUCE AR TICLES OR THINGS OR TO OPERATE ITS COLD STORAGE PLANT [NOT SPECIFIED IN SUB-SECTION (4) OR SUBSECTION (5)] AT ANY TIME DURING THE PERIOD BEGIN NING ON THE 1ST DAY OF APRIL, 1995 AND ENDING ON THE 31ST DAY OF MARCH, [2002]. (4) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDUS TRIAL UNDERTAKING IN AN INDUSTRIALLY BACKWARD STATE SPECIFIED IN THE EIGHTH SCHEDULE SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED F ROM SUCH INDUSTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WIT H THE INITIAL ASSESSMENT YEAR AND THEREAFTER TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS DER IVED FROM SUCH INDUSTRIAL UNDERTAKING : PROVIDED THAT THE TOTAL PERIOD OF DEDUCTION DOES NOT EXCEED TEN CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECUTIVE ASSESSMENT YEARS WHERE THE ASSESSEE IS A CO-OPERATIVE SOCIETY) SUBJECT TO FULFILMENT OF THE CONDITION THAT IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPE RATE ITS COLD STORAGE PLANT OR PLANTS DURING THE PERIOD BEGINNING ON THE 1ST DA Y OF APRIL, 1993 AND ENDING ON THE 31ST DAY OF MARCH, [2004] : PROVIDED................. A PERUSAL OF THE ABOVE PROVISION MAKES IT CLEAR THA T FOR CLAIMING DEDUCTION, CERTAIN CONDITIONS ARE TO BE NECESSARILY SATISFIED. AT THE SAME TIME, IT IS ALSO I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 10 CLEAR THAT THE CONDITIONS ABOVE SAID DO NOT APPLY I N CASE THE UNDERTAKING IN QUESTION IS EITHER A SMALL SCALE INDUSTRY OR IT OPE RATES FROM AN INDUSTRIALLY BACKWARD REGION AND IF ANY OF THE ABOVE SAID CONDIT ION IS SATISFIED, THE CONCERN UNDERTAKING BECOMES ELIGIBLE FOR CLAIMING D EDUCTION. THE CIT(A) IN THE ORDER HAS ACCEPTED ASSESSEES CONTENTION ON BOT H ABOVE COUNTS. WE FIND THAT THE PLEADINGS OF THE REVENUE ONLY CHALLEN GE THE STATUS OF THE ASSESSEE AS SMALL SCALE INDUSTRY AND THE FINDINGS O F THE CIT(A) THAT THE PLACE OF ASSESSEES BUSINESS IS IN AN INDUSTRIALLY BACKWARD STATE I.E. PONDICHERRY, HAVE NOWHERE BEEN DISPUTED. MEANING TH EREBY, EVEN IF WE HOLD THAT THE ASSESSEE IS A SMALL SCALE INDUSTRY, STILL IT IS ENTITLED FOR CLAIM OF DEDUCTION IN VIEW OF SECTION 80IB(4) OF THE ACT S INCE IT IS OPERATING FROM AN INDUSTRIALLY BACKWARD STATE. HENCE, WE OBSERVE THAT THE ASSESSEE SATISFIES THE RELEVANT PROVISION OF SECTION 80IB(4) OF THE A CT AND ARGUMENTS OF THE REVENUE THAT IT IS NOT A SMALL SCALE INDUSTRY OR I T MANUFACTURE AN ITEM CONTAINED IN SCHEDULE XI OF THE ACT DO NOT HOLD A NY GROUND. THEREFORE, WE HOLD THAT ONCE THE ASSESSEE SATISFIES THE CONDITION IN SECTION 80IB(4) OF THE ACT, THE ARGUMENTS OF THE REVENUE ONLY CARRY ACAD EMIC SIGNIFICANCE. HENCE, WE OPINE THAT THE CIT(A) HAS RIGHTLY ACCEPTE D ASSESSEES ARGUMENT QUA CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE A CT WHICH DOES NOT WARRANT ANY INTERFERENCE. 10. COMING TO THE CROSS OBJECTIONS OF THE ASSESSEE , AS ALREADY MENTIONED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1581 581581 581/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.15 1515 152 22 2/M/12 /M/12 /M/12 /M/12 11 HEREINABOVE, THE ASSESSEE HAD DECLARED EXEMPT INCOM E AND ON ASKING OF THE ASSESSING OFFICER, IT HAD ITSELF COMPUTED THE D ISALLOWANCE AMOUNT OF ` .4,83,414/- UNDER RULE 8D OF THE INCOME TAX RULES A ND EXACTLY THE SAME VERY AMOUNT HAS BEEN DISALLOWED. IN OUR OPINION, ON CE THE ASSESSEE ITSELF COMPUTED THE DISALLOWANCE, INSTEAD OF CHALLENGING T HE VERY APPLICABILITY OF THE PROVISIONS, WE DO NOT FIND ANY FORCE IN THE CRO SS OBJECTIONS PREFERRED BY THE ASSESSEE. CONSEQUENTLY, WE DO NOT FIND ANY MERI T EITHER IN THE APPEAL FILED BY THE REVENUE OR CROSS OBJECTIONS AT THE BEH EST OF THE ASSESSEE. 11. TO SUM UP, THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 29 TH OF JANUARY, 2013 AT CHENNAI. SD/ - SD/ - (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 29.01.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.