The ITO,Vapi Ward-4, Nani Daman V. Jitsan Enterprises, Nani Daman

ITA 1754/AHD/2011

• Counselvise Citation: 175420514 RSA 2011
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 04-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: S N L AGARWALA
• Section: 80IB

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'# '#,$% $ & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A. NO.1754/AHD/2011 ( # ( # ( # ( # ( / / / / ASSESSMENT YEAR : 2008-09) THE INCOME TAX OFFICER VAPI, WARD-4 DAMAN # # # # / VS. M/S.JITSAN ENTERPRISE PLOT NO.361/13 GANESH INDUSTRIAL ESTATE KACHIGAM, NANI DAMAN ) $% ./*+ ./ PAN/GIR NO. : AAEFJ 7513 R ( ), / // / APPELLANT ) .. ( -.),/ RESPONDENT ) ), / $/ APPELLANT BY : SHRI A.K. PATEL, D.R. -.), 0 / $ / RESPONDENT BY : SHRI S.N.L. AGARWALA, A.R. #1 0 %/ // / DATE OF HEARING : 27/09/2011 2'( 0 % / DATE OF PRONOUNCEMENT : 14.10.11 $3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-VALSAD DATED 31/03/2011 PASSED FOR ASSESSMENT YEAR 2008-09. GROUNDS RAISED ARE HE REBY REPRODUCED BELOW:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB OF THE ACT STATING THAT DISALLOWANCE OF CLAIM OF DEDUCTION U/S .80IB OF THE ACT ON THE SOLE GROUND THAT THE ASSESSEE WAS NOT HAVING FACTORY LICENCE BEFORE IT STARTED MANUFACTURING ACTIVITIES IS WITHO UT ANY MERITS. ITA NO. 1754/AHD/2011 ITO VS. M/S.JITSAN ENTERPRISE ASST.YEAR - 2008-09 - 2 - 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE POINT THAT THE ASSESSEE HAS FAILED TO PROVE THAT IT HAS COMMENCED THE MANUFACTU RING ACTIVITY ON OR BEFORE 31.03.2004, AS STIPULATED IN SECTION 80IB OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB OF THE I.T. ACT ON DISALLOWANCE OF ` 31,840/- MADE ON SCRAP SALES INCOME. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 13.1 2.2010 WERE THAT THE ASSESSEE-FIRM HAS CLAIMED A DEDUCTION U/S.80-IB OF THE I.T.ACT OF RS.53,43,496/-. IT WAS NOTED BY THE ASSESSING OFFI CER THAT THE SAID CLAIM OF DEDUCTION U/S.80-IB OF THE I.T.ACT FOR AYS 2005- 06, 2006-07 & 2007- 08 WAS REJECTED FOR THE REASON THAT THE PRODUCTION WAS COMMENCED AFTER 31/03/2004 AS PER FACTORY LICENCE. AS AGAINST THAT , THE CLAIM OF THE ASSESSEE WAS THAT THE REQUISITE PERMISSION AS WELL AS REGISTRATION FROM DIFFERENT DEPARTMENTS OF THE ADMINISTRATION OF DAMA N, LIKE SSI REGISTRATION FROM DIC, POWER SANCTION, SALES TAX RE GISTRATION, ETC. WERE OBTAINED BEFORE THE SAID DATE. IT HAS ALSO BEEN P LEADED THAT THE ASSESSEE HAD PURCHASED RAW-MATERIAL, ETC. AND THEREFORE COMM ENCED THE MANUFACTURING ACTIVITY. HOWEVER, THE ASSESSING OFF ICER WAS NOT CONVINCED AND HE HAS FOUND THAT THE FACTORY LICENCE WAS ISSUED BY THE CHIEF INSPECTOR OF THE FACTORY ON 23/04/2004. IN HIS OPINION, SINCE THE FACTORY LICENCE WAS ISSUED AFTER THE PRESCRIBED DAT E AND THE FACTORY COULD NOT BE STARTED WHEN THE SAID FACTORY LICENCE, THERE FORE, THE MANUFACTURING ACTIVITY WAS NOT POSSIBLE BEFORE 31/03/2004, HENCE THE CLAIM WAS NOT PERMISSIBLE. WHEN THE MATTER WAS REACHED BEFORE TH E FIRST APPELLATE AUTHORITY, THE LEARNED CIT(APPEALS) HAS FOLLOWED TH E DECISION OF ITAT ITA NO. 1754/AHD/2011 ITO VS. M/S.JITSAN ENTERPRISE ASST.YEAR - 2008-09 - 3 - AHMEDABAD IN ITA NO.2762/AHD/2010 FOR ASSESSMENT YE AR 2007-08 AND ALLOWED THE CLAIM AS FOLLOWS:- 4. BRIEF FACT OF THE CASE : THE APPELLANT FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 21.11.2008 WHER EIN AN AMOUNT OF RS.53,43,496/- IS CLAIMED AS A DEDUCTION U/S.80-IB OF THE I.T. ACT. THE RETURN WAS PROCESSED U/S.143(1) OF THE I.T. ACT. THE APPELLANT COMMENCED ITS MANUFACTURING ACTIVITY BEFORE THE CUT OFF DATE I.E. 31/03/2004 BUT LEARNED ASSESSING OFFI CER HAD DENIED DEDUCTION U/S.80IB FOR PRECEDING A.Y. 2005-06 AND A .Y. 2006-07 BY ALLEGING THAT FACTORY LICENCE WAS ISSUED TO THE APPELLANT ON 23/04/2004. THE AO ALSO DID NOT CONSIDER SCRAP SAL ES PROFIT FOR THE COMPUTATION OF BENEFIT U/S.80-IB. THE PRESENT APPEAL IS AGAINST THE DISALLOWANCE OF 80-IB BENEFITS AND SCRAP SALES. 5. GROUND 1 . THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF THE HON'BLE ITAT, AHM EDABAD IN ITS OWN CASE VIDE ITA NO.2762/AHD/2010 FOR THE A.Y. 200 7-08. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE HON'B LE ITAT, I DIRECT THE AO TO GRANT BENEFIT U/S.80-IB OF THE I. T. ACT. THE A.O. IS ALSO DIRECTED TO VERIFY THE INCOME NOT ELIGIBLE FOR DEDUCTION U/S.80-IB BEFORE GRANTING RELIEF U/S.80-IB. THE AS SESSEE IS ENTITLED FOR DEDUCTION U/S.80-IB ON THE INCOME WHICH HAS DIR ECT NEXUS OF THE INDUSTRIAL UNDERTAKING IN THE LIGHT OF THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V/S. CIT 317 ITR 218 (SC). THIS GROUND OF APPEAL IS ALLOWED ACCORDINGLY. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE ORD ER OF THE RESPECTED CO-ORDINATE BENCH ITAT D BEARING ITA NO.2762/AHD/2010 FOR A.Y. 2007-08, DATED 07/01/2011 , THE RELEVANT PORTION REPRODUCED BELOW:- 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A P ARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF PLASTIC MOULDED PRODUCTS HAVING INDUSTRIAL UNDERTAKING IN THE UNION TERRITORIES OF ITA NO. 1754/AHD/2011 ITO VS. M/S.JITSAN ENTERPRISE ASST.YEAR - 2008-09 - 4 - DAMAN AND DIU BEING A NOTIFIED AREA. THIS WAS THE FOURTH YEAR OF OPERATION OF THE INDUSTRIAL UNDERTAKING. IT CLAIME D DEDUCTION U/S.80IB WHICH WAS DENIED BY THE AO ON THE GROUND THAT FACTORY LICENCE WAS ISSUED TO THE ASSESSEE ON 23.4.2004 ON THE BASIS OF WHICH DEDUCTION U/S.80IB WAS DISALLOWED IN ASST.YEA R 2005-06 AND 2006-07. THE LD. CIT(A) ALLOWED THE CLAIM FOLL OWING THE DECISION OF THE HON.APEX COURT IN LIBERTY INDIA VS. CIT 317 ITR 218 (SC) AND THE DECISION OF THE TRIBUNAL IN ITA NO.1006/AHD/2009 IN THE CASE OF M/S.SAMARTH HEALTH CARE PRONOUNCED ON 5.6.2009. 3. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THE ISSUE IS NOW COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR AS ST.YEAR 2006-07. THE TRIBUNAL VIDE PARA 9 & 10 OF ITS ORDER PRONOUNC ED ON 30 TH JUNE, 2010 IN ITA NO.892/AHD/2010 HAS HELD AS UNDER :- 9. WE FIND THAT IN THE ASSESSMENT YEAR 2005-06 IN ASSESSEES OWN CASE, THE TRIBUNAL ALLOWED DEDUCTION UNDER SECTION 80IB OF THE ACT ON IDENTICAL FACTS BY OBSER VING AS UNDER:- .. . 3.1. RESPECTFULLY FOLLOWING THE DECISION OF THE TRI BUNAL CITED HEREINABOVE PRONOUNCED IN ASSESSEES OWN CASE IN R ESPECT OF THE IDENTICAL ISSUE OF CLAIM OF DEDUCTION U/S.80-IB IN ASSESSEES FAVOUR, WE HEREBY RESPECTFULLY FOLLOW AND THEREFORE AFFIRM THE FINDINGS OF LD.CIT(A). GROUND NOS.1 & 2 OF THE REVENUE ARE HEREBY DISMISSE D. 4. APROPOS TO GROUND NO.3, THE FIRST APPELLATE AUTH ORITY HAS HELD AS UNDER:- ITA NO. 1754/AHD/2011 ITO VS. M/S.JITSAN ENTERPRISE ASST.YEAR - 2008-09 - 5 - 6. GROUND 2 . THE A.O HAD DENIED THIS REGARDING DISALLOWANCE OF DEDUCTION U/S.80-IB ON SCRAP SALE I NCOME OF RS.31,841/-. THIS ISSUE IS SQUARELY COVERED IN FAV OUR OF THE APPELLANT BY THE DECISION OF THE HON'BLE ITAT, AHME DABAD IN ITS OWN CASE VIDE ITA NO.2762/AHD/2010 FOR THE A.Y. 2007-08. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE HON'B LE ITAT, I DIRECT THE AO TO GRANT BENEFIT U/S.80-IB OF THE I. T. ACT ON THE PROFITS FROM SALE OF SCRAPS. THIS GROUND OF APPEAL IS ALLOWED . 4.1. THEREFORE, THIS ISSUE HAS ALSO BEEN DECIDED BY THE TRIBUNAL IN THE ORDER CITED (SUPRA) DATED 07/01/2007 IN THE FOLLOWI NG MANNER:- 4. THE NEXT ISSUE IS REGARDING CLAIM OF DEDUCTION UNDER SECTION 80IB ON SCRAP SALES. THE LD. AO WAS OF THE VIEW T HAT SCRAP SALES ARE NOT PART OF MANUFACTURING ACTIVITIES AND HENCE NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB. THE LD. LEARNED CIT( A), HOWEVER, ALLOWED THE CLAIM FOLLOWING THE DECISION OF HON.GUJ ARAT HIGH COURT IN HARJIVANDAS JHUTHABHAI ZAVERI AND ANOTHER VS. CIT 258 ITR 785 (GUJ.) 4.2. THE RESPECTED BENCH HAS REFERRED THE FOLLOWING CASES:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN 1. ACIT VS. MAXCARE LABORATORIES LTD. [2005] 273 ITR (A.T.) 0001 (ITAT CUTTACK) 2. SHIP SCRAP TRADERS VS. CIT [2001] 251 ITR 0806 (BOM) 3. CIT VS. SUNDARAM CLAYTON LTD. [1982] 133 ITR 034 (MAD.) 4. DY.CIT VS. INVESTWEL PUBLISHERS P.LTD. [2005] 279 ITR (A.T.) 0024 (ITAT MUM.) 5. FENNER (INDIA) LTD. VS. CIT [2000] 241 ITR 0803 (MAD.) 6. NIRMA INDUSTRIES LTD. VS. ACIT 95 ITD 199 (AHD.)[SB] ITA NO. 1754/AHD/2011 ITO VS. M/S.JITSAN ENTERPRISE ASST.YEAR - 2008-09 - 6 - 4.3. THEREAFTER, THE TRIBUNAL HAS FINALLY HELD THAT ONCE A PRODUCT OR BY-PRODUCT OR WASTE IS A RESULT OF SOME MANUFACTURI NG PROCESS WHICH HAS RESULTED IN THE FINISHED GOODS SOLD BY THE ASSESSEE AND IF THE FINISHED GOODS CAN BE SAID TO BE DERIVED FROM MANUFACTURING ACTIVITY, THEN THERE IS NO REASON TO HOLD THAT SCRAP RESULTED FROM THE SAME ACTIVITY IS NOT DERIVED FROM MANUFACTURING ACTIVITY. THE SAME PROCESS IS G ENERATING TWO ITEMS (I) FINISHED PRODUCT SOLD BY THE ASSESSEE AND (II) WASTE, BY-PRODUCT OR SCRAP. BOTH ARE GENERATED AT THE SAME TIME FROM THE SAME PROCESS. ONE HAS HIGHER MARKET VALUE AND THE OTHER HAS NOT THE S AME VALUE BUT TREATED AS SCRAP. REPRODUCING THESE WORDS FROM THE DECISIO NS OF HON'BLE APEX COURT IN THE CASE OF CIT VS. STERLING FOODS (1999) 237 ITR 279(SC) AND OF PANDIAN CHEMICALS VS. CIT (2003) 262 ITR 278 (SC ), THE ISSUE WAS DECIDED IN ASSESSEES FAVOUR. WE HOLD ACCORDINGLY AND CONFIRM THE VIEW TAKEN BY THE LEARNED CIT(APPEALS). THIS GROUND OF THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 14.10. 2011. SD/- SD/- (A. MOHAN ALANKAMONY) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 14 / 10 /2011 4..#, .#../ T.C. NAIR, SR. PS ITA NO. 1754/AHD/2011 ITO VS. M/S.JITSAN ENTERPRISE ASST.YEAR - 2008-09 - 7 - $3 0 -5 6$5( $3 0 -5 6$5( $3 0 -5 6$5( $3 0 -5 6$5(/ COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. 7 / CONCERNED CIT 4. 7() / THE CIT(A)-VALSAD 5. 5:; -# , , / DR, ITAT, AHMEDABAD 6. ; <1 / GUARD FILE. $3 $3 $3 $3# # # # / BY ORDER, .5 - //TRUE COPY// = == =/ // / * * * * ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..27/09/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28/09/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.14.10.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.10.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER