DCIT, Central Circle - 2(1), Kolkata, Kolkata V. M/s. Sona Vets Pvt. Ltd., Kolkata

ITA 1647/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7880 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 14-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Depreciation; Rule of consistency; Additional depreciation; Rule 8D
• Section: 143(3); 14A; 115JB; 32(1)(iia); 80IA; 32

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA BEFORE SH. P.M.JAGTAP, VICE PRESIDENT & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1647/KOL/2017 (ASSESSMENT YEAR-2014-15) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 04.05.2017 PASSED BY CIT(A)-20, KOLKATA FOR AY 2014-15. 2. GROUND NOS. 1 TO 4 ARE RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). 3. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CONTENTION OF THE LD.AR IS THAT THE ISSUE RAISED IN GROUND NOS. 1 TO 4 ARE COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2009-10, 2010-11, 2012-13 TO 2013-14 VIDE ORDER DATED 30.11.2016 IN IT(SS)A NO.-19-22/KOL/2016. ON PERUSAL OF THE SAID ORDER, WE FIND THE ISSUE RAISED IN THIS APPEAL BY THE REVENUE HAS BEEN DISCUSSED BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL AND BY FOLLOWING PRINCIPLE OF CONSISTENCY, DCIT, CENTRAL CIRCLE-2(1), KOLKATA-700107. VS M/S. SONA VETS PVT. LTD., 17 TH FLOOR, ROOM NO.17B & C, EVEREST HOUSE, 46C, CHOWRINGHEE ROAD, KOLKATA-700071. PAN-AAECS0908G (APPELLANT) (RESPONDENT) APPELLANT BY DR. P.K.SRIHARI, CIT DR RESPONDENT BY SHIKHA AGARWAL, AOA DATE OF HEARING 24.01.2019 DATE OF PRONOUNCEMENT 23.04.2019 ITA NO.1647/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 2 CONFIRMED THE ORDER OF CIT(A) IN ALLOWING DEDUCTION U/S 80IE OF THE ACT. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW:- 6.4. HAVING HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMISSION OF ASSESSEE, AS THE PROPOSITION CANVASSED BY THE LD. AR FOR THE ASSESSEE ARE SUPPORTED BY THE ABOVE CITED JUDGMENTS AND THE FACTS NARRATED BY HIM. THE LD. AR FOR THE ASSESSEE HAS POINTED OUT THAT PRODUCTION OF POULTRY FEEDS CONTAINS PROCESS AND THE ASSESSEE IS MANUFACTURING OF DIFFERENT PRODUCT WHICH IS MARKETABLE AND IDENTIFIED IN A DIFFERENT WAY. THE LD.AR ALSO SUBMITTED THAT ASSESSEE HAS BEEN CLAIMING DEDUCTION U/S. 80IB(5) OF THE ACT SINCE AYS 2005-0-6. EVERY YEAR THE SCRUTINY ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACT FROM AYS 2005-06 TO 2010-11. IN THIS SEARCH ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 153A, AO HAS DISALLOWED THE DEDUCTION CLAIMED U/S.80IB(5)/80IE OF THE ACT WITHOUT BRINGING ON RECORD ANY EVIDENCE OR DOCUMENTS FOUND DURING THE SEARCH. THE SEARCH PARTY DID NOT FIND ANY INCRIMINATING DOCUMENT OR ANY NEW DOCUMENT DURING THE SEARCH ACTION. IN THE ABSENCE OF ANY NEW DOCUMENT/INCRIMINATING DOCUMENT HOW THE ASSESSEE CAN BE DENIED FOR DEDUCTION U/S 80- IB/80LE. THE ASSESSEE HAS SUBMITTED A SYNOPSIS OF MANUFACTURING PROCESS OF POULTRY FEEDS WHICH AMOUNTS TO 'MANUFACTURE' CONSIDERING THE ABOVE CITED JUDICIAL PRECEDENTS CITED IN PARA 6.3 ABOVE. IT IS ALSO CLEAR FROM THE DETAILS FILED WITH THE END PRODUCT THAT POULTRY FEEDS CANNOT BE REVERSED BACK TO ITS ORIGINAL CONTENT/MATERIAL. IT IS DEAR THAT THE POULTRY FEED IS A DISTINCT PRODUCT AND AMOUNTS TO 'MANUFACTURE'. IT IS CLEAR THAT THE PROCESS OF PRODUCING POULTRY FEEDS INVOLVES THE PROCESS OF MANUFACTURING. THE ID. DR, EVEN THOUGH RELIED ON THE DECISION OF THE HYDERABAD BENCH A' OF THE TRIBUNAL IN THE CASE OF VENKATESWARA FEEDS & FEEDS -VS- ACIT 22 TAXMANN.COM 234 (HYD.) BUT WE NOTED THAT THE UNDERTAKING FOR WHICH THE ASSESSEE HAS CLAIMED THE DEDUCTION UNDER SECTION 80-1B WAS MERELY ENGAGED IN CONVERTING THE POULTRY MASH FEED INTO PELLET FEED AND THEREFORE THAT BENCH HAS HELD THAT THERE WAS NO CHANGE IN THE BASIC COMPONENT OR NEW OR DIFFERENT ARTICLE CAME INTO EXISTENCE. AS SUCH, CONVERSION WAS PROCESSING ACTIVITY NOT MANUFACTURING. THE CASE OF THE ASSESSEE UNDER CONSIDERATION IS ENTIRELY DIFFERENT. THE ASSESSEE'S ELIGIBLE UNDERTAKING ITSELF WAS INDEPENDENTLY CARRYING OUT THE COMPLETE ACTIVITY I.E. FROM MIXING, GRINDING TILL THE PELLETISATION. THE RAW MATERIALS ONCE CONSUMED CANNOT BE RECONVERTED INTO THE SAME POSITION. ITS UTILITY GETS CHANGED. APART FROM THIS, KEEPING THE PRINCIPLE OF CONSISTENCY AND THE PROCESS OF MANUFACTURING, THE ACTION OF THE ASSESSING OFFICER OF MAKING DISALLOWANCE U/S. 80-IB(5)/80IE OF THE ACT, IN RESPECT OF MANUFACTURING OF POULTRY FEEDS IS NOT JUSTIFIED. WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER PASSED BY LD. CIT(A). ITA NO.1647/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 3 6.5. IN THE RESULT, APPEALS FILED BY THE REVENUE IN RESPECT OF DEDUCTION U/S 80-IB(5) AND 80-IE OF THE ACT (IN ITA NO.19/K/2016, ITA -20/K/2016,ITA-21/2016 AND ITA-22/K/2016) ARE DISMISSED. 4. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). THUS, GROUND NOS. 1 TO 4 RAISED BY THE REVENUE ARE DISMISSED. 5. GROUND NO.5 IS RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF ADDITIONAL DEPRECIATION. 6. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ISSUE IS COVERED BY THE ORDER OF TRIBUNAL IN FAVOUR OF THE ASSESSEE AS IT WAS NOTED BY THE CIT(A) IN HIS ORDER IN PARA NO.2.4 OF THE IMPUGNED ORDER. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW:- 2. GROUND NO. 3: DISALLOWANCE OF ADDITIONAL DEPRECIATION RS. 22,51,549/: 2.1. THIS GROUND IS DIRECTED AGAINST DISALLOWANCE OF ADDITIONAL DEPRECIATION ON PLANT & MACHINERY U/S 32(1)(IIA) OF THE I.T. ACT AMOUNTING TO RS. 22,51,549/ - ON THE ALLEGATION THAT ASSESSEE IS NOT CARRYING ANY MANUFACTURING ACTIVITY. 2.2. IN THE ASSESSMENT ORDER THE AO HAS HELD THAT MAKING POULTRY FEED CANNOT BE STATED AS MANUFACTURING AS NO NEW PRODUCT OF A DIFFERENT CHEMICAL COMPOSITION OR DIFFERENT INTEGRAL STRUCTURE WAS PRODUCED. THEREFORE HE HELD THAT THE BUSINESS OF THE ASSESSEE DID NOT INVOLVE ANY MANUFACTURING ACTIVITY. 2.3. SIMILAR VIEW HAS BEEN TAKEN BY THE AO FOR DISALLOWING CLAIM OF THE ASSESSEE MADE UNDER SECTION 80LE OF THE I.T. ACT FOR EARLIER ASSESSMENT YEAR AS WELL AS AY 2014-15. IT HAS ALREADY BEEN EXPLAINED ABOVE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF POULTRY & CATTLE FEEDS. THE SIMILAR VIEW HAS ALSO BEEN HELD BY YOUR HONOUR AS WELL AS HON'BLE ITAT, KOLKATA IN THE CASE OF THE ASSESSEE IN THE APPEAL FOR THE EARLIER ASSESSMENT YEARS. 2.4 THEREFORE, THE ADDITIONAL DEPRECIATION U/S 32 (1) (IIA) OF THE I.T. ACT IS ALLOWABLE AS THE PLANT & MACHINERY IS WHOLLY ENGAGED IN THE MANUFACTURING OF POULTRY & CATTLE FEEDS. IN VIEW OF THE FACTS OF THE CASE AND DECISION TAKEN BY YOUR HONOUR AS WELL AS ITAT THAT THE ASSESSEE'S ACTIVITY IS MANUFACTURING, THE ADDITION MADE BE DELETED. ITA NO.1647/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 4 7. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). THUS, GROUND NO. 5 RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NO.6 IS RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE ACT. 9. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOTED THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.4,49,816/- AND BY INVOKING THE METHOD OF RULE 8D(2) FOR THE PURPOSE OF CALCULATING THE DISALLOWANCE U/S 14A, THE AO DISALLOWED RS.8,18,397/-. THE CIT(A) BY PLACING RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF REI AGRO LTD. 144 ITD 141 (CAL.) RESTRICTED THE DISALLOWANCE TO RS.64,936/- TAKING INTO CONSIDERATION THE INVESTMENT WHICH YIELDED THE DIVIDEND. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW:- 12. I HAVE CONSIDERED AY SUBMISSION ON THIS ISSUE AND THE CALCULATION UNDER RULE 8D. ACCORDINGLY AS PER THE CALCULATION UNDER RULE 8D READ WITH SECTION 14A FOR THE INVESTMENTS MADE BY THE ASSESSEE COME TO RS.1,17,954/- (3,018/- + 1,14,936/-). THE ASSESSEE HAS ALREADY DISALLOWED RS.53,018/- SUO MOTO. ACCORDINGLY, ADDITION ON THIS GROUND IS RESTRICTED TO RS.64,936/- AND THE BALANCE ADDITION OF RS.7,53,461/- IS DIRECTED TO BE DELETED. 10. ADMITTEDLY THIS EXERCISE WAS NOT DONE BEFORE THE AO AND WITH THE CONSENT OF BOTH PARTIES, WE DEEM IT PROPER TO REMAND THE MATTER TO THE FILE OF AO FOR HIS FRESH CONSIDERATION TO RECOMPUTE THE DISALLOWANCE TAKING INTO CONSIDERATION THE INVESTMENTS WHICH YIELDED THE DIVIDEND INCOME. THUS, GROUND NO.6 RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO.7 IS RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF SECTION 14A RELEVANT TO BOOK PROFIT U/S 115JB OF THE ACT. IT IS NOTED THAT THE AO DISCUSSED ABOVE, ADDED AN AMOUNT OF RS.8,71,415/- BY INVOKING RULE 8D(2) UNDER THE NORMAL PROVISIONS OF THE ACT. AGAIN THE SAME AMOUNT WAS ADDED BY THE AO UNDER MAT PROCEEDINGS U/S 115JB OF THE ACT. THE CIT(A) WHILE DEALING THE ISSUE IN FIRST APPELLATE PROCEEDINGS, HELD THE DISALLOWANCE/COMPUTATION FOR SECTION 14A R.W. RULE 8D IS NOT ITA NO.1647/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 5 APPLICABLE FOR THE PURPOSE OF CALCULATION OF INCOME U/S 115JB OF THE ACT. BUT, HOWEVER, THE CONTENTION OF THE LD.DR WAS THAT THE DISALLOWANCE FOR THE PURPOSE OF CALCULATION OF INCOME U/S 115JB SHALL BE IN TERMS OF CLAUSE (F) OF EXPLANATION (1) OF SECTION 115JB OF THE ACT. WE FIND FORCE IN THE ARGUMENTS OF LD.DR SINCE THERE WAS NO CALCULATION IN THIS RESPECT BY THE AO IN ASSESSMENT PROCEEDINGS, WE DEEM IT PROPER TO REMAND THE MATTER TO THE AO FOR HIS FRESH CONSIDERATION AS INDICATED ABOVE. THUS, GROUND NO.7 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO.8 RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF & ESIC. 13. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO ADDED THE IMPUGNED AMOUNT FOR NOT DEPOSITING EMPLOYEES CONTRIBUTION BEFORE THE STATUTORY DUE DATE. THE CIT(A) DELETED THE SAID AMOUNT BY PLACING RELIANCE IN THE CASE OF ALOM EXTRUSION LD. 319 ITR 306 (SC) BY HOLDING NO DISALLOWANCE IS MAINTAINABLE IF THE DEPOSIT IS MADE BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. WE FIND THE CIT(A) EXAMINED THE RECORD AND FOUND THAT SAID EMPLOYEES CONTRIBUTION WAS DEPOSITED BEFORE FILING THE RETURN OF INCOME. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER CIT(A), ACCORDINGLY IT IS JUSTIFIED. THUS, GROUND NO.8 RAISED BY THE REVENUE IS DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.04.2019. SD/- SD/- (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER DATE:- 23.04.2019 *AMIT KUMAR* ITA NO.1647/KOL/2017 (ASSESSMENT YEAR-2014-15) PAGE | 6 COPY FORWARDED TO: 1. APPELLANT- DCIT, CENTRAL CIRCLE-2(1), KOLKATA-700107. 2. RESPONDENT- M/S. SONA VETS PVT. LTD., 17 TH FLOOR, ROOM NO.17B & C, EVEREST HOUSE, 46C, CHOWRINGHEE ROAD, KOLKATA-700071. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA