M/s. Kashmir Veneer Industries, Srinagar V. The Income-tax Officer, Srinagar

ITA 215/ASR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0669 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-03-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Keywords: Audit objection
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.215(ASR)/2012 ASSESSMENT YEAR:2004-05 PAN :AADFK8586E M/S. KASHMIR VENEER INDUSTRIES , VS. INCOME TAX OFF ICER, PARIMPORA, SRINAGAR. WARD-1, SRINAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.MUSHTAQ AHMED MIR, COST ACCOUNTA NT RESPONDENT BY: SH.R.L.CHHANALIA, DR DATE OF HEARING: 21/03/2013 DATE OF PRONOUNCEMENT:22/03/2013 ORDER PER BENCH ; THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE CIT(A), JAMMU, DATED 02.03.2012 FOR THE ASSESSMENT YEAR 2004-05. THE SOLE GROUND RAISED BY THE ASSESSEE REA DS AS UNDER: 1. LD. CIT(A) AS WELL AS A.O. ERRED IN LAW AND FA CTS IN RESTRICTING THE DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 196 1 TO 25% INSTEAD OF 100% TO ELIGIBLE INDUSTRIAL UNDERTAKIN GS. 2. THE BRIEF FACTS NARRATED BY THE REVENUE AUTHORIT IES ARE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED IN THIS CASE ON 1 8.12.2006. THE ASSESSEE ITA NO.215(ASR)/2012 2 IN THE RETURN OF INCOME CLAIMED A DEDUCTION OF RS.1 ,28,81,555/- U/S 80IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT), WHI CH WAS ALLOWED. LATER ON, THE CIT, JAMMU PASSED AN ORDER U/S 263 OF THE ACT O N 27.03.2009 AND DIRECTED THE AO TO EXAMINE VARIOUS ISSUES INCLUDIN G THE ISSUE OF ALLOWING DEDUCTION @ 25% OF THE PROFITS DERIVED FROM INDUSTR IAL UNDERTAKING WHICH WAS ERRONEOUSLY ALLOWED BY THE A.O. @ 100% OF THE P ROFITS DERIVED FROM INDUSTRIAL UNDERTAKING. THE ORDER U/S 263 OF THE AC T WAS CONTESTED BY THE ASSESSEE BEFORE THE ITAT, AMRITSAR BENCH AND THE SA ME WAS UPHELD. THE AO PASSED AN ORDER U/S 143(3) R.W.S. 263 OF THE ACT AND RESTRICTED THE CLAIM OF THE ASSESSEE U/S 80IB OF THE ACT TO 25% TREATIN G THE PRESENT ASSESSMENT YEAR AS 6TH YEAR OF OPERATION OF BUSINESS. 3. AGGRIEVED BY THE SAME, THE ASSESSEE FILED AN APP EAL BEFORE THE LD. FIRST APPELLATE AUTHORITY AND THE LD. FIRST APPELLATE AUT HORITY VIDE IMPUGNED ORDER UPHELD THE ORDER OF THE A.O. BY HOLDING THAT THE AS SESSEE IS ENTITLED FOR A DEDUCTION @ 25% UNDER SECTION 80IB OF THE ACT. 4. NOW, THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED O RDER DATED 02.03.2012 AND FILED THE PRESENT APPEAL BEFORE US. 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE IS AN INDUSTRIAL UNDERTAKING, MANUFACTURIN G CORE VENEER AND THE UNIT WAS REGISTERED ON 17.07.1998. LATER ON, THE ASSESS EE STARTED MANUFACTURING ITA NO.215(ASR)/2012 3 OF PLYWOOD AND PLY BOARD, THE REGISTRATION OF WHICH WAS GRANTED BY DIC SRINAGAR ON 09.09.2003. FOR THE ASSESSMENT YEAR 200 4-05, THE ASSESSEE FILED ITS RETURN OF INCOME AND CLAIMED EXEMPTION U/S 80IB OF THE ACT, WHICH WAS ALLOWED BY THE THEN A.O. MEANWHILE, THE SAID ASSESS MENT WAS SET ASIDE BY THE LD. CIT, JAMMU U/S 263 OF THE ACT WITH THE DIRE CTIONS TO THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT . DURING THE COURS E OF DISPOSAL OF AUDIT OBJECTIONS, THE AO CONFIRMED THAT DEDUCTION U/S 80 IB OF THE ACT HAS RIGHTLY BEEN ALLOWED TO THE ASSESSEE BY HIS PREDECESSOR. BU T THE LD. CIT(A) SET ASIDE THE ASSESSMENT. HE FURTHER STATED THAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS INSTALLED NEW MACHINERY WOR TH RS.32,95,000/- AGAINST EXISTING MACHINERY OF RS.3,82,500/- ONLY. THEREFORE , THE ASSESSEE HAS USED ONLY 11.60% OF OLD MACHINERY WHICH IS FAR LESS THA N THAT OF THE 20% ALLOWABLE UNDER SECTION 80IB OF THE ACT. INSPITE O F THIS, THE AO TREATED THE NEW INDUSTRIAL UNDERTAKING UNIT OF MANUFACTURING OF PLYWOOD AND PLY BOARD AS AN EXPANSION OF AN ALREADY EXISTING UNIT AND RES TRICTED THE DEDUCTION U/S 80IB TO 25% ONLY, WHICH IS CONTRARY TO THE VARIOUS JUDICIAL DECISIONS RENDERED BY THE HONBLE HIGH COURTS. HE ALSO DREW O UR ATTENTION TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E CIT VS. MAHAAN FOODS LTD. REPORTED IN (2008) 216 CTR (DEL.) 148 AN D STATED THAT THE HONBLE DELHI HIGH COURT HAS HELD THAT IF THE VALUE OF PLANT AND MACHINERY ITA NO.215(ASR)/2012 4 UTILIZED IN THE NEW UNDERTAKING IS LESS THAN 20% OF THE TOTAL INVESTMENT THEN ASSESSEE DOES NOT GET DISQUALIFIED UNDER THIS PROVI SION. IN THIS CASE, THE INVESTMENT IN THE NEW PLANT & MACHINERY WAS RS.104 .88 LACS AND INVESTMENT IN THE OLD PLANT & MACHINERY WAS RS.20.8 6 LACS WHICH IS LESS THAN 25% OF THE TOTAL INVESTMENT AND ACCORDINGLY TH E HONBLE DELHI HIGH COURT HELD THAT THE ASSESSEE WAS ENTITLED TO THE DE DUCTION U/S 80IA IN RESPECT OF THE PROFITS OF THE NEW INDUSTRIAL UNDERT AKING HAVING SATISFIED THE CONDITIONS. IN SUPPORT OF HIS CONTENTIONS, HE ALSO CITED THE FOLLOWING DECISIONS: I) CIT VS. BATALA ENGINEERING CO. LTD. 120 ITR 683 (P&H) II) CIT VS. SETTALITE ENGINEERING LTD. 113 ITR 208 (GUJ.) III) CIT VS. SEEYAN PLY WOOODS 190 ITR 564 (KER) IV) CIT VS. BHILAI ENGINEERING CORPN. PVT. LTD. 133 ITR 687 (MP) V) CIT VS. MAHAAN FOODS LTD. 216 CTR (DEL) 148 VI) CIT VS. PREMIER COTTON MILLS LTD. 240 ITR 434 (MAD) VII) TEXTILE MACHINERY CORPORATION VS. CIT 107 ITR 195 5.1 HE FURTHER ARGUED THAT THE LD. CIT(A) IN THE I MPUGNED ORDER HAS IGNORED THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS CITATIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE OF VARIOUS DECISIONS AND DECIDED ITA NO.215(ASR)/2012 5 THE ISSUE IN DISPUTE AGAINST THE ASSESSEE WITHOUT A PPRECIATING THE EVIDENCE PRODUCED BY THE ASSESSEE. HE HAS ALSO FILED THE PAP ER BOOK CONTAINING PAGES 1 TO 55, IN WHICH HE HAS ATTACHED WRITTEN SUBMISSIO NS, REGISTRATION FROM DCIT, SRINAGAR, RAW MATERIAL ASSESSMENT, SANCTION O F ADDITIONAL POWER, PERMISSION FOR IMPORT OF MACHINERY, BALANCE SHEET F OR THE F.Y. 2001-02, PROCESS FLOW CHART AND CITATIONS OF VARIOUS JUDGME NTS. 5.2. HE ALSO DREW OUR ATTENTION TOWARDS RELEVANT DO CUMENTARY EVIDENCE PRODUCED BY HIM IN THE SHAPE OF AFORESAID PAPER BOO K AND FINALLY STATED THAT IN THE PRESENT CASE, THE ASSESSEE HAS MADE INVESTME NT IN THE NEW PLANT AND MACHINERY AND USED THE OLD MACHINERY I.E. INVESTMEN T IN THE NEW PLANT & MACHINERY WAS RS.32,95,000/- AND INVESTMENT IN THE OLD PLANT & MACHINERY WAS RS.3,82,500/-. THE CORE VENEER UNIT IS COMPLETE LY SUBMERGED WITH THE NEW PLYWOOD AND PLY-BOARD AND OLD UNIT IS NO LONG ER IN EXISTENCE, THUS RENDERS HARDLY ANY SCOPE FOR NEW ESTABLISHMENT UNDE RTAKING BEING CALLED AS RE-CONSTRUCTION OF THE BUSINESS ALREADY IN EXISTEN CE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT QUALIFIES ALL TH E TESTS OF BEING CONSIDERED AS A NEW INDUSTRIAL UNIT AND IS THUS ELIGIBLE FOR DEDU CTION, CLAIMED BY THE ASSESSEE U/S 80-IB OF THE ACT @ 100% FOR THE ASSESS MENT YEAR IN DISPUTE. ITA NO.215(ASR)/2012 6 6. ON THE CONTRARY, THE LD. DR STRONGLY OPPOSED THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE AND RELIED UPON THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US. WE ARE OF THE CONSIDERED OPINION THAT AS A MATTER OF RECORD, THE ASSESSEE IS AN INDUSTRIAL UNDERTAKING A ND WAS MANUFACTURING CORE VENEER AND THE UNIT WAS REGISTERED ON 17.07.2008 A ND LATER ON THE ASSESSEE STARTED MANUFACTURING OF PLY WOOD AND PLY BOARD AND REGISTRATION OF WHICH WAS GRANTED BY THE DIC SRINAGAR ON 09.09.2003. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 CLAIMING EXEMPTION U/S 80IB OF THE ACT, WHICH WAS ALLOWED BY THE A.O. IT IS ALSO A MATTER OF RECORD THAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS INSTALLED NEW MACHINERY WORTH RS.32,95,000/- AGAINST EXISTING MACHINERY OF RS.3,82,500/-. IN THIS WAY, THE ASSESSEE HAS USED ONLY 11.60% OF OLD MACHI NERY WHICH IS FAR LESS THAN THAT OF 20% ALLOWABLE UNDER THE ACT. BUT WE H AVE SEEN THAT THE REVENUE AUTHORITY HAS IGNORED THESE FACTS AND HAS N OT CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSES SEE ALONGWITH EVIDENCE PRODUCED BY THE ASSESSEE IN THE SHAPE OF PAPER BOOK BEFORE US. WE FIND THAT THE ASSESSEE HAS ALREADY FILED THESE DOCUMENTARY E VIDENCES BEFORE BOTH THE REVENUE AUTHORITIES. ITA NO.215(ASR)/2012 7 8. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE, WE ARE OF THE VIEW THAT INSPITE OF THE FACT THAT REVEN UE AUTHORITY TREATED THE NEW INDUSTRIAL UNIT OF MANUFACTURING OF PLYWOOD AND PL Y BOARD AS AN EXPANSION OF AN ALREADY EXISTING UNIT AND RESTRICTED THE DEDU CTION U/S 80IB TO 25% ONLY BY MIS-INTERPRETING THE WORD EXPANSION WITHOUT C ONSIDERING THE DECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CAS E CIT VS. MAHAAN FOODS LTD. REPORTED IN (2008) 216 CTR (DEL.) 148. T HE ASSESSEE HAS ALSO ATTACHED A COPY OF THE SAID ORDER IN THE PAPER BO OK (PB 53 TO 55). THE ASSESSEE HAS ALSO RELIED UPON VARIOUS OTHER DECISIO NS MENTIONED IN HIS ARGUMENTS. WE HAVE ALSO PERUSED THE SAME AND WE ARE OF THE VIEW THAT THE ASSESSEE HAS MADE INVESTMENT IN THE NEW PLANT & MAC HINERY OF RS.32,95,000/- AND USED THE OLD PLANT AND MACHINER Y OF RS.3,82,500/-, WHICH IS LESS THAN 20% OF THE TOTAL INVESTMENT. THE REFORE, KEEPING IN VIEW THE ORDER PASSED BY THE HONBLE DELHI HIGH COURT IN THE CASE CIT VS. MAHAAN FOODS LTD. (SUPRA), WE FIND THAT FACTS OF TH E PRESENT CASE ARE SQUARELY COVERED BY THE AFORESAID DECISION OF HON BLE DELHI HIGH COURT AND ACCORDINGLY ASSESSEE IS ENTITLED FOR THE RELIEF CLA IMED U/S 80IB OF THE ACT. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE UNABLE TO UPH OLD THE IMPUGNED ORDER AND ACCORDINGLY, WE CANCELS THE SAME BY ACCEPTING T HE APPEAL FILED BY THE ITA NO.215(ASR)/2012 8 ASSESSEE WITH THE DIRECTION TO THE A.O. TO ALLOW DE DUCTION U/S 80IB OF THE ACT @ 100% TO THE ELIGIBLE INDUSTRIAL UNDERTAKING O F THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22ND MARCH, 2013. SD/- SD/- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22ND MARCH, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. KASHMIR VENEER INDUSTRIES, SRINGA R. 2. THE AO WARD-1, SRINGAR. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.