Tirumala Dairy Pvt Ltd, Narasaraopeta V. Addl CIT, Guntur

ITA 153/VIZ/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56784 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 30-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH; TH L PETER
• Keywords: Depreciation; Additional depreciation; Procedural lapse; Competent authority; Reason to believe; Unabsorbed depreciation
• Section: 143(3); 115JB; 80IB; 147

Judgement Text

ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 153 /VIZAG/ 20 09 ASSESSMENT YEAR S : 2005 - 06 M/S. TIRUMALA DA IRY PVT. LTD NARASARAOPET VS. AD. CIT RANGE - 2(1) GUNTUR (APPELLANT) (RESPONDENT) AAACT 8063H ITA NO.154/VIZAG/2009 ASSESSMENT YEARS : 2005 - 06 M/S. TIRUMALA MILK PRODUCTS PVT. LTD NARASARAOPET VS. AD. CIT RANGE - 2(1) GUNTUR (APPELLANT) (RESPONDE NT) AABCT 7907M ITA NO.397/VIZAG/2010 ASSESSMENT YEARS : 2002 - 03 M/S. TIRUMALA DAIRY PVT. LTD NARASARAOPET VS. DCIT, CIRCLE - 2(1) GUNTUR (APPELLANT) (RESPONDENT) AAACT 7907M ITA NO.60/VIZAG/2011 ASSESSMENT YEARS : 2007 - 08 M/S. TIRUMALA M ILK PRODUCTS PVT. LTD. NARASARAOPET VS. JT. CIT RANGE - 2 GUNTUR (APPELLANT) (RESPONDENT) AABCT 7907M APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) & SHRI D.S. SUNDER SINGH, SR.DR DATE OF HEARING: 30.06.2011 DATE OF PRONOUNCEMENT: 11 .08.2011 ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 2 ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAIN ST THE RESPECTIVE ORDER OF THE CIT(A) ON COMMON GROUNDS. THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH TH IS CONSOLIDATED ORDER. THE MAIN CONTROVERSY INVOLVED IN THIS APPEAL IS WIT H REGARD TO THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. OTHER ISSUE INVOLVE D IN ITA NOS.153 OF 2009, 154 OF 2009 AND 60 OF 2011 IS WITH REGARD TO THE CL AIM OF ADDITIONAL DEPRECIATION. WE, THEREFORE, ADJUDICATE THESE APPE ALS SIMULTANEOUSLY ON GROUNDWISE. 2. WITH REGARD TO THE DENIAL OF CLAIM OF DEDUCTION U/S 80IB, THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESS ING OFFICER HAS DISALLOWED THE DEDUCTION CLAIMED U/S 80IB HOLDING THAT (A) THE ASSESSEE WAS NOT A SMALL SCALE INDUSTRIAL UNIT SINCE THE VALUE OF ITS PLANT AND MACHINERY AS ON 31.3.2005 EXCEEDED ` 1 CRORE (B) THE ASSESSEE WAS ENGAGED IN PROCESSING AND TRADING OF MILK AND MILK PRODUCTS AND HAS NOT M ANUFACTURED OR PRODUCED ANY ARTICLE OR THING. RELYING UPON VARIOUS JUDGEME NTS OF THE APEX COURT AND OTHER COURTS, THE A.O. HAS CONCLUDED THAT THE ASSES SEE WAS NOT ENGAGED IN MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING S INCE THE ASSESSEE MERELY MAKES THE MILK PROCURED BY IT MARKETABLE BY ENHANCI NG ITS SELF LIFE BUT THE OUTPUT REMAINS THE SAME AS THE INPUT DOES NOT UNDER GO ANY SIGNIFICANT CHANGE IN ITS CHARACTERISTICS. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSION THAT THE ASSESSEE HAD BEEN SUBJECTED TO SCRUTINY ASSESSMENT FROM THE ASSESSMENT YEAR 1999-2000 ONWARDS AND THE ISSUE HAD BEEN CONSIDERED IN DEPTH BY THE DEPARTMENT, INCLUDING TH ROUGH DIRECTIONS ISSUED BY THE ADDITIONAL CIT U/S 144A OF THE ACT BEFORE BE ING ALLOWED. IT WAS FURTHER CONTENDED THAT AS PER THE PROVISIONS OF THE ACT, THE DEDUCTION TO AN ELIGIBLE INDUSTRY WAS GRANTED FOR A PERIOD OF 10 YE ARS CONTINUOUSLY AND ONCE ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 3 GRANTED IN AN INITIAL YEAR, THERE WAS NO SCOPE FOR RECONSIDERATION IN ANY OF THE LATER YEARS. 4. WHILE ADJUDICATING THESE ARGUMENTS, THE CIT(A) H ELD THAT DOCTRINE OF THE RES JUDICATA DOES NOT HAVE ANY APPLICATION IN I NCOME TAX PROCEEDINGS. EACH YEAR IS A DISTINCT AND INDEPENDENT YEAR AND ER RORS OR MISTAKES COMMITTED IN ONE YEAR CANNOT BE REPEATED IN THE NEX T YEAR AS HELD BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF SADASIV KR ISHNARAO VS. CIT 144 ITR 270. HE HAS ALSO PLACED A RELIANCE UPON THE VARIOU S OTHER JUDGEMENTS OF THE SUPREME COURT WHILE UPHOLDING THE ACTION OF THE A.O . FOR TAKING A VIEW CONTRARY TO THE VIEW TAKEN IN THE EARLIER YEARS. 5. ON MERIT, THE LD. COUNSEL FOR THE ASSESSEE HAS R ELIED UPON VARIOUS JUDGEMENTS IN SUPPORT OF HIS CONTENTION THAT PASTEU RISATION OF THE MILK IS AN ACTIVITY THAT CAN BE DESCRIBED AS A MANUFACTURING O R PRODUCTION. THE MILK PROCURED HAD TO UNDERGO UNDER VARIOUS PROCESS AND T HE PASTEURISED MILK IS A DIFFERENT PRODUCT THAN THE ORIGINAL MILK. THESE AR GUMENTS WERE EXAMINED BY THE CIT(A) BUT WAS NOT CONVINCED WITH IT AND RELYIN G UPON THE ORDERS OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE B.G. CHIT ALE VS. DCIT 116 TTJ 658, THE CIT(A) HAS HELD THAT THE PASTEURISATION OF MILK DID NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. RELYING UPON THIS SPECIAL BENCH ORDER, THE CIT(A) HAS ALSO OBSERVED THAT IF T HE ASSESSEE MARKETS CURD, GHEE OR OTHER PRODUCTS AFTER PROCESSING, THAT AMOUN TS TO A MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. THEREFORE, THE ASSESSEE PLEADED THAT ITS UNIT BE CONSIDERED TO BE MANUFACTURING UNIT AND IS ELIGIBLE U/S 80IB OF THE ACT. THESE ARGUMENTS OF THE ASSESSEE ARE ALSO REJE CTED BY THE CIT(A) ON THE GROUND THAT MAIN TURNOVER OF THE ASSESSEE IS OF PRO CESSED MILK OF DIFFERENT VARIETIES AND PRODUCTION OF CREAM, GHEE, BUTTER AND CURD ETC. ARE ONLY INCIDENTAL ACTIVITY OF THE ASSESSEE COMPANY. THERE FORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80IB OF THE ACT. ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 4 6. THE CIT(A) HAS ALSO APPROVED THE ORDER OF THE A. O., WHEREBY THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE IS NOT A SMALL SCALE INDUSTRY BECAUSE ON THE LAST DATE OF RELEVANT FINANCIAL YEAR , THE TOTAL INVESTMENT IN PLANT AND MACHINERY EXCEEDED ` 1 CRORE WHICH WAS PERMISSIBLE INVESTMENT TO QUALIFY AS A SSI. 7. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL AGAINST THE ORDER OF THE CIT(A) WITH THE SUBMISSION THAT THE ASSESSEE WA S ALLOWED DEDUCTION U/S 80IB IN THE INITIAL YEARS AFTER MAKING A DETAILED E XAMINATION BY THE ASSESSING OFFICER. THEREFORE, ONCE THE DEDUCTION IS ALLOWED IN INITIAL YEARS, IT CANNOT BE DISALLOWED IN SUBSEQUENT YEARS. IN SUPPORT OF THIS PROPOSITION, THE ASSESSEE HAS PLACED A RELIANCE UPON THE FOLLOWING JUDGEMENTS : 1. CIT VS. PAUL BROTHERS (1995) 216 ITR 548 (NAG) 2. MICRO INSTRUMENTS CO. VS. ITO (2008) 12 DTR (CHD) ( TRIB) 501 3. ITO VS. ESSENTIAL MOTTO (2009) 17 DTR (CHD) (TRIB) 281 4. M.M. PATEL & SONS PVT. LTD. VS. ITO (1982) 1 ITD 82 5. JANAK DEHYDRATION PVT. LTD. VS. ACIT 134 TTJ 1 (AHD ) 6. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS. CI T 123 ITR 669 8. WITH REGARD TO THE PRODUCTION OF PASTEURIZED MIL K, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS PR OCURED THE MILK FROM DIFFERENT PLACES AND IN ORDER TO MAKE IT MORE HYGIE NIC WITH DIFFERENT PERCENTAGE OF FAT CONTENTS, IT HAS TO UNDERGO DIFFE RENT PROCESS OF BOILING AND COOLING AND THEREFORE THE FINAL PRODUCT IS ENTIRELY DIFFERENT PRODUCT OTHER THAN THE MILK PROCURED FROM DIFFERENT PLACES. THUS, THE PROCESS OF PASTEURIZATION AND STANDARDIZATION OF MILK AMOUNTS TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING AND THE ASSESSEE IS ENTITLED FOR D EDUCTION U/S 80IB OF THE ACT. IN SUPPORT OF HIS CONTENTION THAT EVEN IN THOSE CAS ES, WHERE THE FINAL PRODUCT REMAINS THE SAME PRODUCT AS OF THE ORIGINAL PRODUCT /RAW MATERIAL, THE PROCESSING AMOUNTS TO A MANUFACTURE OR PRODUCTION, THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE FOLLOWING JUDGEMENTS: ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 5 1. INDIA CINE AGENCIES VS. CIT (2008) 220 CTR (SC) 223 2. CIT VS. EMPTEE POLY-YARN PVT. LTD. (2010) 229 C TR (SC) 1 3. YFC PROJECTS PVT. LTD. VS. DCIT (2010) 37 SOT 1 30 (DEL) 4. ACIT VS. LEEBO METALS (P) LTD. (2010) 4 ITR 275 5. MIDAS POLYMER COMPOUNDS (P) LTD. VS. ACIT (2011 ) 331 ITR 68 6. CIT VS. JANAK RAJ BANSAL (2010) 329 ITR 417 7. EMPIRE INDUSTRIES LTD. & ANOTHER VS. UNION OF IN DIA & ORS. (1986) 162 ITR 846 (SC) 8. DCIT VS. SRI SAI ROLLER FLOUR MILLS PVT. LTD. 2 ITR (TRIB) 490 (HYD) 9. PANKAJ JAIN VS. ITO 104 ITD 152 10. CIT VS. SIDDHAL FOOD PVT. LTD. 262 ITR 563 11. GANESH TRADING COMPANY VS. STATE OF HARYANA 32 STC 623 12. ITO VS. ARIHANT TILES AND MARBLES PVT. LTD. 32 0 ITR 79 (SC) 13. VIJAY SHIP BREAKING CORPORATION VS. CIT 314 IT R 309 14. CIT VS. SESA GOA LTD. 271 ITR 331 15. ANIL STEEL TRADERS VS. DCIT 111 TTJ 747 16. ACIT VS. TIRUPATI MICROT TECH PVT. LTD. 111 TT J 149 17. VIN BROTHERS AND COMPANY VS. ITO 111 TTJ 435 18. SHAH ORIGINALS VS. ACIT 12 TTJ 754 19. ASPIN WALL AND CO. LTD. VS. CIT 251 ITR 323 (S C) 20. BROACH DIST. CO-OP. COTTON SALES GINNING & PROC ESSING SOCIETY 107 ITR 418 (SC) 21. CIT VS. INDIAN OIL BLENDING CO. LTD. 142 ITR (S TATUTE) 1 (SC) 22. ARDESHIR BHIWANDIWALIA VS. STATE OF BOMBAY 2 LL J 77 (SC) 23. STATE OF MADRAS VS. SWASTHIK TOBACCO FACTORY 17 STC 316 (SC) 24. CIT VS. ARJ SECURITY PRINTERS 264 ITR 276. 9. WITH REGARD TO THE SMALL SCALE INDUSTRIES, THE L D. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WAS REGIST ERED AS A SMALL SCALE INDUSTRIES WITH THE CONCERNED AUTHORITIES AFTER FUL FILLING REQUISITE CONDITIONS. AT THE TIME OF REGISTRATION, THE INVESTMENT IN FIXE D ASSETS IN PLANT AND MACHINERY WERE WITHIN THE PRESCRIBED LIMIT. THE RE GISTRATION WAS NEVER ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 6 WITHDRAWN BY THE CONCERNED AUTHORITIES. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE WAS NOT A SMALL SCALE INDUSTRY. 10. THE LD. D.R. ON THE OTHER HAND BESIDES PLACING A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) HAS SUBMITTED THAT EVERY AS SESSMENT YEAR IS AN INDEPENDENT ASSESSMENT YEAR AND RULE OF RES JUDICAT A WOULD NOT APPLY TO THE INCOME TAX PROCEEDINGS. THEREFORE, IN EACH ASSESSM ENT YEAR THE ISSUES ARE TO BE EXAMINED INDEPENDENTLY IN THE LIGHT OF RELEVA NT LEGAL PROVISIONS. WHEN IT HAS BEEN HELD BY THE APPELLATE AUTHORITIES THAT PASTEURIZATION OF MILK DOES NOT AMOUNT TO A MANUFACTURE OR PRODUCTION OF ARTICL ES OR THINGS, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE DEDUCT ION CLAIMED U/S 80IB OF THE ACT. THE LD. D.R. FURTHER CONTENDED THAT FOR THE A SSESSMENT YEAR 2002-03, THE ASSESSMENT ORIGINALLY FRAMED ALLOWING THE CLAIM OF DEDUCTION WAS REOPENED AND DEDUCTION U/S 80IB WAS DISALLOWED BY T HE A.O. THE LD. D.R. FURTHER CONTENDED IF IN ANY OF THE ASSESSMENT YEAR ERROR IS COMMITTED AND CLAIM IS WRONGLY ALLOWED, THE ASSESSING OFFICER IS WITHIN HIS JURISDICTION TO RECTIFY THE ERROR AND DISALLOW THE CLAIM. PASTEURI SATION OF MILK IS SIMPLY PURIFICATION OF MILK WITHOUT CHANGING ITS CHARACTER ISTICS. PASTEURISED MILK REMAIN THE SAME MILK AS IT WAS PROCURED. ONLY THE STRENGTH OF FATS AND PERCENTAGE OF PURITY WAS IMPROVED. WITH REGARD TO THE REGISTRATION OF SMALL SCALE INDUSTRIES, THE LD. D.R. HAS SUBMITTED THAT D URING THE IMPUGNED ASSESSMENT YEAR, THE INVESTMENT IN PLANT AND MACHIN ERIES EXCEEDED THE PRESCRIBED LIMIT. THEREFORE, THE A.O. HAS RIGHTLY HELD THAT THE ASSESSEE IS NOT A SMALL SCALE INDUSTRY. 11. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACE D ON RECORD, WE FIND THAT UNDISPUTEDLY ASSESSEE WAS RECOGNIZED AS A SMAL L SCALE INDUSTRY AND DEDUCTION CLAIMED U/S 80IB WAS ALLOWED TO THE ASSES SEES FIRST TIME IN THE ASSESSMENT YEAR 1993-94 AS CONTENDED BY THE ASSESSE E IN HIS WRITTEN SUBMISSIONS. THIS FACTUAL ASPECT WAS NOT DISPUTED BY THE REVENUE. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT FOR THE ASSE SSMENT YEAR 2000-01, ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 7 2001-02, 2002-03 & 2004-05, THE CLAIM OF DEDUCTION U/S 80IB WAS ALLOWED BUT FOR THE ASSESSMENT YEAR 2002-03, THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER AS THE ASSESSMENT WAS FRAMED U/S 143(1) OF THE ACT. FOR OTHER ASSESSMENT YEARS, THE ASSESSMENT WAS FRAMED U /S 143(3) AND THE ISSUE WAS DULY EXAMINED BY THE ASSESSING OFFICER. NOW TH E QUESTION ARISE, ONCE THE ASSESSEE WAS ALLOWED, THE DEDUCTION U/S 80IB AF TER TREATING THE PASTEURIZATION OF MILK AS A MANUFACTURING ACTIVITY, CAN THE DEDUCTION U/S 80IB CAN BE DISALLOWED IN SUCCEEDING YEARS? 12. IN THIS REGARD, OUR ATTENTION WAS INVITED TO TH E ORDER OF THE TRIBUNAL OF ALLAHABAD BENCH IN THE CASE OF JANAK DEHYDRATION PV T. LTD. VS. ACIT 134 TTJ 1 IN WHICH IT HAS BEEN HELD THAT CONDITION PRECEDEN T FOR ALLOWABILITY OF DEDUCTION U/S 80IB ARE TO BE EXAMINED IN THE INITIA L YEAR OF THE CLAIM AND IF THEY ARE FOUND TO BE SATISFIED, THE A.O. CANNOT IGN ORE THAT FINDING IN THE ASSESSMENT OF A SUBSEQUENT YEAR AND TAKE A DIFFEREN T VIEW. THE TRIBUNAL FURTHER HELD THAT CIT(A) WAS NOT JUSTIFIED IN DISAL LOWING THE DEDUCTION U/S 80IB ON THE GROUND THAT MANUFACTURE AND SALE OF DEH YDRATED ONION FLAKER AND POTATO IS NOT MANUFACTURE OR PRODUCTION OF ARTICLE OR THING TO BE ELIGIBLE TO INCENTIVE DEDUCTION U/S 80IB. 13. IN THE CASE OF MICRO INSTRUMENTS COMPANY VS. IT O (SUPRA), THE TRIBUNAL HAS HELD THAT THE ASSESSEES CLAIM FOR DED UCTION U/S 80IB HAVING BEEN ALLOWED IN THE INITIAL ASSESSMENT YEAR AND ALS O THEREAFTER, THE CLAIM FOR SUCH DEDUCTION CANNOT BE DENIED FOR SUBSEQUENT YEAR S WITHOUT ANY JUSTIFICATION. THE RELEVANT OBSERVATIONS OF THE TR IBUNAL ARE EXTRACTED HEREUNDER: THE ASSESSEE INITIALLY CLAIMED DEDUCTION UNDER S. 80IB FOR THE IMPUGNED UNIT IN THE ASST. YR. 2001-02 AND THE SAME WAS ALLOWED. IN THIS ASSESSMENT YEAR, I.E. 2003-04 THE CLAIM OF THE ASSESSEE WAS IN CONTINUATION OF THE CLAIMS MADE IN THE EARLIER ASSESSMENT YEARS FOR THE IMPUGNED ASSESSMENT YEAR FALLS WITHIN THE NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THE SECTION IN WHICH THE CLAIM IS E LIGIBLE. IT IS ALSO A PERTINENT FACT POSITION THAT THE CLAIM ALLOWED TO THE ASSESSE E IN THE INITIAL ASSESSMENT YEAR OF 2001-02 AND THEREAFTER IN THE ASST. YR. 2002-03 HAS NOT BEEN WITHDRAWN. THERE IS NO CONTRAVENTION FROM THE REVENUE EITHER AT THE ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 8 STAGE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITI ES OR EVEN BEFORE THE TRIBUNAL. THUS, FACTUALLY SPEAKING THE CLAIM OF TH E ASSESSEE FOR DEDUCTION UNDER S. 80IB STANDS ADMITTED IN THE INITIAL ASSESSMENT YEAR AND ALSO THEREAFTER UPTO THE ASSESSMENT YEAR PRIOR TO THE YEAR UNDER CONSIDERATION. ON THIS FACTUAL MATRIX, THERE IS NO JUSTIFICATION F OR THE AO TO DENY THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S. 80IB. THE IMPL ICATION OF THE EARLIER ASSESSMENT MADE FOR THE INITIAL ASSESSMENT YEAR UNDER S. 143(3) IS THAT THE ASSESSEE HAS FULFILLED THE CONDITIONS PRESCRIBE D IN THE SAID SECTION. THEREAFTER, IT IS NOT OPEN FOR THE AO TO RE-EXAMINE THE ISSUE ALL OVER AGAIN AND COME TO A DIFFERENT CONCLUSION IN A SUBSEQUENT YEAR WITHOUT JUSTIFYING SUCH DEPARTURE. IN THE ASSESSMENT ORDER, THERE IS NO DISCUSSION BY THE AO ON THIS ASPECT IN SPITE OF THE FACT THAT THE ASSESS EE HAD TAKEN A SPECIFIC POSITION BASED ON THE RELIEF ALLOWED IN THE PAST. FURTHER, THE CLAIM ACCEPTED BY THE AO IN THE ASST. YR. 2001-02 AND THEREAFTER I N 2002-03 HAS NOT BEEN DISTURBED. CLEARLY, IN A SUCH A SITUATION, THE ONU S WHICH WAS ON THE REVENUE HAS NOT BEEN DISCHARGED. INSOFAR AS THE JUSTIFICAT ION FOR THE CLAIMS OF EXEMPTION/TAX RELIEFS ARE CONCERNED THE ONUS IS ON THE ASSESSEE TO ESTABLISH AND JUSTIFY THE CLAIMS. SO, HOWEVER, IN A SITUATIO N LIKE THE PRESENT SITUATION, THE AO OUGHT TO HAVE JUSTIFIED HIS DEPARTURE FROM T HE EARLIER ACCEPTED POSITION WHEREBY SIMILAR CLAIM HAS BEEN ACCEPTED IN THE PAST. IT IS IN THIS BACKGROUND THE ONUS WAS ON THE AO TO JUSTIFY THE DE NIAL OF DEDUCTION UNDER S. 80IB IN VIEW OF THE PAST HISTORY. THEREFORE, IN THIS BACKGROUND THERE IS NO JUSTIFICATION TO UPHOLD THE STAND OF THE IT AUTHORI TIES TO DENY THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S. 80IB IN RELATION TO THE PROFITS AND GAINS. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS. CI T (1979) 11 CTR (GUJ) 139 : (1980) 123 ITR 669 (GUJ) AND CIT VS. PAUL BRO THERS (1995) 216 ITR 548 (BOM) RELIED ON. 14. IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL IND USTRIES LTD. VS. CIT 123 ITR 669, THEIR LORDSHIP OF THE GUJARAT HIGH COU RT HAVE HELD THAT A REBATE GRANTED U/S 80J CANNOT BE WITHDRAWN IN A SUBSEQUENT YEAR WITHOUT DISTURBING THE RELIEF GRANTED IN THE EARLIER YEARS. THE RELEV ANT OBSERVATION OF THE HONBLE HIGH COURT ARE AS UNDER: IT SHOULD BE STATED THAT THERE IS NO PROVISION IN T HE SCHEME OF S. 80J SIMILAR TO THE ONE WHICH ONE FINDS IN THE CASE OF D EVELOPMENT REBATE WHICH COULD BE WITHDRAWN IN SUBSEQUENT YEAR FOR BREACH OF CERTAIN CONDITIONS. NO DOUBT, THE RELIEF OF TAX HOLIDAY UNDER S. 80J CAN B E WITHHELD OR DISCONTINUED PROVIDED THE RELIEF GRANTED IN THE INITIAL YEAR OF ASSESSMENT IS DISTURBED OR CHANGED ON VALID GROUNDS. BUT WITHOUT DISTURBING T HE RELIEF GRANTED IN THE INITIAL YEAR THE ITO CANNOT EXAMINE THE QUESTION AG AIN AND DECIDE TO WITHHOLD OR WITHDRAW THE RELIEF WHICH HAS BEEN ALREADY ONCE GRANTED. THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THERE WAS NO CASE FOR THE REVENUE TO WITHDRAW THE ASSESSEES CLAIM UNDER S. 80J FOR THE YEAR UNDER REFERENCE, WHEN SUCH CLAIM HAD BEEN ACCEPTED IN THE EARLIER AS SESSMENT YEAR, WHICH ASSESSMENT HAD NOT BEEN DISTURBED. ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 9 15. THE SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN T HE CASE OF ITO VS. ESSENTIAL MOTO (SUPRA) IN WHICH THE TRIBUNAL HAS HE LD THAT DEDUCTION U/S 80IA HAVING BEEN ALLOWED IN INITIAL ASSESSMENT YEAR I.E. 1997-98 IN ASSESSMENT U/S 143(3) WITH A SPECIFIC FINDING THAT ASSESSEE FULFIL LED ALL THE CONDITIONS OF SECTION 80IA WHICH STANDS UNDISTURBED, A.O. COULD N OT HAVE REOPENED THE ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99 AND SUBS EQUENT YEARS FOR WITHDRAWING SAID DEDUCTION. FURTHER, A.O. HAVING A LLOWED IDENTICAL CLAIMS IN SECTION 80IA IN ASSESSMENT U/S 143(3) FOR EARLIER Y EAR AND ALSO SUBSEQUENT ASSESSMENT YEAR COULD NOT HAVE REASON TO BELIEVE IN THE ABSENCE OF ANY FRESH FACTS OR CHANGE OF LAW THAT INCOME ESCAPED ASSESSME NT ON ACCOUNT OF RELIEF U/S 80IA, HENCE, REOPENING WAS ON MERE CHANGE OPINI ON AND INVALID. SIMILAR VIEW WAS ALSO EXPRESSED BY THE TRIBUNAL NAGPUR BENC H IN M.M. PATEL & SONS VS. ITO (SUPRA) IN WHICH IT WAS HELD THAT RELIEF TO ASSESSEE U/S 80HH AND 80J HAVING BEEN ALLOWED IN THE INITIAL ASSESSMENT YEAR AND THE SAID ALLOWANCE HAVING BECOME FINAL AND CONCLUSIVE, ITO CANNOT REJE CT THE RELIEF FOR SUCCEEDING YEARS IN RESPECT OF SAME BUSINESS AND SA ME ASSETS. 16. WE HAVE ALSO CAREFULLY EXAMINED THE NATURE OF A CTIVITIES UNDERTAKEN BY THE ASSESSEE IN PROCESSING FOR PASTEURIZED AND STAN DARDIZED OF MILK. UNDISPUTEDLY, ASSESSEE IS HAVING FULL RANGE OF DAIR Y PRODUCTS AND PROCURED MILK FROM DIFFERENT PLACES AND TO MAKE IT MARKETABL E PRODUCT IT HAS TO UNDERGO UNDER DIFFERENT PROCESSES. TECHNICALLY, PA STEURIZATION OF MILK IS AN IMPORTANT PROCESS. BEFORE PASTEURIZATION THE MILK WAS DANGEROUS SOURCE OF INFECTION AS IT IS PROCURED FROM DIFFERENT PLACES. IN A PASTEURIZATION PROCESS, IT HAS TO UNDERGO BOILING AND COOLING PROCESS BESID ES EXTRACTION OF CREAM THERE FROM. THE PASTEURIZED MILK OF DIFFERENT STAN DARDS 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 EXA MINED BY THE 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 WA S REOPENED U/S 147 OF THE ACT. THE CLAIM OF DEDUCTION CAN BE ALLOWED AS PER PROVISIONS OF SECTION 80IB OF THE ACT FOR A PERIOD OF 10 CONSECUTIVE ASSE SSMENT YEARS BEGINNING ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 10 WITH THE INITIAL ASSESSMENT YEARS SUBJECT TO FULFIL LMENT OF CERTAIN CONDITIONS. IN THE INITIAL YEARS, THE CLAIM WAS ADMITTEDLY ALLO WED BY THE ASSESSING OFFICER AFTER MAKING A NECESSARY ENQUIRY. ONCE IT IS ALLOW ED IN THE INITIAL ASSESSMENT YEAR, IT SHOULD BE ALLOWED IN SUCCEEDING ASSESSMENT YEARS. THERE IS NO PROVISION IN THIS SECTION WHICH EMPOWERS THE ASSESS ING OFFICER TO WITHDRAW THE CLAIM ORIGINALLY ALLOWED IN EARLIER ASSESSMENT YEARS, IN SUCCEEDING YEARS. ONCE THE NATURE OF ACTIVITIES WAS EXAMINED BY THE A .O. AND IT WAS CONSIDERED TO BE THE MANUFACTURING ACTIVITY FOR THE PURPOSE OF ALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT, THE SAME ACTIVITY CANNOT BE DI FFERENTLY INTERPRETED IN ORDER TO DISALLOW THE CLAIM OF DEDUCTION TO THE ASS ESSEE IN SUCCEEDING YEAR. NO DOUBT 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 PROCESSING OF MILK AND MILK REMAINS THE MILK EVEN AFTER PROCESSING THOUGH A LITTLE MORE CLEAN AND MORE FIT FOR CONSUMPTION AND THEREFORE, DOES NOT AM OUNT TO MANUFACTURE OR PRODUCTION FOR THE PURPOSE OF GRANT OF DEDUCTION U/ S 80HHA AND 80I. BUT AFTER THIS JUDGEMENT, THE WORD MANUFACTURE AND PROD UCTION WAS FURTHER INTERPRETED BY THE APEX COURT AND VARIOUS HIGH COUR TS. 17. IN THE CASE OF INDIA CINE AGENCIES VS. CIT (SUP RA), THEIR LORDSHIP OF THE APEX COURT HAVE HELD THAT CONVERSION OF JUMBO R OLLS OF PHOTOGRAPHIC FILMS INTO SMALL ROLLS IN DESIRED SIZE AMOUNTS TO A MANUF ACTURE OR PRODUCTION ELIGIBLE FOR DEDUCTION U/S 80HH AND 80I OF THE ACT. WHILE DEALING WITH THE ISSUE, THEIR LORDSHIP HAVE DEFINED THE WORD MANUFAC TURE BY HOLDING THAT MANUFACTURE IMPLIES A CHANGE BUT EVERY CHANGE IS NO T MANUFACTURE YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF A TREATMENT, LABOUR AND MANIPULATION. NATURALLY MANUFACTURE IS AN END RESULT OF ONE OR MO RE PROCESSES THROUGH WHICH THE ORIGINAL COMMODITIES ARE MADE TO PASS. T HE NATURE AND EXTENT OF PROCESSING MAY VARY FROM ONE CLASS TO ANOTHER. THE RE MAY BE A SEVERAL STAGES OF PROCESSING, A DIFFERENT ACCOUNT OF PROCES SING AT EACH STAGE. WITH EACH PROCESS SUFFERED, THE ORIGINAL COMMODITY EXPER IENCE A CHANGE. 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 ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 11 OF THE COMMODITY. BUT IT IS ONLY WHEN THE CHANGE O R SERIES OF CHANGES TAKES THE COMMODITY TO THE POINT WHERE COMMERCIALLY IT CA N NO LONGER BE REGARDED AS A ORIGINAL COMMODITY BUT INSTEAD IS A RECOGNIZED A NEW AND DISTINCT ARTICLE THAT A MANUFACTURE CAN SAID TO TAKE PLACE. THEY HA VE ALSO DEFINED THE EXPRESSION PRODUCTION AND HELD THAT PACKING, LABELL ING, RELABELLING CONTAINERS, RE-PACKING FROM BULK PACKAGES TO RETAIL PACKAGES AN D THE ADOPTION OF OTHER METHOD TO RENDER THE PRODUCT MARKETABLE ARE THE PAR T 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) BEC OMES USABLE FOR MANUFACTURE OF FABRIC ONLY AFTER IT UNDERGOES THE O PERATION/PROCESS KNOWN AS THEREMO MECHANICAL PROCESS WHICH CONVERTS POY INTO TEXTILES YARN AND THEREFORE, TWISTING AND TEXTURISING OF POY AMOUNTS TO MANUFACTURE IN TERMS OF 80IA. WHILE DEALING WITH THIS ISSUE THEIR LORDS HIP HAVE OBSERVED THAT POY A SEMI FINISHED YARN NOT CAPABLE OF BEING PUT IN WA RP OR WEFT, IT CAN ONLY BE USED FOR MAKING A TEXTILE YARN, WHICH, 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-FERRO US WIRES FROM BIG GAUGE RODS IS COVERED WITHIN THE MEANING OF PRODUCTION U/ S 80IB AND THEREFORE, ASSESSEE IS ENTITLED 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 ASSESSMENT ORDE R IN THESE CASES WERE PASSED IN DECEMBER, 2007. THEREFORE, THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF B.J. CHITALE CANNOT BE CALL ED TO BE AVAILABLE WITH THE ASSESSING OFFICER TO TAKE A VIEW CONTRARY TO THE VI EW TAKEN IN EARLIER ASSESSMENT YEARS. MOREOVER, WE DO NOT FIND ANY VAL ID 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 ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 12 THE CASE OF B.J. CHITALE, VARIOUS JUDGEMENTS ARE RE NDERED BY THE APEX COURT AND VARIOUS HIGH COURTS ON THIS SUBJECT AND IN CASE OF INDIA CINE AGENCIES, THE HONORABLE APEX COURT VIDE ITS JUDGEMENT DATED 1 2.11.2008 HAS CLARIFIED THE EXPRESSION PRODUCTION AND MANUFACTURE AND H ELD THAT PACKING, LABELING, RE-LABELLING CONTAINERS REPACKING FROM BULK PACKAGE TO RETAIL PACKAGE AND THE ADOPTION OF OTHER METHOD TO RENDER THE PRODUCT MARK ETABLE ARE ALSO A PART OF PRODUCTIONS. THE DEDUCTION U/S 80IB IS TO BE ALLOW ED WHEN THE ASSESSEE IS ENGAGED IN THE ACTIVITIES OF MANUFACTURE OR PRODUCT ION. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN PROCESSING AND TRADING OF MI LK AND MILK PRODUCTS. THE BULK OF MILK IS BEING PROCURED FROM DIFFERENT PLACE S AND AFTER ITS PASTEURIZATION, IT WAS PACKED IN SMALL PACKETS FOR ITS MARKETING AND THE PACKING FROM BULK MATERIAL TO RETAIL PACKAGE AMOUNT S TO A PRODUCTION AS PER THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE C ASE OF INDIA CINE AGENCIES (SUPRA). THEREFORE, ONCE THE REVENUE IN T HE INITIAL YEAR HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND ALLOWED DEDU CTION U/S 80IB WHICH HAS TO BE ALLOWED 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 N O CHANGE IN THE LEGAL PROPOSITION. THEREFORE, WE ARE OF THE VIEW THAT RE VENUE WAS NOT JUSTIFIED IN TAKING A CONTRARY VIEW IN SUCCEEDING YEARS. WE THE REFORE, 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. 21. NEXT GROUND RELATE TO THE DISALLOWANCE OF CLAIM OF ADDITIONAL DEPRECIATION RAISED BY THE ASSESSEES. IN THIS REGA RD, IT IS NOTICED FROM THE ORDERS OF THE LOWER AUTHORITIES THAT ASSESSEE HAS C LAIMED ADDITIONAL DEPRECIATION U/S 32(1)(IIA) ON THE ADDITION MADE TO THE FIXED ASSET. THE A.O. FOUND THAT THE ASSESSEE HAD FAILED TO ENCLOSE THE A UDIT REPORT IN FORM-3AA ALONG WITH THE RETURN OF INCOME AS REQUIRED U/S 32( 1)(IIA) OF THE ACT. ON ACCOUNT OF NON-FILING OF THE AUDIT REPORT, THE CLAI M OF ADDITIONAL DEPRECIATION WAS DISALLOWED. ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 13 22. BEFORE THE CIT(A), IT WAS CONTENDED ON BEHALF O F THE ASSESSEE THAT NON-FILING OF THE REPORT WAS MERELY A PROCEDURAL LA PSE AND THE ASSESSEE SHOULD NOT BE PENALIZED FOR THIS. IT WAS FURTHER C ONTENDED THAT THIS WAS ESSENTIALLY ON THE FAILURE OF THE ASSESSEES AUDITO R AND THIS LAPSE OCCURRED ONLY BECAUSE OF RUSH OF AUDIT WORK DURING THAT PERI OD. THE CIT(A) WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES AN D HE HAS CONFIRMED THE DISALLOWANCE OF ADDITIONAL DEPRECIATION AFTER HAVIN G OBSERVED THAT THE AUDIT REPORT IN THE REQUISITE FORM NO.3AA WAS NOT FILED E VEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE HAS ALSO CONFIRMED THE DISALLOWANCE OF DEDUCTIONS U/S 80IB ON THE GROUND THAT ASSESSEE WAS NOT AN INDUSTRIAL UNDERTAKING ENGAGED IN THE MANUFACTURE OR PRODUCTIO N OF ANY ARTICLE OR THING AS REQUIRED UNDER THIS SECTION. NOW THE ASSESSEE H AS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE AU DIT REPORT WAS FILED SUBSEQUENTLY AND THE NON-FILING OF THE REPORT ALONG WITH THE RETURN OF INCOME WAS MERELY A PROCEDURAL LAPSE. THEREFORE, ONCE THE AUDIT REPORT IS FILED, THE ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION SHOULD HAVE BEEN ALLOWED AS PER LAW. 23. THE LD. D.R. PLACED A HEAVY RELIANCE UPON THE O RDER OF THE CIT(A). 24. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT UNDEN IABLY THE AUDIT REPORT WAS NOT FILED ALONG WITH THE RETURN OF INCOME BUT SUBSE QUENTLY IT WAS FILED. NO DOUBT AS PER THE PROVISIONS OF SECTION 32(1)(IIA) O F THE ACT, THE ASSESSEE IS REQUIRED TO FILE THE AUDIT REPORT ALONG WITH THE RE TURN OF INCOME TO CLAIM ADDITIONAL DEPRECIATION. BUT IN CASE IT IS NOT FIL ED ALONG WITH THE RETURN AND FILED SUBSEQUENTLY, THE CLAIM OF THE DEPRECIATION S HOULD NOT BE DENIED ONLY FOR THE TECHNICAL DEFAULT. SINCE THE AUDIT REPORT WAS FILED SUBSEQUENTLY, THE CLAIM OF THE ADDITIONAL DEPRECIATION SHOULD HAVE BEEN EXA MINED BY THE A.O. IN ACCORDANCE WITH LAW. WE, THEREFORE, SET ASIDE THE ORDER 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. ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 14 25. SO FAR AS THE ISSUE OF INDUSTRIAL UNDERTAKING I S CONCERNED, WE FIND THAT ASSESSEE WAS REGISTERED AS A SSI WITH THE CONCERNED AUTHORITIES AND CERTIFICATE TO THIS 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 CONCERNED AUTHORITIES. MOREO VER, IT IS ALSO NOTICED THAT AT THE TIME OF GRANT OF REGISTRATION AS A SSI, THE REQUISITE CONDITIONS WERE ALSO FULFILLED. WE THEREFORE OF THE VIEW THAT UNTI L AND UNLESS THE REGISTRATION GRANTED AS A SSI BY THE CONCERNED AUTHORITIES IS NO T WITHDRAWN, THE ASSESSEE SHOULD BE TREATED AS A SMALL SCALE INDUSTRIAL UNDER TAKING. THE SMALL SCALE INDUSTRIAL UNDERTAKING IS DEFINED IN CLAUSE (G) OF SUB-SECTION 14 OF SECTION 80IB, ACCORDING TO WHICH SMALL SCALE INDUSTRIAL UND ERTAKING MEANS AN INDUSTRIAL UNDERTAKING RECOGNIZED AS SSI U/S 11B OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT 1951. SINCE THE A SSESSEE IS RECOGNIZED AS SSI BY THE COMPETENT AUTHORITY TILL DATE, WE FIND N O MERIT IN THESE FINDINGS OF THE CIT(A) THAT THE ASSESSEE WAS NOT AN INDUSTRIAL UNDERTAKING. 26. IN ITA NO.60 OF 2011, THE ORDER OF THE CIT(A) I S ALSO ASSAILED ON ONE MORE GROUND THAT CIT(A) IS NOT JUSTIFIED IN DISALLO WING THE CLAIM OF SET OFF OF LOSSES OF AMALGAMATED COMPANIES AMOUNTING TO ` 66,01,556/-. 27. THE BRIEF FACTS BORNE OUT IN THIS REGARD FROM T HE ORDER OF THE LOWER AUTHORITIES ARE THAT THE ASSESSEE HAS CLAIMED THE S ET OFF OF LOSSES RELATING TO VARIOUS COMPANIES THAT WERE AMALGAMATED WITH THE AS SESSEE COMPANY DURING THE YEAR. THE LOSSES CLAIMED WERE AS UNDER: ` 1. BHAKTHANJANEYA MILK FOODS PVT. LTD. 51,78,537 2. JANAKIRAMA DAIRY MILK PVT. LTD. 12,95,889 3. PRAGATI MILK PRODUCTS 1,27,130 ------------ 66,01,556 28. THE A.O. FOUND THAT AS PER PROVISIONS OF SECTIO N 72A, SET OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIATION ALLOWA NCE ON AMALGAMATION, ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 15 IS ALLOWED ONLY WHERE THERE IS AN AMALGAMATION OF A COMPANY OWNING AN INDUSTRIAL UNDERTAKING. SINCE THE AMALGAMATED COMP ANIES ARE NOT INDUSTRIAL UNDERTAKINGS AS DEFINED IN SECTION 72A(AA), THE CLA IM OF SET OFF OF AMALGAMATED COMPANIES WAS NOT ALLOWED. THE ASSESSE E HAS PREFERRED AN APPEAL BEFORE THE CIT(A) AND CIT(A) CONFIRMED THE D ISALLOWANCE AFTER HAVING OBSERVED THAT AMALGAMATING COMPANIES WERE NOT ENGAG ED IN MANUFACTURING ACTIVITIES. THEREFORE, THEY ARE NOT INDUSTRIAL UND ERTAKINGS AND AS SUCH, THE SET OFF OF LOSS OF THE AMALGAMATED COMPANIES CANNOT BE ALLOWED. THE RELEVANT OBSERVATION OF THE CIT(A) ARE EXTRACTED HE REUNDER: I HAVE CONSIDERED THE SUBMISSIONS AND ALSO PERUSED THE DETAILS OF RETURNS AND THE ANNUAL REPORT OF THE THREE AMALGAMA TING COMPANIES FILED BY THE AR. FROM THE COMPUTATION OF TOTAL INCOME FILED IN THE CASE OF BHAKTANJANEYA MILK FOODS PVT. LTD., FOR THE A.Y. 20 00-01, IT IS SEEN THAT THE BUSINESS OF THE COMPANY IS STATED TO BE BUYING AND SELLING OF MILK AND OPERATING OF MILK CHILLING CENTRE. THEREFORE, IN THIS CASE, THE COMPANY WAS NOT CARRYING OUT ANY MANUFACTURING OR PROCESSING AC TIVITY BUT APPEARS TO BE MAINLY A CHILLING UNIT AND A TRADING COMPANY. IN T HE CASE OF M/S. PRAGATI MILK PRODUCTS PVT. LTD., THE DIRECTORS REPORT OF THE YE AR ENDED 31.3.2006 SHOWS THAT THE COMPANY HAS LEASED OUT ITS FACTORY BUILDIN G AND PLANT AND MACHINERY TO ITS HOLDING COMPANY M/S. TIRUMALA DAIRY PVT. LTD ., AND HAD ONLY SHOWN RECEIPT OF OTHER INCOME ON ACCOUNT OF THIS. IN THI S CASE ALSO, THEREFORE, THE COMPANY IS NOT SEEN TO BE ENGAGED IN MANUFACTURING OR PROCESSING ACTIVITY AS REQUIRED BY THE SECTION. IN THE CASE OF M/S. JANAK IRAMA DAIRY PVT. LTD., THE AUDITORS REPORT U/S 115JB FOR THE A.Y. 2005-06 SHO WS THE COMPANY AS ENGAGED IN THE BUSINESS OF CHILLING AND SELLING MIL K. AGAIN, THEREFORE, NO MANUFACTURING OR PROCESSING ACTIVITY IS SEEN TO BE CARRIED ON BY THIS COMPANY ALSO. AS BROUGHT OUT BY THE ASSESSING OFFICER, THE PROVI SIONS OF SECTION 72A(7)(AA) DEFINES AN INDUSTRIAL UNDERTAKING AS ONE WHICH IS ENGAGED IN THE MANUFACTURE OR PROCESSING OF GOODS. SECTION 72A(I) READ WITH RULE 9C OF THE IT RULES, SPECIFIES A SITUATION WHERE A COMPANY OWN ING AN INDUSTRIAL UNDERTAKING AMALGAMATES WITH ANOTHER COMPANY. SINC E, IN THIS CASE, NEITHER THE APPELLANT NOR THE AMALGAMATING COMPANIES ARE CA RRYING ON ANY MANUFACTURING ACTIVITY, THE SET OFF OF LOSSES OF TH E AMALGAMATING COMPANIES CANNOT BE ALLOWED. THE ASSESSING OFFICERS DECISIO N IS UPHELD AND THE APPELLANT GETS NO RELIEF ON THIS GROUND ALSO. 29. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE US BUT DURING THE COURSE OF HEARING NOTHING HAS BEEN PLACED BEFORE US TO SUBSTANTIATE THAT THE ITA NOS.153&154/V/09, 397 OF 2010 & 60 OF 2011 OF T IRUMALA DAIRY PVT. LTD., NARASARAOPET 16 AMALGAMATING COMPANIES ARE INDUSTRIAL UNDERTAKINGS. WE HOWEVER, CAREFULLY EXAMINED THE ORDER OF THE CIT(A) AND WE FIND THAT U NDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS RIGHTLY A DJUDICATED THE ISSUE AND WE FIND NO INFIRMITY THEREIN AND WE ACCORDINGLY CON FIRM HIS ORDER. 30. IN THE RESULT, THE APPEAL NOS.153 & 154 OF 2009 AND 397 OF 2010 OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES AND APPEAL NO.60 OF 2011 OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 11.8.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL ME MBER VG/SPS VISAKHAPATNAM, DATED 11 TH AUGUST, 2011 COPY TO 1 M/S. PUNNAIAH & CO., CHARTERED ACCOUNTANT, UDAY 5 - 87 - 129, MAIN ROAD, BRODIPET, GUNTUR-522 002 2 ADDL. CIT, RANGE - 2(1), GUNTUR 3 DCIT, CI RCLED - 2(1), GUNTUR 4 JOINT CIT, RANGE - 2, GUNTUR 5 THE CI T, GUNTUR 6 THE CIT (A) , GUNTUR 7 THE DR, ITAT, VISAKHAPATNAM. 8 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM