M/s Tirumala Milk Products Pvt.Ltd., Narasaraopeta V. THE JCIT, Range - 2, Guntur

ITA 137/VIZ/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0120 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S N MURTHY
• Keywords: Depreciation; Additional depreciation
• Section: 142(1); 80IB; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.137/VIZ/2013 ( / ASSESSMENT YEAR : 2009-10) M/S. TIRUMALA MILK PRODUCTS PVT. LTD., 12-9-11, PRAKASH NAGAR, NARASARAOPET. VS. JCIT, RANGE - 2, GUNTUR. [ PAN : AABCT 7907 M ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) ./ I.T.A.NO.259/VIZ/2013 ( / ASSESSMENT YEAR : 2009-10) D CIT, CIRCLE - 2 (1) , GUNTUR. VS. M/S. TIRUMALA MILK PRODUCTS PVT. LTD., 12-9-11, PRAKASH NAGAR, NARASARAOPET. [ PAN : AABCT 7907 M ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : G.V.N. HARI AR '(& ) / RESPONDENT BY : T.S.N. MURTHY CIT ( DR ) ) - / DATE OF HEARING : 02/12/2015 ) - / DATE OF PRONOUNCEMENT : 18 /12/2015 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER : THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE, ARE DIRECTED AGAINST THE ORDER OF CIT(A), GUNTUR, D ATED 22/01/2013 FOR THE A.Y. 2009-10. 2. SINCE, THE ISSUES INVOLVED IN THESE APPEALS ARE CO MMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY WAY OF T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3 . BRIEF FACTS OF THE CASE, ARE THAT THE ASSESSEE-CO MPANY, WHICH IS ENGAGED IN PROCESSING AND TRADING OF MILK AND MILK PRODUCTS, WAS FILED ITS RETURN OF INCOME FOR THE A.Y. 2009-10 ON 28/09/ 2009, DECLARING TOTAL INCOME OF RS. 16,49,12,792/-. THE CASE WAS SELECTE D FOR SCRUTINY ASSESSMENT AND ACCORDINGLY, NOTICES UNDER SEC. 143( 2) & 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO THE NOTICES, THE A UTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED BOOKS OF ACCOUNTS, INFORMATION/DOCUMENTS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SEC. 80IB OF THE ACT FOR RS. 2,66,83,037/- . THE ASSESSING OFFICER ISSUED S HOW-CAUSE NOTICE AND ASKED THE ASSESSEE AS TO WHY THE DEDUCTION UNDER SE C. 80IB SHALL NOT BE DISALLOWED. IN RESPONSE TO THE SHOW CAUSE NOTICE, T HE ASSESSEE 3 SUBMITTED THAT IT IS INVOLVED IN THE BUSINESS OF PR OCESSING OF MILK AND MILK PRODUCTS. THE ASSESSEE FURTHER SUBMITTED THAT IT PROCURES MILK FROM VARIOUS PLACES AND PROCESS IT INTO PACKAGED MI LK AND ALSO MANUFACTURE CURD, GHEE AND OTHER ALLIED MILK PRODUC TS. THEREFORE, THE ACTIVITY CARRIED OUT BY IT, WAS AMOUNTS TO MANUFACT URE OR PROCESSING OF GOODS OR ARTICLES AND IT IS ELIGIBLE FOR CLAIMING D EDUCTION UNDER SEC. 80IB OF THE ACT. THE ASSESSING OFFICER DID NOT CONVINCE WITH THE ASSESSEES EXPLANATION, DISALLOWED THE CLAIM OF DEDUCTION UNDE R SEC. 80IB OF THE ACT. WHILE DOING SO, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILS NOT ONLY TO QUALIFY TO BE A SMALL SCALE INDUS TRIAL UNDERTAKING BUT ALSO TO BE SAID TO BE ENGAGED IN ANY MANUFACTURING ACTIVITY SO AS TO ELIGIBLE FOR CLAIMING DEDUCTION UNDER SEC. 80IB OF THE ACT. 4 AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREFER RED AN APPEAL BEFORE THE CIT(A). BEFORE CIT(A), THE ASSESSEE CON TENDED THAT IT IS INVOLVED IN THE BUSINESS OF MANUFACTURE/PROCESSING OF MILK AND MILK PRODUCTS, THEREFORE, IT QUALIFIES FOR DEDUCTION UND ER SEC. 80IB OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT THE HON'BLE INC OME TAX APPELLATE TRIBUNAL, IN ASSESSEES OWN CASE FOR THE EARLIER YE ARS HAS ALLOWED THE DEDUCTION CLAIMED UNDER SEC. 80IB OF THE ACT. THER EFORE, UNDER SIMILAR SET OFF OF FACTS AND CIRCUMSTANCES, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION FOR THE YEAR UNDER CONSIDERATION. THE CIT(A), AFTE R CONSIDERING THE 4 EXPLANATION FURNISHED BY THE ASSESSEE HELD THAT THE ASSESSEE IS NOT A SMALL SCALE INDUSTRIAL UNDERTAKING IN VIEW OF THE I NVESTMENT IN ASSETS EXCEEDING THE SPECIFIED LIMIT, THEREFORE, DEDUCTION UNDER SEC. 80IB IS NOT ALLOWABLE FOR THE YEAR UNDER CONSIDERATION. THE CI T(A) FURTHER HELD THAT DURING THE YEAR UNDER CONSIDERATION, THE INVESTMENT IN FIXED ASSETS OF THE ASSESSEE-COMPANY EXCEEDS SPECIFIED LIMITS, THER EFORE IT CEASES TO BE QUALIFIED AS SMALL SCALE INDUSTRIAL UNDERTAKING AND HENCE, CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE CIT(A)S ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5 THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBM ITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED B Y THE DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE FO R THE A.YS. 2002- 03, 2005-06, 2007-08 & 2008-09. THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT THE ITAT, CATEGORIC ALLY HELD THAT THE ASSESSEE INVOLVED IN THE MANUFACTURE/PROCESSING OF MILK AND MILK PRODUCTS, THEREFORE, ELIGIBLE FOR DEDUCTION UNDER S EC. 80IB OF THE ACT. FURTHER, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE RELIED UPON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF ACE MULTI AXES SYSTEMS LTD. VS. DCIT REPORTED IN 367 ITR 266. 6. ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE STR ONGLY SUPPORTED THE ORDER OF THE CIT(A). DEPARTMENTAL RE PRESENTATIVE FURTHER 5 ARGUED THAT THE DEPARTMENT HAS CHALLENGED THE ORDER OF THE ITAT, BEFORE THE HON'BLE ANDHRA PRADESH HIGH COURT. IN V IEW OF THE FACT THAT THE ISSUE HAS NOT ATTAINED FINALITY, ORDER PASSED B Y THE ASSESSING OFFICER SHOULD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER DISALLOW ED THE CLAIM UNDER SEC. 80IB OF THE ACT, ON THE GROUND THAT THE ASSESS EE IS NOT A SMALL SCALE INDUSTRIAL UNDERTAKING AND NOT INVOLVED IN MA NUFACTURE/PROCESS OF ARTICLES OR THINGS SPECIFIED IN THE SAID SECTION, T HEREFORE, NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SEC. 80IB OF THE ACT. THE CI T(A) UPHELD THE ADDITIONS/DISALLOWANCE MADE BY THE ASSESSING OFFICE R. THE ASSESSEES CONTENTION IS THAT IT IS INVOLVED IN THE MANUFACTUR E/ PROCESSING OF MILK AND MILK PRODUCTS AND THEREFORE, IT IS A MANUFACTUR ER OF GOODS OR ARTICLES SPECIFIED IN SEC. 80IB OF THE ACT, HENCE, ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB OF THE ACT. DURING THE COURSE OF HEARING, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE I SSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE I TAT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE FOR THE EARLIER ASSESS MENT YEARS. WE HAVE GONE THROUGH THE CASE-LAWS RELIED UPON BY THE ASSESSE, IN THE LIGHTS OF THE FACTS OF THE PRESENT CASE AND COME TO THE CONCLUSION THAT 6 THE ITAT, HAS HELD THE ISSUE IN FAVOUR OF THE ASSES SEE IN THE EARLIER ASSESSMENT YEARS. THE RELEVANT PORTION IS REPRODUCE D HEREINUNDER:- 16. WE HAVE ALSO CAREFULLY EXAMINED THE NATURE OF A CTIVITIES UNDERTAKEN BY THE ASSESSEE IN PROCESSING FOR PASTEU RIZED AND STANDARDIZED OF MILK. UNDISPUTEDLY, ASSESSEE IS HA VING FULL RANGE OF DAIRY PRODUCTS AND PROCURED MILK FROM DIFFERENT PLACES AND TO MAKE IT MARKETABLE PRODUCT IT HAS TO UNDERGO UNDER DIFFERENT PROCESSES. TECHNICALLY, PASTEURIZATION OF MILK IS AN IMPORTANT PROCESS. BEFORE PASTEURIZATION THE MILK WAS DANGER OUS SOURCE OF INFECTION AS IT IS PROCURED FROM DIFFERENT PLACES. IN A PASTEURIZATION PROCESS, IT HAS TO UNDERGO BOILING A ND COOLING PROCESS BESIDES EXTRACTION OF CREAM THERE FROM. TH E PASTEURIZED MILK OF DIFFERENT STANDARDS I.E. TONE, DOUBLE TONE ETC. AND ASSESSEE IS ALSO ENGAGED IN PRODUCTION OF GHEE, BUTTER, CURD AND OTHER MILK PRODUCTS. ALL THESE ACTIVITIES WERE EXAMINED BY TH E A.O. IN ASSESSMENT YEAR 2000-01, 2001-02 & 2004-05 IN REGUL AR ASSESSMENT. IN 2002-03, THE CLAIM WAS ALLOWED U/S 143(1) BUT IT WAS REOPENED U/S 147 OF THE ACT. THE CLAIM OF DEDU CTION CAN BE ALLOWED AS PER PROVISIONS OF SECTION 80IB OF THE AC T FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEARS SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS. IN THE INITIAL YEARS, THE CLAIM WAS ADMITTEDLY ALLOWED BY THE ASSESSING OFFICER AFTER MAKING A NECESSARY ENQUIRY. ONCE IT IS ALLOWED IN THE INITIAL ASSESSMENT YEAR, IT SHOULD BE ALLOWED IN SU CCEEDING ASSESSMENT YEARS. THERE IS NO PROVISION IN THIS SE CTION WHICH EMPOWERS THE ASSESSING OFFICER TO WITHDRAW THE CLAI M ORIGINALLY ALLOWED IN EARLIER ASSESSMENT YEARS, IN SUCCEEDING YEARS. ONCE THE NATURE OF ACTIVITIES WAS EXAMINED BY THE A.O. A ND IT WAS CONSIDERED TO BE THE MANUFACTURING ACTIVITY FOR THE PURPOSE OF ALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT, THE SAM E ACTIVITY CANNOT BE DIFFERENTLY INTERPRETED IN ORDER TO DISAL LOW THE CLAIM OF DEDUCTION TO THE ASSESSEE IN SUCCEEDING YEAR. NO D OUBT THERE IS A SPECIAL BENCH IN THE CASE OF B.J. CHITALE VS. DCIT (SUPRA) IN WHICH IT WAS HELD THAT PASTEURIZATION OF MILK IS ONLY PRO CESSING OF MILK AND MILK REMAINS THE MILK EVEN AFTER PROCESSING THO UGH A LITTLE MORE CLEAN AND MORE FIT FOR CONSUMPTION AND THEREFO RE, DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION FOR THE PURPOSE OF GRANT OF DEDUCTION U/S 80HHA AND 80I. BUT AFTER THIS JUDGEM ENT, THE WORD MANUFACTURE AND PRODUCTION WAS FURTHER INTERPRETED BY THE APEX COURT AND VARIOUS HIGH COURTS. 7 17. IN THE CASE OF INDIA CINE AGENCIES VS. CIT (SUP RA), THEIR LORDSHIP OF THE APEX COURT HAVE HELD THAT CONVERSIO N OF JUMBO ROLLS OF PHOTOGRAPHIC FILMS INTO SMALL ROLLS IN DES IRED SIZE AMOUNTS TO A MANUFACTURE OR PRODUCTION ELIGIBLE FOR DEDUCTI ON U/S 80HH AND 80I OF THE ACT. WHILE DEALING WITH THE ISSUE, T HEIR LORDSHIP HAVE DEFINED THE WORD MANUFACTURE BY HOLDING THAT M ANUFACTURE IMPLIES A CHANGE BUT EVERY CHANGE IS NOT MANUFACTUR E YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF A TREATMENT, LABOUR AND MANIPULATION. NATURALLY MANUFACTURE IS AN END RESU LT OF ONE OR MORE PROCESSES THROUGH WHICH THE ORIGINAL COMMODITI ES ARE MADE TO PASS. THE NATURE AND EXTENT OF PROCESSING MAY V ARY FROM ONE CLASS TO ANOTHER. THERE MAY BE A SEVERAL STAGES OF PROCESSING, A DIFFERENT ACCOUNT OF PROCESSING AT EACH STAGE. WIT H EACH PROCESS SUFFERED, THE ORIGINAL COMMODITY EXPERIENCE A CHANG E. WHENEVER A COMMODITY UNDERGOES A CHANGE AS A RESULT OF SOME OPERATION PERFORMED ON IT OR IN REGARD TO IT, SUCH OPERATION WOULD AMOUNT TO PROCESSING OF THE COMMODITY. BUT IT IS ONLY WHEN T HE CHANGE OR SERIES OF CHANGES TAKES THE COMMODITY TO THE POINT WHERE COMMERCIALLY IT CAN NO LONGER BE REGARDED AS A ORIG INAL COMMODITY BUT INSTEAD IS A RECOGNIZED A NEW AND DISTINCT ARTI CLE THAT A MANUFACTURE CAN SAID TO TAKE PLACE. THEY HAVE ALSO DEFINED THE EXPRESSION PRODUCTION AND HELD THAT PACKING, LABELL ING, RELABELLING CONTAINERS, RE-PACKING FROM BULK PACKAGES TO RETAIL PACKAGES AND THE ADOPTION OF OTHER METHOD TO RENDER THE PRODUCT MARKETABLE ARE THE PART OF PRODUCTIONS AS DEFINED IN ADVANCED LAW LEXIGAN. 18. IN THE CASE OF CIT VS. EMPTY POLY YARN PVT. LTD . (SUPRA) THEIR LORDSHIP FURTHER HELD THAT POY (PARTIALLY ORIENTED YARN) BECOMES USABLE FOR MANUFACTURE OF FABRIC ONLY AFTER IT UNDE RGOES THE OPERATION/PROCESS KNOWN AS THEREMO MECHANICAL PROCE SS WHICH CONVERTS POY INTO TEXTILES YARN AND THEREFORE, TWIS TING AND TEXTURISING OF POY AMOUNTS TO MANUFACTURE IN TERMS OF 80IA. WHILE DEALING WITH THIS ISSUE THEIR LORDSHIP HAVE OB SERVED THAT POY A SEMI FINISHED YARN NOT CAPABLE OF BEING PUT I N WARP OR WEFT, IT CAN ONLY BE USED FOR MAKING A TEXTILE YARN, WHIC H, IN TURN CAN BE USED IN THE MANUFACTURE OF FABRIC. 19. IN THE CASE OF ACIT VS. LEEBO METALS PVT. LTD. (SUPRA), THE TRIBUNAL HAS HELD THAT ACTIVITY OF ASSESSEE MAKING NON-FERROUS WIRES FROM BIG GAUGE RODS IS COVERED WITHIN THE MEA NING OF 8 PRODUCTION U/S 80IB AND THEREFORE, ASSESSEE IS ENTI TLED FOR DEDUCTION U/S 80IB OF THE ACT. 20. ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF B.J. CHITALE WAS PASSED ON 6.6.2008, WHEREAS THE ASSESSM ENT ORDER IN THESE CASES WERE PASSED IN DECEMBER, 2007. THEREFO RE, THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF B.J. CHITALE CANNOT BE CALLED TO BE AVAILABLE WITH THE ASSESSING OFFICER TO TAKE A VIEW CONTRARY TO THE VIEW TAKEN IN EARLIER ASSESSME NT YEARS. MOREOVER, WE DO NOT FIND ANY VALID REASONS WITH THE ASSESSING OFFICERS TO REJECT THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT ALLOWED IN EARLIER YEARS, IN SUCCEEDING YEARS. AFTER THIS ORDER OF THE SPECIAL BENCH IN THE CASE OF B.J. CHITALE, VARIOUS JUDGMENT S ARE RENDERED BY THE APEX COURT AND VARIOUS HIGH COURTS ON THIS S UBJECT AND IN CASE OF INDIA CINE AGENCIES, THE HONORABLE APEX COU RT VIDE ITS JUDGMENT DATED 12.11.2008 HAS CLARIFIED THE EXPRESS ION PRODUCTION AND MANUFACTURE AND HELD THAT PACKIN G, LABELING, RE- LABELLING CONTAINERS REPACKING FROM BULK PACKAGE TO RETAIL PACKAGE AND THE ADOPTION OF OTHER METHOD TO RENDER THE PROD UCT MARKETABLE ARE ALSO A PART OF PRODUCTIONS. THE DED UCTION U/S 80IB IS TO BE ALLOWED WHEN THE ASSESSEE IS ENGAGED IN TH E ACTIVITIES OF MANUFACTURE OR PRODUCTION. ADMITTEDLY, THE ASSESSE E IS ENGAGED IN PROCESSING AND TRADING OF MILK AND MILK PRODUCTS . THE BULK OF MILK IS BEING PROCURED FROM DIFFERENT PLACES AND AF TER ITS PASTEURIZATION, IT WAS PACKED IN SMALL PACKETS FOR ITS MARKETING AND THE PACKING FROM BULK MATERIAL TO RETAIL PACKAG E AMOUNTS TO A PRODUCTION AS PER THE JUDGEMENT OF THE HONBLE SUPR EME COURT IN THE CASE OF INDIA CINE AGENCIES (SUPRA). THEREFORE , ONCE THE REVENUE IN THE INITIAL YEAR HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND ALLOWED DEDUCTION U/S 80IB WHICH HAS TO BE ALLO WED CONSECUTIVELY FOR 10 SUCCEEDING YEARS, THE REVENUE SHOULD NOT HAVE TAKEN A VIEW CONTRARY TO THE EARLIER VIEW IN S UCCEEDING YEAR TO DISALLOW THE CLAIM OF THE ASSESSEES. ADMITTEDLY , THERE IS NO CHANGE IN THE LEGAL PROPOSITION. THEREFORE, WE ARE OF THE VIEW THAT REVENUE WAS NOT JUSTIFIED IN TAKING A CONTRARY VIEW IN SUCCEEDING YEARS. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) IN ALL THESE CASES AND DIRECT THE A.O. TO ALLOW THE CLAIM OF DEDUCTION U/S 80IB TO THE ASSESSEES. 9 8 THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF ACE MULTI AXES SYSTEMS LTD . (SUPRA) WHILE, DEALING WITH THE SIMILAR ISSUE HAS HELD AS UNDER:- 4. SEC.80IB IS AN INCENTIVE PROVISION. IT PROVIDES DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIA L UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS. FOR AN INDUSTRIAL UNDERTAKING TO BE ELIGIBLE FOR THE SAID DEDUCTION, IT HAS TO FULFILL ALL THE CONDITIONS MENTIONED UNDER SUB-S EC.(2) OF SEC.80IB. THE FOUR CONDITIONS WHICH ARE STIPULATED THEREIN ARE, FIRSTLY, THE INDUSTRIAL UNDERTAKING MUST NOT HAVE B EEN FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREAD Y IN EXISTENCE. THE SECOND CONDITION IS, SUCH AN UNDERTAKING IS NOT FORMED BY TRANSFER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. THE THIRD CONDITION IS THAT THE INDUSTRIAL UNDERTAK ING MANUFACTURES OR PRODUCES ANY ARTICLE OR THING NOT BEING ANY ARTI CLE OR THING SPECIFIED IN THE LIST IN ELEVENTH SCHEDULE. HOWEVER , IN RESPECT OF A SMALL SCALE INDUSTRY UNDERTAKING, EVEN THAT CONDITI ON IS WAIVED. IN OTHER WORDS, A SMALL SCALE INDUSTRY MANUFACTURING O R PRODUCING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE E LEVENTH SCHEDULE, IS ALSO ENTITLED TO THE AFORESAID DEDUCTION. THE FOURT H CONDITION IS, THE SAID INDUSTRIAL UNDERTAKING EMPLOYS 10 OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF PO WER OR EMPLOYS 20 OR MORE WORKERS IN A MANUFACTURING PROCESS CARRI ED ON WITHOUT THE AID OF POWER. ONCE THESE FOUR CONDITIONS ARE FU LFILLED, THE ASSESSEE IS ENTITLED TO THE BENEFIT UNDER SEC.80IB OF THE ACT. SUB- SEC.(3) OF SEC.80IB PROVIDES THE EXTENT OF DEDUCTIO N ELIGIBLE UNDER SEC.80IB AND ALSO THE NUMBER OF YEARS SUCH A DEDUCT ION IS AVAILABLE TO SUCH AN UNDERTAKING. SUB-SEC.(3) MANDA TES THAT THE INDUSTRIAL UNDERTAKING SHALL BE ELIGIBLE FOR THE SA ID DEDUCTION FOR A PERIOD OF 10 CONSECUTIVE YEARS, BEGINNING WITH THE INITIAL ASSESSMENT YEAR. HOWEVER, IT IS SUBJECT TO TWO COND ITIONS AS STIPULATED THEREIN. THE SECOND CONDITION IS WHAT IS APPLICABLE TO THE CASE ON HAND WHICH PROVIDES, IF THE INDUSTRIAL UNDERTAKING IS A SMALL SCALE INDUSTRY UNDERTAKING, IT HAS TO BEGIN M ANUFACTURE OR PRODUCE ARTICLES OR THINGS AT ANY TIME DURING THE P ERIOD BEGINNING ON THE 1ST DAY OF APRIL 1995 AND END ON THE 31ST DA Y OF MARCH 2002. THIS IS A CONDITION WHICH A SMALL SCALE INDUS TRY HAS TO FULFILL IN ADDITION TO THE CONDITIONS MENTIONED IN SUB-SEC. (2) OF SEC.80IB. 10 ONCE ALL THESE CONDITIONS ARE FULFILLED, A SMALL SC ALE INDUSTRY IS ENTITLED TO THE BENEFIT OF DEDUCTION FOR A PERIOD O F 10 CONSECUTIVE YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR. 5. IN THE ENTIRE PROVISION, THERE IS NO INDICATION THAT THESE CONDITIONS HAD TO BE FULFILLED BY THE ASSESSEE ALL THE 10 YEARS. WHEN ONCE THE BENEFIT OF 10 YEARS, COMMENCING FROM T HE INITIAL YEAR, IS GRANTED, IF THE UNDERTAKING SATISFY ALL TH ESE CONDITIONS INITIALLY, THE UNDERTAKING IS ENTITLED TO THE BENEF IT OF 10 CONSECUTIVE YEARS. THE ARGUMENT THAT, IN THE COURSE OF 10 YEARS , IF THE GROWTH OF THE INDUSTRY IS FAST AND IT ACQUIRES MACHINERY A ND THE TOTAL VALUE OF THE MACHINERY EXCEEDS RS.1 CRORE, IT CEASES TO H AVE THE SAID BENEFIT, DO NOT FOLLOW FROM ANY OF THE PROVISIONS. IT IS TRUE THAT THERE IS NO EXPRESS PROVISION INDICATING EITHER WAY , WHAT WOULD BE THE POSITION IF THE SMALL SCALE INDUSTRY CEASES TO BE A SMALL SCALE INDUSTRY DURING THE SAID PERIOD OF 10 YEARS. BECAUS E OF THAT AMBIGUITY, A NEED FOR INTERPRETATION ARISES. IF WE KEEP IN MIND THE OBJECT OF THE LEGISLATURE PROVIDING FOR THESE INCEN TIVES AND WHEN A PERIOD OF 10 YEARS IS PRESCRIBED, THAT IS THE PERIO D, PROBABLY, WHICH IS REQUIRED FOR ANY INDUSTRY TO STABILIZE ITSELF. D URING THAT PERIOD THE INDUSTRY NOT ONLY MANUFACTURES PRODUCTS, IT GEN ERATES EMPLOYMENT AND IT ADDS TO THE WEALTH OF THE COUNTRY . MERELY BECAUSE AN INDUSTRY STABILIZES EARLY, MAKES PROFITS , MAKES FUTURE INVESTMENT IN THE SAID BUSINESS, AND IT GOES OUT OF THE DEFINITION OF THE SMALL SCALE INDUSTRY, THE BENEFIT UNDER SEC.80I B CANNOT BE DENIED. IF SUCH A LITERAL INTERPRETATION IS PLACED ON THE SAID PROVISION, IT WOULD RUN COUNTER TO THE VERY OBJECT OF GRANTING INCENTIVES. IT WOULD KILL THE INDUSTRY. THEREFORE K EEPING IN MIND THE OBJECT WITH WHICH THESE PROVISIONS ARE ENACTED, KEEPING IN MIND THE INDUSTRIAL GROWTH WHICH IS REQUIRED TO BE ACHIEVED, IF TWO INTERPRETATIONS ARE POSSIBLE, THE COURTS HAVE TO LE AN IN FAVOUR OF EXTENDING THE BENEFIT OF DEDUCTION TO AN ASSESSEE W HO HAS AVAILED THE OPPORTUNITY GIVEN TO HIM UNDER LAW AND HAS GROW N IN HIS BUSINESS. THEREFORE WE ARE OF THE VIEW, IF A SMALL SCALE INDUSTRY, IN THE COURSE OF 10 YEARS, STABILIZES EARLY, MAKES FUR THER INVESTMENTS IN THE BUSINESS AND IT RESULTS IN IT'S GOING OUTSID E THE PURVIEW OF THE DEFINITION OF A SMALL SCALE INDUSTRY, THAT SHOU LD NOT COME IN THE WAY OF ITS CLAIMING BENEFIT UNDER SEC.80IB FOR 10 C ONSECUTIVE YEARS, FROM THE INITIAL ASSESSMENT YEAR. THEREFORE THE APPROACH OF THE AUTHORITIES RUNS COUNTER TO THE SCHEME AND THE INTENT OF THE LEGISLATURE. THEREBY THEY HAVE DENIED THE LEGITIMAT E BENEFIT, AN INCENTIVE GRANTED TO THE ASSESSEE. BOTH THE SAID OR DERS CANNOT BE 11 SUSTAINED. THEREFORE THE SUBSTANTIAL QUESTION OF LA W IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HEN CE WE PASS THE FOLLOWING: ORDER 1. THE APPEAL IS ALLOWED. THE IMPUGNED ORDER IS HE REBY SET ASIDE. THE ORIGINAL ORDER OF GRANTING THE BENEFIT OF DEDUCTION UNDER SEC. 80IB, IS RESTORED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E AND ALSO RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N OF THIS TRIBUNAL, IN ASSESSEES OWN CASE, WE ARE OF THE OPINION THAT THE ACTIVITY CARRIED OUT BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SEC . 80IB OF THE ACT. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION UNDER SEC. 80IB OF THE ACT. 10. THE NEXT ISSUE, CAME UP FOR OUR CONSIDERATION, IS WHETHER THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION UN DER SEC. 32(1)(IIA) OF THE ACT ON THE FIXED ASSETS PURCHASED & INSTALLED D URING THE RELEVANT FINANCIAL YEAR. 11 . BRIEF FACTS OF THIS ISSUE, IS THAT DURING THE A.Y . 2009-10, THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION OF RS. 1,74,39,561/- ON VARIOUS FIXED ASSETS ADDED DURING THE YEAR. THE AS SESSEE CONTENDED THAT SINCE IT IS INVOLVED IN THE BUSINESS OF MANUFA CTURE/PROCESSING OF GOODS OR ARTICLES, IT IS ELIGIBLE FOR ADDITIONAL DE PRECIATION UNDER SEC. 32(1)(IIA) OF THE ACT. HOWEVER, THE ASSESSING OFFI CER DISALLOWED THE 12 CLAIM OF ADDITIONAL DEPRECIATION ON THE GROUND THAT THE ASSESSEE FAILS NOT ONLY TO QUALIFY TO BE A SMALL SCALE INDUSTRIAL UNDE RTAKING BUT ALSO TO BE SAID TO BE ENGAGED IN ANY MANUFACTURING ACTIVITY SO AS TO ELIGIBLE FOR CLAIMING ADDITIONAL DEPRECIATION UNDER SEC. 32(1)(I IA) OF THE ACT, THEREFORE, DISALLOWED THE CLAIM. 12 DURING THE APPELLATE PROCEEDINGS, BEFORE THE CIT(A) , THE ASSESSEE CONTENDED THAT IT IS INVOLVED IN THE BUSINESS OF PR OCESSING OF MILK AND MILK PRODUCTS AND ALSO AT THE TIME OF INITIAL CLAIM OF DEDUCTION, THE INVESTMENT IN THE PLANT AND MACHINERY IS WITHIN THE THRESHOLD LIMIT TO BE QUALIFIED FOR SSI. THEREFORE, IT IS ELIGIBLE FOR A DDITIONAL DEPRECIATION UNDER SEC. 32(1)(IIA) OF THE ACT. HOWEVER, THE CIT (A) RESTRICTED THE ADDITIONAL DEPRECIATION PROPORTIONATELY TO THE EXTE NT OF TURNOVER ATTRIBUTABLE TO THE BUSINESS OF MANUFACTURE OR PROD UCTION OF ARTICLE OR THING I.E. SALE OF PRODUCTS SUCH AS CURD, GHEE ETC. AGGRIEVED BY THE CIT(A)S ORDER, THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US. 13 THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBM ITTED THAT THE ASSESSEE IS AN SSI INVOLVED IN THE BUSINESS OF MANU FACTURE/PROCESSING OF MILK AND MILK PRODUCTS, THEREFORE, IT IS ELIGIBLE F OR ADDITIONAL DEPRECIATION ON THE INVESTMENTS MADE IN THE FIXED ASSETS DURING THE YEAR. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED B Y THE DECISION OF THE 13 ITAT, VISAKHAPATNAM BENCH IN ASSESSE OWN CASE FOR T HE A.Y. 2008-09, WHEREIN THE TRIBUNAL CATEGORICALLY HELD THAT THE AS SESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION ON THE VALUE OF FIXED ASSET S PURCHASED IN THE RELEVANT FINANCIAL YEAR. 14 ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT THE CIT(A) WAS ERRED IN ALLOWING PROPORTIONATE DEDU CTION TOWARDS ADDITIONAL DEPRECIATION, AS THE ASSESSEE IS NOT A S SI, WHICH IS INVOLVED IN MANUFACTURE/PRODUCTION OF GOODS OR ARTICLES, THEREF ORE, NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. THE DEPARTMENTAL REPRESEN TATIVE FURTHER ARGUED THAT TO BE QUALIFIED FOR ADDITIONAL DEPRECIA TION, THE ASSESSEE SHOULD BE A MANUFACTURE OR PRODUCER OF GOODS OR ART ICLES OR THINGS. HOWEVER, IN THIS CASE, THE ASSESSEE IS NOT INVOLVED IN THE MANUFACTURE OR PROCESSING OF ANY GOODS OR ARTICLES, THEREFORE, NOT QUALIFIED FOR ADDITIONAL DEPRECIATION. 15 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. THE ISSUE OF ELIGIBILITY OF AD DITIONAL DEPRECIATION ON THE VALUE OF FIXED ASSETS PURCHASED DURING THE YEAR IS ALREADY DEALT WITH BY THE ITAT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE FOR THE A.Y. 2008-09. THE TRIBUNAL, IN THE ASSESSEES OWN CASE, HELD THAT THE ASSESSEE IS A SSI, WHICH IS ENGAGED IN MANUFACTURE/ PROCESSING OF MILK AND MILK PRODUCTS AND THE ACTIVITY CARRIED OUT BY T HE COMPANY IS WITHIN 14 THE DEFINITION OF MANUFACTURE/PROCESSING OF ARTICLE S OR THINGS. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION U/S 32(1)(IIA). THE RELEVANT PORTION IS REPRODUCED HER EINUNDER:- 6. WITH REGARD TO THE SECOND GROUND OF HIGHER/ADDIT IONAL DEPRECIATION, WE FIND THAT THIS GROUND IS ALSO COVE RED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2002-03, 2005-06 AND 2007-08. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORIT IES, WE FIND THAT UNDENIABLY THE AUDIT REPORT WAS NOT FILED ALONG WITH THE RETURN OF INCOME BUT SUBSEQUENTLY IT WAS F ILED. NO DOUBT AS PER THE PROVISIONS OF SECTION 32(1)(IIA ) OF THE ACT, THE ASSESSEE IS REQUIRED TO FILE THE AUDIT REP ORT ALONG WITH THE RETURN OF INCOME TO CLAIM ADDITIONAL DEPRE CIATION. BUT IN CASE IT IS NOT FILED ALONG WITH THE RETURN A ND FILED SUBSEQUENTLY, THE CLAIM OF THE DEPRECIATION SHOULD NOT BE DENIED ONLY FOR THE TECHNICAL DEFAULT. SINCE THE A UDIT REPORT WAS FILED SUBSEQUENTLY, THE CLAIM OF THE ADD ITIONAL DEPRECIATION SHOULD HAVE BEEN EXAMINED BY THE A.O. IN ACCORDANCE WITH LAW. WE, THEREFORE, SET ASIDE THE O RDER OF THE CIT(A) IN THIS REGARD AND DIRECT THE A.O. TO RE- EXAMINE THE CLAIM OF ADDITIONAL DEPRECIATION AS PER PROVISIONS OF LAW. SO FAR AS THE ISSUE OF INDUSTRIAL UNDERTAKING IS CONCERNED, WE FIND THAT ASSESSEE WAS REGISTERED AS A SSI WITH THE CONCERNED AUTHORITIES AND CERTIFICATE TO T HIS EFFECT IS ALSO PLACED ON RECORD. NOTHING IS PLACED ON RECORD BY THE REVENUE THAT THE REGISTRATION GRANTED TO THE ASSESSEES AS A SSI WAS EVER WITHDRAWN BY THE CONCER NED AUTHORITIES. MOREOVER, IT IS ALSO NOTICED THAT AT THE TIME OF GRANT OF REGISTRATION AS A SSI, THE REQUISITE CO NDITIONS WERE ALSO FULFILLED. WE THEREFORE OF THE VIEW THAT UNTIL AND UNLESS THE REGISTRATION GRANTED AS A SSI BY THE CONCERNED AUTHORITIES IS NOT WITHDRAWN, THE ASSESSE E SHOULD BE TREATED AS A SMALL SCALE INDUSTRIAL UNDER TAKING. THE SMALL SCALE INDUSTRIAL UNDERTAKING IS DEFINED I N CLAUSE (G) OF SUB-SECTION 14 OF SECTION 80IB, ACCORDING TO WHICH 15 SMALL SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUSTR IAL UNDERTAKING RECOGNIZED AS SSI U/S 11B OF THE INDUST RIES (DEVELOPMENT AND REGULATION) ACT 1951. SINCE THE ASSESSEE IS RECOGNIZED AS SSI BY THE COMPETENT AUTH ORITY TILL DATE, WE FIND NO MERIT IN THESE FINDINGS OF TH E CIT(A) THAT THE ASSESSEE WAS NOT AN INDUSTRIAL UNDERTAKING . 7. IN THAT YEAR THE CLAIM OF THE ASSESSEE FOR ADDIT IONAL DEPRECIATION WAS DISALLOWED ON TWO POINTS; ONE IS O N NON-FILING OF AUDIT REPORT ALONG WITH THE RETURN OF INCOME AND TH E SECOND FOR NON-RECOGNITION OF THE ASSESSEE AS A SMALL SCALE IN DUSTRY. WITH REGARD TO THE NON-FILING OF AUDIT REPORT ALONG WITH THE RETURN, THE TRIBUNAL HAS HELD THAT SINCE THE AUDIT REPORT WAS F ILED SUBSEQUENTLY THE CLAIM OF ADDITIONAL DEPRECIATION S HOULD HAVE BEEN EXAMINED BY THE A.O. IN ACCORDANCE WITH LAW AN D THE MATTER WAS SET ASIDE TO THE A.O. FOR RE-ADJUDICATION. SO FAR AS THE ISSUE OF INDUSTRIAL UNDERTAKING IS CONCERNED, THE TRIBUNA L HAS HELD THAT THE ASSESSEE WAS REGISTERED AS A SSI WITH THE COMPE TENT AUTHORITIES AND THE REGISTRATION EARLIER GRANTED AS AN SSI WAS NEVER WITHDRAWN. THEREFORE, THE ASSESSEE SHOULD BE TREATED AS AN INDUSTRIAL UNDERTAKING. BUT IN THE IMPUGNED ASSESS MENT YEAR, THE CLAIM OF DEPRECIATION WAS DISALLOWED ON THE GROUND THAT COMPANY IS NEITHER A MANUFACTURING COMPANY NOR A PROCESSING COMPANY AND IS NOT ENGAGED IN PRODUCTION OR MANUFACTURE OF ARTICLES OR THING. IN THE AFORESAID ORDER OF THE TRIBUNAL, TH E TRIBUNAL HAS CATEGORICALLY HELD THAT THE ASSESSEE IS A SMALL SCA LE INDUSTRY AND IS ALSO ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. M EANING THEREBY, THE ASSESSEE IS ENGAGED EITHER IN MANUFACTURING OR PRODUCTION OF ARTICLES. SINCE THESE FINDINGS OF THE TRIBUNAL HAS NOT BEEN REVERSED SO FAR, THE ASSESSEE IS TO BE HELD TO BE T HE SMALL SCALE INDUSTRY ENGAGED IN MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING. THEREFORE, THE ASSESSEE IS ENTITLED FOR ADD ITIONAL DEPRECIATION IN ACCORDANCE WITH LAW. IT IS ALSO NO T CLEAR FROM THE ORDER OF THE LOWER AUTHORITIES, WHETHER THE A.O. HA S EXAMINED THE OTHER CONDITIONS FOR ALLOWING AN ADDITIONAL DEPRECI ATION TO THE ASSESSEES BECAUSE HE HAS DISALLOWED THE CLAIM OF TH E ASSESSEES ON THE GROUND THAT ASSESSEE WAS NEITHER A MANUFACTURIN G COMPANY NOR A PROCESSING COMPANY AND IS NOT ENGAGED IN PROD UCTION OR MANUFACTURING OF ANY ARTICLE OR THING. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE F ILE OF THE A.O. WITH A DIRECTION TO EXAMINE OTHER CONDITIONS AND AD JUDICATE THE 16 ISSUE IN ACCORDANCE WITH LAW AND THE TERMS INDICATE D HEREIN ABOVE. 16 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CAS E AND ALSO RESPECTFULLY FOLLOWING THE COORDINATE BENCHS DECIS ION IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, WE ARE OF THE OPINION, THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION ON THE VALUE O F FIXED ASSETS ACQUIRED DURING THE YEAR. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE ADDIT IONAL DEPRECIATION UNDER SEC. 32(1)(IIA) OF THE ACT. 17. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALL OWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER 2015. SD/- SD/- ( . ) ( . . . . ) ( (( ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 3 / DATED : 18/12/2015. VR/SPS 17 ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE ASSESSEE M/S. TIRUMALA MILK PRODUCTS PVT. LTD., 12-9-11, PRA KASH NAGAR, NARASARAOPET. 2. '(& / THE REVENUE I) JCIT, RANGE-2, GUNTUR. II) DCIT , CIRCLE-2(1), GUNTUR. 3. 5 / THE CIT, GUNTUR. 4. 5 () / THE CIT (A), GUNTUR. 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM