Blow Packaging (India) Private Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1015/CHNY/2014

• Counselvise Citation: 101521714 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 10-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2014
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation
• Section: 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO. 1015/MDS/2014 / ASSESSMENT YEAR : 2009-10 M/S BLOW PACKAGING (INDIA) PVT. LTD [FORMERLY, BLOW PACKAGING (INDIA) LTD.) 102, MANNARSAMY KOIL STREET CHENNAI 600 013 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE 1(2) CHENNAI [PAN AAACB 3145 L ] ( %& / APPELLANT) ( '(%& /RESPONDENT) ./ I.T.A.NO.399/MDS/2015 / ASSESSMENT YEAR : 2008-09 M/S BLOW PACKAGING (INDIA) PVT. LTD [FORMERLY, BLOW PACKAGING (INDIA) LTD.) NO.55D,SIDCO INDUSTRIAL ESTATE AMBATTUR, CHENNAI 600 098 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE 1(2) CHENNAI ( %& / APPELLANT) ( '( %& /RESPONDENT) / APPELLANT BY : SHRI T. BANUSEKAR, CA /RESPONDENT BY : SHRI P. RADHAKRISHNAN, JCIT / DATE OF HEARING : 10 - 0 6 - 2015 ! / DATE OF PRONOUNCEMENT : 17 - 0 7 - 2015 ITA NOS.399/15 & 1015/14 :- 2 -: /ORDER PER N.R.S.GANESAN, JUDICIAL MEMBER THESE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME-TA X (APPEALS) AND PERTAIN TO ASSESSMENT YEARS 2008-09 AND 2009- 10. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE A PPEALS, WE HEARD THEM TOGETHER AND DISPOSE OF THE SAME BY THIS COMMO N ORDER. 2. SHRI T. BANUSEKAR, LD. REPRESENTATIVE FOR THE ASSE SSEE SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS CLAIM OF DEDUCTION U/S 80IB OF THE ACT. 3. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE O F PLASTIC CANS AND CONTAINERS. THE ASSESSEE-COMPANY WAS REGISTERED AS A SMALL SCALE INDUSTRY BY THE DIRECTORATE OF INDUSTRIES, TAMILNAD U. THE COPY OF THE REGISTRATION CERTIFICATE IS AVAILABLE AT PAGE 2 OF THE PAPER BOOK. REFERRING TO THE LETTER DATED 9.9.2004 BY GENERAL M ANAGER, DISTRICT INDUSTRIES CENTRE, THIRUVALLUR, THE LD. REPRESENTAT IVE POINTED OUT THAT SO LONG AS THE VALUE OF THE PLANT AND MACHINERY DOE S NOT EXCEED ` 3 CRORES, THE ASSESSEE CONTINUES TO BE A SMALL SCALE INDUSTRY. THE COST OF PLANT AND MACHINERY AS ON 31.3.2002 IS AT ` 1,30,88,806/-. AFTER DEPRECIATION, THE NET BLOCK OF PLANT AND MACHINERY AS ON 31.3.2002 IS ITA NOS.399/15 & 1015/14 :- 3 -: AT ` 64,21,616/-. THE COST OF PLANT AND MACHINERY OF U NIT-II AS ON 31.3.2002 IS ` 92,97,315/-. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, AS ON TODAY THE COST OF ASSET DOES NOT EXCEED ` 3 CRORES, SO THE ASSESSEE CONTINUES TO BE A SMALL SC ALE INDUSTRY ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE ASSESSING OFFICER SIMPLY REFERRING TO PROVISIONS OF SECTION 80IB(3) OF THE A CT FOUND THAT THE COST OF PLANT AND MACHINERY IS NOT LESS THAN ` 1 CRORES THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE CERTIFICATE ISSUED BY THE INDUSTRIES DEPARTMENT OF GOVERNMENT OF TAMILNADU WAS NOT CONSIDERED BY THE LOWER AUTHORITI ES. REFERRING TO THE PROVISIONS OF SECTIONS 25 & 26 OF THE INDUSTRIE S (DEVELOPMENT AND REGULATION) ACT, 1951, THE LD. REPRESENTATIVE SUBMI TTED THAT THE CENTRAL GOVERNMENT DELEGATED ITS POWER TO THE STATE GOVERNMENT AND ITS OFFICERS TO SPECIFY THE INDUSTRIES WHICH ARE OF SMALL SCALE IN NATURE. ACCORDING TO THE LD. REPRESENTATIVE, TO PROVIDE SIN GLE WINDOW SERVICE TO SMALL SCALE INDUSTRIES, THE ENTIRE PROCEDURAL AS PECT WAS SIMPLIFIED BY DELEGATING THE POWER TO DISTRICT INDUSTRIES CENTRE. THE LD. REPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT IN ACE MULTI AXES SYST EMS LTD VS DCIT IN I.T.A.NO. 477 OF 2013 DATED 28.7.2014, A COPY OF WH ICH IS AVAILABLE AT PAGE 8 OF THE PAPER BOOK. THE LD. REPRESENTATIVE A LSO PLACED HIS RELIANCE ON THE DECISION OF CHANDIGARH BENCH OF THI S TRIBUNAL IN MICRO ITA NOS.399/15 & 1015/14 :- 4 -: INSTRUMENTS CO. VS ITO [2008] 12 DTR 501. THE LD. REPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN SAWARIA PIPES (P) LTD VS ACIT [201 3] 33 TAXMANN.COM 380. 4. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IB CLAIMING IT AS A SMALL SCALE INDUSTRY. REFERR ING TO THE ASSESSMENT ORDER, THE LD. DR SUBMITTED THAT THE CLAIM OF DEDUC TION U/S 80IB WAS MADE IN RESPECT OF SECOND UNIT OF THE ASSESSEE AT 5 5D, SIDCO INDUSTRIAL ESTATE, AMBATTUR. ACCORDING TO THE LD. DR, THE SECOND UNIT IS ONLY AN EXPANSION OF THE EARLIER UNIT. ACCORDING T O THE LD. DR, TWO UNITS ARE NOT INDEPENDENT AND SEPARATE, THEREFORE, THE CLAIM OF THE ASSESSEE FOR THE SECOND UNIT CANNOT BE ALLOWED. AC CORDING TO THE LD. DR, BOTH UNITS ARE OWNED AND CONTROLLED BY THE ASSE SSEE THEREFORE, THE ASSESSEE CANNOT BE CONSTRUED AS HAVING SEPARATE AND INDEPENDENT UNIT FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB . THE LD. DR PLACED HIS RELIANCE ON THE DECISION OF THIS TRIBUNAL IN M/ S CARESS BEAUTY CARE PRODUCTS PVT. LTD VS CIT IN I.T.A.NO. 79/MDS/2011 D ATED 15.1.2013, A COPY OF WHICH IS FILED BY THE LD. DR. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER ITA NOS.399/15 & 1015/14 :- 5 -: DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE UNIT AT 55-D SIDCO INDUSTRIAL ESTATE, AMBATTUR, IS ONLY A B RANCH UNIT. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT EVEN ASSUM ING IT WAS CONSIDERED TO BE AN INDEPENDENT AND SEPARATE UNIT S TILL THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB. THE ASSESSING OFFICER ALSO FOUND THAT THE INVESTMENT IN PLANT AND MACHINERY WAS AT G ROSS VALUE OF 212.71 LAKHS AS ON 31.3.2009. ACCORDINGLY, THE ASS ESSING OFFICER FOUND THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTI ON U/S 80IB SINCE THE INVESTMENT EXCEEDED ` 1 CRORES. APPARENTLY, THE ASSESSING OFFICER PLACED HIS RELIANCE ON THE GUIDELINES ISSUED UNDER INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 FOR SMALL SC ALE INDUSTRIES. BOTH THE AUTHORITIES BELOW OVERLOOKED THE POWER DEL EGATED TO STATE INDUSTRIES DEPARTMENT AND THE CRITERIA DETERMINED B Y STATE INDUSTRIES DEPARTMENT FOR SMALL SCALE INDUSTRIES. 6. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SECTION 80IB OF THE ACT. SEC. 80IB(14)(G) OF THE ACT DEFINES SMALL SCALE INDUSTRIAL UNDERTAKING AS FOLLOWS: SMALL SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUS TRIAL UNDERTAKING WHICH IS, AS ON THE LAST DAY OF THE PRE VIOUS YEAR REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING UN DER SECTION 11B OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) A CT, 1951 (65 OF 1951). ITA NOS.399/15 & 1015/14 :- 6 -: 7. THE HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE O F SAWARIA PIPES (P) LTD. (SUPRA), AFTER CONSIDERING THE NOTIF ICATION ISSUED BY THE GOVERNMENT OF INDIA UNDER THE INDUSTRIES (DEVELOPME NT AND REGULATION) ACT, 1951, FOUND THAT IF THE INVESTMENT ON FIXED PLANT AND MACHINERY OF A SMALL SCALE INDUSTRIAL UNDERTAKING A S ON THE LAST DAY OF THE PREVIOUS YEAR DOES NOT EXCEED ` 3 CRORES, IT IS ENTITLED FOR DEDUCTION U/S 80IB OF THE ACT. IN THE CASE BEFORE THE HYDERABAD BENCH OF THIS TRIBUNAL THE INVESTMENT IN THE PLANT AND MACHINERY WAS MORE THAN ` 4 CRORES THEREFORE, THE TRIBUNAL FOUND THAT THE AS SESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80IB. IN THE CASE B EFORE US, THE INVESTMENT IN THE PLANT AND MACHINERY DOES NOT EXCE ED ` 3 CRORES IN BOTH UNITS OF THE ASSESSEE, THEREFORE, THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IS IN FAVOUR OF THE ASSESSEE. IN OTHER WORDS, SO LONG AS THE INVESTMENT IN PLANT AND MACHINERY DOES NOT EXCEED ` 3 CRORES, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. IN THIS CASE, ADMITTEDLY, THE INVESTMENT IN PLANT AND MACHINERY IS ONLY ` 212.71 LAKHS AS ON 31.3.2009, THEREFORE, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE CONTINUES TO B E A SMALL SCALE INDUSTRY AS ON THE LAST DAY OF THE PREVIOUS YEAR HE NCE, IT IS ELIGIBLE FOR DEDUCTION U/S 80IB. THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT WHEN THE CENTRAL GOVERNMENT DELEGATES ITS POWER TO STATE GOVERNMENT UNDER (INDUSTRIES AND DELEGATION) ACT 19 51, THE ITA NOS.399/15 & 1015/14 :- 7 -: GUIDELINES ISSUED BY THE STATE INDUSTRIES DEPARTMEN T HAS TO BE FOLLOWED FOR DETERMINING WHETHER AN UNDERTAKING IS SMALL SCALE INDUSTRY OR NOT. 8. THE NEXT CONTENTION OF THE LD. DR IS THAT THE ASSE SSEE IS CLAIMING DEDUCTION ONLY IN RESPECT OF THE BRANCH UN IT AT 55D, SIDCO INDUSTRIAL ESTATE, AMBATTUR. WE HAVE CAREFULLY GON E THROUGH THE PERMANENT REGISTRATION CERTIFICATE COPY OF WHICH AV AILABLE AT PAGE 2 OF THE PAPER BOOK. THE REGISTRATION CERTIFICATE ISSUE D BY THE DIRECTORATE OF INDUSTRIES SHOWS THAT THE MAIN UNIT MANUFACTURIN G BLOW MOULDED PLASTIC CONTAINERS ONLY. THE BRANCH UNIT MANUFACTU RES INJECTION MOULDED PLASTIC BUCKETS ONLY. THE BRANCH UNIT, IN ADDITION TO THE ABOVE, MANUFACTURING INJECTION MOULDED PLASTIC COMP ONENTS SUCH AS PAILS AND BUCKETS MADE OUT OF HD, LD. AND PP MATERI AL AND BLOW MOULDED PLASTIC BARRELS, DRUMS AND CONTAINERS. IN F ACT, THE METHODS OF PRODUCTION IN MAIN UNIT AT 271, SIDCO INDUSTRIAL ES TATE AND THE METHOD IN THE BRANCH UNIT AT 55D, SIDCO INDUSTRIAL UNIT ARE DIFFERENT EVEN THOUGH BOTH UNITS PRODUCING VARIOUS PLASTIC PR ODUCTS. THE ASSESSING OFFICER FURTHER OBSERVED THAT PRODUCTION WAS COMMENCED ON 20.10.1997 AND EXPANSION-I WAS ON 2.12.2007. IN FA CT, THE EXPANSION-I WAS ON 2.12.2000 AS MENTIONED IN THE CE RTIFICATE OF REGISTRATION AND NOT ON 2.12.2007 AS OBSERVED BY TH E ASSESSING OFFICER. MERELY BECAUSE THE SECOND UNIT WAS SHOWN AS BRANCH UNIT OR ITA NOS.399/15 & 1015/14 :- 8 -: EXPANDED UNIT, IT CANNOT BE SAID THAT THE BRANCH UN IT IS NOT AN INDEPENDENT UNIT. IN FACT, THE INJECTION MOULDED P LASTIC COMPONENTS ARE MANUFACTURED AT 55-D, SIDCO INDUSTRIAL UNIT. T HIS METHOD IS NOT USED IN THE MAIN UNIT. THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT BOTH UNITS ARE FUNCTIONING DIFFERENTLY EVEN THOUGH THE END PRODUCT IN BOTH UNITS ARE PLASTIC COMPONENTS. THEREFORE, BOTH THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN TREATING BOTH THE UNITS AS SAME UNIT. MERELY BECAUSE ONE UNIT IS TREATED AS BRANCH UNIT FOR ADMI NISTRATIVE CONVENIENCE, IT DOES NOT MEAN THAT BOTH THE UNITS A RE ONE AND THE SAME. IN VIEW OF THE ABOVE, BOTH THE AUTHORITIES B ELOW ARE NOT JUSTIFIED IN TREATING BOTH THE UNITS AS ONE AND THE SAME. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT BOTH MAIN AND BRA NCH UNIT ARE SEPARATE AND INDEPENDENT ONE, THEREFORE, THE AUTHOR ITIES BELOW ARE NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE U/ S 80IB OF THE ACT. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW AR E SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE U/S 80IB OF THE ACT. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AR E ALLOWED. ITA NOS.399/15 & 1015/14 :- 9 -: ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OF JULY, 2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 17 TH JULY, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF