M/s. Team Ferro Alloys Pvt.Ltd., Vapi V. The ACIT., Vapi Circle, Vapi

ITA 1793/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76829 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K
• Assessee Lawyers: M K PATEL
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER TEAM FERRO ALLOYS PVT. LTD, SURVEY NO. 357/2/2/1 & 357/2/3/2, BEHIND DADRA GARDEN, VILLAGE DADRA-396230, U.T. OF DADRA & NAGAR HAVELI PAN: AAACT 8925 A (APPELLANT) VS THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI (RESPONDENT) ASSESSEE BY: SRI M.K. PATEL, A.R. REVENUE BY: SRI A.K. PANDEY, SR.D.R. DATE OF HEARING : 04-06-2014 DATE OF PRONOUNCEMENT : 13-06-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THESE ARE THE ASSESSEES APPEALS AGAINST THE SEPAR ATE ORDERS OF LD. CIT(A), VALSAD DATED 25-02-2011 AND 28/03/2011 FOR A.Y. 2006-07 & 2007-08 RESPECTIVELY. ITA NOS. 1792 & 1793/AHD/2011 ASSESSMENT YEAR 2006-07 & 07-08 I.T.A NOS.1792 & 1793 /AHD/2011 A.Y. 2006-07 & 20 07-08 PAGE NO TEAM FERRO ALLOYS PRIVATE LTD VS. ACIT 2 2. BOTH THESE APPEALS ON IDENTICAL FACTS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER BY TA KING THE FACTS FOR ASSESSMENT YEAR 2007-08. 3. THE COMMON EFFECTIVE GROUND TAKEN BY ASSESSEE IS AS UNDER:- 3. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND INTERPRETATION OF LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN NOT GRANTING DEDUCTION U/S. 80IB OF THE ACT FROM THE PROFITS AND GAINS OF THE APPELLANT ON THE BASIS THAT THE INDUSTRIAL UNDERTAKING IS FORMED BY RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. THE ACTION OF THE LEARNED CO MMISSIONER OF INCOME TAX (APPEAL) IS BASED ON PRESUMPTIONS AND SU RMISES, AND IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DESERVES TO BE DELETED. 4. DURING THE ASSESSMENT PROCEEDINGS AO OBSERVED TH AT ASSESSEE COMPANYS INDUSTRIAL UNDERTAKING HAS BEEN FORMED BY SPLITTING UP OR RECONSTRUCTION. THE AO THEREFORE DISALLOWED DEDUCT ION U/S. 80IB BY OBSERVING AS UNDER:- THOUGH THE APPELLANT HAS RECONSTRUCTED NEW BUILDIN G AND INSTALLED NEW PLANT AND MACHINERIES AT NEW PLACE, THE FACT IS THAT IT SHIFTED ITS BUSINESS FROM ONE PLACE TO ANOTHER. HENCE THE APPE LLANT HAS NOT STARTED A NEW BUSINESS BY RECONSTRUCTING ITS EXISTI NG BUSINESS. HENCE THE CONDITION LAID DOWN U/S. 80IB(2)(II) READ WITH EXPLANATION 2 IS NOT FULFILLED. 5. LD. CIT(A) CONFIRMED THIS ACTION OF AO BY OBSERV ING AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATION MA DE BY THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTION RAIS ED BY THE A.R. SIMILAR ISSUE WAS DECIDED BY MY PREDECESSOR LD. CIT (A) VIDE APPEAL NO. CIT(A)/VLS/134/2006-07 DATED 3.01.2007 FOR THE A.Y. 2005-06 WHEREIN THE LD. CIT(A) HAD DISMISSED THE APPEAL UPH OLDING THE FINDINGS OF THE AO IN APPELLANTS OWN CASE. THE FA CTS AND CIRCUMSTANCES BEING SAME IN THIS YEAR TOO, I AM INC LINED TO CONFIRM THE ORDER OF THE AO. THUS, THE APPEAL IN THIS GROU ND IS DISMISSED. 6. FURTHER AGGRIEVED NOW THE ASSESSEE IS BEFORE US. I.T.A NOS.1792 & 1793 /AHD/2011 A.Y. 2006-07 & 20 07-08 PAGE NO TEAM FERRO ALLOYS PRIVATE LTD VS. ACIT 3 7. AT THE TIME OF HEARING LEARNED COUNSEL OF THE AS SESSEE SUBMITTED THAT AO AS WELL AS LD. CIT(A) HAVE DISALLOWED THE C LAIM OF DEDUCTION OF THE ASSESSEE U/S. 80IB OF THE ACT BY FOLLOWING THEIR OR DERS FOR ASSESSMENT YEAR 2005-06. HOWEVER HONBLE ITAT WHILE DECIDING THE A PPEAL FOR ASSESSMENT YEAR 2005-06 HAVE DECIDED THE ISSUE IN FAVOUR OF AS SESSEE AND AGAINST THE REVENUE HOLDING THAT ASSESSEE WAS ENTITLED FOR THE CLAIM OF DEDUCTION U/S. 80IB OF THE INCOME TAX ACT. THEREFORE APPEALS OF THE ASSESSEE ARE ALSO REQUIRED TO BE ALLOWED. LD. DR HOWEVER RELIED ON THE ORDERS OF LOWER AUTHORITIES. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT THE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 WHEREIN FOLLOWING WAS HELD:- 8. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT NOW, THIS ISSUE IS COVERED BY THE DECISIO N OF COORDINATE BENCH. IN THIS REGARD, THE FACTS NARRATED BY THE A SSESSEE ABOUT THE NEW UNIT ARE AS FOLLOWS:- INDUSTRIAL UNDERTAKING CONSISTS OF LAND, BUILDING, PLANT AND MACHINERY AND OTHER EQUIPMENTS. IN THIS REGARD, W W OULD LIKE TO BRING BEFORE YOUR HONOR THE FACTS OF THE CASE WHICH ARE AS UNDER.. A. IN OUR CASE WE HAVE PURCHASED A NEW PIECE OF L AND ON WHICH NEW BUILDING IS CONSTRUCTED ON. B. WE HAVE INSTALLED ENTIRELY NEW SET OF PLANT AND MACHINERIES. A STATEMENT SHOWING DETAILS OF VARIOUS PLANT AND MA CHINERIES INSTALLED ARE ENCLOSED. C. WE HAVE EMPLOYED MORE THIN 20 WORKERS. A STATE MENT SHOWING LIST OF WORKERS EMPLOYED DURING THE YEAR IS ENCLOSED. D. OUR INDUSTRIAL UNDERTAKING IS LOCATED IN A BACKWARD AREAS SPECIFIED IN THE EIGHTH SCHEDULE TO THE INCOME TAX ACT. THUS WE SATISFY ALL INC CONDITIONS AS REQUIRED IN SECTION 8 0-1B. FURTHER MORE WE WOULD LIKE TO BRING BEFORE, YOUR HONOR THAT.,... I.T.A NOS.1792 & 1793 /AHD/2011 A.Y. 2006-07 & 20 07-08 PAGE NO TEAM FERRO ALLOYS PRIVATE LTD VS. ACIT 4 A. THERE IS NO TRANSFER OF ANY OF THE ASSETS FROM THE OLD UNIT TO NEW UNIT, B. THERE WAS NO TRANSFER OF PLANT MACHINERY OR AN Y OTHER MANUFACTURING FACILITIES FROM THE OLD UNIT TO NEW UNIT, C. ALL PLANTS AND MACHINERIES INSTALLED IN THE IN DUSTRIAL UNDERTAKING ARE NEW. D. THERE WAS NO TRANSFER OF BUSINESS FROM THE OLD UNIT TO NEW UNIT. E. WE HAVE OBTAINED ALL THE REQUIRED LICENSES AND C ERTIFICATES FROM VARIOUS GOVERNMENT AGENCIES LIKE. CENTRAL EXCISE, S ALES TAX, DIG, POLLUTION CONTROL BOARD AND FACTORY LICENSE ETC. AS REQUIRED UNDER THE RESPECTIVE LEGISLATION FOR SETTING UP A NEW UNI T. COPY OF THE SAME IS ATTACHED HEREWITH FOR YOUR KIND PERUSAL. THUS IT CAN BE SEEN THAT IN OUR CASE, NONE OF THE B USINESS HAS BEEN BROKEN UP AND ALSO THAT NO PORTION OF THE BUSI NESS ACTIVITY OF ANY OTHER UNDERTAKING HAS BEEN BROKEN UP SO AS TO F ORM OUR UNDERTAKING. 9. ON THE BASIS OF THE FACTS AND EVIDENCES PLACED O N RECORD, WE HEREBY HOLD THAT THE UNIT IN QUESTION HAS NOT BEEN FORMED EITHER BY SPLITTING UP OR BY RECONSTRUCTION OF A BUSINESS. TH ERE WAS A NEW INDEPENDENT LOCATION WHERE NEW PLANT AND MACHINERY WAS STATED TO BE INSTALLED. WHETHER THE ASSESSEE CARRIED THE SAME B USINESS OR DIFFERENT BUSINESS WAS OF NO CONSIDERATION AS IT WAS DONE BY THE REVENUE AUTHORITIES. RATHER THE REVENUE AUTHORITIES WERE NO T JUSTIFIED IN TREATING THE EXISTENCE OF NEW UNIT AS A RECONSTRUCTION OF OLD UN IT. IN THE CASE OF M/S. COMPUTER FORCE (SUPRA) WHEREIN ELABORATELY DISCUSSE D TERM USED 'SPLITTING UP' OR 'RECONSTRUCTION. WE HAVE NOTED THAT THE A.O . HAS MOLDED THE FACTS AND STATED THAT THE OLD UNIT WAS CLOSED DOWN CONSEQ UENTLY GIVEN BIRTH TO A NEW UNIT. THIS REASONING OF THE A.O. CANNOT BE APPR OVED BECAUSE THE SAME IS MERELY PRESUMPTION THAT THE OLD UNIT HAD GI VEN BIRTH TO A NEW UNIT. WE PLACE RELIANCE ON THE DECISION OF ABBAS NABI SHA IKH (SUPRA), RELEVANT PARA OF THE TRIBUNAL ORDER IS REPRODUCED BELOW: IT WOULD BE A CASE OF RECONSTRUCTION IF AT THE SAM E PLACE WHERE THE ALREADY EXISTING UNIT IS FUNCTIONING NEW/ADDITIONAL MACHINERY/PLANT ARE INSTALLED OR NEW CAPITAL IS INFUSED OR CERTAIN MODIFICATIONS AND ALTERATIONS IN THE PROCESS FOR MANUFACTURING THE PR ODUCT IS CARRIED OUT AND THERE IS A CONTINUITY OF THE ACTIVITIES OF THE BUSINESS IN THE SAME INDUSTRIAL UNDERTAKINGS. BUT WHERE AT A NEW LO CATION INDEPENDENT OF THE EARLIER EXISTING UNIT, NEW PLANT AND MACHINERY ARE PURCHASED AND INSTALLED, NEW CAPITAL IS INVESTE D THEN IT WOULD BE A CASE OF SETTING UP OF A NEW UNIT EVEN THOUGH F OR CARRYING OUT THE SAME BUSINESS. THE ESSENTIAL DIFFERENCE LIES IN CHANGE IN LOCATION AND INSTALLATION OF NEW INFRASTRUCTURE IN THE FORM OF FACTORY BUILDING AND PLANT AND MACHINERY, WHETHER ASSESSEE CARRIES OUT THE SAME BUSINESS OR DIFFERENT BUSINESS IS NOT AN ESSEN TIAL INGREDIENT TO HOLD IT IS A RECONSTRUCTION OR NOT. THE REVENUE AUTHORITIES WERE I.T.A NOS.1792 & 1793 /AHD/2011 A.Y. 2006-07 & 20 07-08 PAGE NO TEAM FERRO ALLOYS PRIVATE LTD VS. ACIT 5 NOT JUSTIFIED IN TREATING IT AS A CASE OF CONSTRUCT ION MERELY BECAUSE ASSESSEE CONTINUED TO CARRY ON THE SAME BUSINESS IN THE NEW UNIT ALSO. ON THE BASIS THAT OLD UNIT DID NOT FUNCTION O R IT HAS STOPPED ACTIVITIES MAY GIVE RISE LO AN IMPRESSION THAT THE NEW UNIT IS THE RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. BU T EARNING ON THE SAME BUSINESS IN THE NEW UNIT IS NOT SUFFICIENT AT ITS OWN TO HOLD THAT THE NEW UNIT IS A RECONSTRUCTION OF BUSINESS A LREADY IN EXISTENCE UNLESS LOCATION IS THE SAME AND THERE IS NO INSTALLATION OF NEW PLANT AND MACHINERY. THE OLD UNIT MAY STOP FUNC TIONING IMMEDIATELY OR AFTER SOMETIME. IF OLD UNIT RUNS PAR ALLEL FOR SOME TIME AND THEREAFTER IT STOP FUNCTIONING THEN IT IS NOT GOING TO MAKE ANY DIFFERENCE. ONE CANNOT SAY THAT IF OLD UNIT STO PS FUNCTIONING IMMEDIATELY ON THE START OF NEW UNIT IT WOULD BE A CASE OF RECONSTRUCTION AND IF OLD UNIT STOPS FUNCTIONING AF TER A YEAR OR SO, AFTER THE NEW UNIT STARTS FUNCTIONING, IT WILL NOT BE A CASE OF RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. FU RTHER, IF THE ARGUMENT OF THE ID. DR IS ACCEPTED THEN SEVERAL UNI TS WHERE SAME BUSINESS IS CARRIED OUT, WOULD ALWAYS BE TREATED AS RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE AND THUS DENYING THE BENEFIT OTHERWISE AVAILABLE TO THE TAX PAYER. THEREFORE, CA RRYING ON THE SAME BUSINESS IN THE NEW UNIT OR STOPPAGE OF BUSINE SS IN THE OLD UNIT CANNOT BE A CRITERIA TO HOLD THAT IT IS A CASE OF RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE.' 9.1 AFTER DUE CONSIDERATION OF THE FACTS INVOLVED, WE HEREBY DIRECT THAT THE ASSESSEE IS ENTITLED FOR THE CLAIM OF DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961. SUBSTANTIVE GROUND RAISED BEFORE US IS, THEREFORE, ALLOWED. IN VIEW OF THE ABOVE, THE APPEALS FILED BY THE ASSE SSEE FOR BOTH THE YEARS ARE ALLOWED. 9. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 13/06/2014 AK I.T.A NOS.1792 & 1793 /AHD/2011 A.Y. 2006-07 & 20 07-08 PAGE NO TEAM FERRO ALLOYS PRIVATE LTD VS. ACIT 6 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,