Salzer Electronics Limited, CHENNAI V. Addl.CIT, Coimbatore

ITA 1594/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0978 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 27-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: R KUMAR
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER] I.T.A.NO.1594/MDS/2011 ASSESSMENT YEAR : 2008-09 M/S SALZER ELECTRONICS LTD. SAMICHETTIPALAYAM COIMBATORE 641 007 VS THE ADDL. CIT RANGE IV COIMBATORE [PAN AAECS3411L] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. KUMAR, ADVOCATE RESPONDENT BY : DR. S. MOHARANA, CIT/DR DATE OF HEARING : 28-01-2013 DATE OF PRONOUNCEMENT : 28-01-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE AS SESSEE TAKING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE OF RS.19,87,344/- CLAIMED AS DEDUCTION U/S 80IB(4) OF THE ACT, BEING THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING SITUATED IN UNA, HIMACHAL PR ADESH. I.T.A.NO. 159411 :- 2 -: 3. THE ASSESSING OFFICER AND THE COMMISSIONER (APPE ALS) ERRED I N HOLDING THAT THE PRODUCTION BY THE APPELLANT COMPANY OF ROTARY SWITCHES AND ELECTRIC SWITCHES DO ES NOT AMOUNT TO 'MANUFACTURE'. 4. THE AUTHORITIES BELOW FAILED TO SEE THAT THE AP PELLANT HAD THE TOOLS AND APPLIANCES AND MAN POWER NECESSAR Y FOR THE PURPOSE OF THE MANUFACTURING ACTIVITY AT IT S INDUSTRIAL UNIT AT UNA, HIMACHAL PRADESH. 5. THE AUTHO R ITIES BELOW WERE NOT RIGHT IN DENYING THE DEDUCTION CLAIMED U/S 80IB(4) MERELY BECAUSE THE INVESTMENT IN THE UNA UNIT AND THE SALES TURNOVER O F THE UNIT ARE MODEST, WHICH ARE NOT RELEVANT CRITERIA FO R ALLOWABILITY OF THE DEDUCTION IN QUESTION . 6. THE APPELLANT SUBMITS THAT I TS CLAIM FOR DEDUCTION OF RS.19,87,344/- U/S 80IB(4) WAS PROPE R AND THE DEDUCTION IS ALLOWABLE IN COMPUTING ITS INCOME. 2. THE A.R OF THE ASSESSEE SUBMITTED THAT THE ASS ESSEE CLAIMED DEDUCTION U/S 80IB(4) OF THE ACT OF ` 19,87,344/- IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2008-09 WHICH IS THE FIFTH YEAR FOR WHICH DEDUCTION IS ALLOWABLE TO THE ASSES SEE. HE FILED A LETTER FROM THE ASSESSEE WHEREIN IT HAS BEEN STATE D THAT UNA UNIT AT HIMACHAL PRADESH WAS SET UP IN JANUARY 2004 AND THA T DURING THE ACCOUNTING YEAR ENDED 31.3.2004 AND UPTO ACCOUNTING YEAR ENDED 31.3.2007, THE UNA UNIT WAS RUNNING AT A LOSS AND T HEREFORE, IN ABSENCE OF ANY PROFIT, THE ASSESSEE DID NOT CLAIM DEDUCTION U/S 80IB(4) OF THE ACT IN THE ASSESSMENT YEARS 2004-05 TO 2007-08. THE ASSESSEE HAS CLAIMED DEDUCTION FOR THE YEAR ENDED 3 1.3.2008 U/S 80IB(4) WHICH IS THE FIFTH YEAR OF OPERATION OF THE UNA UNIT WHEN THE I.T.A.NO. 159411 :- 3 -: ASSESSEE MADE PROFIT OF ` ` 19,87,344/. HE SUBMITTED THAT IT WILL BE SEEN FROM THE ASSESSMENT ORDER DATED 29.12.2010 U/ S 143(3) OF THE ACT THAT THE ASSESSING OFFICER HAS DISALLOWED THE D EDUCTION U/S 80IB TO THE ASSESSEE FOLLOWING THE DECISION OF THE HON' BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS BABCOCK & WILLCOX OF IN DIA LTD, 241 ITR 583, WHEREIN IT WAS HELD THAT THE ACTIVITY OF ERECT ING A BOILER AT A SITE BY ASSEMBLING THE PARTS DOES NOT AMOUNT TO MANUFACT URE. THE ASSESSING OFFICER, IN PARA 11 OF HIS ORDER HAS STAT ED THAT AS THE ASSESSEE DID NOT CARRY OUT ANY MANUFACTURING ACTIVI TY BY CONVERTING RAW MATERIAL INTO FINISHED GOODS AT THEIR UNA PLANT AND SINCE THE ASSEMBLY OF PRE-MANUFACTURED PARTS DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION, HE HAS HELD THAT THE ASSESSEE DID NOT MANUFACTURE OR PRODUCE ANY ARTICLE OR THING WITHIN THE MEANING OF CLAUSE (III) OF SUB- SECTION (2) OF SECTION 80IB OF THE ACT AND THEREFOR E, DID NOT ALLOW DEDUCTION U/S 80IB OF ` 19,87,344/- AS CLAIMED BY THE ASSESSEE. HE SUBMITTED THAT THE HON'BLE MADRAS HIGH COURT IN TH E CASE OF CIT VS CHIRANJJEEVI WIND ENERGY LTD [2011] 333 ITR 192, HA S HELD THAT PROCUREMENT OF PARTS AND ASSEMBLING OF WINDMILL AMO UNTS TO PRODUCTION OF ARTICLE AND ASSESSEE WAS ENTITLED TO SPECIAL DEDUCTION U/S 80IB OF THE ACT. HE, THEREFORE, SUBMITTED T HAT FOLLOWING THE ORDER OF THE HON'BLE MADRAS HIGH COURT(SUPRA), THE APPEAL OF THE I.T.A.NO. 159411 :- 4 -: ASSESSEE SHOULD BE ALLOWED AND DEDUCTION CLAIMED U /S 80IB(4) SHOULD BE ALLOWED TO THE ASSESSEE. 3. ON THE OTHER HAND, THE CIT/DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING T HE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE AS SESSEE IN THE INSTANT CASE, CLAIMED DEDUCTION OF ` 19,87,344/- U/S 80IB(4) OF THE ACT IN THE FIFTH YEAR OF ITS ELIGIBILITY TO CLAIM DEDUCTION U /S 80IB OF THE ACT AND SUCH DEDUCTION WAS NOT CLAIMED IN THE EARLIER YEAR S BEING ASSESSMENT YEARS 2004-05 TO 2007-08 AFTER SETTING UP OF THE UN IT IN JANUARY 2004 AS THE ASSESSEE WAS INCURRING LOSSES AND DID NOT H AVE ELIGIBLE PROFIT TO CLAIM DEDUCTION. WE FIND THAT THE ASSESSING OFFICE R HAS DISALLOWED THE CLAIM OF DEDUCTION TO THE ASSESSEE BY FOLLOWING TH E DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS B ABCOCK & WILLCOX OF INDIA LTD. (SUPRA) ON THE GROUND THAT THE ASSESSEE DID NOT CARRY OUT ANY MANUFACTURING ACTIVITY BY CONVERTING RAW MATERI AL INTO FINISHED GOODS AT THEIR UNA PLANT AND THAT THE ASSESSEE WAS CARRYING ON THE ACTIVITY OF ASSEMBLING OF PRE-MANUFACTURED PARTS WH ICH DID NOT AMOUNT TO MANUFACTURE OR PRODUCTION WITHIN THE MEANING OF CLAUSE (III) OF SUB- SECTION(2) OF SECTION 80IB OF THE ACT. I.T.A.NO. 159411 :- 5 -: 5. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER ON THE GROUND THAT THE A.R COULD NOT EXPLAI N THE DETAILS OF ASSEMBLING ACTIVITY CARRIED OUT AT UNA PLAT AT HIMA CHAL PRADESH. 6. THE SUBMISSION OF THE A.R OF THE ASSESSEE IS THA T THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS CHI RANJJEEVI WIND ENERGY LTD (SUPRA) HAS HELD THAT PROCUREMENT OF PAR TS AND ASSEMBLING WINDMILL AMOUNTS TO PRODUCTION OF ARTICLE AND THER EFORE, THE ASSESSEE IS ENTITLED TO SPECIAL DEDUCTION U/S 80IB OF THE A CT. WE FIND THAT THE CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OF FICER DISALLOWING THE CLAIM OF DEDUCTION TO THE ASSESSEE ON THE GROU ND THAT THE A.R OF THE ASSESSEE COULD NOT EXPLAIN THE DETAILS OF ASSEM BLING ACTIVITY CARRIED OUT AT UNA PLANT AT HIMACHAL PRADESH. BEFORE US AL SO THE ASSESSEE HAS NOT FILED THE DETAILS OF ASSEMBLING ACTIVITY CA RRIED OUT AT UNA PLANT. IN THE ABSENCE OF THE DETAILS, WE ARE UNABLE TO ADJ UDICATE THE APPEAL OF THE ASSESSEE IN ITS ENTIRETY. WE FIND THAT THIS ORDER WAS PASSED BY THE HON'BLE HIGH COURT ON JANUARY 10,2011. FURT HER WE FIND THAT THE ASSESSMENT ORDER WAS PASSED ON 29.12.2010 BY TH E ASSESSING OFFICER AND THEREFORE, THE SAME WAS NOT AVAILABLE A T THE TIME OF PASSING OF ASSESSMENT ORDER BY THE ASSESSING OFFICE R. WE ALSO FIND THAT THE ORDER OF THE CIT(A) WAS PASSED ON 30.6.201 1. BUT THE CIT(A) HAS NOT CONSIDERED THE DECISION OF THE HON'BLE MADR AS HIGH COURT I.T.A.NO. 159411 :- 6 -: WHILE ADJUDICATING THE APPEAL OF THE ASSESSEE. H ENCE, IN OUR CONSIDERED VIEW, IT WOULD BE JUST AND FAIR IF THE I SSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO READJUDICAT E THE ISSUE AFRESH AFTER CONSIDERING THE ACTIVITY CARRIED OUT BY THE ASSESSEE AT UNA PLANT IN HIMACHAL PRADESH IN THE LIGHT OF THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS CHIRANJJEEVI WIND ENERGY LTD (SUPRA). WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AU THORITIES AND REMAND THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND ADJUDICATION OF THE SAME AFRESH IN THE LIGHT OF THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS CHIRANJJEEVI WIND ENERGY LTD (SUPRA) AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, TH E GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOS ES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON MONDAY, THE 28 TH OF JANUARY 2013, AT CHENNAI SD/- SD/- (SATBEER SINGH GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 28 TH JANUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR