Pooja Industries, Solan V. ITO, Solan

ITA 11/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0713 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 11/CHD/2012 ASSESSMENT YEAR : 2007-08 POOJA INDUSTRIES V I.T.O. WARD 1, SOLAN (HP) PLOT NO. 75, SECTOR 1 PARWANOO SOLAN AAGFP 3843 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURINDER BABBAR RESPONDENT BY: SHRI N.K. SAINI DATE OF HEARING : 27.12.2012 DATE OF PRONOUNCEMENT : 14.01.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A), SHIMLA DATED 31.10.2011. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN CONCURRING WITH THE ITO IN REJ ECTING THE VALID CLAIM OF THE ASSESSEE U/S 80IC OF THE ACT . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE REJECTION OF CLA IM OF RS. 1,12,94,962/- IN CONCURRENCE WITH THE ITO BY HO LDING THAT THERE IS NO DISTINCTION BETWEEN A FLOUR MILL AND A ROLLER FLOUR MILL. 3 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED RETURN DECLARING INCOME OF RS. 82,760/-. THIS INCOME WAS AFTER CLAIM OF DEDUCTION AMOUNTING TO RS. 1,12,94,962/- U/S 80I C OF THE ACT. EARLIER THE ASSESSEE WAS CLAIMING DEDUCTION U /S 80IB OF THE ACT AND IN THE PRESENT YEAR IT WAS CLAIMED THAT THE 2 ASSESSEE HAD MADE SUBSTANTIAL EXPANSION AND THEREFO RE, WAS ENTITLED TO DEDUCTION U/S 80IC OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IC ON THE BA SIS OF EXPANSION IN FLOUR MILL. HE FURTHER NOTICED THAT DE DUCTION U/S 80IC IS NOT AVAILABLE IN VIEW OF SUB-SECTION (8) OF SECTION 80IC WHICH PRESCRIBED THAT DEDUCTION IS NOT AVAILABLE UN DER THIS PROVISION ON MANUFACTURE OF ARTICLE OR THING SPECIF IED IN SCHEDULE XIII, PART B. SINCE PART B OF SCHEDULE XI II SPECIFICALLY MENTIONED FLOOR MILL AT ITEM 8, THE DE DUCTION WAS NOT AVAILABLE. THE ASSESSEE WAS CONFRONTED WITH TH IS SITUATION BY WAY OF SHOW CAUSE NOTICE VIDE ORDER SHEET DATED 26.11.2010 AND FOLLOWING POINTS WERE RAISED: I) BEING 6 TH YEAR OF PRODUCTION DEDUCTION U/S 80IB IS ALLOWABLE 25% INSTEAD OF 100% CLAIMED BY YOU. II) AS PER THIRTEENTH SCHEDULE, DEDUCTION U/S 80IC IS NOT ALLOWABLE TO FLOUR MILLS. III) IN NUTSHELL,, YOU ARE REQUESTED TO EXPLAIN WHY DEDUCTION CLAIMED AT 100% MAY NOT BE REDUCED TO 25% OF TOTAL PROFITS. THE ASSESSEE SUBMITTED DETAILED REPLY IN WHICH IT W AS CONTENDED THAT SUBSTANTIAL EXPANSION HAS BEEN CARRI ED OUT AS INVESTMENT IN THE PLANT AND MACHINERY DURING THE YE AR WAS MORE THAN 50% OF THE BOOK VALUE. FURTHER THE ASSES SEE WAS RUNNING A ROLLER FLOUR MILL WHICH IS DISTINCT FRO M THE FLOUR MILL AND IN THIS REGARD REFERENCE WAS MADE TO THE SALES TAX EXEMPTION GIVEN BY THE GOVERNMENT OF HIMACHAL PRADE SH WHEREIN IT WAS CLARIFIED THAT ROLLER FLOUR MILLS IS DIFFERENT FROM FLOUR MILL VIDE LETTER NO. IND (A)(F) 6-16/9 4 DARTED 1.7.1994. SINCE ROLLER FLOUR MILL IS NOT MENTION ED IN PART B OF SCHEDULE XIII, THEREFORE, THE ASSESSEE WAS ELIGI BLE FOR 3 DEDUCTION U/S 80IC. THE ASSESSING OFFICER AFTER CO NSIDERING THE REPLY REJECTED THE SAME BECAUSE THE ASSESSEE WA S RUNNING BASICALLY A FLOUR MILL AND THE MAIN ITEM MANUFACTUR ED WAS ATTA/FLOUR. HE ALSO OBSERVED THAT INTERPRETATION BY THE GOVERNMENT OF HIMACHAL PRADESH UNDER SALES TAX LAWS COULD NOT BE APPLIED TO THE INCOME-TAX. HOWEVER, HE ALLO WED THE DEDUCTION U/S 80IB (4) @ 25%. 4. ON APPEAL BEFORE THE LD. CIT(A) THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED. IT W AS AGAIN EMPHASIZED THAT THE ROLLER FLOUR MILL IS DIFFERENT FROM FLOUR MILL AND IN THIS REGARD REFERENCE WAS ALSO MADE TO THE R EGISTRATION CERTIFICATE ISSUED BY THE DEPARTMENT OF INDUSTRIES. IT WAS FURTHER SUBMITTED THAT IN A FLOUR MILL ONLY ATTA AN D CHOKKAR ARE THE END PRODUCTS WHEREAS IN ROLLER FLOUR MILL IN AD DITION TO ATTA AND CHOKKAR, MAIDA AND SUZI ARE ALSO PRODUCED. THE FLOUR MILL IS PRACTICALLY A CHAKKI MADE OUT OF STONE WHEELS WHEREAS ROLLER FLOUR MILL IS MADE OF ROLL BODIES WHICH IS E NTIRELY DIFFERENT FROM A FLOUR MILL. THE CLARIFICATION GIV EN BY THE GOVERNMENT OF HIMACHAL PRADESH REGARDING EXEMPTION IN SALES- TAX WAS ALSO REITERATED. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS DID NOT FIND FORCE IN THE SAME AND REJECTED THE CLAIM OF TH E ASSESSEE. 6 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND E MPHASIZED THAT FLOUR MILL IS DIFFERENT FROM ROLLER FLOUR MILL . FIRSTLY THE FLOUR MILL CAN PRODUCE ONLY FLOUR AND CHOKER WHEREA S ROLLER FLOUR MILL ALSO PRODUCES IN ADDITION TO FLOUR AND C HOKER, MAIDA AND SUZI. SECONDLY THE FLOUR MILL MACHINERY IS VER Y SIMPLE AND 4 A SMALL SINGLE FLOOR BUILDING IS REQUIRED TO INSTAL L THE SAME WHEREAS IN CASE OF ROLLER FLOUR MILL FIVE STOREY BU ILDING IS REQUIRED ALONG WITH SOPHISTICATED MACHINERY. THIRD LY THE GOVERNMENT OF HIMACHAL PRADESH HAS CLARIFIED VIDE L ETTER DATED 1.7.1994 (COPY PLACED AT PAGE 55 OF PAPER BOOK) WRI TTEN BY D.C-CUM-SECRETARY TO INDUSTRIES TO THE DIRECTOR OF INDUSTRIES THAT ROLLER MILL ARE NOT COVERED UNDER SR NO. 1 OF ANNEXURE III. THAT SINCE ROLLER FLOUR MILL ARE DIFFERENT FROM FLO UR MILL AND THEREFORE, SAME IS ELIGIBLE FOR SALES TAX EXEMPTION . THUS IT IS CLEAR THAT FLOUR MILL IS DIFFERENT FROM ROLLER FLOU R MILL. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DISPUT ED THAT THE ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION DURI NG THE YEAR AND DEDUCTION STANDS DENIED U/S 80IC MAINLY ON THE BASIS THAT FLOUR MILL FINDS MENTION IN SCHEDULE XIII, PART B C ONTAINING LIST OF ARTICLE OR THINGS WHICH ARE NOT ENTITLED FOR DED UCTION. SINCE ROLLER FLOUR MILL DOES NOT FIND MENTION IN SCHEDULE XIII, PART B AND ITEM 8 BY THE SCHEDULE ONLY REFERS TO THE FLOUR MILL / RICE MILLS WHICH ARE DIFFERENT FROM THE ROLLER FLOUR MIL L, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IC. THE L D. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE LD. CIT(A) IN PARA 5.4 OF HER ORDER USES THE DEFINITION GIVEN IN THE DICTI ONARY WHICH IS NOT CORRECT BECAUSE IT HAS BEEN HELD BY THE VARIOU S DECISIONS THAT IF AN ITEM IN SCHEDULE IS TO BE INTERPRETED TH AT THE SAME SHOULD BE INTERPRETED ON THE BASIS OF TRADE NAMES GIVEN BY THE TRADE. 7 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE REF ERRED TO PAGE 12 OF THE PAPER BOOK WHICH IS A COPY OF FORM 3 CD OF TAX AUDIT REPORT AND INVITED OUR ATTENTION TO COL NO. 8 . AGAINST THE NATURE OF BUSINESS TAX AUDITOR HAS CLEARLY MENT IONED FLOUR 5 MILL WHICH ITSELF SHOWS THAT THE ASSESSEE WAS RUNN ING A FLOUR MILL. HE REFERRED TO PG 24 OF THE PAPER BOOK AND P OINTED OUT THAT OPENING STOCK OF MAIDA AND SUZI WHICH CLEARLY SHOWS THAT THE ASSESSEE WAS EARLIER ALSO PRODUCING MAIDA AND S UZI WHICH HAS BEEN PRODUCED NOW. HE REFERRED TO PG 33 TO 38 OF THE PAPER BOOK WHICH IS A COPY OF LETTER ADDRESSED TO T HE ASSESSING OFFICER AND POINTED OUT THAT CLAIM REGARD ING DISTINCTION BETWEEN FLOUR MILL AND ROLLER FLOUR MIL L WAS SOUGHT TO BE ARRANGED FOR THE FIRST TIME ON 9.12.2010 BY T HIS LETTER I.E. AFTER THREE YEARS. 8 IN THE REJOINDER THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT DISTINCTION BETWEEN FLOUR MILL AND ROLLER FLOU R MILL WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER O NLY WHEN THE ISSUE RAISED BY THE ASSESSING OFFICER FOR DENIA L OF DEDUCTION U/S 80IC. FURTHER MERELY BECAUSE THE ASS ESSEE WAS MANUFACTURING MAIDA AND SUZI EARLIER ALSO ONLY PROV ES THAT THE ASSESSEE WAS RUNNING A ROLLER FLOUR MILL RIGHT FROM THE BEGINNING. 9 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. W E FIND THAT THE LD. CIT(A) HAS DISCUSSED THE ISSUE IN DETA IL AND IN THIS REGARD WE WOULD LIKE TO PRODUCE PARA 4 TO 4.4 OF HE R ORDER WHICH ARE AS UNDER: 4 THE RIVAL SUBMISSIONS HAVE BEEN CONSIDERED. THE ENTRY AT SR NO. 8 IN SCHEDULE XIII, PART B READS FLOUR MILL/RICE MILL. ON THE FACT OF IT, THE ENTRY MAKE S IT CLEAR THAT ALL TYPES OF FLOUR MILLS AND RICE MILLS ARE CO VERED BY THIS ENTRY. IT DOES NOT ELABORATE THE CATEGORIES O R TYPES OF FLOUR MILLS AND RICE MILLS. THE HEADING OF THE XIII SCHEDULE READS LIST OF ARTICLE OR THING. THEREFO RE, IT IS CLEAR THAT WHAT IS PROHIBITED BY VIRTUE OF XIII SCH EDULE IS THE PRODUCTION/MANUFACTURING OF THE SPECIFIED ARTIC LES OR THINGS. ACCORDINGLY, IT IS THE PRODUCTION OF FLOUR /RICE THROUGH FLOUR MILL/RICE MILL WHICH IS BARRED FROM ENTITLEMENT U/S 80IC OF THE INCOME-TAX ACT, 1961 BY VIRTUE 6 OF SCHEDULE XIII. THUS THE PROHIBITION IS IN RESPE CT OF THE PRODUCTION OF FLOUR, AND IT IS IMMATERIAL WHETHER T HE FLOUR MILL PRODUCING THE FLOUR IS AN ORDINARY CHAKKI OR A ROLLER FLOUR MILL. IN FACT, LOGICALLY SPEAKING, THE PROVI SIONS OF SECTION 80IC READ WITH SCHEDULE XIII WOULD HARDLY B E RELEVANT IN THE CASE OF AN ORDINARY CHAKKI WHICH DO ES NOT INVOLVE SO MUCH OF INVESTMENT, WHAT TO TALK OF SUBS TANTIAL EXPANSION AND SUCH OTHER THINGS. FURTHER FLOUR MIL LS CAN BE OF VARIOUS TYPES, SUCH AS STONE MILL, HAMMER MIL L, PLATE MILL, PIN MILL, ROLLER MILL ETC. THE EQUIPMENT USE D IN THESE MILLS CAN BE POWERED BY HAND, WATER, ANIMALS, ELECT RICITY OR DIESEL ENGINE. THE ONLY DIFFERENCE BETWEEN VARI OUS MILLING PROCESSES IS THAT OF TECHNIQUE AND SPEED. F LOUR IS A COMMON PRODUCT IN ALL KINDS OF MILLING PROCESSES. THEREFORE, IT CAN NOT BE SAID THAT WHAT IS INTENDED BY ENTRY NO.8 IN PART B OF SCHEDULE XIII IS ONLY A STO NE MILL AND NOT A HAMMER MILL OR A PLATE MILL OR A PIN MILL OR A ROLLER FLOUR MILL. PUTTING SUCH AN INTERPRETATION WOULD REDUCE THE ENTRY TO A FARCE. 4.1 FURTHER, THE RELEVANT ENTRY OF FLOUR MILL/RICE MILLS IN SCHEDULE XIII ALSO MENTIONS AN EXCISE CLASSIFICATIO N OF 11.01 AGAINST IT. THIS CLASSIFICATION CODE REFERS TO CLASSIFICATION OF PRODUCTS UNDER THE CENTRAL EXCISE TARIFF ACT, WHICH DEALS WITH PRODUCTS OF THE MILLING INDUS TRY. THERE IS NO DISTINCTION MADE IN THIS CHAPTER BETWEE N GOODS PRODUCED BY ROLLER FLOUR MILLS OR BY ANY OTHE R TYPE OF FLOUR MILL. VARIOUS PRODUCTS ARE CLASSIFIED AS PER THE STARCH CONTENT AND ASH CONTENT. THE CODE 11.01 REFE RS TO WHEAT FLOUR AND THERE IS NO DISTINCTION MADE AS TO WHETHER THE WHEAT FLOUR IS MADE BY A ROLLER MILL OR BY ANY OTHER MILL. 4.2 CERTAIN DECISIONS UNDER THE CENTRAL EXCISE TARI FF ACT ALSO MAKE IT CLEAR THAT THE CLASSIFICATION CODE 11. 01 IS A BROAD HEADING WHICH COVERS VARIOUS PRODUCTIONS OF T HE MILLING INDUSTRY. IN THE CASE OF BHAGYALAXMI POHA INDUSTRIES V. COMMISSIONER (2007) 215 ELT 458 (TRIB BANGALORE), IT WAS HELD THAT RICE FLAKES OR POHA AR E PRIME FACIE CLASSIFIABLE UNDER HEADING 11.01 OF THE CENTR AL EXCISE TAFIFF. IN ANOTHER CASE OF MAHAVIR FOOD PRO DUCTS V COMMISSIONER (2007) 211 ELT 29 (TRIB LB), IT HAS BEEN HELD THAT MAKAI POHA I.E. CORN BOILED AND FLATTENED BETWEEN ROLLERS, IS CLASSIFIABLE UNDER THE HEADING 11.01 OF THE CENTRAL EXCISE TARIFF ACT. 4.3 THE ASSESSEES CONTENTION THAT THE STATE GOVERNMENT OF HIMACHAL PRADESH HAS ACCEPTED THE DISTINCTION BETWEEN FLOUR MILL AND ROLLER FLOUR MIL L IS OF NO RELEVANT. THE SCHEME OF SALES TAX INCENTIVES WHICH WAS IN FORCE IN THE STATE IN 1994 WAS ENTIRELY A SEPARA TE SCHEME NOTIFIED BY THE STATE GOVERNMENT. THAT SCHE ME HAS NO RELEVANCE OR CONNECTION WITH THE TAX HOLIDAY COMPRISED IN SECTION 80IC, WHICH WAS ENACTED BY THE FINANCE ACT, 2003 AS A PART OF THE NEW INDUSTRIAL P OLICY OF THE CENTRAL GOVERNMENT ANNOUNCED IN 2003 FOR STATES LIKE H.P. THIS BECOMES FURTHER CLEAR BY THE FACT THAT T HE LIST OF INELIGIBLE INDUSTRIES CONTAINED IN SCHEDULE XIII IS ALMOST ENTIRELY DIFFERENT IN CONTENT FROM THE LIST OF UNITS 7 DECLARED TO BE INELIGIBLE FOR SALES TAX INCENTIVES BY THE STATE GOVERNMENT. FOR THE PURPOSE OF THE INCOME-TA X ACT, THE ENTRY IN SCHEDULE XIII HAS TO BE UNDERSTOO D IN ITS NORMAL SENSE AND NOT IN TERMS OF ANY CLARIFICATIONS ISSUED BY THE STATE GOVERNMENT UNDER AN ENTIRELY DIFFERENT SCHEME. 4.4 A STATUTE IS THE EDICT OF THE LEGISLATURE. THE LANGUAGE EMPLOYED IN A STATUTE IS THE DETERMINATIVE FACTOR OF THE LEGISLATIVE INTENT. THE FIRST AND PRIMARY R ULE OF CONSTRUCTION IS THAT ONE MUST GO BY THE INTENTION O F THE LEGISLATION ITSELF AS HELD IN PADMASUNDRA RAO V STT E OF TN 255 ITR 147 (S.C); CGT V. LAXMI DEVI 220 ITR 50, CI T V.DEEP CHAND, 2547 ITR 756. IT WAS ALSO HELD BY HO N'BLE SUPREME COURT IN THE CASE OF VIKRANT TYRES V FIRST ITO, 247 ITR 821 (S.C) THAT UNLESS THERE IS AN INTENTION TO THE CONTRARY, THE WORDS IN A STATUTE SHOULD BE GIVEN TH EIR ORDINARY GRAMMATICAL OR NATURAL MEANING (EMPHASIS SUPPLIED). THE RELEVANT PORTION OF SECTION 80IC READS AS UNDER : 80-IC. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERT AKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SEC TION (2), 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 GAI NS, AS SPECIFIED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE, (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SP ECIFIED IN THE THIRTEENTH SCHEDULE, OR WHICH MANUFACTURES OR PRODU CES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SP ECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPA NSION DURING THE PERIOD BEGINNING THE THIRTEENTH SCHEDULE (SEE SECTIONS 80IB(4) AND 80IC(2)} LIST OF ARTICLES OR THINGS PART A FOR THE STATE OF SIKKIM --------------------------------------------------- --------------------------- SCHEDULE XIII LIST OF ARTICLES OR THINGS PART B FOR THE STATE OF HIMACHAL PRADESH AND THE STATE OF UTTARANCHAL 8 S NO ACTIVITY OR ARTICLE OR THING EXCISE CLASSIFICATION SUB-CLASS UNDER NATIONAL INDUSTRIAL CLASSIFICATION (NIC) 1998 1 TOBACCO AND TOBACCO PRODUCTS INCLUDING CIGARETTES AND PAN MASALA 24.01 TO 24.04 AND 21.06 1600 2 THERMAL POWER PLANT (COAL / OIL BASED) 40102 OR 40103 3 COAL WASHERIES/DRY COAL PROCESSING 4 INOROGANIC CHEMICALSL LEXCLUDING MEDICINAL GRADE OXYGEN (2804.11), MEMDICINAL GRADE HYDROGEN PEROXIDE (2847.11), COMPRESSED AIR (2851.30) CHAPTER 28 5 ORGANIC CHEMICALS EXCLUDING PROVITAMINS/VITAMINS, HORMONES (29.36), GLYCOSIDES (29.39), SUGAR (29.40) CHAPTER 29 24117 6 TANNINGAND DYEING EXTRACTS, TANNINS AND THEIR DERIVATIVES, DYES, COLOURS, PAINTS AND VARNISHES, PUTTY, FILLERS AND OTHER MASTICS, INKS CHAPTER 32 24113 OR 24114 7 MARBLE AND MINERAL SUBSTANCES NOR CLASSIFIED ELSEWHERE 25.04 25.05 14106 OR 14107 8 FLOUR MILLS/RICE MILLS 11.01 15311 9 TO 20 FROM THE ABOVE IT IS CLEAR THAT DEDUCTION U/S 80IC IS AVAILABLE WHENEVER THE ASSESSEE UNDERTAKES A SUBSTANTIAL EXPA NSION. THE ISSUE RELATING TO SUBSTANTIAL EXPANSION HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. HOWEVER, SUB-SE C (2) FURTHER REQUIRES THAT DEDUCTION IS AVAILABLE ONLY T O SUCH UNDERTAKING WHICH BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING WHICH ARE NOT MENTIONED IN SCHEDULE XIII, PART B. THUS IT IS CLEAR AS OBSERVED BY THE LD. CIT(A) THE DEDUC TION IS NOT 9 DENIED ON A PARTICULAR TYPE OF MILL BUT IT IS DENIE D ON A PARTICULAR TYPE OF ARTICLE OR THING WHICH IS MENTIO NED THEREIN. IT SHOULD BE EMPHASIZED THAT PART B OF SCHEDULE XIII, ITEM 8 TALKS OF FLOUR MILL UNDER THE HEAD ACTIVITY OR ARTICLE O R THING BUT THAT HAS BEEN FURTHER CLARIFIED IN THE SCHEDULE ITS ELF BY WAY OF EXCISE CLASSIFICATION AS WELL AS SUB-CLAUSE UNDER N ATIONAL INDUSTRIES CLASSIFICATION (N.I.C) 1998. THE LD. CI T(A) HAS FURTHER OBSERVED THAT CENTRAL EXCISE TARIFF CLASSIF ICATION CODE 11.01 OF CENTRAL EXCISE ACT MAKES IT CLEAR THAT IT IS A BROAD HEADING WHICH COVERS VARIOUS PRODUCTS OF THE MILLIN G INDUSTRY. FURTHER N.I.C. 1998 GIVES VARIOUS CATEGORIES OF PRO DUCTS UNDER VARIOUS HEADS KNOWN AS DIVISIONS. DIVISION 15 RE ADS AS UNDER: DIVISION 15 MANUFACTURE OF FOOD PRODUCTS OF BREWAGES 15311 FLOUR MILLING THIS CLASSIFICATION UNDER VARIOUS NIC STANDARDS HAS BEEN ISSUED BY MINISTRY OF STATISTICS AND PROGRAMME IMPL EMENTATION, GOVERNMENT OF INDIA. CODE 15311 HAS BEEN MENTIONED IN PART B OF SCHEDULE XIII AT COL. 8. SINCE THIS DIVISION PERTAIN TO FOOD AND BREWAGES AND ONLY ONE ITEM IN RESPECT OF FLOUR MILLING IS THERE, IT BECOMES CLEAR THAT THE PARLIAM ENT WAS CLEAR IN ITS INTENTION THAT ACTIVITY OF FLOUR MILLING WOU LD NOT BE ENTITLED TO DEDUCTION U/S 80IC AND THAT IS WHY THE SAME HAS BEEN PLACED IN SCHEDULE XIII ALONG WITH EXCISE CLA SSIFICATION CODE 11.01 AS WELL AS NATIONAL INDUSTRIES CLASSIFIC ATION UNDER DIVISION 15 AT SL NO. 15311. THEREFORE, THE ACTIV ITY OF FLOUR MILLING OR ARTICLE OR THING UNDER WHICH CAN BE CALL ED FLOUR IS NOT ELIGIBLE FOR DEDUCTION U/S 80IC BY VIRTUE OF IT S ENTRY IN THE NEGATIVE LIST IN PART B OF SCHEDULE XIII. 10 10 THE LD. COUNSEL OF THE ASSESSEE THOUGH ARGUED T HAT THIS ITEM SHOULD BE INTERPRETED ON THE BASIS OF A TRADE NAME BUT NO TRADE JOURNAL OR ANY OTHER MATERIAL WAS PRODUCED TO SHOW THAT IN THE TRADE PARLANCE FLOUR MILL IS DISTINCT FROM ROLLER FLOUR MILL. IN ANY CASE THE ASSESSEE ITSELF HAS BEEN SHO WN TO BE RUNNING A FLOUR MILL AS PER THE TAX AUDIT REPORT (C OPY OF WHICH IS AVAILABLE AT PG 12 TO 20 AT SL NO. 8 WHICH DEALS WITH THE NATURE OF BUSINESS, THE SAME HAS BEEN SHOWN AS FLO UR MILL. 11 WE HAVE ALSO PERUSED PAGE 25 OF THE PAPER BOOK W HICH IS AN ANNEXURE GIVING QUANTITATIVE DETAILS OF PRINCIPL E ITEMS OF RAW MATERIAL AND FINISHED PRODUCTS HAS BEEN FOLLOWED. ANNEXURE IV QUANTITATIVE DETAILS OF PRINCIPAL ITEMS OF RAW MATE RIAL ITEM WHEAT (IN QTLS) OPENING STOCK 14345.66 PURCHASES DURING THE PREVIOUS YEAR 140348.50 CONSUMPTION DURING THE PREVIOUS YEAR 149102.62 SALES DURING THE PREVIOUS YEAR NIL CLOSING STOCK 5591.54 YIELD OF FINISHED PRODUCTS FLOUR 118746 MAIDA/ SUZI 16984. 45 CHOKER 16586.46 %AGE OF YIELD 79.64% 11.39% 11.12% SHORTAGE/EXCESS, IF ANY PROCESS GAIN(QTLS) = (3214.29) 2.15% FROM THE ABOVE IT IS CLEAR THAT PRINCIPLE ACTIVITIE S REMAIN MILLING OF FLOUR AND 79.64% WHEAT CRUSHED RESULTS I NTO MILLING OF FLOUR AND MAIDA AND SUZI IS ONLY AT 11.39% WHICH CAN BE 11 CALLED AS BI-PRODUCT. THUS IT IS CLEAR THAT MAIN A CTIVITY OF THE ASSESSEE IS MILLING AND BY DOING THE ACTIVITY LISTE D IN THE NEGATIVE LIST IN PART B OF SCHEDULE XIII, DEDUCTION U/S 80IC, IS NOT AVAILABLE. 12 THE LD. COUNSEL OF THE ASSESSEE HAD PUT UP LOT O F STRESS ON THE CLARIFICATION OF LEGAL EXEMPTION GRANTED BY THE GOVERNMENT OF HIMACHAL PRADESH. RELEVANT LETTER IS EXTRACTED BELOW: IND(A)(F)6-16/94 GOVERNMENT OF HIMACHAL PRADESH INDUSTRIES DEPARTMENT THE D.C-CUM-SECRETARY (INDUSTRIES) TO THE GOVERNMENT OF HIMACHAL PRADESH TO THE DIRECTOR OF INDUSTRIES HIMACHAL PRADESH, SHIMLA-1 DATED, SHIMLA-2 1.7.1994 JUNE 1994 SUB: SALES TAX EXEMPTION TO ROLLER FLOUR MILLS, CLARIFICATION THEREOF SIR, I AM DIRECTED TO REPLY TO YOUR LETTER NO. IN/DEV., F.19- 18/91-IB DATED 20.4.94 IN THE ABOVE CITED SUBJECT A ND TO SAY THAT THE MATTER HAS BEEN EXAMINED IN CONSULTATION W ITH LAW DEPARTMENT. ACCORDING TO RULE 11.1 (D) OF THE REVI SED RULES REGARDING GRANT OF INCENTIVES TO INDUSTRIAL UNITS I N HIMACHAL PRADESH, ALL INDUSTRIAL UNITS RE ELIGIBLE FOR SALES TAX INCENTIVES WHICH ARE REGISTERED AS APPELLATE AUTHORITY DEALER UNDER THE H.P. GENERAL SALES TAX ACT, 1968/CENTRAL SALES TAX ACT, 1956 AND COMPLY WITH ITS PROVISIONS, EXCEPT FOR THE INDU STRIES NOTIFIED IN ANNEXURE-III OR AS NOTIFIED BY THE STAT E GOVERNMENT FROM TIME TO TIME. ACCORDING TO SL NO. 1 OF ANNEXU RE III OF THE SAID RULES, FLOUR MILLS ARE NOT ELIGIBLE FOR SALES TAX INCENTIVES. IN OTHER WORDS, THE ROLLER FLOUR MILLS ARE NOT COVE RED UNDER SL NO. 1 OF ANNEXURE III AND HENCE ARE ELIGIBLE FOR SA LES TAX INCENTIVES SUBJECT TO FULFILLMENT OF OTHER REQUIREM ENTS. YOURS FAITHFULLY SD/- JOINT SECRETARY (INDUSTRIES) TO THE GOVERNMENT OF HIMACHAL PRADESH 12 IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY BRUSHE D ASIDE THIS CLARIFICATION BECAUSE IT DEALS WITH THE SALES TAX E TC. WHICH IS A STATE SUBJECT AND THIS CLARIFICATION CAN NOT NEGATE S THE INTENTION OF THE PARLIAMENT GIVEN IN PART B OF SCHE DULE XIII WHICH IS A NEGATIVE LIST FOR DEDUCTION U/S 80IC. I N THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ASSES SEE BY VIRTUE OF BEING PLACED IN PART B OF SCHEDULE XIII, IS NOT ENTITLED TO DEDUCTION U/S 80IC. THE ASSESSING OFFICER HAS B EEN MORE THAN REASONABLE FOR GRANTING DEDUCTION U/S 80IB @ 2 5%. IN THESE CIRCUMSTANCES WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 14.01.2013. SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 14.01.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 13 14