M/s. Aggarwal & Co, Jalandhar V. The Addl.Commissioner of Income-tax, Jalandhar

CO 7/ASR/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6917 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 23-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-04-2011
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S.SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 118(ASR)/2011 ASSESSMENT YEAR:2006-07 PAN: THE DY. COMMR. OF INCOME-TAX, VS. M/S. AGGARWAL & C O. RANGE-III, JALANDHAR. (ENGINEERS & ERECTORS) JALANDHAR (APPELLANT) (RESPONDENT) C.O. NO.07(ASR)/2011 (ARISING OUT OF ITA NO.118(ASR)/2011) ASSESSMENT YEAR : 2006-07 M/S. AGGARWAL & CO., VS. DY. COMMR. OF INCOME-TAX, (ENGINEERS & ERECTORS) RANGE-III, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. TARSEM LAL, DR RESPONDENT BY: SH. SANDEEP VIJH, CA DATE OF HEARING :23.02.2011 DATE OF PRONOUNCEMENT: ORDER PER BENCH: THIS APPEAL BY THE REVENUE AND C.O. BY THE ASSESSE E ARISE FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 28.01.2011 FO R THE ASSESSMENT YEAR 2006-07.THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 2 1. THAT THE LD. CIT(A), HAS ERRED IN ALLOWING RELI EF OF RS.1383784/- BY ALLOWING DEDUCTION U/S 80IC OF THE INCOME-TAX ACT, 1961 WHICH WAS RIGHTLY RESTRICTED BY THE A.O. TO RS.526550/- AS AGAINST RS.19,10,334/- CLAIMED BY TH E ASSESSEE. 2. THAT WHILE ALLOWING THE RELIEF OF RS.13,83,784/- LD. CIT(A) HAS FAILED TO APPRECIATE THAT CLAIM OF THE ASSESSEE WAS RIGHTLY RESTRICTED AFTER GETTING ENQUIRIES MADE FROM THE IN SPECTORS. 3. THAT WHILE ALLOWING THE RELIEF OF RS.13,83,784/- LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE FAILED TO ES TABLISH THE PHYSICAL EXPANSION OF THE UNIT IN RESPECT OF THE DE DUCTION U/S 80IC WAS CLAIMED. 4. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET-ASIDE AND THAT OF THE A.O. RESTORED. 5. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AN D DISPOSED OF. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AO NOTE D THAT THE ASSESSEE HAD CLAIMED THAT IT HAD TWO UNITS, NAMELY UNIT-1 AND UN IT-II, AND THE UNIT-1 HAD CLAIMED DEDUCTION U/S 80IB AND UNIT-II HAD CLAIMED DEDUCTION U/S 80IC. THE TURNOVER OF BOTH THE UNITS WAS NOTED BY THE AO FOR AYS FROM 2002-03 TILL AY 2006-07 AS UNDER: A.Y. UNIT-1(80IB) UNIT-II(80IC) 2006-07 1,84,86,103 7,28,30,860 2005-06 2,14,03,708 5,86,42,217 2004-05 63,473,935 THERE IS NO TRADING A/C OF UNIT-II 2003-04 2,69,25,895 3 2002-03 2,16,79,180 THE AO NOTED THAT IN FORM NO.10CCB THE ASSESSEE HAD CLAIMED COMMENCEMENT OF UNIT-II ON 01.05.2003. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF DEDUCTION U/S 80IC. AS PER THE ASSESSE ES SUBMISSION BEFORE THE AO, UNIT-1 WAS ENTITLED TO DEDUCTION @ 25% AS PER S ECTION 80IC(3) AND THE UNIT II WHICH WAS A SUBSTANTIAL EXPANSION UNIT WAS ENTITLED TO DEDUCTION @ 100% AS PER SECTION 80IC(3)(I). IT WAS SUBMITTED TH AT THE UNIT-1 WAS ENTITLED TO DEDUCTION FROM AY 1997-98 AND THAT THE SUBSTANTI AL EXPANSION DIVISION HAD BEEN CLAIMING DEDUCTION FROM AY 2004-05. IT WAS ALSO SUBMITTED THAT THE SUBSTANTIAL EXPANSION WAS RECOGNIZED W.E.F. 01. 05.2003 AS PER THE CERTIFICATE ISSUED BY THE DISTRICT INDUSTRIES CENTR E, SOLAN. IT WAS SUBMITTED THAT THE SUBSTANTIAL EXPANSION WAS BASICALLY A NEW UNIT FOR WHICH SEPARATE TRADING ACCOUNT HAD BEEN PREPARED. DETAILS OF MACHI NERIES INSTALLED IN THIS DIVISION ALONG WITH COPIES OF BILL FOR THE SAME WER E ALSO SUBMITTED. THE DETAILS OF THE NUMBER OF WORKERS WERE ALSO SUBMITTE D. 2.1. THE AO DEPUTED TWO INSPECTORS FOR MAKING ON TH E SPOT INQUIRY AT THE ASSESSEES FACTORY PREMISES. THE INSPECTORS REPORTE D THAT THEY HAD PREPARED LISTS OF MACHINERY INSTALLED AND THE WORKERS PRESEN T AT THE FACTORY PREMISES IN THE PRESENCE OF PARTNER OF THE ASSESSEE FIRM DUR ING THEIR VISIT. THEY ALSO 4 REPORTED THAT ALL THE MACHINERY USED IN THE ASSESSE ES MANUFACTURING PROCESS, EXCEPT A TRANSFORMER AND GENERATOR SET, WERE INSTAL LED IN A HALL ON THE FIRST FLOOR OF THE ASSESSEES BUILDING AND THERE WAS NO D ISTINCTION OF ANY UNIT IN THE SAID HALL. IT WAS FURTHER REPORTED THAT A SEPAR ATE BUILDING WAS UNDER ERECTION ON THE DAY OF INSPECTION. THE AO EXAMINED THE ASSESSEES BOOKS ON 17.12.2008 ALONGWITH BILLS AND VOUCHERS AND NOTED I N THE ORDER SHEET THAT THERE WAS A COMMON PREMISE FOR UNIT 1 AND UNIT II O F THE ASSESSEE, THERE AS A COMMON INVOICE BOOK OF BOTH THE UNITS, THERE WAS A COMMON INVOICE BOOK OF BOTH THE UNITS, THERE WAS A COMMON STOCK REGISTE R, COMMON RAW MATERIAL AND COMPONENTS REGISTER AND COMMON SEMI FINISHED AN D FINISHED GOODS REGISTER. HE ALSO NOTED THAT BOTH THE UNITS HAD COM MON REGISTRATION NO. AND SALES TAX NUMBER AND THAT THERE WERE COMMON EMPLOYE ES FOR BOTH THE UNITS. THE INVENTORY OF PLANT AND MACHINERY WAS ALSO COMMO N. HE EXPRESSED THE OPINION THAT IN VIEW OF THESE FACTS THERE WAS NO SU BSTANTIAL EXPANSION BY THE ASSESSEE FIRM, WHICH WAS STATED TO BE ALSO CORROBOR ATED BY THE REPORT OF THE INSPECTORS DATED 15.12.2008. A COPY OF THE INSPECTO RS REPORT WAS PROVIDED TO THE ASSESSEE FOR COMMENTS ON THE VIEW THAT THE S -CALLED SUBSTANTIAL EXPANSION WAS ONLY ON PAPER JUST TO CLAIM DEDUCTION @ 100% ON THE ALLEGED UNIT II. 5 2.2. THE ASSESSEE CONTESTED THE CONCLUSION REACHED BY THE AO. IT WAS REITERATED THAT BOTH THE UNIT 1 AND UNIT II EXISTED WITHIN THE SAME COMPLEX AND THOUGH THEY HAD A COMMON SALES BOOK FOR BOTH TH E UNITS, THE UNITS HAD SEPARATE STOCK REGISTERS APART FROM A COMBINED STOC K REGISTER. IT WAS SUBMITTED THAT THE SEPARATE STOCK REGISTER WAS MAIN TAINED TO KNOW THE PRODUCTION FROM EACH UNIT SO AS TO DETERMINE THE SA LES PERTAINING TO THE TWO UNITS SEPARATELY SINCE COMMON SALES BILL BOOK WAS B EING MAINTAINED. THE SEPARATE STOCK REGISTERS WERE PRODUCED FOR THE AOS EXAMINATION ON 22.12.2008, WHICH THE AO OPINED HAD BEEN PREPARED O N 17.12.2008. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT IT WAS ENTITLED TO ONE EXCISE REGISTRATION NUMBER ONLY SINCE THE UNIT NO.II WAS ONLY AN EXPANS ION OF THE EARLIER UNIT. FOR THE SAME REASON, IT WAS SUBMITTED THAT THE ASSE SSEE WAS ENTITLED TO ONLY ONE SALES TAX NO. IN RESPECT OF THE EMPLOYEES, THE ASSESSEE SUBMITTED THAT THOUGH THERE WAS A COMMON EMPLOYEE REGISTER, THE EM PLOYEES WORKING FOR BOTH THE UNITS WERE SEPARATELY IDENTIFIABLE. IT WAS SUBMITTED THAT THE CONFUSION HAD OCCURRED BECAUSE THE VERIFICATION HAD BEEN DONE THROUGH INSPECTORS IN DECEMBER, 2008 WHEN THERE HAD BEEN CH ANGE IN THE FACTUAL POSITION AS COMPARED TO AY 2006-07. IT WAS SUBMITTE D THAT THE BILLS OF THE MACHINERY REPRESENTING SUBSTANTIAL EXPANSION HAS BE EN FILED, WHICH EXPANSION HAD BEEN CERTIFIED BY THE DEPARTMENT OF I NDUSTRIES AFTER DUE 6 VERIFICATION AND INSPECTION. IT WAS SUBMITTED THAT MACHINERY FOR BOTH THE UNIT 1 AND UNIT II WAS PLACED ON THE SAME HALL AND THERE WAS A PHYSICAL PARTITION IN BETWEEN AS WELL AS SEPARATE ELECTRICAL CONNECTIONS FOR THE TWO UNITS. IT WAS SUBMITTED THAT AT THE TIME WHEN THE I NSPECTORS HAD VISITED THE ASSESSEES FACTORY PREMISES, THE MACHINERY OF UNIT 1 WHICH WAS QUITE OLD HAD BEEN SENT FOR REPAIR AND MODERNIZATION FOR WHIC H COPIES OF CHALLANS AND GATE PASSES WERE SUBMITTED. IT WAS ALSO SUBMITTED T HAT THE ASSESSEE HAD PURCHASED 20 NEW LOOMS IN OCTOBER, 2008 OUT OF WHI CH 10 LOOMS WERE TO BE INSTALLED IN THE NEW SHED WHICH WAS BEING CONSTR UCTED. IT WAS SUBMITTED THAT THE TWO UNITS WERE PART OF ONE UNIT AND THAT I N THE YEAR ENDED 31.03.2006 THE TWO UNITS WERE INSTALLED IN SEPARATE AREAS IN T HE SMALL HALL WHICH HAD A PHYSICAL PARTITION IN BETWEEN. 2.3. THE AO EXAMINED THE SUBMISSIONS. HE NOTED THAT THE ASSESSEE HAD RENTED OUT A SUBSTANTIAL PORTION OF ITS BUILDING AT PLOT NO.86 INDUSTRIAL AREA, BADDI TO OUTSIDE COMPANIES IN THE YEAR 2004. ONLY O NE HALL WAS AVAILABLE WITH THE ASSESSEE FIRM FOR MANUFACTURING AS REPORTE D BY THE INSPECTORS. HE NOTED THAT THE ASSESSEE HAD ACCEPTED THAT IT WAS ON E UNIT AND EXPRESSED THE OPINION THAT IT WAS WRONG TO SAY THAT THE INSPECTOR S COULD NOT CONFIRM THE POSITION OF MACHINERIES WHICH EXISTED ON 31.03.2006 . HE ALSO NOTED THAT RULE 18BBB(2) OF THE INCOME-TAX RULES LAID DOWN THA T A SEPARATE REPORT WAS 7 TO BE FURNISHED BY EACH UNDERTAKING OR ENTERPRISE O F THE ASSESSEE CLAIMING DEDUCTIONS U/S 80I, 80IA, 80IB AND 80IC WHICH SHOUL D BE ACCOMPANIED BY THE PROFIT & LOSS ACCOUNT AND THE BALANCE-SHEET OF THE UNDERTAKING OR ENTERPRISE AS IF THE UNDERTAKING OR THE ENTERPRISE WERE A DISTINCT ENTITY. HE NOTED THAT THE ASSESSEE HAD FILED A COMMON BALANCE SHEET, SEPARATE TRADING ACCOUNTS FOR THE TWO UNITS, BUT A COMMON PROFIT & L OSS ACCOUNT FOR BOTH THE UNITS. HE, THEREFORE, HELD THAT THE ASSESSEE HAD VI OLATED THE PROVISIONS OF RULE 18BBB(2) SINCE THE ASSESSEE HAD NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR BOTH THE UNITS 1 & 11. HE NOTED THAT O N 17.12.2008, THE ACCOUNTANT AND COUNSEL OF THE ASSESSEE PRODUCED BOO KS OF ACCOUNT AND STATED THAT THERE WAS A COMMON STOCK REGISTER, COMMON RAW MATERIAL AND COMPONENT REGISTER AND A COMMON SEMI FINISHED GOODS AND RAW MATERIAL REGISTER. HE ALSO NOTED THAT THE TWO SEPARATE STOCK REGISTERS PRODUCED ON 22.12.2008 HAD BEEN NOTED TO BE NEWLY MADE REGISTER S THOUGH CLAIMED TO BE OLD REGISTERS THAT THAT THE ORDER SHEET ENTRY IN TH IS REGARD HAD BEEN SIGNED BY THE ASSESSEES REPRESENTATIVES. THE AO WAS OF THE O PINION EACH UNIT SHOULD HAVE SEPARATE EXCISE NUMBERS AND SEPARATE EMPLOYEES REGISTERS. HE ALSO NOTED THAT THE LETTER DATED 19.03.2004 OF THE DEPAR TMENT OF INDUSTRIES TALKED ABOUT APPROVAL OF REVISED CAPACITY AFTER SUBSTANTIA L EXPANSION BUT NOT ABOUT SEPARATE UNITS 1 AND 11. AS PER THE AO EVEN THE ELE CTRICITY BILLS DID NOT BEAR 8 DISTINCTION OF UNIT 1 AND UNIT 11. THE AO NOTED THA T COMPUTING THE PROFITS OF EACH OF THE UNITS, THE EXPENDITURE IN THE PROFIT & LOSS ACCOUNT HAD BEEN ALLOCATED ON THE BASIS OF TURNOVER ONLY. NO PHYSICA L PARTITION IN THE HALL OF THE ASSESSEE WAS NOTED BY THE INSPECTORS. THE AO W AS OF THE OPINION THAT THE EXPLANATION THAT OLD MACHINERY HAD BEEN SENT FO R REPAIRS WAS JUST A COVER. HE NOTED THAT THE PURCHASES AND SALES BY BOT H THE UNITS WERE FROM AND TO THE SAME PARTIES. HE ALSO NOTED THAT ALMOST ALL THE MACHINERY INVENTORISED ON 13.12.2008, EXCEPT TWO, WERE PURCHASED AND INSTA LLED BY MARCH, 2003. THE AO ALSO NOTED THAT THE SUBSTANTIAL EXPANSION WA S RECOGNIZED W.E.F. 01.05.2005 BY THE DEPARTMENT OF INDUSTRIES AND THAT THE BOOK VALUE OF PLANT AND MACHINERY AS ON 01.04.2003 WAS RS.14,66,788/- A ND THAT THE INVESTMENT IN PLANT AND MACHINERY DURING THE FY 2003-04 WAS ON LY RS.36,610/-, WHICH WAS JUST 2.49% OF THE PLANT AND MACHINERY WHICH EXI STED ON 01.04.2003 THE AO, THEREFORE, HELD THAT NO SUBSTANTIAL EXPANSION T OOK PLACE. THE AO ALSO HELD THAT THE ENTIRE EXERCISE APPEARED TO BE SPLITT ING UP OF THE BUSINESS, WHICH HE HELD WAS CORROBORATED BY THE PROFIT & LOSS ACCOUNT AS ON 31.03.2004, IN WHICH NO DISTINCTION BETWEEN UNIT 1 AND UNIT 11 WAS SHOWN. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAD NO INTENTION TO PAY DUE TAXES TO THE GOVERNMENT AND NOTED THAT IN 2004-05 W HEN THE SUBSTANTIAL EXPANSION TOOK PLACE, NO DISTINCTION BETWEEN UNIT 1 AND UNIT 11 HAD BEEN 9 SHOWN. THE AO HELD THAT SPLITTING UP OF BUSINESS IN VOLVED THE IDEA OF SUBSTANTIALLY THE SAME PERSONS CARRYING ON THE SAME BUSINESS BY BREAKING DOWN THE UNIT INTO TWO CONCERNS. HE HELD THAT THE E XPRESSION SPLITTING UP OF THE BUSINESS ALREADY IN EXISTENCE INDICATED A CA SE WHERE THE INTEGRITY OF A BUSINESS EARLIER IN EXISTENCE WAS BROKEN UP AND DIF FERENT SECTIONS OF THE ACTIVITY PREVIOUSLY CONDUCTED WERE CARRIED ON INDEP ENDENTLY. HE HELD THAT THE ASSESSEE DID NOT CARRY OUT ACTIVITIES INDEPENDE NTLY. HE HELD THAT THE SAME PERSONS WERE CARRYING ON THE SAME BUSINESS AND THAT THE NEW UNIT GIVEN BIRTH ON PAPER WAS SIMPLY TO FACILITATE EVASION OF TAX. H E HELD THAT THE NEW UNIT COULD NOT BE SAID TO BE AN INDEPENDENT UNIT HAVING SEPARATE IDENTITY FROM THE OLD UNIT AND THAT THIS WAS A CASE OF SPLITTING UP O R RECONSTRUCTION OF BUSINESS. THE AO HELD THAT DEDUCTION U/S 80IC ON THE SO CALLE D UNIT-II WAS NOT ALLOWABLE SINCE THE BUSINESS OF UNIT 1 HAD BEEN SPL IT UP AND DIVERTED TO UNIT II. THE AO ALSO NOTED THAT IN THE ASSESSMENT FOLDER S FOR AY 2001-02 AND 2003-04 THE ASSESSEE HAD SURRENDERED 50% OF EXPENSE S BOOKED UNDER THE HEAD INTEREST AND BANK CHARGES AND SALARY TO PARTNE RS FOR THE HEAD OFFICE AND ADDED BACK TO THE EXPENSES OF THE RAFFIA DIVISI ON I.E. THE FACTORY OF THE ASSESSEE. SIMILAR DISALLOWANCE WAS MADE IN THE PRES ENT ASSESSMENT YEAR. ON THE BUSINESS PROFIT SO DETERMINED, THE AO ALLOWED D EDUCTION @ 25%. 10 3. BEFORE THE LD. CIT(A), THE LD. COUNSEL FOR THE ASSESSEE MADE THE SUBMISSIONS, WHICH ARE REPRODUCED BY THE LD. CIT(A) VIDE PARA 2.5 OF HIS ORDER, WHICH ARE AVAILABLE AT PAGE 6 TO 13 OF HIS O RDER. THE SUBMISSIONS ALONG WITH DOCUMENTARY EVIDENCES WERE FORWARDED TO THE A.O. FOR HIS COMMENTS BY THE LD. CIT(A). THE A.O. FORWARDED THE COMMENTS, WHICH ARE AVAILABLE IN PARA 2.6 AT PAGES 13 TO 26 OF CIT(A)S ORDER. 4. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSESS EE APPEARING BEFORE THE LD. CIT(A) SUBMITTED HIS COMMENTS AND CLARIFICATION S BEFORE THE LD. CIT(A), WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) IN PARA 2.7. AVAILABLE AT PAGES 6 TO 19 OF HIS ORDER. 5. THE LD. CIT(A) AFTER PERUSAL OF THE EXPLANATION SUBMITTED BY THE LD. COUNSEL AND DOCUMENTARY EVIDENCES PRODUCED BEFORE HIM, THE REMAND REPORT FROM THE AO, THE COMMENTS FROM THE LD. COUNS EL APPEARING FOR THE ASSESSEE, VIDE PARA 3 OF HIS ORDER ALLOWED THE CLAI M OF THE ASSESSEE. 6. THE LD. DR, SH. TARSEM LAL, APPEARING FOR THE RE VENUE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND VEHEMENTLY A RGUED THAT THE ASSESSEE HAS NOT DISTINGUISHED THE UNIT 1 & UNIT 11 AND WAS HAVING COMMON EXCISE DUTY NO., SALES TAX NO., COMMON BOOKS OF ACCOUNT AN D, THEREFORE, THERE WAS A SPLITTING AND RECONSTRUCTION OF THE EXISTING UNIT AND ACCORDINGLY WAS NOT ENTITLED TO ANY DEDUCTION U/S 80IC OF THE ACT. 11 7. THE LD. COUNSEL FOR THE ASSESSEE, SH. SANDEEP VI JH, HEAVILY RELIED UPON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ALSO THE COMMENTS ON THE REMAND REPORT OF THE A.O. AND INVITED OUR ATTEN TION TO VARIOUS PROVISIONS CONTAINED IN SECTION 80IC AND RULE 18BBB(2) OF THE INCOME-TAX RULES, 1962. HE ARGUED AND INVITED OUR ATTENTION TO THE DE FINITION OF SUBSTANTIAL EXPANSION, WHICH IS THE MAIN REQUIREMENT OF SECTION 80-IC(1) OF THE ACT. THE SUBSTANTIAL EXPANSION AS PER SECTION 80IC(8)(IX ) MEANS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY AT LEAST 50% OF THE BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL E XPANSION IS UNDERTAKEN. HE ALSO POINTED OUT THAT THE PRODUCTION OF THE UNIT WHERE SUBSTANTIAL EXPANSION HAD BEEN MADE WAS W.E.F. 01.05.2003 AND T O THAT EFFECT, HE INVITED OUR ATTENTION TO THE ORDER, WHICH IS THE APPROVAL O F THE REVISED INVESTMENT AFTER SUBSTANTIAL EXPANSION GIVEN BY THE DISTRICT I NDUSTRY CENTRE, SOLAN (HP). THE LD. COUNSEL FOR THE ASSESSEE, FURTHER, INVITED OUR ATTENTION TO PAPER BOOK PAGES 23 & 24, THE ELECTRIC CONNECTION, WHICH WAS S EPARATELY INSTALLED FOR THE UNIT WHERE THE SUBSTANTIAL EXPANSION HAD BEEN M ADE AND THE ELECTRIC METER FOR THE OLD UNIT WHICH WAS AVAILABLE EARLIER AT PAPER BOOK PAGES 25 & 26. AS REGARDS CBDTS CIRCULAR NO.7 OF 2003 DATED 0 5.09.2003, THE PARA 49 WAS READ BY THE LD. COUNSEL FOR THE ASSESSEE WITH S PECIFIC REFERENCE TO PARA 12 49.1, WHERE IT IS CLEARLY MENTIONED THAT IN ORDER T O GIVE BOOST TO THE ECONOMY IN THE STATE OF HIMACHAL PRADESH, A NEW SECTION 80- IC HAS BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FROM THE PROFITS OF NEW UNDERTAKINGS OR ENTERPRISES OR EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION. FOR THIS PURPOSE, SUBSTANTIAL EXPANSION HAS BEEN DEFINED AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINE RY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKIN G DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. THERE IS NO DISPUTE TO THE FACT THAT THE VALUE OF PLANT MACHINERY AS ON 31.03.2003 WAS RS. 31 LACS AN D THE ASSESSEE HAD ADDED THE PLANT AND MACHINERY OF THE VALUE OF RS.71 LACS FOR THE PURPOSE OF SUBSTANTIAL EXPANSION MEANING THEREBY VALUE OF PLAN T AND MACHINERY HAD BEEN ADDED MORE THAN 50% OF THE EXISTING PLANT AND MACHINERY AS ON 01.04.2002. ACCORDINGLY, HE SUPPORTED THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD MADE SUBSTANTIAL EXPANSION AND HAS COME INTO PRODUCTION AS ON 01.05. 2003 FOR THE UNIT IN WHICH SUBSTANTIAL EXPANSION HAS BEEN MADE. AS SUBMI TTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE PLANT AND MACHINERY AS ON 31.03.2002 WAS AROUND 13 RS.31 LACS AND THE ASSESSEE HAD ADDED THE PLANT AND MACHINERY OF MORE THAN RS.71 LACS FOR SUBSTANTIAL EXPANSION HAS NOT BEEN C ONTROVERTED BY THE LD. DR APPEARING FOR THE REVENUE. THERE IS NO CONDITIO N LAID DOWN IN SECTION 80IC OF THE ACT THAT ANY NEW UNDERTAKING SHOULD BE THERE TO CLAIM DEDUCTION U/S 80IC OF THE ACT. THE CONDITION APPLICABLE TO TH E ASSESSEE IS THAT THERE SHOULD BE SUBSTANTIAL EXPANSION AND THE SUBSTANTIAL EXPANSION HAS BEEN DEFINED U/S 80IC (8)(IX) OF THE ACT. THE ASSESSEE, THEREFORE, HAS MET THE SAID CONDITION OF SECTION 80-IC(8)(IX) OF THE ACT. THE D ISTRICT INDUSTRIES CENTRE, SOLAN (HP) HAS GIVEN THE APPROVAL OF THE REVISED CA PACITY AFTER SUBSTANTIAL EXPANSION, WHICH IS AVAILABLE AT PAGE 10 OF ANNEXUR E-C TO THE AOS ORDER. THE SAME IS NOT UNDER DISPUTE. THE ASSESSEE HAS INS TALLED SEPARATE ELECTRIC CONNECTION IS ALSO NOT UNDER DISPUTE. THE PURCHASES , SALES, THE EMPLOYEES OF THE UNIT UNDER SUBSTANTIAL EXPANSION ARE IDENTIFIAB LE AND THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD. DR WITHOUT ANY PLAUSIB LE AND POSSIBLE EXPLANATION OR ANY EVIDENCE ON RECORD. THEREFORE, IN VIEW OF THE PROVISIONS CONTAINED IN SECTION 80-IC, THE CONTENTS OF CBDTS CIRCULAR NO.7 OF 2003 (SUPRA) AND ARGUMENTS OF BOTH THE PARTIES AND FACTS AVAILABLE ON RECORD, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND TH E SAME IS UPHELD. 14 9. NOW WE DEAL WITH C.O. NO.7(ASR)/2011 FOR THE ASS ESSMENT YEAR 2006- 07 FILED BY THE ASSESSEE WHERE THE ONLY GROUND RAIS ED BY THE ASSESSEE READS AS UNDER: 1. THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE FINDING THAT THERE WAS NO DISTINCTION BETWEEN THE OLD UNIT AND T HE NEW UNIT (SUBSTANTIAL EXPANSION). 10. SINCE WE HAVE UPHELD THE VIEW TAKEN BY THE CIT( A) AND DISMISSED THE APPEAL OF THE DEPARTMENT, THE C.O. FILED BY THE ASS ESSEE NEEDS NO SEPARATE ADJUDICATION, AS IT FALLS IN THE REALM OF ACADEMIC INTEREST. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.118(ASR)/2011 AND C.O. NO.7(ASR)/2011 OF THE ASSESSEE ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 5TH MARCH, 2012. SD/- SD/- (H.S.SIDHU) (B.P.JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5TH MARCH, 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. AGGARWAL & CO. (ENGINEERS & ERECT ORS) JALANDHAR 2. THE ADDL. CIT-III, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY