M/s. Jalaram Plast Pack, Daman V. The Income tax Officer,Vapi Ward-4, Daman

ITA 1327/AHD/2009

• Counselvise Citation: 132720514 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 43B; 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 1327/ AHD/2009 (ASSESSMENT YEAR 2005-06) M/S. JALARAM PLAST PACK, SURVEY NO.200/4, GALA NO.1, 1 ST FLOOR, PANCHAT UDYOG NAGAR, DAMAN-3962210 VS. ITO, WAPI WARD 4, DAMAN PAN/GIR NO. : AAEFJ 3685L (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI TUSHAR P HEMANI, AR RESPONDENT BY: SHRI RAKESH AGRAWAL, SR. DR DATE OF HEARING: 03.11.2011 DATE OF PRONOUNCEMENT: 21.12.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) I, SURAT DATED 24.03.2009 FOR THE ASSESSMENT YEAR 2005 -06. 2. GROUND NO.1 IS GENERAL. 3. GROUND NO.2 AND 3 HAVE INTERCONNECTED ISSUE WHIC H READ AS UNDER: (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS-1), SURAT, HAS ERRED IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN REJECTING THE CLAIM OF THE APPELLANT FOR DEDUCTI ON OF RS.4,92,6967-U/S.SOIB OF THE ACT EVEN THOUGH YOUR A PPELLANT HAD SATISFIED ALL THE CONDITIONS PRESCRIBED U/S.80IB OF THE ACT. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS-1), I.T.A.NO. 1327 /AHD/2009 2 SURAT, HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S.80-IB TO THE APPELLANT AS THERE WAS A DELAY IN OBTAINING FACTORY LICENSE AS THE COMPLIANCE WITH THE PROVISIONS FACTO RIES ACT, ARE NOT RELEVANT FOR ALLOWING CLAIM OF DEDUCTION U/S 80 IB. 4. THE BRIEF FACTS OF THE CASE ON THIS ISSUE TILL T HE ASSESSMENT STAGE ARE NOTED BY THE LD. CIT(A) IN PARAS 2.1.1 TO 2.1.5 OF HIS ORDER WHICH ARE REPRODUCED BELOW: 2.1.1 THIS IS REGARDING DISALLOWANCE OF DEDUCTION U/S.80IB ON THE GROUND THAT THE FACTORY LICENCE WAS NOT ACQUIRED BY THE FIRM ON OR BEFORE 31.03.2004. IN THE ASSESSMENT ORDER, THE A.O . HAS STATED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB OF RS.4 ,92,696/-, AS PER THE AUDIT REPORT THE MANUFACTURING ACTIVITY COM MENCED ON 29.03.2004 WHEREAS THE FACTORY LICENCE ISSUED BY TH E CHIEF INSPECTOR OF THE FACTORY WAS ISSUED ON 12.10.2004. THE A.O., THEREFORE, ISSUED A SHOW-CAUSE NOTICE AS TO WHY DED UCTION CLAIMED U/S.80IB SHOULD NOT BE DISALLOWED AS THE MANUFACTUR ING ACTIVITY COULD NOT HAVE STARTED BEFORE THE ISSUE OF FACTORY LICENCE. ACCORDING TO THE A.O., THE FACTORY LICENCE IS A THI RD PARTY EVIDENCE FROM THE GOVT. DEPARTMENT. THE A.O., THEREFORE, ASK ED THE ASSESSEE TO PROVE THAT THE MANUFACTURING OPERATIONS WERE STARTED ON OR BEFORE 31.03.2004. THE ASSESSEE STATED THAT FACT ORY HAS STARTED PRODUCTION IN F.Y. 2003-04 ITSELF ON 29.03.2004 WHI CH IS EVIDENCED FROM THE FOLLOWING DOCUMENTS:- (I) COPY OF PROVISIONAL S.S.I, REGISTRATION. (II) COPIES OF PURCHASE BILLS OF RAW MATERIALS D URING MARCH 2004. (III) COPY OF EVIDENCE TO SHOW THAT ELECTRI CITY CONNECTION WAS OBTAINED IN MARCH. (IV) DETAILS OF CONTRACTOR WHO CARRIED OUT THE E LECTRICAL WORK, (V) INSTALLATION REPORT OF MACHINERY. (VI) COPIES OF RELEVANT PROOFS LIKE BILLS, DELIVE RY CHALLAN AND LORRY RECEIPT FOR INSTALLATION OF MACHINERY. (VII) CREDIBLE EVIDENCE THAT WORKERS WERE DEPLOYE D AND THEY WERE ENGAGED IN MANUFACTURING ACTIVITY. 2.1.2 IN VIEW OF THE ABOVE, THE ASSESSEE STATED THA T THERE WAS NO VIOLATION OF THE CONDITIONS MENTIONED FOR DEDUCTION U/S.80IB. THE FACTORY LICENCE WAS ALSO ISSUED BY THE DEPARTMENT O N 12.10,2004 WHICH SHOWS THAT THERE WAS NO VIOLATION OF THE FACT ORY ACT. THE I.T.A.NO. 1327 /AHD/2009 3 ASSESSEE ARGUED THAT THE DELAY IN OBTAINING THE FAC TORY LICENCE IS NOT A PROOF THAT MANUFACTURING ACTIVITY HAD NOT STA RTED. 2.1.3 THE A.O. DID NOT ACCEPT THE ABOVE EXPLANATION AND STATED THAT AS PER THE FACTORY RULES NO PREMISES SHOULD BE USED AS A FACTORY WITHOUT PREVIOUS PERMISSION IN WRITING FROM THE CHI EF INSPECTOR OF FACTORY. THE A.O. ARGUED THAT THE ASSESSEE IS GUILT Y U/S.92. 2.1.4 THE A.O. FURTHER STATED THAT EVEN ON FACTS TH E MACHINERY WAS DELIVERED ONLY ON 31.03.2004 TO THE ASSESSEE AND CO NTRARY TO THIS DELIVERY REPORT ERECTION REPORT OF MACHINERY IS DAT ED 28.03.2004. ON PAGE-6 OF THE ASSESSMENT ORDER, THE A.O. HAS STA TED AS UNDER: - 'FURTHER, ON PERUSAL OF PURCHASE BILLS OF MACHINERY , DELIVERY CHALLAN AND ERECT/ON AND INSTALLATION REPORT, IT IS SEEN THAT PRINTING MACHINE WAS PURCHASED FROM M/S. SANDIP MACHINERY & MFG. CO. LTD., VIDE BILL NO.34A DATED 25.3.2QO4, BUT MACHINE RY WAS DELIVERED ON 31.O3.2OO4 TO THE ASSESSEE AND ERECTIO N REPORT DATED 23.O3.2OO4 IS SUBMITTED BY M/S. SANDIP MACHINERY & MFG. CO. LTD. OTHER TWO MACHINES LLDPE FILK PLANT & CUTTING, SEALING MACHINES WERE PURCHASED IN THE MONTHS OF MAY, 20OS AND JUNE, 2005 RESPECTIVELY.' 2.1.5 IN VIEW OF THE ABOVE, THE A.O. STATED THAT TH E ASSESSEE HAS VIOLATED THE PROVISIONS OF FACTORIES ACT AND COULD NOT HAVE STARTED THE MANUFACTURING/PRODUCTION ON OR BEFORE 31.03.200 4 AND HENCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB . 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 6. IT WAS THE SUBMISSION BY THE LD. A.R. OF THE ASS ESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNA L DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN I.T.A.N O. 2764/AHD/2010 DATED 31.03.2011 AND HE SUBMITTED A COPY OF THIS TR IBUNAL DECISION. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 2007-08. I.T.A.NO. 1327 /AHD/2009 4 AS PER THIS TRIBUNAL ORDER, IT WAS HELD BY THE TRIB UNAL THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IB AND HENCE TO THIS EXTENT, THE ISSUE INVOLVED IS COVERED IN FAVOUR OF THE ASSESSEE BY TH IS TRIBUNAL ORDER. BY RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, WE DIRE CT THE A.O. TO ALLOW DEDUCTION TO THE ASSESSEE U/S 80-IB AS PER LAW. IN THE RESULT, THESE GROUNDS NO.2 & 3 OF THE ASSESSEE ARE ALLOWED. 8. GROUND NO.4 READS AS UNDER: (4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS-1), SURAT, HAS ERRED IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN MAKING ADDITION OF RS. 10,06,7657- BY INVOKING P ROVISIONS OF SEC.40(A)(IA) OF THE INCOME TAX ACT, 1961. 9. BRIEF FACTS OF THE CASE ARE NOTED BY THE LD. CIT (A) IN PARA 3.1.1 TO 3.1.2 OF HIS ORDER WHICH ARE REPRODUCED BELOW: 3.1.1 THESE ARE REGARDING DISALLOWANCE OF RS. 10,0 6,765/- U/S.40(A)(IA) AND REGARDING DISALLOWANCE OF RS,4,97 5/- U/S.40(A)(2)(B) AND NOT ALLOWING DEDUCTION U/S.80IB ON THE INCREASED PROFIT. IN THE ASSESSMENT ORDER, THE A.O. HAS STATED THAT THE ASSESSEE HAS PAID JOB CHARGES OF RS. 10,06,765/ - TO JALARAM PLASTICS DURING THE YEAR. THE ASSESSEE HAS DEDUCTED TDS OF RS.38,678/- OUT OF SOME EXPENSES BUT HAS PAID THE S AME TO THE GOVT. ACCOUNT BEYOND THE DUE DATE. THE ASSESSEE HAS ALSO FAILED TO DEDUCT TDS ON JOB CHARGES OF RS.9,68,087/- PAID BY THE ASSESSEE. THE A.O. ASKED THE ASSESSEE AS TO WHY THE DISALLOWA NCE MAY NOT BE MADE U/S.40(A)(IA). IN RESPONSE, THE ASSESSEE HA S STATED THAT IT WILL NOT AFFECT THE TAXABLE INCOME BECAUSE THE INCR EASED INCOME WILL BE SUBJECT TO DEDUCTION U/S.80IB. THE ASSESSEE ALSO RELIED ON THE DECISION OF ZENITH RUBBER & PLASTIC WORKS (35-T TJ-259- ITAT, MUMBAI). 3.1.2 THE A.O. DID NOT ACCEPT THIS EXPLANATION AND MADE THE DISALLOWANCE U/S.40(A)(IA) AND STATED THAT NO DEDUC TION U/S.80IB CAN BE GIVEN. I.T.A.NO. 1327 /AHD/2009 5 10. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 11. IT IS SUBMITTED BY THE LD. A.R. THAT THE ASSESS EE HAS MADE PAYMENT OF TDS ALONG WITH INTEREST U/S 201(1A) OF THE INCOM E TAX ACT, 1961. IT IS ALSO SUBMITTED THAT THE PAYEES HAVE ALREADY INCLUDE D THIS AMOUNT IN THE INCOME IN THE RESPECTIVE RETURN AND PAID TAX AND TH EREFORE, THERE IS NO LOSS TO THE REVENUE. AN ALTERNATIVE CONTENTION IS ALSO RAISED THAT EVEN IF THIS AMOUNT IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE , THE SAME HAS TO BE ADDED TO GROSS TOTAL INCOME AND DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE U/S 80-IB ON THE ENHANCED INCOME. RELIANC E IS PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF RAMESH IN DUSTRIES VS ITO IN I.T.A.NO. 3131/AHD/2008 DATED 21.01.2011 AND HE SUB MITTED A COPY OF THIS TRIBUNAL DECISION. LD. D.R. OF THE REVENUE SU PPORTED THE ORDERS OF AUTHORITIES BELOW. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL ORDER CITED BY THE LD. A.R. REGARDING THE DISALLOWANCE MAD BY THE A.O. U/S 40(A)(IA), WE FIND THAT A CLEAR FINDIN G IS GIVEN BY THE LD. CIT(A) IN PARA 3.3.1 OF HIS ORDER THAT THE ASSESSEE HAS NOT CONTESTED THE DISALLOWANCE MADE U/S 40(A)(IA) WHICH HAS BEEN CORR ECTLY MADE AS PER LAW AND THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE DISALLOWANCE HAS INCREASED TO PROFITS AND THEREFORE, DEDUCTION U/S 8 0-IB SHOULD BE GIVEN ON THE INCREASED PROFIT. ON THIS ASPECT, LD. CIT(A) H AS REJECTED THE CONTENTION OF THE ASSESSEE ON THIS BASIS THAT THE D ISALLOWANCE U/S 40(A)(IA) LIKE U/S 43B INCREASED THE INCOME OF THE ASSESSEE D UE TO DEEMING PROVISION AND HENCE, IT IS NOT A PROFIT DERIVED FRO M THE INDUSTRIAL I.T.A.NO. 1327 /AHD/2009 6 UNDERTAKING AND HENCE, THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S 80-IB OF THE ACT. NOW, WE GO THROUGH THE TRIBUNAL DECISION CITED BY THE LD. A.R. HAVING BEEN RENDERED IN THE CASE OF RAMESH INDUSTRI ES (SUPRA). IN THAT CASE, THE TRIBUNAL HAS FOLLOWED ANOTHER TRIBUNAL DE CISION RENDERED IN THE CASE OF ITO VS CHIRAG PLAST IN I.T.A.NO. 2415/AHD/2 009 DATED 23.10.2009 WHEREIN, IT WAS HELD THAT THE ASSESSEE I S ELIGIBLE FOR DEDUCTION U/S 80-IB IN RESPECT OF INCREASED INCOME AFTER MAKI NG DISALLOWANCE U/S 40(A)(IA). SINCE NO CONTRARY DECISION HAS BEEN BRO UGHT TO OUR NOTICE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW AND HENCE, BY RESPECTFULLY FOLLOWING THESE TWO TRIBUNAL DECISIONS, WE HOLD THA T FOR ALLOWING DEDUCTION TO THE ASSESSEE U/S 80-IB, THE INCREASED INCOME AFTER MAKING DISALLOWANCE U/S 40(A)(IA) SHOULD BE CONSIDERED. G ROUND NO.4 OF THE ASSESSEE IS ALSO ALLOWED. 13. GROUND NO.5 IS AS UNDER: (5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS-1), SURAT, HAS ERRED IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN MAKING ADDITION OF RS.4,9757- U/S.40A(2)(B) OF THE INCOME TAX ACT, 1961. 14. WITH REGARD TO THIS ISSUE, IT IS SUBMITTED BY T HE LD. A.R. THAT THE ADDITION MADE BY THE A.O. IS NOT JUSTIFIED AND ALTE RNATIVE CONTENTION IS RAISED THAT EVEN IF THIS ADDITION IS MADE, THE SAME SHOULD BE CONSIDERED AS ELIGIBLE FOR DEDUCTION U/S 80-IB. LD. D.R. OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE DISALLOWANCE HAS BEEN MADE BY THE A.O. OF RS.4,975/- U/S 40A(2B). REGARDING THIS ISSUE, WE FIND THAT A CLEA R FINDING IS GIVEN BY THE LD. CIT(A) IN PARA 3.3.2 OF HIS ORDER WITH REGARD T O THE DISALLOWANCE U/S I.T.A.NO. 1327 /AHD/2009 7 40A(2B) THAT INCOME CAN BE ELIGIBLE FOR DEDUCTION U /S 80-IB BUT SINCE THE DEDUCTION U/S 80-IB HAS BEEN DISALLOWED, NO DEDUCTI ON CAN BE ALLOWED ON THIS ACCOUNT. NOW, WE HAVE HELD THAT THE ASSESSEE I S ELIGIBLE FOR DEDUCTION U/S 80-IB AND HENCE, THIS AMOUNT SHOULD ALSO BE CON SIDERED AS INCOME OF THE ASSESSEE WHILE COMPUTING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80- IB. THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED. 16. REGARDING THE REMAINING GROUNDS, IT WAS SUBMITT ED BY THE LD. A.R. THAT THESE ARE GENERAL. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. 18. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (G.C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 14/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.19/12 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/12 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/12/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..