Sawaria Pipes Pvt. Ltd., Hyderabad V. ACIT, Circle -3(1), Hyderabad

ITA 141/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61935 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P PEERYA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Application of stay
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER S.A. NO. 71/HYD/2012 (IN ITA NO. 141/HYD/2012 ASSESSMENT YEAR: 2008-09) M/S SAWARIA PIPES PVT. LTD., APPELLANT HYDERABAD (PAN AAFCS3155C) VS. ASSTT. COMMISSIONER OF INCOME-TAX, RESPONDE NT HYDERABAD. AND ITA NO. 141/HYD/2012 ASSESSMENT YEAR: 2008-09) M/S SAWARIA PIPES PVT. LTD., APPEL LANT HYDERABAD (PAN AAFCS3155C) VS. ASSTT. COMMISSIONER OF INCOME-TAX, RE SPONDENT HYDERABAD. APPELLANT BY : SHRI A.V. RAGHURAM RESPONDENT BY : SHRI P. PEERYA DATE OF HEARING : 09/05/2012 DATE OF PRONOUNCEMENT : 09/07/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: BY THIS STAY APPLICATION THE ASSESSEE SEEKS STAY OF COLLECTION OF OUTSTANDING DEMAND OF RS. 16,16,44/-.THE APPLICA NT HAS REQUESTED FOR STAY OF DEMAND OF THE TAXES TILL THE DISPOSAL OF APPEAL BY THE TRIBUNAL ON THE GROUND THAT, THE APPL ICANT HAS A S.A. NO. 71/H/12 & ITA NO. 141/H/12 SAWARIA PIPES PVT. LTD. 2 GOOD CASE ON MERITS AND HAS ALREADY PAID AN AMOUNT OF RS. 16,16,044/-. 2. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE PART IES AND PERUSING THE RECORD, WE HAVE TAKEN UP THE CORRESPON DING APPEAL OF THE ASSESSEE FOR DISPOSAL. ITA NO. 141/HYD/12 3. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 28/12/2011 FOR THE ASSES SMENT YEAR 2008- 09. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS IN THE BUSINESS OF MANUFACTURING AND SALE OF HOT ROLLED ST RIPS AND ERWS PIPES AND TUBES (ELECTRIC RESISTANCE WELDED MILD STEEL SH EET PIPES & TUBES. DURING THE YEAR, ASSESSEE COMPANY CLAIMED DEDUCTION U/S.80IB AMOUNTING TO RS. 71,93,135 (@30% ON NET PROFIT OF R S.2,39,77,1 19/-) DURING THE COURSE OF SCRUTINY PROCEEDINGS THE DEDUC TION CLAIMED BY THE ASSESSEE COMPANY HAD BEEN VERIFIED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER HELD THAT THE SAID CLAIM OF ASSE SSEE COMPANY IS IN CONTRAVENTION TO THE CONDITION LAID DOWN AS PER PRO VISIONS OF SECTION 80IB2(III) OF THE I.T. ACT. THE ASSESSING OFFICER F URTHER OBSERVED THAT '80IB(2) SPEAKS THAT THIS SECTION APPLIES TO ANY IN DUSTRIAL UNDERTAKING WHICH FULFILLS ALL THE FOLLOWING CONDITIONS, NAME1Y :- (III) IT MANUFACTURES OF PRODUCES ANY ARTICLE OR TH ING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVE NTH SCHEDULE, OR OPERATES ONE OR MORE COLD STORAGE PLANT OR PLANTS, IN ANY PART OF INDIA: PROVIDED THAT THE CONDITION IN THIS CLAUSE SHALL, I N RELATION TO A SMALL SCALE INDUSTRIAL UNDERTAKING OR AN INDUSTRIAL UNDER TAKING REFERRED 'TO IN SUB-SECTION (4) SHALL APPLY AS IF THE WORDS 'NOT BEING ANY ARTICLE S.A. NO. 71/H/12 & ITA NO. 141/H/12 SAWARIA PIPES PVT. LTD. 3 OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHE DULE' HAD BEEN OMITTED'. 5. THE ASSESSING OFFICER THEREFORE WAS OF THE VIEW THAT TO CLAIM DEDUCTION UNDER SECTION 801B (2) (III), THE FOLLOWI NG CONDITIONS ARE NECESSARY FOR THE ELIGIBILITY TO CLAIM AS SMALL SCA LE INDUSTRY: I. ASSESSEE CLAIMING DEDUCTION SHOULD BE A SMALL SC ALE INDUSTRIAL UNDERTAKING: II. PROFITS AND GAINS SHOULD BE DERIVED FROM MANUFA CTURING OR PRODUCTION OF ARTICLES OR THINGS NOT BEING ANY ARTI CLE OR THING SPECIFIED IN THE LIST IN THE 11 TH SCHEDULE. III. PRODUCTION OR MANUFACTURING ACTIVITY SHOULD HA VE BEEN STARTED AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL, 1995 AND ENDING ON 31 ST DAY OF MARCH, 2004. IV. THE BOOK VALUE OF THE PLANT AND MACHINERY SHOUL D NOT EXCEED RS.3 CRORES FOR THE ASSESSMENT YEAR UNDER CONSIDERA TION. 6. IN VIEW OF THE ABOVE CONDITIONS, THE ASSESSING O FFICER HELD THAT FOR CLAIMING DEDUCTION U/S.801B THE ASSESSEE COMPANY SH OULD REQUIRE TO JUSTIFY ALL THE CONDITIONS FOR EACH AND EVERY ASSES SMENT YEAR. IN THIS CASE THE ASSESSEE COMPANY HAS NOT FULFILLED COLUMN IV OF THE CONDITIONS I.E. 'THE BOOK VALUE OF THE PLANT AND MACHINERY SHOULD N OT EXCEED RS.3 CRORES FOR THE ASSESSMENT YEAR UNDER CONSIDERATION'. DURIN G THE COURSE OF SCRUTINY PROCEEDINGS THE ASSCSSEE'S AUTHORIZED REPR ESENTATIVE SHRI JASRAJ SHRISHRIMAL, WAS ASKED TO EXPLAIN AS TO WHY THE DED UCTION CLAIMED U/S.801B OF THE I.T. ACT SHOULD NOT BE DISALLOWED A S THE W.D.V. ON PLANT AND MACHINERY AS ON 31-03-2008 ACCORDING TO THE BOO K WRITTEN DOWN VALUE IS RS.4,14,24,791/- AND PLANT & MACHINERY PUT TO USE (OTHERS) RS.L ,06,62, 195/- AND PLANT & MACHINERY NOT PUT TO USE RS.4, 19, 13,872/-. AS THE TOTAL WDV OF THE PLANT & MACHINERY INCLUDING TH E OTHERS AND NOT PUT TO USE COMES TO RS.9,40,00,858/- WHICH AS PER THE COND ITIONS EXCEEDED RS. 3 CRORES ON PLANT & MACHINERY. S.A. NO. 71/H/12 & ITA NO. 141/H/12 SAWARIA PIPES PVT. LTD. 4 7. THE ASSESSEE SUBMITTED A LETTER DATED 12-8-2010 THE CONTENTS OF WHICH ARE REPRODUCED AS UNDER: 'IT IS SUBMITTED THAT THE ASSESSEE COMPANY IS A SMA LL SCALE INDUSTRY AND HAS STARTED MANUFACTURING ACTIVITY FROM 10-02-2 000, RELEVANT TO THE FINANCIAL YEAR 1999-2000 AND ITS INVESTMENT IN PLANT AND MACHINERY IS BELOW 5 CRORES AS PER THE DEFINITION O F INVESTMENT IN PLANT AND MACHINERY GIVEN IN THE INDUSTRIES DEVELOP MENT AND REGULATION ACT (LOR ACT) AS PROVIDED IN SECTION 801 8 OF THE INCOME TAX ACT RELATING TO DEFINITION OF SMALL SCALE INDUS TRY (SSI). THE COMPANY WAS REGISTERED UNDER SSI ON 20-03-1999 VIDE PROVISIONAL REGISTRATION NO. 01-22-94721 DATED 20-0 3-1999, THE INITIAL AS'ST. YEAR IS 2003-04. THE INVESTMENT IN PLANT AND MACHINERY AS ON 01-04-2 007 I.E.,- CLOSING BALANCE AS ON 31-3-2007 AS PER THE LAST YEA RS AUDIT REPORT IN FORM 10CCB (AS PER LOR ACT) 2,48,6 7,620.00 ADD: FURTHER INVESTMENT IN PLANT AND MAC HINERY DURING THE FINANCIAL YEAR 2007-08 (AS PER IDR ACT) 1,61,44,285.00 TOTAL INVESTMENT IN PLANT & MACHINERY (AS PER IDR ACT) 4,10,11,905.00 THE INVESTMENT LIMIT FIXED BY THE CIRCULAR NO. SO 1 288(E) DATED 241999 OF INDUSTRIES DEVELOPMENT AND REGULATION ACT OF RS. 1 CRORE AND: 5 CRORES WAS INSERTED IN PLACE OF EARLIE R GENERAL LIMIT OF RS. 3 CRONIS, FIXED BY THE CIRCULAR NO. SO 857(E) D ATED. 10-12- 1997, WITHOUT KEEPING -IN MIND THE PROVISIONS OF IN COME TAX ACT. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE CLAI M MADE BY US IS GENUINE AND IS IN ACCORDANCE WITH THE LETTER AND SP IRIT OF SECTION 80IB AND MAY THEREFORE BE ALLOWED'. 8. THE ASSESSING OFFICER HELD THAT THE SUBMISSIONS MADE BY THE ASSESSEE'S AUTHORIZED REPRESENTATIVE VIDE LETTER DA TED: 12-08-2010 IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: FOR THE PURPOSE OF SECTION 80IB 'SMALL SCALE INDUS TRIAL UNDERTAKINGS MEANS AN INDUSTRIAL UNDERTAKING, AS ON THE LAST DAY OF PREVIOUS YEAR, REGARDED AS SMALL SCALE INDUSTRIAL U NDERTAKING U/S.L1B OF INDUSTRIES (DEVELOPMENT AND REGULATIONS) ACT, 1951'. AS S.A. NO. 71/H/12 & ITA NO. 141/H/12 SAWARIA PIPES PVT. LTD. 5 PER THE GAZETTE NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT VIDE S.0.857 (C) DT. 10-12-1999 APPLICABLE FOR THE RELEV ANT ASSESSMENT YEARS, SMALL SCALE INDUSTRIAL UNDERTAKING IS AN IND USTRIAL UNDERTAKING IN WHICH THE INVESTMENT FOR FIXED ASSETS IN PLANT A ND MACHINERY, WHETHER ON OWNERSHIP BASIS OR ON LEASE OR ON HIRE P URCHASE DOES NOT EXCEED RS. 3 CRORES. IN VIEW THE ABOVE FACTS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE COMPANY AS PER THE ABOVE NOTIFICATION OF S MALL SCALE: INDUSTRY VIDE S.0.857 (C) DT. 10-12-1999 AND AS PER THE COND ITION SPECIFIED U/S.80IB(2)(JJI), THE ASSESSEE HAS FAILED TO SATISF Y THE CONDITIONS LAID DOWN AS PER PROVISIONS OF THE SECTION. AS THE ASSES SEE COMPANY FAILED TO SATISFY THE CONDITIONS THE COMPANY IS NOT TO BE TRE ATED AS 'SMALL SCALE INDUSTRY' TO CLAIM DEDUCTION U/S.80IB OF THE I.T.AC T. HENCE, THE DEDUCTION CLAIMED AMOUNTING TO RS. 71,93,135/- WAS DISALLOWED AND THE SAME WAS ADDED TO THE TOTAL INCOME RETURNED. 9. AGGRIEVED, THE ASSESSEE PREFERRED THE APPEAL BE FORE THE CIT(A) AND RELIED ON THE SUBMISSIONS MADE VIDE LETTER DATE D 12/08/2010 BEFORE THE AO. THE ASSESSEE FURTHER SUBMITTED WITHOUT PREJ UDICE TO ABOVE IT IS SUBMITTED THAT EVEN IF THERE IS ANY DEBATABLE ISSUE IT IS SETTLED LAW THAT THE VIEW FAVORABLE TO THE ASSESSEE HAS TO BE TAKEN AS HAS BEEN HELD IN THE CASE OF CIT V. VEGETABLE PRODUCTS LTD (1973) 88 ITR 192 (SC) FOLLOWED IN CIT V. MULTI METALS LTD (1991)188 ITR 1 51 (RAJ), CIT V. BHARAT NIDHI LTD. (1983) 141 ITR 740 (DEL) AND CRR V. INTE RNATIONAL COMPUTERS LTD., (1981) 131 ITR 1 (BOM). 10. HE FURTHER SUBMITTED THAT AN INCENTIVE PROVISI ON MEANT FOR GROWTH OF INDUSTRIAL GROWTH PARTICULARLY SSI SHALL BE LIBE RALLY CONSTRUED. ONCE THE UNDERLYING PURPOSE OF AN ENACTMENT IS SERVED, THERE IS NO REASON WHY THE DEDUCTION SHOULD BE RESTRICTED ON ONE PRETEXT OR OT HER. FOLLOWING CASE LAWS ARE RELEVANT AND SUPPORTS THE CASE OF APPELLAN T. I) BAJAJ TEMP- LTD V S. CRR (1992) 196 ITR 188 (SC) . S.A. NO. 71/H/12 & ITA NO. 141/H/12 SAWARIA PIPES PVT. LTD. 6 II) CIT VS KRISHNA COPPER & STEEL ROLLING MILLS (19 92) 193 ITR 281 (SC). III) CIT VS BABY MARINE EXPORTS (2007) 160 TAXMAN 1 60 (SC) (WHERE THE COURT STRONGLY ADVOCATED FOR A LIBERAL INTERPRETATI ON. 11. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) HELD THAT THE ASSESSEE CANNOT BE CONSIDERED AS A SMALL S CALE INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF SECTION 11B OF TH E IDR ACT, 1951 AS ON THE LAST DAY OF THE PREVIOUS YEAR RELEVANT TO THE A Y 2008-09. ACCORDING TO THE CIT(A), THE ASSESSEE DID NOT COMPLY WITH THE CO NDITIONS OF THE PROVISO TO CLAUSE (III) OF SUB-SECTION 2 OF SECTION 80IB, I T IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB OF THE ACT. 12. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE REQUIREMENT OF BEING A SMALL SCALE INDUSTRIAL UNDERTAKING APPLIES TO THE INITIAL ASSESSMENT ONLY AND THEREAFTER DEDUCTION U/S 80IB IS TO BE ALL OWED FOR THE NEXT CONSECUTIVE ASSESSMENT YEARS, WITHOUT ANY REFERENCE TO ITS ASSETS BASE, THE CIT(A) FOLLOWING THE DECISION OF THE ITAT, PUNE IN THE CASE OF SAMRUDDHI INDUSTRIES LTD. (SUPRA) HELD THAT THE ASS ESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB IN THE AY 2008-09 AS IT HAS FAILED TO SATISFY THE CONDITIONS LAID DOWN THEREIN ON THE LAST DAY OF THE RELEVANT PREVIOUS YEAR AND COULD NOT HAVE BEEN TREATED AS A SMALL SCA LE INDUSTRY FOR CLAIMING SUCH DEDUCTION. HE ACCORDINGLY, UPHELD THE DISALLOWANCE OF CLAIM OF DEDUCTION OF RS. 71,93,135/- U/S 80IB MADE BY TH E ASSESSING OFFICER. 13. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US AND REITERATED THE SUBMISSIONS AS MADE BE FORE THE CIT(A). 14. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE CRUX AND MAIN ISSUE BASED ON WHICH LEARNED ASSE SSING OFFICER IN HIS S.A. NO. 71/H/12 & ITA NO. 141/H/12 SAWARIA PIPES PVT. LTD. 7 IMPUGNED ORDER DENIED THE DEDUCTION IS THAT THE CLA IM OF THE COMPANY FOR DEDUCTION U/S.80IB IS IN CONTRAVENTION OF SEE 8 0IB(2)(III) OF THE INCOME TAX ACT, AND THEREFORE CANNOT BE ALLOWED. 16. FOR BEING CONSIDERED AS A SSI, IT IS REQUIRED T O BE A SMALL INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF SECTION 80 IB(14) (G). HOWEVER, EVEN THOUGH IT IS CLAIMED THAT THE INCENTIVES PROVIDED B Y SEC. 11B OF THE IDR ACT, 1951 WERE REPLACED BY THE MICRO, SMALL AND MED IUM ENTERPRISES DEVELOPMENT ACT, 2006 (MSME) W.E.F. 16.6.2006, IT I S SEEN THAT SUB SECTION (14)(G) SPEAKS OF A SMALL SCALE INDUSTRY U NDERTAKING WITHIN THE MEANING OF SEC. 11B OF THE IDR ACT, 1951 ONLY. ACCO RDINGLY, A SMALL SCALE INDUSTRIAL UNDERTAKING HAS TO BE UNDERSTOOD WITHIN THE MEANING ASSIGNED TO IT UNDER THE IDR ACT ONLY AND THE MSME ACT, AS C ONTENDED BY THE LEARNED REPRESENTATIVE OF THE ACT. IF THE APPELLANT INDUSTRIAL UNDERTAKING IS TO BE REGARDED AS A SMALL INDUSTRIAL UNDERTAKING, W ITHIN THE MEANING OF SEC. 11B OF THE IDR ACT AS ON THE LAST DAY OF THE P REVIOUS YEAR, ITS INVESTMENT ON FIXED ASSETS IN PLANT AND MACHINERY, WHETHER ON OWNERSHIP BASIS OR ON LEASE OR HIRE PURCHASE, SHOULD NOT EXCE ED RS. 3 CRORES. HOWEVER, IT IS CLEAR THAT IN THE ASSESSEES CASE, T HE ASSESSEE HAD TOTAL INVESTMENT IN PLANT & MACHINERY OF RS. 4,10,11,904/ -, BESIDES THE PLANT AND MACHINERY OF OTHERS PUT TO USE IN ITS CASE WAS OF RS. 1,06,62,195/-. THE ASSESSEE ALSO HAD PLANT & MACHINERY OF RS. 4,19 ,13,872/- WHICH HAD NOT BEEN PUT TO USE. THE TOTAL WDV OF PLANT & MACHI NERY OF RS. 9,40,00,858/-, THEREFORE, MUCH EXCEEDED THE LIMIT O F RS. 3 CRORE APPLICABLE TO AN SSI ON THE LAST DAY OF THE PREVIOU S YEAR. ACCORDINGLY, WE ARE OF THE OPINION THAT THE ASSESSEE CANNOT BE CONS IDERED AS A SMALL SCALE INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF SEC. 11-B OF THE IDR ACT, 1951 AS ON THE LAST DAY OF PREVIOUS YEAR RELEV ANT TO THE A.Y. 2008- 09. SINCE THE ASSESSEE DID NOT COMPLY WITH THE COND ITIONS OF THE PROVISO TO CLAUSE (III) OF SUBSECTION 2 OF SECTION 80IB, IT IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80B OF THE ACT. S.A. NO. 71/H/12 & ITA NO. 141/H/12 SAWARIA PIPES PVT. LTD. 8 17. THE APPEAL OF THE ASSESSEE IS DISMISSED AND THE S.A. FILED BY THE ASSESSEE BECOMES INFRUCTUOUS, THEREFORE, THE SAME I S DISMISSED AS INFRUCTUOUS. 18. IN THE RESULT, BOTH THE APPEAL AND THE S.A. OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 09/07/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 9 TH JULY, 2012. KV COPY TO:- 1) SAWARRIA PIPES PVT. LTD., C/O R. JASRAJ & CO., ADVOCATE, 15-1-91/4/A, 2 ND FLOOR, PAPALAL PLAZA, FEELKHANA, HYDERABAD-12. 2) ACIT, CIRCLE 3(1), HYDERABAD 3) THE CIT (A)-IV HYDERABAD 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 02/07/12 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 03/07/12 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER