KALA GENSET P.LTD, Pune V. Dy CIT, Pune

ITA 1866/PUN/2012

• Counselvise Citation: 186624514 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Depreciation; Principle of natural justice; Question of law
• Section: 143(3); 234B; 80IB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.2056 & 2057/PN/2012 (A.YS. 2007-08 & 2008-09) DCIT, CIRCLE-9, PUNE APPELLANT VS. KALA GENSET PVT. LTD., PLOT NO.392/1, MAHALUNGE INGLE, TALEGAON CHAKAN RD, TQ: KHED, DIST: PUNE PAN: AAACK6784C RESPONDENT ITA NOS.1866 & 1867/PN/2012 (A.YS. 2007-08 & 2008-09) KALA GENSET PVT. LTD., PLOT NO.392/1, MAHALUNGE INGLE, TALEGAON CHAKAN RD, TQ: KHED, DIST: PUNE PAN: AAACK6784C APPELLANT VS. DCIT, CIRCLE-9, PUNE RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI S.P. WALIMBE DATE OF HEARING : 03.01.2014 DATE OF ORDER : 28.02.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: 2 ALL THESE CROSS APPEALS ARE ARISING OUT OF RESPECT IVE ORDERS OF CIT(A)-V, PUNE PERTAINING TO THE SAME ASSESSEE ON A LMOST COMMON ISSUES. SO THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 2. IN ITA NO.2056/PN/2012, THE REVENUE RAISED THE F OLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN ALLOWING THE ASSES SEE'S CLAIM OF RS. 7,74,08,854/-CLAIMED AS DEDUCTION U/S 80IB O F THE I.T.ACT, 1961, WHEN THE ASSESSEE IS NOT INVOLVED IN MANUFACTURING OR PRODUCING ACTIVITY BUT IS ONLY CAR RYING OUT THE ACTIVITY OF ASSEMBLING AT ITS SILVASSA UNIT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB(5)(I) OF THE IT. ACT, BY HOLDING THAT ASSEMBLI NG OF VARIOUS COMPONENTS AMOUNTS TO MANUFACTURE; WITHOUT APPRECIA TING THAT NO MANUFACTURING ACTIVITY IS POSSIBLE WITHOUT SOPHISTICATED MACHINERY OR SKILLED MANPOWER. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN IGNORING THE SIGNI FICANCE OF AMENDMENT OF SEC. 10A AND 10B BY THE FINANCE ACT, 2 000 WHEREBY DEFINITION OF MANUFACTURING, WHICH INCLUDED ANY PROCESS OR ASSEMBLING, HAS BEEN DELETED W.E.F. 01/04/2001 THEREBY MEANING THAT THOSE INVOLVED IN ASSEMBLING AND PROCESSING WOULD NOT BE ENTITLED TO BENEFITS INTENDED FOR MANUFACTURING CONCERNS. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPLYING THE RATIO OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BABCOCK & WILCOX OF INDIA LTD REPORTED IN 241 ITR 583 WHEREIN IT HAS BEEN HELD THAT THE ACTIVITY OF ERECTING OF BOILER AT SITE BY ASSEMBLING OF PARTS CANNOT BE EQUATED WITH MANUFACTURE OF AN ARTI CLE OR THING. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPLYING THE RATIO OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. N.C. BUDHIRAJA & CO. 3 REPORTED IN 204 ITR 412, WHEREIN THE MEANING OF MANUFACTURE HAS BEEN ANALYZED IN DETAIL. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN APPLYING THE SAME NET PROFIT RATIO IN RESPECT OF SILVASSA UNIT AS WELL AS CHAKAN UNIT, WITHOUT APPRECIATING THAT HEAVY EXPENDITURE LOADED ON CHAKAN UNIT TO REDUCE THE PERCENTAGE OF PROFIT AS C OMPARED TO THE SILVASSA UNIT' 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING / ASSEMBLING OF GENERATOR SETS. THE ASSESSEE COMPANY HAD FILED RETURN OF INCOME ON 05.11.2007 DE CLARING TOTAL INCOME OF RS.35,91,676/-. THE ASSESSMENT WAS COMPL ETED AT RS.8,10,00,530/- WHEREIN THE DEDUCTION CLAIMED U/S. 80IB(5)(I) AMOUNTING TO RS.7,74,08,854/- WAS DISALLOWED ON THE GROUND THAT THE ASSESSEE COMPANY WAS NOT ENGAGED IN MANUFACTURI NG OF GENERATOR SETS AT SILVASA BUT WAS MERELY ASSEMBLING GENERATOR SETS AND THEREFORE SILVASA UNIT WAS NOT ENTITLED TO DEDU CTION U/S.80IB(5)(I) OF I.T. ACT. AS STATED ABOVE, THE A SSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND ASSEMBLING GENERATOR S ETS UNDER THE BRAND NAME 'KALA' HAS THREE UNITS, TWO AT CHAKAN, N EAR PUNE AND ONE AT SILVASSA. UNIT -I AT CHAKAN IS ENGAGED IN MANUFACTURING OF CANOPIES WHICH IS PART OF GENERATOR SETS WHICH C ONTROLS THE NOISE LEVEL. UNIT-LL AT CHAKAN AS WELL AS SILVASSA ARE ENGAGED IN MANUFACTURING / ASSEMBLING OF GENERATOR SETS. WHIL E IN CASE OF CHAKAN UNIT CLAIM OF DEDUCTION U/S.80IB(5)(I) HAS B EEN MADE AT 30% AND IN CASE OF SILVASSA UNIT THE CLAIM OF DEDUCTION HAS BEEN MADE AT 100%. AT SILVASSA, THE ASSESSEE COMPANY HAS BEEN DOING THE ASSEMBLY OF GENSETS PRIOR TO 31.03.2004 AND THE CLA IM OF DEDUCTION WAS ACCEPTED IN THE EARLIER YEARS OF ASSESSMENT AS WELL. HOWEVER, IN A.Y. 2007-08, THE ASSESSING OFFICER TOOK A DIFFEREN T VIEW HOLDING THAT SILVASSA UNIT WAS NOT ENTITLED TO DEDUCTION U/S.80I B(5)(I) AS IT WAS 4 NOT ENGAGED IN MANUFACTURING OF GENSETS BUT ONLY AS SEMBLY OF THE SAME. FURTHER, THE ASSESSING OFFICER HELD THAT PRO FITABILITY OF SILVASSA UNIT WAS ARTIFICIALLY INFLATED IN THE SENS E THAT MOST OF THE EXPENDITURE WERE LOADED ON CHAKAN UNIT WHERE DEDUCT ION WAS CLAIMED AT 30% WHILE VIRTUALLY VERY LESS EXPENDITUR E WAS BOOKED IN SILVASSA UNIT IN ORDER TO INFLATE THE PROFIT ARTIFI CIALLY AND CLAIM HIGHER DEDUCTION U/S.80IB(5)(I) OF I.T. ACT WHICH WAS 100% IN RESPECT OF SILVASSA UNIT. 4. THE MAIN GROUND PERTAINS TO ACTION OF DISALLOWIN G CLAIM OF DEDUCTION U/S.80IB(5)(I) OF I.T. ACT HOLDING THAT T HE UNIT WAS NOT ENGAGED IN THE MANUFACTURING OF GENSETS BUT MERELY ASSEMBLING THE GENSETS. THE ASSESSING OFFICER NOTICED THAT THE AS SESSEE COMPANY WAS OUTSOURCING VARIOUS COMPONENTS I.E. ENGINES, AL TERNATORS, CONTROL PANELS ETC. FROM VARIOUS MANUFACTURERS AND ASSEMBLING GENSETS UNDER THE BRAND NAME 'KALA'. THE ASSESSING OFFICER OBSERVED THAT SILVASSA UNIT WAS ENGAGED IN ASSEMBLI NG OF GENSETS. THE ASSESSING OFFICER ALSO OBSERVED THAT NO COMPONE NT WAS MANUFACTURED BY SILVASSA UNIT. HE ALSO TOOK NOTE OF THE FACT THAT SILVASSA UNIT AS ON 31.03.2007 WAS HAVING PLANT AND MACHINERY OF 15.85 LACS CONSISTING OF THREE CRANES ONLY WITH FUR NITURE AT RS.3.15 LACS AND WDV OF VEHICLES AT 16.46 LACS. HAVING SATI SFIED WITH THE FACT THAT THE UNIT OF SILVASSA WAS ENGAGED IN ASSEMBLING OF GENSETS, THE ASSESSING OFFICER CONFRONTED THE ASSESSEE REGARDING ADMISSIBILITY OF DEDUCTION U/S 80IB(5)(I) OF INCOME-TAX ACT. THE STA ND OF THE ASSESSEE HAS BEEN THAT IN THE PAST MORE PARTICULARLY IN A.Y. 2005-06 & 2006- 07 OF DEDUCTION HAS BEEN ALLOWED U/S.143(3) OF INCO ME-TAX ACT. THE ASSESSING OFFICER WAS HOWEVER, NOT CONVINCED AS HE WAS OF THE VIEW THAT QUESTION OF LAW ARISES AS TO WHETHER ASSEMBLIN G COULD BE EQUATED WITH MANUFACTURING. THE ASSESSEE HAS RAISED VARIOUS CONTENTIONS BEFORE THE ASSESSING OFFICER. HOWEVER, HE REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE SILVAS SA UNIT ASSEMBLING VARIOUS PARTS OF GENSETS AND NOT MANUFAC TURING, SO IT 5 WAS NOT ENTITLED FOR U/S.80IB(5)(I). IN RESULT, HE DISALLOWED THE CLAIM AMOUNT TO RS.7,74,08,854/- AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4.1 THE MATTER WAS CARRIED BEFORE THE FIRST APPELLA TE AUTHORITY, WHO HAVING CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSE SSEE, ALLOWED THE RELIEF TO THE ASSESSEE AS DETAILED IN PARAS 13 TO 17 OF ITS ORDER. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF RE VENUE, INTER ALIA STATED THAT THE CIT(A) IS NOT JUSTIFIED IN ALLOWING ASSESSEES CLAIM OF RS.7,74,08,854/- CLAIMED AS DEDUCTION U/S.80IB(5)(I ) BECAUSE THE ASSESSEE HAS NOT INVOLVED IN MANUFACTURING ACTIVITY BUT WAS ONLY CARRIED OUT ACTIVITY OF ASSEMBLING AT SILVASSA UNIT . THE CIT(A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION U/S.80IB(5)(I) BY HOLDING THAT ASSEMBLING OF VARIOUS COMPONENTS AMOUNTING TO MANUF ACTURE WITHOUT APPRECIATING THAT NO MANUFACTURING ACTIVITY WAS POSSIBLE WITHOUT SOPHISTICATION MACHINERY OR SKILLED MAN POW ER. IT WAS ALSO SUBMITTED THAT CIT(A) HAS IGNORED THE SIGNIFICANCE OF AMENDMENT OF SEC. 10A & 10B OF INCOME-TAX ACT BY FINANCE ACT 200 0, WHEREBY THE DEFINITION OF MANUFACTURE WHICH INCLUDED IN THE PRO CESS OR ASSEMBLING HAS BEEN DELETED W.E.F. 01.04.2001, MEAN ING THEREBY THAT THOSE INVOLVED IN ASSEMBLING AND PROCESSING WO ULD NOT BE ENTITLED TO THE BENEFIT INTENDED FOR MANUFACTURING CONCERN. THUS, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDER OF ASSESSING OFFICER ON THE ISSUE AND REQUESTED TO UPH OLD THE SAME ON THIS ISSUE. ON THE OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 4.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING GENERATOR SETS UNDER THE BRAND NAME KALA. THE ASSESSEE COMPANY HAS TWO UNITS AT CHAKAN AS STATED ABOVE AND ONE UNIT AT SILVASSA. THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION IN RESPECT OF CHAKAN AND SILVASSA UNITS. THE DEDUCTIO N AVAILABLE AT 6 CHAKAN UNIT WAS AT 30% OF THE PROFIT WHILE IN RESPE CT OF SILVASSA UNIT, THE DEDUCTION WAS AVAILABLE AT 100% OF THE PR OFIT OF THE UNIT. 4.3 THUS, THE ASSESSEE COMPANY HAS CLAIMED DEDUCTIO N IN RESPECT OF PROFITS FOR BOTH UNITS. THE DEDUCTION CLAIMED I N RESPECT OF SILVASSA UNIT WAS OF RS.7,74,08,854/- FOR A.Y. 2007 -08. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF THE D EDUCTION MADE BY THE ASSESSEE IN RESPECT OF SILVASSA UNIT BECAUSE TH E ASSESSEE WAS NOT ENGAGED IN MANUFACTURING OF ARTICLE IN SILVASSA UNI T, BUT HE WAS SIMPLY ASSEMBLING VARIOUS COMPONENTS OF GENSETS. A CCORDING TO THE ASSESSING OFFICER, THE ASSESSEE ITSELF HAS ADMITTED THAT IT WAS ENGAGED IN THE ASSEMBLING WITH VARIOUS PARTS, HENCE DEDUCTION U/S.80IB(5)(I) WAS NOT ALLOWABLE TO THE ASSESSEE. THE ASSESSING OFFICER HAS RELIED UPON THE DECISION OF CALCUTTA HI GH COURT IN THE CASE OF CIT VS. BABCOCK AND WILCOX OF INDIA LTD. RE PORTED IN (2000) 241 ITR 583 IN ORDER TO SUPPORT HIS CASE THAT THE D EDUCTION U/S.80IB(5)(I) WAS NOT AVAILABLE TO A UNIT ENGAGED IN ASSEMBLING OF VARIOUS PARTS. IN APPEAL BEFORE CIT(A), THE ASSESS EE HAS EXPLAINED THE VARIOUS STEPS WHICH WERE FOLLOWED FOR MANUFACTU RING OF GENSETS. THE ASSESSEE POINTED OUT THAT VARIOUS ITEMS LIKE EN GINES, ALTERNATORS, BATTERIES, CONTROL PANEL, CANOPIES, ETC. ARE PROCUR ED BY THE SILVASSA UNIT. THEREAFTER, THE TECHNICAL TEAM INSPECTS THE M ATERIAL RECEIVED AND ONLY AFTER THOROUGH CHECK UP, THE ITEMS ARE SEN T FOR MANUFACTURING. THE ASSESSEE FURTHER EXPLAINED THAT THE VARIOUS ENGINEERS ASSEMBLE THE VARIOUS PARTS AND ALSO THEY HAVE TO ALIGN THE ENGINE AND THE ALTERNATOR. AFTER FINAL ASSEMBLY, VA RIOUS TESTS LIKE VIBRATION TESTS, LOAD TEST, NOISE TEST, ETC. ARE CA RRIED OUT. 4.4 IN THIS BACKGROUND, THE STAND OF ASSESSEE HAS B EEN THAT THERE IS NO DISPUTE THAT IT IS ENGAGED IN ASSEMBLY OF VAR IOUS PARTS TO MANUFACTURE GENSET. THE ISSUE IS WHETHER ASSEMBLY A MOUNTS TO MANUFACTURE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TATA LOCOMOTIVE AND ENGINEERING COMPANY LTD. [(1968) 68 ITR 325 (BOM)] 7 HELD THAT MANUFACTURE INCLUDES ASSEMBLY OF VARIOUS PARTS. THE ASSESSEE ALSO PLACED RELIANCE ON THE FOLLOWING DECI SIONS WHEREIN IT HAS BEEN HELD THAT ASSEMBLY AMOUNTS TO MANUFACTURE A. JACKSON ENGINEERS [ (2012) 341 ITR 518 (DEL H.C. )] B. MAHESH CHANDRA SHARMA [(2009) 308 ITR 222 (P&H)] 4.5 THE STAND OF THE ASSESSEE HAS BEEN THAT THE RAW MATERIALS WERE ENGINE, BATTERIES, CANOPIES, ALTERNATORS, ETC. AND THE FINAL PRODUCT WAS GENERATOR SET WHICH WAS TOTALLY DIFFERENT PRODU CT HAVING A SEPARATE NAME AND IDENTITY IN THE MARKET. ACCORDING LY, THE ASSESSEE SUBMITTED THAT ASSEMBLY AMOUNTS TO MANUFACTURE AND HENCE, THE DEDUCTION SHOULD BE ALLOWED. THE ASSESSEE HAS ASSE MBLED GENSETS. ACCORDING TO HIM, THE ASSESSEE IS PAYING EXCISE DUT Y ON THE GENSETS MANUFACTURED. SECONDLY, HE HAS ALSO ACCEPTED THAT T HE FINAL PRODUCT I.E. GENERATOR SET IS A NEW PRODUCT VIS-A-VIS THE RAW MA TERIAL USED. ACCORDINGLY, HE HAS ACCEPTED THE CLAIM OF THE ASSES SEE AND HAS ALLOWED THE DEDUCTION. THE HONBLE MADRAS HIGH COU RT IN THE CASE OF CHIRANJEEVI WIND ENERGY LTD.[2011-TIOL-91-HC-MAD -IT] HAS HELD THAT THE ASSESSEE ENGAGED IN THE ACTIVITY OF PROCUR ING DIFFERENT PARTS OF WINDMILLS AND THEREAFTER, ASSEMBLING THEM TO FOR M WINDMILL WAS ENGAGED IN MANUFACTURING ACTIVITY. THE RELEVANT PAR A OF THE DECISION IS AS UNDER: 'THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF PROCUR ING DIFFERENT PARTS FOR ASSEMBLING WINDMILLS. ACCORDING TO THE AP PELLANT, SINCE THE ASSESSEE MERELY PROCURED THE DIFFERENT PA RTS OF THE WINDMILL AND ASSEMBLED THE SAME, IT COULD NOT AMOUN T TO EITHER 'MANUFACTURE' OR 'PRODUCTION' OF ANY ARTICLE OR THI NG, AS SPELT OUT IN SECTION 80IB(2)(III). THUS SUCH CONTENTION WAS R EJECTED BY THE TRIBUNAL. HAVING HEARD BOTH THE PARTIES, THE HIGH COURT HELD THAT: THE DIFFERENT PARTS PROCURED BY THE ASSESSEE BY THE MSELVES CANNOT BE TREATED AS WINDMILL. THOSE DIFFERENT PART S BEAR DISTINCTIVE NAMES AND WHEN ASSEMBLED TOGETHER, THEY GET 8 TRANSFORMED INTO A FINAL PRODUCT, WHICH IS COMMERCI ALLY KNOWN AS A WINDMILL. HOWEVER, THERE CAN BE NO DIFFICULTY IN HOLDING THAT SUCH AN ACTIVITY CARRIED OUT BY THE ASSESSEE W OULD AMOUNT TO 'MANUFACTURE' AS WELL AS 'PRODUCTION' OF A THING OR ARTICLE AS SET OUT IN SECTION 80IB(2)(III).' 4.6 THE HONBLE HIGH COURT OF DELHI IN THE CASE OF JACKSON ENGINEERS [(2012) 341 ITR 518(DELH)] HAS DECIDED A SIMILAR ISSUE. THE RELEVANT PORTION OF THE SAME IS AS UNDER: 'DEDUCTION UNDER S. 80-IAMANUFACTURE OR PRODUCTION ASSEMBLING OF DIESEL GENERATING SETSASSEMBLING OF VARIOUS COMPONENTS OF DIESEL GENERATING SETS INVOLVES COUPL ING AND ALIGNING THE ENGINE WITH THE ALTERNATORCHAIN PULLE Y BLOCKS ARE USED TO LIFT THE ENGINE AND THE ALTERNATOR AT THE T IME OF COUPLING, AS THESE ARE VERY HEAVY COMPONENTSAFTER THE COUPLING IS DONE, THE ENGINE AND THE ALTERNATOR ARE MOUNTED ON A BASE FRAMEENGINE AND THE ALTERNATOR ARE AFFIXED TO THE BASE FRAME BY MEANS OF NUTS AND BOLTS FITTED IN THE GROO VESOTHER COMPONENTS ARE FITTED TO COMPLETE THE DG SETFUNCTI ON OF THE CONTROL PANEL IS TO INDICATE THE VOLTAGE AND THE CU RRENT THAT IS GENERATEDIT IS FITTED WITH SWITCHES AND INSTRUMENT S TO REGULATE AND CONTROL THE POWER SUPPLYFUNCTION OF T HE BATTERY IS TO PROVIDE THE INITIAL CURRENT REQUIRED TO START THE ENGINE AND THE FUNCTION OF THE SILENCER IS TO DIMINISH THE SOU ND OF THE DG SET WHEN IT RUNS WHILE THE FUNCTION OF THE RADIATOR IS TO MAINTAIN THE TEMPERATURE OF THE DG SETABOVE COMPON ENTS CONSTITUTE THE INPUTS IN THE MANUFACTURE OF A DIESE L GENERATING SETDG SET IS THE FINAL PRODUCT WHICH HAS A DISTINC TIVE NAME, CHARACTER AND FUNCTION DIFFERENT FROM EACH OF THE C OMPONENTS THEREFORE, THE ACTIVITY OF ASSEMBLING GENSETS FROM VARIOUS COMPONENTS AMOUNTS TO MANUFACTURE OR PRODUCTION FOR THE PURPOSE OF DEDUCTION UNDER S. 80-IA.' AS DISCUSSED ABOVE, THE HON'BLE BOMBAY HIGH COURT I N THE CASE OF TATA LOCOMOTIVE AND ENGINEERING COMPANY LTD. (SU PRA) HAS DECIDED A SIMILAR ISSUE IN FAVOUR OF ASSESSEE. 4.7 THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT V. BABCOCK AND WILCOX INDIA LTD. (SUPRA) IS NOT APPLIC ABLE TO THE FACTS OF THE PRESENT CASE. IN SAID CASE, THE ASSESSEE WA S ENGAGED IN THE ACTIVITY OF ERECTION OF BOILERS AS A SUB CONTRACTOR . IT WAS HELD THAT SUCH AN ACTIVITY OF ERECTION OF BOILERS DID NOT AMO UNT TO 9 MANUFACTURE. IN THE SAID CASE, THE ISSUE WAS WHETH ER ASSEMBLY AMOUNTS TO MANUFACTURE WAS NOT INVOLVED. ACCORDING LY, THE RATIO OF BABCOCK AND WILCOX INDIA LTD. (SUPRA) IS NOT APPLI CABLE TO THE FACTS OF THE PRESENT CASE. IN THIS BACKGROUND, WE HOLD TH AT CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE U/S .80IB(5)(I) BY HOLDING THAT ASSEMBLING VARIOUS COMPONENTS AMOUNTS TO MANUFACTURING. THIS REASONED FACTUAL AND LEGAL FIN DING OF CIT(A) ON THE ISSUE NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. SIMILAR ISSUE AROSE IN ITA NO.2057/PN/2012 FOR A.Y. 2008-09. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONIN G, WE UPHOLD THE ORDER OF CIT(A) ON THE ISSUE. ACCORDINGLY, WE HOLD THAT GROUNDS NOS.1-5 OF REVENUES APPEAL ARE DISMISSED. THE OTH ER GROUNDS RAISED BY REVENUE ARE SIMILAR TO THAT OF ISSUES RAISED IN ASSESSEES APPEAL WHICH WILL BE TAKEN CARE IN THE ASSESSEES APPEAL O N THE SAID ISSUE. 4.8 AS A RESULT, BOTH THE REVENUES APPEALS ARE DIS MISSED. 5. IN ITA NO.1866/PN/2012 FOR A.Y. 2007-08, THE ASS ESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED ASSESSING OFFICER ERRED LAW AND ON FACT S IN MAKING AN ASSESSMENT AND THEREFORE ORDER UNDER SECT ION 143(3) IS ILLEGAL, WITHOUT JURISDICTION AND / OR AB INITIO VOID AND DESERVES TO BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS NARRA TED IN THE STATEMENT OF FACTS AND EVIDENCE AND MATERIAL ON RECORD AND LEGAL POSITION, THE LEARNED ASSESSING OFFICER E RRED IN HOLDING ENTIRE INCOME OF RS,7,74,08,854 SILVASA UN IT AS TAXABLE DISALLOWING THE ENTIRE DEDUCTION UNDER 80 IB CLAIM. THE ADDITION BASED ON INCORRECT INTERPRETATION OF LAW T HAT SILVASA IS NOT MANUFACTURING GENSETS IS NOT CORRECT AND THEREF ORE LIABLE TO BE DELETED IN TOTO. 3. THE LEARNED ASSESSING OFFICER ERRED IN ASSUMING THE PROFIT OF SILVASSA UNIT DISPROPORTIONATELY HIGHER AS COMPARED TO UNIT AT CHAKAN, PUNE, WHEN HIGHER PROFIT IS NOT A FACTOR FO R DISALLOWING THE DEDUCTION WHEN THE APPELLANT FULFILS OTHER STAT UTORY CONDITIONS. THE ASSESSING OFFICER SHOULD NOT HAVE D ISCARDED SEPARATE AUDITED FINANCIAL STATEMENTS OF THE SILVAS SA UNIT, AUDIT REPORT U/S 10CCB, SEPARATE BOOKS OF ACCOUNTS, 10 SUPPORTING DOCUMENTS AND ALSO EXPLANATION ON RECORD ON THE GROUND OF HIGHER PROFITABILITY. 4. THE LEARNED ASSESSING OFFICER ERRED IN ARRIVING AT A CONCLUSION THAT INCOME ARISING FROM SERVICE CHARGES OF RS.74,77,000/- IN RESPECT OF GENSETS ASSEMBLED SOLD BY SILVASSA UNIT IS NOT ENTITLED TO BENEFIT UNDER SECT ION 80IB AS THE SERVICE CHARGES FORM AN INTEGRAL PART OF THE PROFIT OF THE UNDERTAKING WHEN THE SAME IS DERIVED FROM THE UNDER TAKING AND INEXTRICABLY LINKED WITH THE BUSINESS OF THE UN DERTAKING. 5. THE LEARNED ASSESSING OFFICER HAS NOT PROPERLY APPR ECIATED THE FACTS THAT SERVICE CHARGES COLLECTED BY THE APP ELLANT WERE MAINLY ON ACCOUNT OF GENSETS SOLD WHICH IS THE INTE GRAL AND COMPOSITE PART OF SALE OF ANY CAPITAL EQUIPMENT, HE NCE SHALL BE PART OF PROFITS AND GAIN DERIVED FROM INDUSTRIAL UN DER TAKING. 6. THE LEARNED ASSESSING OFFICER OUGHT TO HAVE FOLLOWE D THE PRINCIPLES OF NATURAL JUSTICE WHILE FRAMING ASSESSM ENT AND GIVEN A SHOW CAUSE NOTICE BEFORE ADDITION. 7. THE LEARNED ASSESSING OFFICER ERRED IN CHANGING INT EREST UNDER SECTION 234A, 234B AND 234C OF THE INCOME TAX ACT, 1961, WHEN NO SUCH INTEREST IS CHARGEABLE. 8. THE LEARNED ASSESSING OFFICER ERRED IN LAW AS WELL AS IN FACT IN INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 WHICH DOES NOT ACCORD WITH THE SETTLE D LEGAL PRINCIPLES. 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR WITHDRAW ANY OF THE GROUND EITHER BEFORE OR AT THE TIME OF HEARING, AS MAY BE NECESSARY. 6. THE ASSESSING OFFICER OBSERVED THAT PROFITS OF S ILVASSA UNIT WAS ARTIFICIALLY INFLATED IN ORDER TO CLAIM HIGHER DEDU CTION. THE ASSESSING OFFICER HAS OBSERVED THAT PROFIT OF SILVASSA UNIT W AS EXTRA HIGH COMPARED TO PROFIT OF CHAKAN UNIT. HE FOUND THAT S ILVASSA UNIT HAD PROFIT @ 9.65% WHILE CHAKAN UNIT WAS SHOWING NET PR OFIT @ 1.78%. HE FURTHER OBSERVED THAT CANOPY WAS SUPPLIED TO SIL VASSA UNIT BY ITS CHAKAN UNIT. IT WAS COMPARATIVELY AT LESSER PRICE COMPARED TO CANOPY SUPPLIED TO THIRD PARTY. THE ASSESSING OFFI CER OBSERVED THAT IN RESPECT OF 177 UNITS, DUE TO THIS ARRANGEMENT OF TRANSACTIONS IN RESPECT OF CANOPY, PROFIT OF RS.53,85,100/- WAS INF LATED. 11 ACCORDINGLY, HE ESTIMATED THE INFLATION OF PROFIT O F RS.10,000/- EACH IN RESPECT OF 3141 UNITS AT RS.2,96,40,000/- (3141- 177) X RS.10,000/- IN ORDER TO JUSTIFY HIS POINT THAT PROF IT OF SILVASSA UNIT WAS DISPROPORTIONATELY HIGHER. ACCORDINGLY, HE HEL D THAT THE PROVISIONS OF SECTION 80IA(10) R.W.S. 80IB(13) APPL ICABLE IN THIS CASE AND SAME SHOULD BE CONSIDERED WHILE GRANTING ANY RE LIEF TO THE ASSESSEE COMPANY. 6.1 THE MATTER WAS CARRIED BEFORE THE FIRST APPELLA TE AUTHORITY, WHO AFTER CONSIDERING THE SAME HAS OBSERVED THAT HIGHER PROFIT IN RESPECT OF SILVASSA UNIT WAS ALLEGED TO BE FOR FOLLOWING RE ASONS (I) SUPPLY CANOPIES TO SILVASSA UNIT AT LESSER PRICE COMPARED TO THIRD PARTIES LOADING AND (II) LOADING OF ADMINISTRATIVE COSTS TO CHAKAN UNIT. THE STAND OF THE ASSESSEE HAS BEEN THAT SALE OF CAN OPIES TO THIRD PARTY WAS MADE TO ORDER WHILE QUALITY OF CANOPIES S UPPLIED TO SILVASSA UNIT WAS DIFFERENT. REGARDING LOADING AND OTHER ADMINISTRATIVE EXPENSES TO CHAKAN UNIT CLAIMED BY A SSESSEE HAS BEEN THAT THE SAME WAS NOT BY WAY OF ARRANGEMENT. REJECTING THE CONTENTION OF ASSESSEE, THE CIT(A) HELD THAT THE AS SESSEE HAS INFLATED THE PROFIT OF SALVASSA UNIT, THEREFORE AMOUNT OF IN FLATED PROFIT WAS WORKED OUT BY APPLYING THE SAME NET PROFIT RATIO IN RESPECT OF SALVASSA UNIT AS WELL AS CHAKAN UNIT WHICH IS AS UN DER: PAR T I CULARS CHAKAN UNIT % TO SALES SILVASSA UNIT % TO SALES (TOTAL AS PER AUDITED FINANCIALS) TURNOVER 232229734 789805022 1022032956 NET PROFIT AFTER TAX (AS PER AUDITED FINANCIALS) 2584873 1.11% 7 , 74 , 08 , 854 9.80% 7 9993727 7.8% TAX PROVISION 2220215 0 2220215 NET PROFIT BEFORE TAX (AS PER AUDITED FINANCIALS) 4805088 2.07% 77408854 9.80% 82213942 8.0% RE CA STED PROFIT ON THE 18680781 8.04% 63533161 8.04 % 82213942 8.0% 12 BASIS OF TURNOVER DIFFERENCE 1 , 38 , 75 , 693 6.2 IN VIEW OF ABOVE, THE CIT(A) HAS OBSERVED THAT THE EXCESS PROFIT OF RS.1,38,75,693/- HAS BEEN LOADED TO SILVASSA UNI T. ACCORDINGLY THE ADDITION OF RS.1,38,75,693/- WAS CONFIRMED AND THE ASSESSING OFFICER WAS DIRECTED TO SUBSTITUTE THE FIGURE OF DI SALLOWANCE TO RS.138,75,693/- IN PLACE OF RS.7,74,08,854/- WHILE FINALIZING THE CLAIM OF DEDUCTION U/S.80IB(10) OF ACT. THE SAME H AS BEEN OPPOSED BEFORE US BY BOTH SIDES AS CONTENDED IN THE GROUNDS OF APPEAL BEFORE US AS DISCUSSED ABOVE. 6.3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT ACCORDING TO THE ASSESSING OFF ICER, THE PROFIT OF SILVASSA UNIT WAS ELIGIBLE FOR 100% DEDUCTION WHILE PROFIT OF CHAKAN UNIT WAS ELIGIBLE FOR DEDUCTION AT 30%. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS SHOWN HIGHER PROFIT IN SI LVASSA UNIT. THE ASSESSING OFFICER STATED THAT NET PROFIT RATIO OF C HAKAN WAS 1.78% WHILE THAT OF SILVASSA UNIT WAS 9.65%. THE ASSESSI NG OFFICER FURTHER STATED THAT THE ASSESSEE HAS ARRANGED HIS AFFAIRS I N SUCH A MANNER THAT HIGHER PROFITS ARE SHIFTED TO SILVASSA UNIT. 6.4 THE ASSESSING OFFICER HAS STATED THAT CHAKAN UN IT HAS SOLD SAME TYPE OF CANOPY AT LESSER RATES TO SILVASSA UNI T VIS-A-VIS THE RATE CHARGED TO OTHER PARTIES. ACCORDING TO HIM, THE ASS ESSEE HAD SOLD 25KVA CANOPY TO SILVASSA UNIT AT RS.52,300/- WHILE THE SALE PRICE TO OTHER PARTIES WAS RS.81,000/-. SIMILARLY, THE ASSE SSING OFFICER HAS STATED THAT THERE ARE COMPARABLE INSTANCES OF 177 C ANOPIES AND THE BENEFIT GRANTED WAS CALCULATED BY HIM AT RS.53,85,1 00/- IN RESPECT OF THE 177 CANOPIES AS DISCUSSED ABOVE. THE CHAKAN UNIT HAS SOLD 3141 CANOPIES TO SILVASSA UNIT AND A PROFIT MARGIN OF RS. 10,000/- WAS CONSIDERED BY HIM TO HAVE BEEN THE INDIRECT BEN EFIT GRANTED TO THE SILVASSA UNIT. THUS, HE HAS COMPUTED THE INDIRE CT BENEFIT BY REDUCING 177 CANOPIES FOR WHICH DIRECT EVIDENCE WAS AVAILABLE OUT OF 13 3141 CANOPIES SOLD DURING THE YEAR AND HAS WORKED O UT THE EXCESS BENEFIT GRANTED TO SILVASSA UNIT AT RS.2,96,40,000/ - AS DISCUSSED ABOVE. 6.5 THE ASSESSEE OBJECTED TO THE ACTION OF THE ASSE SSING OFFICER. HE HAS STATED THAT THE PRICE CHARGED BY CHAKAN UNIT WA S MUCH HIGHER THAN THE PRICE OF THE CANOPIES PURCHASED FROM THIRD PARTIES. THE STAND OF THE ASSESSEE HAS BEEN THAT THE COMPARABLE RATES ADOPTED BY THE ASSESSING OFFICER WERE NOT CORRECT SINCE THE CA NOPIES SOLD TO THIRD PARTIES I.E. KIRLOSKAR OIL ENGINES LTD. WERE HAVING TOTALLY DIFFERENT FEATURES. THE ASSESSEE ALSO EXPLAINED VAR IOUS REASONS FOR WHICH THE NET MARGIN IN THE CHAKAN UNIT WAS LESSER AS COMPARED TO THE NET MARGIN IN SILVASSA UNIT. IN APPEAL, THE CI T(A) HELD THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE VARIATION IN THE NET PROFIT MARGIN BETWEEN THE TWO UNITS. ACCORDINGLY, IN PARA 24 OF HIS ORDER, THE CIT(A) HAS HELD THAT THE SAME NET PROFIT RATIO SHOULD BE CONSIDERED FOR BOTH THE UNITS AND HENCE, HE HAS CAL CULATED THE EXCESS PROFIT LOADED TO SILVASSA UNIT AT RS. 1,38,7 5,693/-. WE FIND THAT MAIN REASON FOR MAKING ADDITION THAT THERE IS DIFFERENCE IN NET PROFIT RATIO OF BOTH UNITS. THE ALLEGATION IS THAT THE CANOPY SOLD BY CHAKAN UNIT TO SILVASSA UNIT WERE AT MUCH LESSER RA TE AS COMPARED TO CHARGED TO THIRD PARTIES. THE STAND OF THE ASSE SSEE HAS BEEN THAT HE HAS SOLD 33 CANOPIES TO KIRLOSKAR OIL ENGINES LT D. APART FROM THIS SALE, THE ASSESSEE HAS NOT SOLD TO ANY OTHER T HIRD PARTY. IN THIS REGARD, THE CONTENTION OF THE ASSESSEE IS THAT THE CANOPIES SOLD TO KIRLOSKAR WERE OF TOTALLY DIFFERENT FEATURES. ON PA GE 57 OF THE PAPER BOOK, THE ASSESSEE HAS GIVEN THE POINTS OF DIFFEREN CE IN RESPECT OF THE CANOPIES SOLD TO THE SILVASSA UNIT AND THOSE SOLD T O KIRLOSKAR. FROM THE ABOVE, WE FIND THAT THE CANOPIES SOLD TO SILVAS SA UNIT WERE SEMI FINISHED WHILE THOSE SOLD TO KIRLOSKAR WERE FULLY F INISHED CANOPIES. MOREOVER, FROM THE EXPLANATION OF ASSESSEE, IT IS F OUND THAT THE SPECIFICATIONS WERE ALSO DIFFERENT. THE NOISE LEVE LS WERE ALSO DIFFERENT. THE GAUGE OF STEEL USED IN ABOVE TWO WA S DIFFERENT. THE ASSESSEE ALSO GAVE DETAILS OF THE DIFFERENCE IN THE COST OF THE 14 MANUFACTURING THE CANOPIES AS ENCLOSED ON PAGES 91 & 92 OF THE PAPER BOOK. CONSIDERING THE DIFFERENT FEATURES AND SPECIFICATIONS IN THE CANOPIES SOLD TO KIRLOSKAR, THE ASSESSEE HAD CH ARGED HIGHER RATE TO KIRLOSKAR AS EVIDENT FROM THE DETAILED WORKING O F COST DIFFERENCE SUBMITTED BY THE ASSESSEE AS DISCUSSED ABOVE. CONS IDERING THE VARIOUS DIFFERENCES BETWEEN THE CANOPIES SOLD TO KI RLOSKAR AND SILVASSA UNIT, THE COMPARISON MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 6.6 THE ASSESSEE FURTHER HAS EXPLAINED THAT IT HAD PURCHASED CANOPIES FROM THIRD PARTIES. THE RELEVANT DETAILS A RE ENCLOSED ON PAGE 127 OF THE PAPER BOOK. AS PER THE DETAILS, IT WAS CLAIMED THAT THE RATE CHARGED BY CHAKAN UNIT WAS MUCH HIGHER IN RESPECT OF MOST OF THE CANOPIES VIS-A-VIS THE RATE CHARGED BY THIRD PARTIES. THIS FACT HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. AC CORDINGLY, IT WAS SUBMITTED THAT THE PRICE CHARGED BY CHAKAN UNIT WAS VERY REASONABLE AND THERE WAS NO INDIRECT BENEFIT TRANSF ERRED FROM CHAKAN UNIT TO SILVASSA UNIT. 6.7 MOREOVER, THE ASSESSEE HAS EXPLAINED THE VARIOU S REASONS FOR HIGHER NET PROFIT MARGIN IN SILVASSA UNIT. FIRSTLY, THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THE CHAKAN UNIT AND SILVASSA UNITS. THE ASSESSEE HAD CLARIFIED THAT DU E TO EXCESS DEPRECIATION, EXCESS EMPLOYEE AND EXCESSIVE MANUFAC TURING EXPENSES, THE PROFIT MARGIN OF CHAKAN UNIT WAS LOW. IT WAS FURTHER EXPLAINED THAT IN VIEW OF THE GUIDELINES ISSUED BY CENTRAL POLLUTION CONTROL BOARD, CERTAIN SPECIFIC DIRECTIONS FOR CONT ROLLING NOISE LEVELS WERE TO BE MAINTAINED. HENCE, THE D.G. SETS COULD N OT BE SOLD WITHOUT CANOPIES WHICH ACT AS A NOISE DAMPENING AGE NT. HENCE, THE ASSESSEE COMPANY STARTED MANUFACTURING CANOPIES IN CHAKAN UNIT. THE LOWER AUTHORITIES HAVE NOT APPRECIATED THAT THE DIFFERENCE IN DEPRECIATION WAS BASICALLY BECAUSE SUBSTANTIAL PLAN T AND MACHINERY WAS PERTAINING TO CANOPY MANUFACTURING DIVISION. TH E RELEVANT CHART 15 IS ENCLOSED ON PAGE 49 OF THE PAPER BOOK. THE HIGH ER EMPLOYEE AND MANUFACTURING EXPENSES WERE BECAUSE OF THE FACT THA T THE CANOPIES WERE BEING MANUFACTURED IN CHAKAN UNIT WHICH WAS NO T THE CASE IN SILVASSA UNIT. THE CHART GIVING THE DETAILS OF THE PROFIT EARNED BY THE TWO UNITS AS ENCLOSED ON PAGE 146 OF THE PAPER BOOK . 6.8 THE ASSESSING OFFICER HAS INVOKED SUB SECTION 1 0 OF SECTION 80IA. IN THIS REGARD, THE STAND OF THE ASSESSEE IS THAT SUB SECTION 10 IS NOT APPLICABLE SINCE IT IS APPLICABLE TO THE TRA NSACTIONS BETWEEN THE ASSESSEE AND THIRD PERSON. IN THIS CASE BEFORE US, THE TRANSACTIONS ARE BETWEEN THE TWO UNITS OF THE ASSES SEE AND IF AT ALL, ANY PROVISION IS TO BE APPLIED I.E. SUB SECTION 8 O F SECTION 80IA. AS PER THE SAID SECTION, IF ANY GOODS ARE TRANSFERRED TO AN ELIGIBLE BUSINESS FROM OTHER BUSINESS AND THE CONSIDERATION OF THE GOODS TRANSFERRED DOES NOT CORRESPOND TO THE MARKET VALUE THEN THE ASSESSING OFFICER HAS THE POWER TO RE-COMPUTE THE P RICE AND DISALLOW THE DEDUCTION. FOR APPLYING THE PROVISIONS OF SUB SECTION (8), THE ASSESSING OFFICER CAN MAKE DISALLOWANCE ON CONCRETE BASIS AND NOT ON PRESUMPTIONS AND SURMISES. THE ASSESSING OFFIC ER HAS NOT BEEN ABLE TO POINT OUT THAT THE MARKET VALUE OF THE CANO PIES SOLD BY CHAKAN UNIT TO SILVASSA UNIT WAS MUCH HIGHER. THE ASSESSEE HAS CLARIFIED THAT THE CANOPIES SOLD TO KIRLOSKAR WERE NOT COMPARABLE TO THE CANOPIES SOLD TO SILVASSA UNIT. SECONDLY, HE H AS CONSIDERED AN INDIRECT BENEFIT OF RS.L0,000/- FOR THE CANOPIES IN RESPECT OF WHICH NO COMPARABLE PRICE HAS BEEN CITED. THUS, THIS ADDITI ON IS NOT JUSTIFIED AND METHOD ADOPTED BY THE ASSESSING OFFICER IS NOT CORRECT AND THE ADDITION IN QUESTION IS ON PRESUMPTIONS AND SURMISE S. THE LOWER AUTHORITIES HAVE NOT PROPERLY APPRECIATED THE FACTS . THEY HAVE NOT PROPERLY CONSIDERED THE VARIOUS CONTENTIONS RAISED ON BEHALF OF ASSESSEE FOR HIGHER NET PROFIT MARGIN IN SILVASSA U NIT. THE ASSESSEE HAS GIVEN DETAILED CHARTS GIVEN BASIS OF ALLOCATION OF COMMON EXPENSES TO BOTH THE UNITS. IN RESPECT OF COMMON EX PENSES, THE ASSESSEE HAS ALLOCATED MOST OF THE EXPENSES ON TURN OVER BASIS. 16 THERE IS NO CONCRETE EVIDENCE THAT THE ASSESSEE HAD SHIFTED THE PROFITS OF CHAKAN UNIT TO SILVASSA UNIT AT SUCH MAG NITUDE AND HENCE, THE ADDITION SUSTAINED BY THE CIT(A) CANNOT BE SUSTAINED AS SUCH. AT THE SAME TIME OBJECTION OF REVENUE AUTHOR ITIES ON THIS PART CANNOT BE REJECTED IN TOTAL. TAKING ALL FACTS AND CIRCUMSTANCES INTO CONSIDERATION, THE REDUCTION OF CLAIM OF DEDUCTION U/S.80IB(10) IS RESTRICTED TO 15% AS AGAINST LOWER AUTHORITIES IN A .Y. 2007-08. FACTS BEING SIMILAR IN A.Y. 2008-09 ON THE ISSUE OF REDUC TION OF CLAIMED DEDUCTION U/S.80IB(10). FOLLOWING THE SAME REASONI NG, THE REDUCTION OF CLAIM OF DEDUCTION IS REDUCED TO 15% A S AGAINST LOWER AUTHORITIES. ACCORDINGLY, THE ASSESSEES APPEAL ON THIS ACCOUNT IS PARTLY ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE DEDUCTION U/S.80IB(10). 6.9 THE ISSUE RAISED BY WAY OF GROUND NO.7 IS WITH REGARD TO CHARGING OF INTEREST U/S.234A, 234B AND 234C OF ACT WHICH IS CONSEQUENTIAL. 6.10 THE ISSUE WITH REGARD TO PENALTY U/S.271(1)(C) OF ACT IS PREMATURE, SO SAME IS DISMISSED. 6.11 AS A RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED 7. IN THE RESULT, THE TWO APPEALS FILED BY REVENUE ARE DISMISSED AND THE TWO APPEALS FILED BY ASSESSEE ARE PARTLY AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF FEBRUARY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 28 TH FEBRUARY, 2014 GCVSR 17 COPY TO:- 1. DEPARTMENT 2. ASSESSEE 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. THE DR, B BENCH, I.T.A.T., PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE