The DCIT, Circle-4, Ahmedabad V. Jafee Food Industries Pvt.Ltd., Ahmedabad

ITA 1604/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6684 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 20-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SRDR
• Assessee Lawyers: PF JAIN
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.1604/AHD/2007 ASSESSMENT YEAR:2003-04 DATE OF HEARING:1.4.10 DRAFTED:5.4.10 DCIT, CIRCLE-4, NAVJVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD V/S. JAFEE FOOD INDUSTRIES PVT. LTD., C/O. 8 TH FLOOR, WHITE HOUSE, PANCHVATI, AHMEDABAD PAN NO.AAACJ0345R (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. NEETA SHAH, SR-DR RESPONDENT BY:- SHRI, P.F. JAIN, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VIII, AHMEDABAD IN APPEAL NO. C IT(A)-VIII/DC-4/241/05-06 DATED 15-01-2007. THE ASSESSMENT WAS FRAMED BY THE CIT, CIRCLE-4, AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 23-01-2006 FOR THE ASSESSMENT YEAR 2003 -04. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION U/S.80-IB OF THE ACT. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE A.O. TO ALLOW THE DEDUCTION OF RS.16,37,737/- CLAIM ED BY THE ASSESSEE U/S. 80IB OF THE ACT, IGNORING THE FACT THAT THE REQUISI TE CONDITIONS FOR CLAIMING DEDUCTION U/S.80IB WERE NOT FULFILLED IN THIS CASE. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE IS MANUFACTURER OF SOFT DRINK CONCENTRATE AND CLAIMING DEDUCTION U/S.80-IB OF THE ACT ITA 1604/AHD/2007 A.Y. 2003-04 DCIT CIR-4, ABD V. JAFEE FOOD INDS. PVT. LTD. PAGE 2 FROM EARLIER YEARS AND ALSO IN THIS YEAR. THE ASSES SING OFFICER HAS NOT DISPUTED THE OTHER CONDITIONS OF ELIGIBILITY OF THE ASSESSEES C LAIM OF DEDUCTION U/S.80-IB OF THE ACT BUT DISALLOWED THE CLAIM OF THE ASSESSEE ONLY ON ON E PREMISES THAT THE NUMBER OF WORKERS EMPLOYED BY THE ASSESSEE ARE LESS THAN THE PRESCRIBED-LIMIT UNDER THIS SECTION. THE AO NOTED THE DETAILS IN PARA-3.4 OF HIS ASSESSMENT ORDER AS UNDER:- 3.4 THE DETAILS OF NUMBER OF WORKERS/EMPLOYEES OF THE ASSESSEE COMPANY HAS BEEN FURNISHED VIDE ITS LETTER DATED 16.08.2005 , WHICH IS AS UNDER:- MONTH NO OF WORKERS/ EMPLOYEES SALARY/ WAGES AMT.(RS.) BONUS EX-GRATIA TOTAL APRIL.20 12 23726 23726 MAY, 02 14 28172 9218 2262 39652 JUNE,02 1 2900 2900 JULY, 02 1 2900 2900 AUGUST,02 1 2900 2900 SEPT.02 1 2900 2900 OCT.02 1 2900 2900 NOV.02 1 2900 2900 DEC. 02 1 2900 2900 JAN. 03 1 2900 2900 FEB. 03 1 2900 2900 MAR. 03 1 2900 2900 TOTAL 80898 9218 2262 92378 ON PERUSAL OF THE DETAILS OF NUMBER OF WORKERS OF E MPLOYEES, IT IS SEEN THAT THERE WERE 12 WORKERS/EMPLOYEES DURING APRIL-02, 14 WORKERS/EMPLOYEES DURING MAY, 202 AND FOR THE REMAINING PERIOD OF YEA RS THERE WAS ONLY 1 WORKER/EMPLOYEE WORKING WITH THE ASSESSEE COMPANY. IT WOULD NOT HAVE BEEN POSSIBLE TO CARRY ON ALL THE BUSINESS ACTIVITY AND ALSO MANUFACTURING ACTIVITY BY A SINGLE PERSON AT THREE FAR AWAY LOCATED BUSINESS PREMISES. IT IS EVIDENT THAT FROM JUNE, 2002 TO MARCH, 2003 LESS THAN 10 EMPLOYE ES/WORKERS WERE EMPLOYED BY THE ASSESSEE FOR MANUFACTURING PROCESS. REGARDING, EMPLOYMENT OF EMPLOYEE/WORKERS HAVE BEEN WORKING. BUT THE ASSESSING OFFICER IN FINAL CONCLUSION STATE D THAT THE ASSESSEE IS HAVING THREE BUSINESS PREMISES DURING THE YEAR UNDER CONSIDERATI ON, FROM WHERE THE BUSINESS OPERATION WERE CONDUCTED, AND ALL THE THREE BUSINES S PREMISES ARE LOCATED FAR AWAY FROM EACH OTHER. ACCORDING TO HIM, THERE ARE ONLY S IX WORKERS WORKING IN THE MANUFACTURING UNIT DURING APRIL 02 AND EIGHT WORKE RS DURING MAY 02 AT FACTORY AND ACCORDINGLY TO HIM, THE CONDITION OF EMPLOYING 10 O R MORE WORKERS FOR MANUFACTURING PROCESSES CARRIED ON WITH THE AID ON POWER AS LAID DOWN U/S.80-IB 2(IV) HAS NOT BEEN FULFILLED AND HE DISALLOWED THE CLAIM OF DEDUCTION U/S.80-IB OF THE ACT OF THE ASSESSEE. ITA 1604/AHD/2007 A.Y. 2003-04 DCIT CIR-4, ABD V. JAFEE FOOD INDS. PVT. LTD. PAGE 3 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY GIVING FOLLOWING FINDI NG IN PARA-2.2 OF HIS APPELLATE ORDER:- 2.2. I HAVE GONE THROUGH THE DETAILED WRITTEN SUBM ISSIONS AND THE ACCOMPANYING SUBMISSIONS AND ALSO PERUSED THE REASO NING GIVEN BY THE AO. IT IS A FACT THAT THIS WAS THE THIRD YEAR OF OPERAT ION OF THE ELIGIBLE UNDERTAKING AND THE DEDUCTION WAS ALLOWED FOR THE PRECEDING TWO YEARS. THE CORRESPONDING SALES WERE NOT IN DISPUTE, QUANTITATI VE DETAIL IS ALSO EXPLAINED WITH REFERENCE TO GAIN IN WEIGHT. THE CLOSING STOCK OF RAW MATERIAL IS STILL CONTINUING IN THE BALANCE SHEET AS PART OF INVENTOR Y WHICH IS NOT IN DISPUTE. AS THE PROCESS WAS STOPPED IN JUNE, 2002 ANY ANALYSIS IS SHOULD BE WITH REFERENCE TO THE FACTS OBTAINING ON THAT DATE AND O N A MUCH LATER PERIOD. THE FACT OF PRODUCTION AND SALE BEING NOT DISPUTED, A N OTIONAL BIFURCATION OF DEPLOYMENT OF FACTORY WORKERS TO DENY THE EXEMPTION IS AN EXERCISE DEVOID OF MERIT. AS RIGHTLY RELIED ON BY THE APPELLANT ON THE DECISIONS OF THE CIT V. SULTAN & SONS RICE MILLS 272 ITR 181 (ALLAH) AND TH E DECISION IN THE CASE OF RICHA CHADA 282 ITR (AT) 1 (BOMBAY TRIBUNAL)., DEDU CTION OTHERWISE ELIGIBLE CANNOT BE DENIED BY INTERPRETING THE PROVISIONS AGA INST THE ADVANCEMENT OF THE OBJECTS AND FURTHER THAT AS STATED IN THE SECON D DECISION CITED ABOVE, THERE SHOULD BE SUBSTANTIAL COMPLIANCE AND THERE IS NO COMPULSION THAT THE SAME NUMBER OF WORKERS SHOULD BE UTILIZED THROUGHOU T THE YEAR. THE MANUFACTURING PROCESS WAS CARRIED OUT WITH THE EMPL OYMENT OF MORE THAN 10 WORKERS WHICH IS NOT IN DOUBT. THIS BEING A SEASONA BLE FACTORY PROVIDING INPUT FOR BEVERAGES DURING SUMMER, NO OTHER INTERPRETATIO N TO DENY EXEMPTION IS APPROPRIATE. IN THIS VIEW OF THE MATER, THE REQUISI TE CONDITIONS BEING SATISFIED AND THE PROFIT GENERATION NOT BEING IN DOUBT, THE A PPELLANT IS ENTITLED TO CLAIM U/S.80IB(3). SIMILAR CLAIMS FOR EARLIER YEARS HAVE BEEN ALLOWED AND THERE IS NO CONTRA FINDINGS. IN THE LIGHT OF THE ABOVE DISCUSS ION, I DIRECT THE AO TO ALLOW THE DEDUCTION CLAIMED BY THE APPELLANT U/S.80IB IN THE CAPACITY AS A SMALL SCALE UNDERTAKING AND INVOLVING IN MANUFACTURING AC TIVITY AS SPECIFIED THEREIN. HOWEVER, OTHER INCOME OF RS.31,842/- SHALL NOT BE C ONSIDERED FOR THIS DEDUCTION. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 5. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEES FACTORY WORK FOR TWO MONTH S AS IS EVIDENT FROM THE FACTS RECORDED BY THE ASSESSING OFFICER AND EVEN ELECTRIC ITY CONSUMED FOR THESE TWO MONTHS, I.E. APRIL 02 AND MAY 02 IS THE ONLY MONT HS WHERE PRODUCTION CARRIED OUT BY THE ASSESSEE. IT IS A FACT THAT IN THE MONTH OF APR IL 02 AND MAY 02, THE WORKERS EMPLOYED THERE WERE 12-14 AS NOTED BY THE AO. AS T HE LD. COUNSEL FOR THE ASSESSEE STATED THAT IN VIEW OF THE DECISION OF MUM BAI BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. M.S. RICHA CHADHA (2006) 282 ITR (AT) 1 (MUM), WHEREIN IT IS HELD THAT IN A FACTORY WHERE 10 OR MORE WORKERS EMPLOYED , WORKED FOR THE PERIOD FOR WHICH ITA 1604/AHD/2007 A.Y. 2003-04 DCIT CIR-4, ABD V. JAFEE FOOD INDS. PVT. LTD. PAGE 4 MANUFACTURING PROCESSED CONTINUED THE PROPORTIONATE DEDUCTION U/S.80-IB WILL BE ALLOWED. THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80-IB F OR THE EARLIER ASSESSMENT YEAR, I.E. 2001- 02 AND 2002-03 HAVE ALREADY BEEN ALLOWED TO THE ASS ESSEE AND THE DEDUCTION WAS DENIED ONLY IN THIS YEAR EVEN IN THE SIMILAR FACTS AND CIR CUMSTANCES OF THE CASE. 6. WE ARE OF THE VIEW THAT FOR THE PURPOSE OF CLAIM ING DEDUCTION U/S.80-IB OF THE ACT, IT IS NOT NECESSARY THAT THE ASSESSEE SHOULD EMPLOY 10 OR MORE WORKERS THROUGH OUT THE YEAR BUT WHAT IS NECESSARY UNDER THIS PROVISION IS THAT THER E IS SHOULD BE SUBSTANTIAL COMPLIANCE FOR THE PERIOD FOR WHICH MANUFACTURING PROCESSED CONTIN UED AND THE ASSESSEE HAD TO EMPLOYEE MORE THAN 10 YEARS IN THE MAIN MANUFACTURING PROCES S OR IN SUBSIDIARY PROCESS RELATING THERETO AND FOR THAT PERIOD THE ASSESSEE IS ENTITLE D FOR DEDUCTION U/S.80-IB OF THE ACT. ACCORDINGLY, IN THE PRESENT CASE THE NEED FOR SUBST ANTIAL COMPLIANCE WILL ARISE IN CASE OF A FACTORY WHICH IS SEASONAL ONE OR WHICH IS TEMPORARY CLOSED DUE TO ANY OTHER REASON LIKE TEMPORARY LOCK-OUT, STRIKE OR OTHER NATURAL CALAMIT Y OR DUE TO SEASONAL BUSINESS OF THE ASSESSEE. IN A BENEFICIAL PROVISION THE ADDITIONAL CONDITION SHOULD BE READ AS IF THEY ARE NOT SPECIFICALLY PROVIDED BY THE LEGISLATURE, IF BY A N ORMAL INTERPRETATION OF THE PROVISION THE BENEFIT IS AVAILABLE THE TAXPAYER SHOULD BE ALLOWED SUCH BENEFIT AND NOT DENIED BY PUTTING ONE CONDITION OR OTHER WHICH DOES NOT EXISTS. IN V IEW OF THE ABOVE, WE ARE OF THE VIEW, THAT CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSE E AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 01/04/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SI NGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 01/04/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VIII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD