ITO, Baddi V. M/s Shree Ram Print-N-Pack, Solan

ITA 1203/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4487 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-04-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 15-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Depreciation; Tax effect
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACOCUNTANT MEMBER ITA NO. 1203/CHD/2012 ASSESSMENT YEAR:2009-10 THE ITO VS. SH. RAM PRINT-N-PACK BADDI VILL & PO MANPURA SOLAN PAN NO.ABFFS4545L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.S. NAGAR RESPONDENT BY : SHRI VISHAL MOHAN DATE OF HEARING : 25/09/2013 DATE OF PRONOUNCEMENT : 18.10.2013 ORDER PER T.R. SOOD, AM THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER PASSED BY THE LD. CIT(A), SHIMLA, H.P. ON 09/08/2012 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION OF RS. 55,70,119/- TO THE ASSESSEE WHICH WAS DISALLOWED BY THE ASSESSING OFFICER U/S 80IC OF THE INCOME TAX ACT. 2 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET-ASIDE AND THAT OF ASSESSING OFFICER RESTORED. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAS CLAIMED DEDUCTION U/S 80IC AMOUNTING TO RS. 55,70,119/-. O N PERUSAL OF THE BALANCE SHEET, IT WAS NOTICED THAT DETAILS OF PLANT S AND MACHINERY WERE AS UNDER:- OPENING BALANCE OF PLANT & MACHINERY AS ON 01-04-20 08 RS. 42,82,528/- ADDITION BEFORE 30-09-2008 RS. 19,380/- ADDITION AFTER 30-09-2008 RS. 4,85,478/- TOTAL VALUE RS. 47,87,386/- LESS DEPRECATION RS. 6,81,697/- BALANCE RS. 41,05,689/- IT WAS FURTHER NOTICED FROM THE COPIES OF THE BILLS THAT MACHINERY AT THE TIME OF COMMENCEMENT OF THE BUSINESS WAS PURCHASED AS SECOND HAND MACHINERY FROM M/S PRINTERS PARK, CHENNAI AS PER TH E FOLLOWING DETAILS:- SL.NO. BILL NO. & DATE PARTICULARS QTY. AMOUNT. 1 002 DATED 07-12- 2005 ONE SET OF USED SECOND HAND HEIDELBERG 72 V FOUR, COLOUR PRINTING MACHINE WITH STANDARD ACCESSORIES. ONE 36,40,00/- 2 26 DATED 05-04- 2006 HEIDEC BERG SORM SINGLE COLOR USED PRINTING MACHINE WITH STANDARD ACCESSORIES. ONE 8,32,000/- 3 29 DATED 03-02- 2007 ONE SET OF USED SECOND HAND SEYPA 36 PAPER CUTTING MACHINE WITH STANDARD ACCESSORIES. ONE 3,64,000/- ` RS. 48,36,000/- 3 THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY DE DUCTION SHOULD BE ALLOWED BECAUSE AS PER SECTION 80IC (4) OF THE ACT, THE PLANT AND MACHINERY SHOULD NOT BE PREVIOUSLY USED FOR ANY PUR POSE. IN RESPONSE TO THIS QUERY, IT WAS STATED AS UNDER:- IN RESPECT OF YOUR QUERY RAISED BY YOUR GOOD SELF REGARDING INSTALLATION OF PREVIOUSLY USED MACHINERY, IT IS SU BMITTED THAT THE ASSESSEE FIRM HAS NOT INSTALLED ANY PREVIOUSLY USED MACHINERY IN INDIA. THE MACHINERIES WERE PURCHASED FROM M/S PRINTERS PA RK INDIA WHICH WERE IMPORTED FROM ABROAD AND WAS USED THERE ONLY. THEREFORE, THE ASSESSEE FULFILLS THE CONDITIONS LAID UNDER SECTION 80-IC, AS IT HAS NOT INSTALLED ANY PREVIOUSLY USED MACHINERY IN INDIA. 4. THE ASSESSING OFFICER AFTER EXAMINING THE ABOVE REPLY WAS NOT CONVINCED BECAUSE NO DOCUMENTARY EVIDENCE WERE FURN ISHED TO SUPPORT THE ASSESSEES CLAIM. ACCORDINGLY, DEDUCTION U/S 8 0IC WAS DENIED. 5. ON APPEAL, LD. CIT(A) ALLOWED DEDUCTION BY FOLL OWING HER ORDER FOR ASSESSMENT YEAR 2007-08. 6. IN FACT, IT TRANSPIRED DURING THE COURSE OF HEA RING THAT DEDUCTION WAS ALLOWED BY THE LD. CIT(A) FOR ASSESSMENT YEAR 2 007-08 BUT SINCE THE TAX EFFECT WAS LESS THAN THE AMOUNT FOR WHICH R EVENUE WAS NOT SUPPOSED TO FILE APPEAL UNDER THE INSTRUCTIONS, NO APPEAL WAS FILED BY THE REVENUE. 7. BEFORE US, LD. DR STRONGLY SUPPORTED THE ORDER O F ASSESSING OFFICER AND SUBMITTED THAT ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM 4 BEFORE THE ASSESSING OFFICER. NO DOCUMENTARY EVIDE NCE WAS FILED TO PROVE THAT MACHINERY WAS NOT USED PREVIOUSLY . 8. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT MACHINES WERE IMPORTED BY M/S S PRINTERS PARK, CHEN NAI AND THE NECESSARY DOCUMENTS WERE FILED BEFORE THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2007-08 AS WELL AS DURING THIS YEAR . THE MACHINERY WAS IMPORTED BY M/S M/S PRINTERS PARK, CHENNAI AND WAS NEVER USED IN INDIA. HE THEN REFERRED TO EXPLANATION BELOW THE S ECTION 80IA(3) OF THE ACT AND POINTED OUT THAT MACHINERY WHICH WAS USED O UTSIDE INDIA WOULD NOT BE CONSIDERED AS USED IN INDIA. HE ALSO POINTED OUT THAT SECTION 80IC(4) SPECIFICALLY REFERS TO THIS EXPLANA TION AND, THEREFORE, IT CANNOT BE SAID THAT MACHINERY WAS EARLIER USED IN I NDIA AND ACCORDINGLY ASSESSEE WAS RIGHTLY HELD TO BE ELIGIBLE FOR DEDUCT ION U/S 80IC OF THE ACT. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND THAT DEDUCTION U/S 80IC WAS DENIED VIDE ASSESSMENT ORDER PASSED U/S 143(3) EVEN IN ASSESSMENT YEAR 2007-08 ON THE SAME FOOTING , COPY OF WHICH IS PLACED AT PAGES 43 TO 46 OF THE PAPER BOOK IN THAT YEAR EVEN AN AFFIDAVIT OF M/S PRINTERS PARK, CHENNAI WAS SUBMITT ED BEFORE THE ASSESSING OFFICER. THE CONTENTS OF THE AFFIDAVIT H AVE BEEN EXTRACTED BY ASSESSING OFFICER IN ASSESSMENT YEAR 2007-08 AS UNDER:- WE HAVE IMPORTED THE SEYPA 36 PAPER CUTTING MACHI NE FROM M/S SOUTH EAST TRADING INC OF USA FOR RE-SALE AND WE HAVE NOT USED THIS MACHINE FOR ANY KIND OF CUTTING OR ANY OTHER 5 PRODUCTION IN INDIA AFTER THE IMPORT. WE SOLD THE A BOVE MACHINE TO M/S SHRI RAM PRINT N PACK VIDE OUR INVOICE NO. 29 D ATED 02-02- 2007 10. EVEN THE BILLS OF LADING WERE FILED BUT STILL T HE ASSESSING OFFICER DID NOT ACCEPT THE SAME. THE LD. CIT(A) ADJUDICATE D THE ISSUE THROUGH HER APPELLATE ORDER, COPY OF WHICH IS PLACED AT PAG ES 47 TO 50 OF THE PAPER BOOK WHEREIN VIDE PARAS 4 & 4.1 WHICH ARE AS UNDER:- 4. THE RIVAL SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED WITH REFERENCE TO THE FACTS OF THE CASE. IT IS NOTED THAT HE APPELLANT HAD DULY SUBMITTED THE BILL S OF PURCHASE OF THE MACHINERY UNDER CONSIDERATION ALONG WITH THE COPIES OF THE BILL OF LADING FROM U.S. NATIONAL LINES INC. IT HAD ALSO SUBMITTED THE AFFIDAVIT FROM THE P RINTERS PARK, FROM WHOM THE SAID MACHINERY WAS PURCHASED WHEREIN IT WAS CERTIFIED THAT THE MACHINERY WAS IMP ORTED FROM USA FOR RE-SALE AND THAT THE MACHINERY WAS NOT USED FOR ANY KIND OF CUTTING OR ANY OTHER PRODUCTION IN INDIA AFTER THE IMPORT. THE APPELLANT ALSO FURNISHED A CE RTIFICATE OF IMPORTED EXPORTER CODE (IEC) IN THE NAME OF THE PRINTERS PARK. BUT THE LD. A.O WAS NOT SATISFIED WI TH THE DOCUMENTS FURNISHED BY THE APPELLANT. HE WENT ON TO CONCLUDE THAT THE AFFIDAVIT GIVEN BY THE PRINTERS P ARK WAS SILENT ABOUT HE USES OF THE MACHINE AND THEREFORE T HE APPELLANT HAD NOT COMPLIED WITH SECTION 80IC(4) OF THE ACT. IT IS NOT UNDERSTOOD AS TO HOW THE LD. A.O. AR RIVED AT THIS CONCLUSION EVEN AFTER THE SUBMISSION OF THE CO MPLETE DOCUMENTARY EVIDENCE REGARDING THE PURCHASE OF THE MACHINERY BY THE APPELLANT, THE IMPORT OF THE MACHI NERY BY THE PRINTERS PARK THE BILLS OF IMPORT THE BILLS OF LADING AND THE AFFIDAVIT OF THE PRINTERS PARK, CHENNAI. IF THE LD. A.O. 6 HAD SUSPECTED ANY OF THE FACTS STATED BY THE APPELL ANT OR THE PRINTERS PARK, HE SHOULD HAVE CONDUCTED INDEPEN DENT ENQUIRIES AND BROUGHT SOMETHING TANGIBLE ON RECORD TO CONTROVERT THE CLAIM OF THE APPELLANT. HOWEVER, THE LD. A.O. HAS DONE NOTHING IN THIS REGARD. HE HAS SIMPLY PROCEED ON THE BASIS OF SURMISES AND CONJECTURES AN D ASSUMED THAT THE MACHINERY WAS PUT TO USE IN INDIA AFTER THE IMPORT BEFORE THE APPELLANT BOUGHT THE SAME FRO M THE PRINTERS PARK. 4.1 FURTHER ENQUIRIES WERE GOT CONDUCTED THROUGH TH E ASSESSING OFFICER DURING THE COURSE OF APPELLATE PROCEEDINGS. AS PER THE REPORT SUBMITTED BY THE ASS ESSING OFFICER, THE BUSINESS OF M/S. PRINTERS PARK IS TO I MPORT THE USED PRINTING MACHINES AND TO SELL THE SAME. THEY H AVE GOT NOTHING TO DO WITH THE PRINTING IN INDIA AFTER IMPO RT M/S. PRINTERS PARK HAVE ALSO FURNISHED A FRESH AFFIDAVIT DATED 24.10.2011 TO THIS EFFECT TO THE LD. A.O. AS PER TH E ENQUIRIES CONDUCTED FROM THE O/O THE ZONAL JOINT DI RECTOR GENERAL OF FOREIGN TRADE, CHENNAI, THE IEC NUMBER I S MANDATORY ONLY AT THE TIME OF THE CLEARANCE OF THE IMPORTED GOODS, BUT THE PROCESS OF IMPORT, I.E. PLA CING THE ORDER, FILING OF BILL OF LADING ETC. CAN TAKE PLACE EVEN WITHOUT AN IEC NUMBER. IT IS NOTED THAT THE IMPORTE D GOODS IN QUESTION WERE CLEARED AFTER THE RECEIPT OF THE I EC NUMBER BY M/S. PRINTERS PARK. THUS THERE IS NOTHING ON RECORD TO ESTABLISH THAT THE MACHINES PURCHASED BY THE APPELLANT FROM M/S. PRINTERS PARK. WHICH, IN TURN I MPORTED THE SAME FROM THE USA, WERE PUT TO USE IN INDIA AFT ER THE IMPORT AND PRIOR TO THE PURCHASE BY THE APPELLANT. THEREFORE, THE DENIAL OF DEDUCTION U/S 80-IC BY THE LD. A.O. IS NOT FOUND TO BE SUSTAINABLE. THE LD. A.O. I S ACCORDINGLY DIRECTED TO ALLOW THE DEDUCTION U/S 80- IC OF THE ACT TO THE APPELLANT . 7 11. THE ABOVE CLEARLY SHOWS THAT SUFFICIENT EVIDENC E WAS THERE TO PROVE THAT PLANT AND MACHINERY PURCHASED FROM M/S P RINTERS PARK WAS NOT USED PREVIOUSLY IN INDIA. SIMILAR ENQUIRIES W ERE ALSO CONDUCTED BY LD. CIT(A) WHICH GAVE THE SAME RESULTS. WE FURT HER FIND THAT EXPLANATION TO SECTION 80IA (3) OF THE ACT READS AS UNDER:- EXPLANATION 1. FOR THE PURPOSES OF CLAUSE (II), AN Y MACHINERY OF PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OTHER TH AN THE ASSESSEE SHALL NOT BE REGARDED AS MACHINERY OR PLANT PREVIOU SLY USED FOR ANY PURPOSE, IF THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY :- (A) SUCH MACHINERY OR PLANT WAS NOT, AT ANY TIME PREVIO US TO THE DATE OF THE INSTALLATION BY THE ASSESSEE, US ED 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 COMPU TING THE TOTAL INCOME OF ANY PERSON FOR ANY PERIOD PRIOR TO THE DATE OF THE INSTALLATION OF MACHINERY OR PLANT BY THE ASSESSEE. FURTHER, THE EXPLANATION TO SECTION 80IC(4) READS A S UNDER:- EXPLANATION- THE PROVISIONS OF EXPLANATIONS 1 AND 2 TO SUB-SECTION (3) OF SECTION 80-IA SHALL APPLY FOR THE PURPOSES O F CLAUSE(II) OF THIS SUB-SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUS E (II) OF THAT SUB- SECTION. 8 12. THUS, THROUGH THIS CLARIFICATION IN RESPECT OF USAGE OF PLANT AND MACHINERY U/S 80IC (4) HAS BEEN ADOPTED IN AS GIVEN IN EXPLANATION TO SECTION 80IA(3). THE EXPLANATION MAKES IT CLEAR TH AT PLANT WHICH WAS USED OUTSIDE INDIA BY A PERSON OTHER THAN THE ASSES SEE SHALL NOT BE REGARDED AS PLANT AND MACHINERY PREVIOUSLY USED FOR ANY PURPOSE. SINCE IN THE CASE BEFORE US, THE PLANT AND MACHINER Y WAS NEVER USED WITHIN INDIA, AS PER THE DOCUMENTS SUBMITTED BY THE ASSESSEE AND ENQUIRIES MADE BY LD. CIT(A). THOUGH THE MACHINERY WAS SECOND HAND BUT IT WAS NOT USED BY THE ASSESSEE OUTSIDE INDIA, THEREFORE, IT CANNOT BE SAID THAT MACHINERY WAS PREVIOUSLY USED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IC(4) OF THE ACT. WE FIN D NO FORCE IN THE SUBMISSIONS OF THE LD. DR THAT DOCUMENTS WERE NOT F ILED BEFORE THE ASSESSING OFFICER. THE READING OF THE ASSESSMENT O RDER FOR ASSESSMENT YEAR 2006-07 CLEARLY SHOW THAT DOCUMENTS WERE FILE D BEFORE THE ASSESSING OFFICER ALSO. IN THESE CIRCUMSTANCES, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 13. IN THE RESULT, REVENUES APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18.10.2 013) SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 18 TH OCT., 2013 RKK 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH