Jay Shree Tea & Industries Ltd., Kolkata V. JCIT(OSD),Cir-4, KOLKATA, Kolkata

ITA 1879/KOL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6478 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B K CHATURVEDI
• Keywords: Depreciation; Earning of tax free income; Proportionate interest
• Section: 143(3); 14A

Judgement Text

1 ITA NOS.1878, 1879/KOL/2014 & 2451/KOL/2016 JAY SHR EE TEA & INDUSTRIES LTD. A.Y.2010-11,2011-12 & 2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A KOL KATA [BEFORE HONBLE SHRI SATBEER SINGH GODARA, JM & S HRI M.BALAGANESH, AM ] ITA NOS.1878 & 1879 /KOL/2014 ASSESSMENT YEARS : 2010-11 & 2011-12 JAY SHREE TEA & INDUSTRIES LTD. -VERSUS- J.C.I.T. ,(OSD), CIR-4, KOLKATA KOLKATA (PAN:AAACJ 7788 D) (RESPONDENT) ITA NO.2451 /KOL/2016 ASSESSMENT YEAR : 2013-14 JAY SHREE TEA & INDUSTRIES LTD. -VERSUS- D.C.I.T. CIRCLE-4(1) KOLKATA KOLKATA (PAN:AAACJ 7788 D) (RESPONDENT) FOR THE APPELLANT: SHRI B.K.CHATURVEDI, AR FOR THE RESPONDENT : SHRI SALLONG YADEN, ADDL. CIT. DATE OF HEARING : 01.05.2018. DATE OF PRONOUNCEMENT : 04.05.2018. ORDER PER BENCH 1. THE ASSESSEEE HAS FILED THE INSTANT APPEALS FO R A.Y.2010-11, 2011-12 & 2013- 14, AGAINST THE CIT(A)-IV, KOLKATAS SEPARATE ORDE RS DATED 11/08/2014 & 22.11.2016 PASSED IN APPEAL NO. 20/CIT(A)-IV/2013-1 4, 127/CIT(A)-IV/2013-14 & 199/CIT(A)-2/16-17; RESPECTIVELY, IN PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. HEARD BOTH PARTIES. CASE FILES PERUSED. 3. WE ADVERT TO ASSESSEES PLEADINGS FIRST. ITS ID ENTICAL GRIEVANCE IN THE FORMER TWO ASSESSMENT YEARS CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION INVOKING SECTION 14A R.W.R. 8D DISALLOWANCE IN RE LATION TO ITS EXEMPT INCOME (S) WITHOUT ESTABLISHING THE RELEVANT NEXUS BETWEEN THE CORRESPONDING INCOME AND EXPENDITURE. WE NOTICE IN THIS BACKGROUND THAT THE CIT(A) HAS ALREADY GRANTED RELIEF 2 ITA NOS.1878, 1879/KOL/2014 & 2451/KOL/2016 JAY SHR EE TEA & INDUSTRIES LTD. A.Y.2010-11,2011-12 & 2013-14 TO THE ASSESSEE IN FORMER TWO ASSESSMENT YEARS 2010 -11 AND 2011-12 DELETING PROPORTIONATE INTEREST EXPENDITURE DISALLOWANCE UND ER RULE 8D(2)(II) OF INCOME TAX RULES. IT FURTHER TRANSPIRES THAT THE ASSESSEE HAD SUO MOTO DISALLOWED THE RELEVANT DIRECT AND ADMINISTRATIVE EXPENDITURE IN THE TWO AS SESSMENT YEARS. LEARNED COUNSEL FAILS TO DISPUTE THE SAME DURING THE COURSE OF HEAR ING. WE THEREFORE SEE THAT THERE CAN HARDLY BE ANY GRIEVANCE ON ASSESSEES PART SO FAR A S THESE TWO REMAINING COMPONENTS OF THE IMPUGNED DISALLOWANCE ARE CONCERNED. THE ASS ESSEE HAD NOT CHALLENGED THE SAID TWO DISALLOWANCE (S) DURING THE LOWER APPELLATE PRO CEEDINGS AS WELL. THE ASSESSEES GRIEVANCE IS NOT MAINTAINABLE THEREFORE. THUS THIS FIRST SUBSTANTIVE GROUND IN THE FORMER TWO ASSESSMENT YEARS IS REJECTED. 4. THE ASSESSEES IDENTICAL LATTER SUBSTANTIVE GROU ND IN FORMER TWO ASSESSMENT YEARS AND THE SOLE GRIEVANCE IN LAST ASSESSMENT YEA R CHALLENGES BOTH THE LOWER AUTHORITIES ACTION DENYING SECTION 80IE DEDUCTION IN RESPECT OF ITS UNIT/GARDEN SITUATED IN NORTH-EAST IN THE COURSE OF ASSESSMENT AS CONFIRMED IN THE LOWER APPELLATE PROCEEDINGS. THE CIT(A) AFFIRMS THE IMPUGNED DISALL OWANCE BY REFERRING TO HIS ORDER DATED 05.12.2013 IN A.Y.2009-10. BOTH PARTIES TAKE US TO THIS TRIBUNALS COORDINATE BENCHS ORDER IN ASSESSEES OWN CASE ITA NO.359/KOL /2014 DATED 16.03.2018 ACCEPTING THE VERY SUBSTANTIVE GROUND FOR STATISTIC AL PURPOSES AS UNDER :- 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE LD. AO IN DENIAL OF DEDUCTION U/S 80IE OF THE ACT, IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF GROWING AND MANUFACTURING OF TEA, MANUFACTURING CHE MICAL AND FERTILIZERS, TRADING OF TEA, WAREHOUSING AND DEVELOPMENT OF REAL ESTATE. THE ASSESSEE CLAIMED DEDUCTION OF RS. 1,30,08,824/- U/S 80IE OF THE ACT IN RESPECT OF FOLLOWING UNITS SITUATED AT NORTH-EASTERN STATES. 3 ITA NOS.1878, 1879/KOL/2014 & 2451/KOL/2016 JAY SHR EE TEA & INDUSTRIES LTD. A.Y.2010-11,2011-12 & 2013-14 THE LD. AO DID NOT DISCUSS ANYTHING ABOUT THE CLAIM OF DEDUCTION U/S 80IE OF THE ACT IN THE ASSESSMENT ORDER BUT MERELY PROCEEDED TO DISALLOW THE DEDUCTION U/S 80IE WHILE COMPLETING THE ASSESSMENT. THE LD. CIT(A ) ON GOING THROUGH THE ACCOUNTS OF THE ASSESSEE AS WELL AS AUDIT REPORT S UBMITTED IN FORM 10CCB IN RESPECT OF ELIGIBLE UNITS, OBSERVED THAT THE ASSESS EE HAD CARRIED OUT SUBSTANTIAL EXPANSION AND HAD NOT COMPLETED THE SAME WITHIN THE SAME YEAR IN WHICH SUCH SUBSTANTIAL EXPANSION WERE UNDERTAKEN. IN OTHER WO RDS, IN THE OPINION OF LD. CIT(A), THE SUBSTANTIAL EXPANSION ONCE UNDERTAKEN S HOULD BE COMPLETED WITHIN THE SAME FINANCIAL YEAR IN ORDER TO CLAIM DEDUCTION U/S 80IE OF THE ACT. THE LD. CIT(A) ALSO MADE A PASSING REFERENCE THAT THE ADDIT IONS TO PLANT AND MACHINERIES WERE MADE IN 2 TO 3 YEARS TIME BY THE ASSESSEE IN THE NORMAL WAY WHICH ARE ON ACCOUNT OF REPLACEMENT OF OLD MACHINERIES. THE LD. CIT(A) DID NOT AGREE TO THE CONTENTION OF THE ASSESSEE THAT THERE IS NO TIME LI MIT PRESCRIBED IN SECTION 80IE OF THE ACT TO COMPLETE THE SUBSTANTIAL EXPANSION WITHI N THE YEAR IN WHICH IT WAS UNDERTAKEN.. BASED ON THIS OBSERVATION, THE LD. CIT (A) UPHELD THE ACTION OF THE LD. AO IN DENYING DEDUCTION U/S 80IE OF THE ACT. AG GRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 2. FOR THAT THE LEARNED CIT(APPEALS) CONFIRMED THE ACTION TAKEN BY THE LEARNED ASSESSING OFFICER FOR NOT ALLOWING DEDUCTION AGAINS T INCOME EARNED FROM OUR UNIT/GARDEN SITUATED IN THE NORTH-EAST, WHICH IS DE DUCTIBLE U/S 80IE OF THE INCOME TAX ACT, 1961 ALTHOUGH THE APPELLATE HAS INCREASE I N THE INVESTMENT IN THE PLANT AND MACHINERY BY MORE THEN TWENTY-FIVE PER CENT OF THE BOOKS VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION I S UNDERTAKEN. 4 ITA NOS.1878, 1879/KOL/2014 & 2451/KOL/2016 JAY SHR EE TEA & INDUSTRIES LTD. A.Y.2010-11,2011-12 & 2013-14 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD SET UP TEA ESTATES IN NORTH-EASTERN STATES. THE ASSESSEE HAD CARRIED OUT CERTAIN SUBSTANTIAL EXPANSION IN ITS EXISTING ELIGI BLE UNDERTAKINGS AND HAD CLAIMED DEDUCTION U/S 80IE OF THE ACT IN THE RET URN OF INCOME. IT IS A FACT THAT THE LD. AO HAD NOT DISCUSSED ANYTHING ABOUT THE CLA IM OF DEDUCTION U/S 80IE OF THE ACT IN HIS ASSESSMENT ORDER. WE FIND THAT THE D EDUCTION U/S 80IE OF THE ACT IS ELIGIBLE TO ASSESSEE WHO BEGINS TO MANUFACTURE IN A NY OF THE NORTH EASTERN STATES DURING THE PERIOD 01.04.2007 TO 31.03.2017 E ITHER BY SETTING UP A NEW UNIT OR BY UNDERTAKING SUBSTANTIAL EXPANSION TO MANUFACT URE OR PRODUCE ANY ELIGIBLE ARTICLE OR THING. THE PROVISION OF SECTION 80IE(1) STIPULATES THAT THE ASSESSEE WOULD BE ENTITLED TO 100% OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS AS DEDUCTION FOR 10 ASSESSMENT YEARS COMMENCING WITH T HE INITIAL ASSESSMENT YEAR. THE EXPRESSION INITIAL ASSESSMENT YEAR IS DEFINE D IN SECTION 80IE(7) AS UNDER: (7) FOR THE PURPOSES OF THIS SECTION, (I ) 'INITIAL ASSESSMENT YEAR' MEANS THE ASSESSMENT Y EAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MA NUFACTURE OR PRODUCE ARTICLES OR THINGS, OR COMPLETES SUBSTANTIAL EXPANS ION; [UNDERLINING PROVIDED BY US] FROM THE AFORESAID DEFINITION OF INITIAL ASSESSMEN T YEAR, IT COULD BE INFERRED THAT THE INITIAL ASSESSMENT YEAR SHALL BE THE YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS COMPLETED BY THE ASSESSEE WHICH WOULD ENABLE IT TO GENERATE REVENUES AND CLAIM DEDUCTION THEREON U/S 80IE OF TH E ACT. THIS GOES TO PROVE THAT THERE IS NO TIME LIMIT PRESCRIBED IN SECTION 8 0IE AS TO WHEN THE SUBSTANTIAL EXPANSION SHOULD BE COMPLETED BY THE ASSESSEE. THE PROVISIONS OF SECTION 80IE(2) OF THE ACT STIPULATES THAT IF AN UNDERTAKIN G BEGINS TO MANUFACTURE OR ELIGIBLE ARTICLE OR THING BY UNDERTAKING SUBSTANTIA L EXPANSION ON ANY DATE AFTER 01.04.2007 AND BEFORE 31.03.2017. THIS IS THE ONLY REQUIREMENT WITH REGARD TO TIME LIMIT SPECIFIED IN SECTION 80IE OF THE ACT. NO WHERE IT MANDATES, AS POINTED OUT BY THE REVENUE HEREIN, THAT THE SUBSTANTIAL EXP ANSION ONCE COMMENCED SHOULD BE COMPLETED WITHIN SAME FINANCIAL YEAR. HENCE, THE DENIAL OF DEDUCTION U/S 80IE OF THE ACT BY THE REVENUE IS NOT TENABLE AS PER LAW . HOWEVER, WE FIND THAT THE EXPRESSION SUBSTANTIAL EXPANSION IS ALSO DEFINED IN 80IE(7)(III) OF THE ACT WHEREIN, IT SHOULD RESULT IN INCREASE IN INVESTMEN T OF PLANT AND MACHINERY BY AT LEAST 25% OF THE BOOK VALUE OF PLANT AND MACHINERY. THIS FACTUAL ASPECT AS TO WHETHER THE ASSESSEE HAD INDEED INVESTED IN PLANT A ND MACHINERY MORE THAN 25% OF THE BOOK VALUE OF PLANT AND MACHINERY (BEFORE D EPRECIATION IN ANY YEAR); AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH SUBS TANTIAL EXPANSION IS UNDERTAKEN, WAS NOT VERIFIED BY THE AUTHORITIES BE LOW. HENCE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DEEM IT FIT AND APPROPRIA TE, TO REMAND THIS ISSUE TO THE FILE OF THE LD. AO, FOR THIS LIMITED PURPOSE OF VER IFICATION OF QUANTUM OF INVESTMENT IN PLANT AND MACHINERY SO AS TO SATISFY THE DEFINIT ION OF SUBSTANTIAL EXPANSION WITHIN THE MEANING OF 80IE(7)(III) OF THE ACT. IF T HE ASSESSEE IS FOUND TO BE SO 5 ITA NOS.1878, 1879/KOL/2014 & 2451/KOL/2016 JAY SHR EE TEA & INDUSTRIES LTD. A.Y.2010-11,2011-12 & 2013-14 SATISFIED, THEN DEDUCTION U/S 80IE OF THE ACT SHOUL D BE ALLOWED TO THE ASSESSEE. ACCORDINGLY, GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THERE IS NO DISTINCTION ON FACT EVIDENT IN THE IMPUGNED ASSESSMENT YEAR ON THE VERY ISSUE. WE THEREFORE ADOPT JUDICIAL CONSISTENCY IN ALL THESE THREE ASSESSMENT YEARS TO REMIT THE INSTANT ISSUE AS WELL BACK TO THE ASSE SSING OFFICER FOR THE PURPOSE OF LIMITED VERIFICATION ON QUANTUM OF INVESTMENT IN PL ANT AND MACHINERY THE CONCERNED. THE ASSESSEES LATTER GRIEVANCE IS ACCEPTED FOR STA TISTICAL PURPOSES ACCORDINGLY. 6. WE QUOTE OUR ABOVE DISCUSSION TO PARTLY ACCEPT A SSESSEES FORMER TWO APPEALS ITA NOS. 1878 AND 1879/KOL/2014 FOR STATISTICAL PUR POSES WHEREAS ITS LAST APPEAL ITA NO.2451/KOL/2016 IS ACCEPTED FOR STATISTICAL PURPO SES. ORDERED ACCORDINGLY. O RDER PRONOUNCED IN THE OPEN COURT ON 04.05.2018. SD/- SD/- [M.BALAGANESH] [ S.S. GODARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 04.05.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.JAY SHREE TEA & INDUSTRIES LTD., 10, CAMAC STREET , KOLKATA-700017. 2. J.C.I.T. (OSD)- CIRCLE-4, KOLKATA/DCIT-CIRCLE-4 (1), KOLKATA 3. C.I.T.(A)- IV, KOLKATA 4. C.I.T.-II, KO LKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHES 6 ITA NOS.1878, 1879/KOL/2014 & 2451/KOL/2016 JAY SHR EE TEA & INDUSTRIES LTD. A.Y.2010-11,2011-12 & 2013-14