Asst. Commissioner of Income , circle -3(2), Hyderabad V. M/s Venkateswara Pipes Ltd, Secunderabad

ITA 1408/HYD/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6261 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 11-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: U. MINI CHANDRAN
• Keywords: Difference of opinion; Change of opinion
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 80IB

Judgement Text

ITA NO 1408 OF 2012 SRI VENKATESWARA PIPES LTD SEC UNDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1408/HYD/2012 (ASSESSMENT YEAR: 2006-07) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3(2) HYDERABAD VS M/S. SRI VENKATESWARA PIPES LIMITED SECUNDERABAD PAN: AAECS 1639 L FOR REVENUE: SMT. U. MINICHANDRAN, DR FOR ASSESSEE : SHRI A.SRINIVAS O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2006-07. IN TH IS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF TH E CIT (A), GUNTUR, DATED 13.04.2011 ALLOWING THE ASSESSEES CL AIM OF DEDUCTION U/S 80IB(3)(II) OF THE I.T. ACT. THE GROU NDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: 1. THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS OF THE CASE. 2. THE LEARNED CIT (A) ERRED IN ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 80IB(3)(II) DESPITE NON- FULFILLMENT OF CONDITIONS STIPULATED UNDER THE PROVISIONS OF SECTION 80IB. 3. THE LEARNED CIT (A) OUGHT TO HAVE RECOGNIZED THAT THE ASSESSEES INVESTMENT IN PLANT & MACHINERY EXCEEDED RS.1.00 CRORE AS ON THE LAST DATE OF HEARING : 29.12.2016 DATE OF PRONOUNCEMENT : 11.01.2017 ITA NO 1408 OF 2012 SRI VENKATESWARA PIPES LTD SEC UNDERABAD PAGE 2 OF 6 DAY OF THE PREVIOUS YEAR, WHICH CONDITION IS ESSENTIAL FOR CLAIMING THE STATUS OF SSI UNIT. 4. THE LEARNED CIT (A) OUGHT TO HAVE RECOGNIZED THAT TO GET THE STATUS OF SSI UNIT, THE ASSESSEE HAS ACTUALLY REDUCED THE VALUE OF RS.3,34,67,563 FROM TOTAL VALUE OF PLANT & MACHINERY OBLIVIOUS OF THE FACT THAT THE PLANT & MACHINERY ON THE LAST DAY OF THE PREVIOUS YEAR ITSELF IS MORE THAN RS.1.00 CRORE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AN D SALE OF AC PIPES AND LAYING AND JOINTING CIVIL WORKS. FOR T HE A.Y 2006-07, THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.11.20 06 DECLARING AN INCOME OF RS.46,00,414. DURING THE ASSESSMENT PROCE EDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSE E HAS FILED FORM NO.10CCB ALONG WITH THE RETURN OF INCOME FOR TH E A.Y 2006- 07 CLAIMING DEDUCTION U/S 80IB OF THE ACT. HE OBSER VED THAT AS PER FORM NO.10CCB, THE VALUE OF THE MACHINERY OR PLA NT USED IN BUSINESS IS RS.1,62,76,268. THE ASSESSEE WAS THEREF ORE, ASKED TO SHOW CAUSE AS TO WHY THE DEDUCTION U/S 80IB SHOULD NOT BE DISALLOWED AS THE VALUE OF ITS MACHINERY EXCEEDED R S.1.00 CRORES. IN RESPONSE, THE ASSESSEE SUBMITTED THAT FORM 10CCB ORIGINALLY SUBMITTED ALONG WITH THE RETURN OF INCOME WAS ERRON EOUS AND THAT THE SAID DEFECT WAS DETECTED BY THEM AND POINT ED OUT DURING THE COURSE OF SCRUTINY PROCEEDINGS. THE ASSESSEE, T HEREAFTER FILED THE REVISED FORM NO.10CCB DURING THE SCRUTINY PROCE EDINGS GIVING A DETAILED STATEMENT OF ANALYSIS OF THE PLANT & MAC HINERY WHEREIN THE ITEMS ARE SEGREGATED ITEM-WISE INTO THOSE THAT ARE ELIGIBLE UNDER THE INDUSTRIES DEVELOPMENT AND REGULATION ACT AND THOSE EXCLUDED FROM THE DEFINITION OF PLANT AND MACHINERY UNDER THE ITA NO 1408 OF 2012 SRI VENKATESWARA PIPES LTD SEC UNDERABAD PAGE 3 OF 6 SAID ACT. IT WAS STATED THAT THE ELIGIBLE VALUE OF THE PLANT & MACHINERY IS BELOW RS.1.00 CRORES AND AS SUCH THE A SSESSEE IS ELIGIBLE FOR THE STATUS OF SMALL SCALE INDUSTRY AND ALSO TO CLAIM DEDUCTION U/S 80IB OF THE ACT. HOWEVER, THE AO OBSE RVED THAT THE ASSESSEE HAS FILED A LETTER DATED 26.8.2008 ADDRESS ED TO THE DISTRICT INDUSTRIES CENTRE, R.R. DISTRICT REQUESTIN G FOR ENDORSEMENT OF EXPANSION COST IN PERMANENT SSI REGI STRATION CERTIFICATE, ACCORDING TO WHICH, THE VALUE OF THE P LANT & MACHINERY IS SHOWN AT RS.37.63 LAKHS ONLY AS AGAINST THE VALU E SHOWN IN FORM NO.10CCB AT RS.1,62,76,268. HE OBSERVED THAT TH E ASSESSEE COULD NOT ESTABLISH THE REASONS FOR THE TWO DIFFERE NT VALUES OF PLANT & MACHINERY AND ALSO THAT THE ASSESSEE DID NO T IDENTIFY THE ITEMS WHICH ARE INCLUDED FOR THE PURPOSE OF SSI UNI TS AS PER SECTION 11B OF THE SSI ACT QUOTED BY HIM IN THE FIR ST 10CCB CERTIFICATE DATED 27.11.2006 AND THAT THE ASSESSEE FAILED TO EXPLAIN WHY THERE WAS A CHANGE OF OPINION TO EXCLUD E THEM IN THE REVISED FORM 10CCB CERTIFICATE. HE THEREFORE, DISAL LOWED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. AGGRIEVED, THE AS SESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) ALONG WITH A N ITEM-WISE CLASSIFICATION OF PLANT & MACHINERY THAT IS ELIGIBL E AND INELIGIBLE UNITS FOR THE PURPOSE OF DETERMINATION OF SSI STATU S UNDER THE INDUSTRIES (DEVELOPMENT REGULATION ACT) AND ALSO TH E PROOF OF ENDORSEMENT IN ITS SSI REGISTRATION CERTIFICATE, IS SUED BY THE DEPARTMENT OF INDUSTRIES, GOVT. OF A.P. AFTER INSPE CTION BY THE OFFICIALS POST INSTALLATION AND COMMISSIONING OF PL ANT & MACHINERY. THE CIT (A) OBSERVED THAT THE AO HAS FAI LED TO DISPROVE THE ASSESSEES CONTENTIONS AND HAS ERRONEO USLY COME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT FILED THE RELEVANT MATERIAL. HOLDING THAT THE AO HAS FAILED TO DISCHAR GE THE ONUS OF ITA NO 1408 OF 2012 SRI VENKATESWARA PIPES LTD SEC UNDERABAD PAGE 4 OF 6 REFUTING THE ASSESSEES STAND BY CITING ANY COGENT MATERIAL, THE CIT (A) ALLOWED THE ASSESSEES APPEAL. AGAINST THIS ORDER OF THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE ABOVE GROUNDS OF APPEAL. 3. THE LEARNED DR SUBMITTED THAT THOUGH THE ASSESSE E FAILED TO SATISFY THE CONDITIONS LAID DOWN U/S 80IB (3)(II) OF THE ACT, THE CIT (A) HAS ALLOWED THE ASSESSEES CLAIM WITHOU T ANY VERIFICATION OF THE FACTS. SHE THEREFORE, PRAYED TH AT THE ORDER OF THE CIT (A) MAY BE RECALLED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUBMITTED THAT THE ASSESSEE WAS SET UP AS A S MALL SCALE INDUSTRY IN THE YEAR 1997 VIDE PERMANENT REGISTRATI ON CERTIFICATE NO.01226194 DATED 27.10.1997 WHICH HAS SUBSEQUENTLY BEEN ENDORSED VIDE LETTERS DATED 18.8.1998 AND 17.10.200 5 RESPECTIVELY. HE DREW OUR ATTENTION TO THE COPIES O F THE LETTERS PLACED AT PAGE NOS.16 TO 21 OF THE PAPER BOOK IN SU PPORT OF THE ABOVE CONTENTION. HE HAS ALSO DRAWN OUR ATTENTION T O THE NOTIFICATION NO.4(I)/2000/SSI/VD&POL DATED 19.10.20 00 WHEREIN A CLARIFICATION WAS ISSUED THAT ANY UNIT WHICH HAS RECEIVED PROVISIONAL/PERMANENT REGISTRATION PRIOR TO 24.12.1 999 AND HAS TAKEN CONCRETE STEPS FOR IMPLEMENTING THE PROJECT W OULD CONTINUE TO ENJOY THE SSI STATUS SO LONG AS INVESTMENT IN PL ANT & MACHINERY DOES NOT EXCEED RS.300 LAKHS AND THAT NO TIME LIMIT IS PRESCRIBED FOR SUCH UNIT REACHING THE CEILING OF RS .300 LAKHS THUS, ACCORDING TO HIM, THE INVESTMENT LIMIT FROM R S.3.00 CRORES TO RS.1.00 CRORE HAS BEEN REDUCED ONLY W.E.F. 24.12 .1999 AND SUBMITTED THAT EVEN IF THE ENTIRE VALUE OF THE PLAN T & MACHINERY IS ITA NO 1408 OF 2012 SRI VENKATESWARA PIPES LTD SEC UNDERABAD PAGE 5 OF 6 TAKEN INTO CONSIDERATION AT RS.1,74,16,470, THE ASS ESSEE WAS STILL ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. HE SUBM ITTED THAT ALL THESE FACTS WERE CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL AT AHMEDABAD IN THE CASE OF DCIT VS. M/S. REFOIL EARTH PVT LTD FOR THE A.Y 2005-06 IN ITA NO.456/AHD/2012 A ND THE TRIBUNAL HAS ALLOWED THE DEDUCTION U/S 80IB OF THE ACT BY REFUSING TO ENTERTAIN THE REVENUES APPEAL. A COPY OF THE SAID ORDER IS FILED BEFORE US. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, THE ONLY ISSUE TO BE ADJUDICATED IS WHET HER THE VALUE OF THE PLANT & MACHINERY IS MORE THAN RS.1.00 CRORES A ND IS IT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. ACCORDI NG TO THE ASSESSEE, NOT ALL THE PLANT & MACHINERY IS TO BE IN CLUDED IN THE VALUE OF PLANT & MACHINERY TO TREAT THE ASSESSEE AS AN ELIGIBLE SSI UNIT OR NOT. 6. FURTHER, WE FIND THAT THE ASSESSEE HAS BEEN GRANT ED PERMANENT REGISTRATION IN THE YEAR 1997 AND AS PER THE NOTIFICATION IN THE YEAR 1999, THE ASSESSEES WHO WE RE GRANTED REGISTRATION PRIOR TO 1997 ARE ALLOWED TO POSSESS P LANT AND MACHINERY OF NOT MORE THAN RS.3.00 CRORES EVEN THOU GH THE LIMIT HAS BEEN REDUCED TO 1.00 CRORES. FURTHER, AS PER THE LIST GIVEN BY THE ASSESSEE, THE VALUE OF THE ELIGIBLE PLANT & MAC HINERY IS VERY MUCH LESS THAN RS.1.00 CRORES AND EVEN IF THE VALUE OF THE WHOLE OF THE MACHINERY IS TAKEN INTO CONSIDERATION, THEN THE SAME IS LESS THAN RS.3.00 CRORES AND THE ASSESSEE HAS ALSO BEEN ENDORSED AS AN SSI UNIT BY THE RELEVANT AUTHORITY. THEREFORE , WE DONT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT ( A) THAT THE ITA NO 1408 OF 2012 SRI VENKATESWARA PIPES LTD SEC UNDERABAD PAGE 6 OF 6 ASSESSEE IS A SSI UNIT AND THAT IT WAS ELIGIBLE FOR THE DEDUCTION U/S 80IB(3)(II) OF THE ACT. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 11 TH JANUARY, 2017. VINODAN/SPS COPY TO: 1 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3(2), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD, 2 M/S. SRI VENKATESWARA PIPES LTD, KPR HOUSE, SP RO AD, SECUNDERABAD 3 CIT (A)-GUNTUR 4 CIT III HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER