DCIT, Rohtak V. M/s. Micro Turners, Rohtak

ITA 2181/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2622 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 22-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAMITA M BISWAS
• Assessee Lawyers: PIYUSH K KAMAL
• Keywords: Opportunity of being heard; Rule of consistency
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.-2181/DEL/2016 ( ASSESSMENT YEAR: 2012-13) DCIT CIRCLE ROHTAK, AAYAKAR BHAWAN ROHTAK VS M/S. MICRO TURNERS HISAR ROAD ROHTAK PAN AABFM1796J REVENUE BY MS. PRAMITA M. BISWAS, CIT (DR) ASSESSEE BY SHRI GAUTAM JAIN, ADVOCATE, SHRI PIYUSH K KAMAL, ADVOCATE ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 5.2.2016 OF CIT(A) R OHTAK PERTAINING TO 2012-13 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS :- 1. THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 3,55,16,810/- MADE BY THE AO ON ACCOUNT OF DISA LLOWANCE OF EXPENSES OF TAXABLE UNIT AFTER REALLOCATION WITHOUT CONSIDER ING THE LOW NP OF TAXABLE UNITS AS COMPARED TO THE EXEMPT ONES ALSO AUDIT EXP ENSES WERE ONLY DEBITED IN ONE TAXABLE UNIT. 2. THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING T HE ADDITION OF RS. 9,71,51,832/- MADE BY THE AO ON ACCOUNT OF DISALLOW ANCE ON RESTICTIION THE DEDUCTION U/S 80IC BY NOT CONSIDERING THE LATEST DE CISION OF M/S. HYCRON ELECTRONICS V/S ITO IN THE ITA NO. 798/CHD/2012 DAT ED 29.05.2015 WHERE IN THE CASE OF M/S. TIRUPATI LPG INDUSTRIES V/S DCI T HAD BEEN ALREADY CONSIDERED. DATE OF HEARING 03.01.2019 DATE OF PRONOUNCEMENT 08.03.2019 2 ITA NO. 2181/DEL/2016 3. LD. CIT DR HAS SOUGHT TIME ON THE GROUND TH AT PAPER BOOK IS REQUIRED TO BE FILED BY THE REVENUE. SHRI GAUTAM JA IN, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESEE BY DECISIONS OF TH E APEX COURT AND THE ORDERS OF THE ITAT CONSISTENTLY, ACCORDINGLY THE DE PARTMENTAL REQUEST FOR TIME WAS OBJECTED TO. A PASS OVER WAS GIVEN SO THAT THE LD. CIT(A) DR MAY FAMILIARIZE HERSELF WITH THE FACTS AND CONSIDER THE FEASIBILITY OF THE ASSESSEES OBJECTS TO THE GRANT OF TIME. IN THE SEC OND ROUND WHEN THE APPEAL CAME UP FOR HEARING THE LD. AR SOUGHT PERMIS SION TO ELABORATE THE FACTS SUBJECT TO THE LEAVE OF THE CIT(DR). THE LD. CIT DR POSED NO OBJECTION. 4. THE LD. AR REFERRING TO THE ISSUE RAISED TO GROU ND NO. 1 BY THE REVENUE INVITED ATTENTION TO THE DISCUSSION IN THE ASSESSMENT ORDER MADE BY THE AO IN PARA 5. INVITING ATTENTION TO UN NUMBERED PAGE 3 OF THE ASSESSMENT ORDER HE SUBMITTED THAT THE ASSESSIN G OFFICER OBSERVED THAT THE EXPENSES ARE DEBITED MAINLY TO THE TAXABLE UNITS AN D SAME IS NOT IN COMMENSURATION WITH THE TURNOVER OF THE UNITS. V IDE QUESTIONNAIRE DATED 3.12.2014, THE ASSESEE WAS ASKED TO JUSTIFY THE LOW NP IN TAXABLE UNITS AS COMPARED TO EXEMPTED UNITS & WHY THE EXPENSES ARE Q UITE HIGH IN SOME OF THE UNITS WITH DETAILS. IT WAS SUBMITTED THAT THE A SSESSEE WAS NOTED MADE THE SUBMISSIONS ON 22.12.2014 & 21.1.2015 VIDE WRIT TEN REPLIES NOTICED. INVITING ATTENTION TO THE ORDER OF THE CIT(A) IT WA S SUBMITTED THAT THE CIT(A) HAS GRANTED RELIEF HOLDING THAT THE AO HAS N OT BROUGHT ANY FACTUAL EVIDENCE OF DISCREPANCY ON RECORD AND HAS MADE AN A DDITION ON A CONJECTURAL BASIS WITHOUT PROVING ANY FALSITY IN T HE CLAIM. THE NOTICED THAT THE ISSUE WAS A SUBJECT MATTER OF CONSIDERATIO N BEFORE THE ITAT OVER THE YEARS. ATTENTION WAS INVITED TO ORDER DATED 20 TH DECEMBER, 2016 FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR I.E 2011-12 ASSESSMENT IN ITA NO. 2028/DEL/2016 COPY OF WHICH HAS BEEN FILED AND MADE AVAILABLE AT PAGES 24 TO 29. IT WAS SUBMITTED THAT THE SPECIFIC ISSUE WAS DISCUSSED. SIMILARLY ATTENTION WAS INVITED TO ORDER DATED 17 TH MARCH, 2018 COPY AVAILABLE AT PAGE 50 TO 56 FOR 2011-12 ASSESSMENT Y EAR WHEREIN IDENTICAL 3 ITA NO. 2181/DEL/2016 CLAIM WAS REPULSED BY THE ITAT. SIMILARLY, IN 2008- 09; 2009-10 AND 2010-11 ASSESSMENT YEARS THE ITAT ORDERS DATED 15.2 .2013, 19.7.2013 AND 9.8.2016 IN ITA NO. 4569/DEL/2011, ITA NO. 213 4/DEL/2012, ITA NO. 2369/DEL/2014 RESPECTIVELY DISMISSED THE DEPART MENTAL APPEALS ON SIMILAR ISSUES. COPIES OF THESE ORDERS IT WAS SUBMI TTED IS AVAILABLE AT PAGES 1 - 7, 8 -14 AND 15-23. IN THE SAID BACKGROUN D IT WAS HIS SUBMISSION THAT THERE IS NO MERIT IN THE DEPARTMENT AL APPEAL. IT WAS HIS SUBMISSION THAT IT IS EVIDENT FROM RECORD THAT THER E IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES. 5. ADDRESSING THE SECOND ISSUE RAISED BY THE REVENUE I N THE PRESENT APPEAL ATTENTION WAS INVITED TO THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. CLASSIC BINDING INDUSTRIES 407 ITR 429 (SC) (COPY AVAILABLE AT PAGES 62-66). INVITING SPECIFIC ATTENTION TO PARA 2 9 OF THE SAID DECISION AND THE CHART OF SYNOPSIS FILED ON THE ISSUE IT WAS HIS SUBMISSION THAT AASSESSEES CASE IS FULLY COVERED BY THE SAID DECIS ION. 6. LD. CIT(DR) CONFRONTED WITH THE ORDERS OF THE ITAT IN THE CONTEXT OF THE FACTS AS NOTED IN THE ORDERS OF THE AO AND THE CIT(A) AND THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. CLASSIC B INDING INDUSTRIES RESPECTIVELY SUBMITTED THAT RELIANCE IS PLACED UPON THE ASSESSMENT ORDER. HOWEVER NO INFIRMITY ON FACT OR POSITION OF LAW WAS CITED. THE REQUEST FOR TIME CONSEQUENTLY WAS WITHDRAWN AND FOR THE TWO DEP ARTMENTAL GROUNDS SHE RELIED UPON THE ASSESSMENT ORDER. HOWEVER, NO CONTRARY FACT OR ARGUMENT WAS BROUGHT TO THE NOTICE OF THE BENCH. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORDS. WE FIND QUA THE FIRST ISSUE W HEREIN THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING ORDERS OF THE ITAT THE ISSUE STANDS COVERED IN ASSESSEES FAVOUR: SR. NO. ASSESSMEN T YEAR DISALLOWANCE MADE ON ACCOUNT OF ALLOCATION OF EXPENSES REMARKS I) 2005-06 8,00,000 CIT(A) DELETED THE DISALLOWANCE AND UPHELD BY THE DECISION OF HONBLE TRIBUNAL 4 ITA NO. 2181/DEL/2016 IN ITA NO. 554/DEL/2009 (PAGES 67-69 OF JPB) II) 2008-09 9,52,155 CI T(A) D E L E T E D T H E DI SA LLO WA N CE ' A ND UPH E LD B Y TH E D EC I S I O N O F HON ' BL E TR IBUN A L IN IT A N O. 4 56 9 / D E L 12 011 AT PAGES 2-4 OF JPB FOLLO W IN G D ECISION OF H O N ' BL E TRIBUNAL FOR A SSE S S MENT YE AR 2 005 - 06 III) 2009-10 26,88,182 CIT ( A) D E LETED TH E DI S ALLO W ANC E AND UPH E LD B Y THE DECISION O F HON ' BL E T RIBUN A L IN IT A NO. 2 1 3 4 / D E L /2 01 2 AT PAGES 9-11 OF JPB FOLLOWIN G D E CI S ION OF HO N ' BL E TRIBUN A L FOR A SSE S S MENT YEA R 2 005-06 IV) 2010-11 10,04,37,872 CI T( A ) D E L E T E D TH E DI S ALLO WA N CE AND UPH E LD B Y TH E DECI S ION O F H ON ' BL E TRI BUNAL IN I T A N O . 23 69 / D /2 0 14 A T PAGES 18-23 OF JPB FOLLO W IN G D EC I S I O N S O F H ON ' BL E TRIBUN A L FO R ASSESSMENT YEA R S 2 00 5 -06 A ND 20 09-10 V) 2011-12 7,44,41,172 C I T(A) D E L E T E D TH E DI SA LL OWA N CE A ND U PH E L D BY TH E D EC I SION OF HON' B LE TRI BUN A L IN ITA N O . 1194 / D 12 0 15 AT PAGES 50-56 OF JPB FOLLO W IN G D E CI SIO N S O F HON ' BL E TRIBUN A L FO R ASSESSME NT YEAR 2 010 -1 10 7.1 IT IS SEEN THAT THE SAID ISSUE CAME UP FOR CONS IDERATION FOR THE FIRST TIME BEFORE THE ITAT IN ITA NO. 2369/DEL/2014 WHERE IN AFTER DETAILED DISCUSSION IN THE ORDER DATED 9.8.2016 IT IS SEEN T HAT THE DEPARTMENTAL APPEAL ON SIMILAR ISSUE WAS DISMISSED BY THE ITAT. WE HAVE SEEN THAT THESE SPECIFIC PARAS AND REASONINGS HAS BEEN TAKEN INTO CONSIDERA TION BY THE COORDINATE BENCH IN ITA NO. 1194/DEL/2015 (COPY FILED IN PAPER BOOK PAGES 50 TO 56 ORDER DATED 7.3.2018 IN 2011-12 ASSESSMENT YEARS. T HESE PARAS ARE EXTRACTED HEREUNDER FOR THE SAKE OF COMPLETENESS:- 2. THE FACTS OF THE CASE ARE THAT ASSESSEE-FIRM I S DEALING IN MANUFACTURING OF PRECISION TURNED PARTS AT ROHTAK AND BRANCHES AT GURGAON, CHA KAN, BAROTIWALA, PANTNAGAR AND HARIDWAR AND UNITS AT BAROTIWALA, PANTNAGAR, NALAGA RH AND HARIDWAR ARE LOCATED IN EXEMPTED ZONES. BULK OF PURCHASES ARE MADE AT HEAD OFFICE AT ROHTAK AND AFTER DOING CERTAIN OPERATIONS, THE SEMI-FINISHED ITEMS ARE SENT TO OTH ER UNITS FOR FURTHER OPERATIONS AS ALL THE OPERATIONS ARE NOT PRACTICABLE IN ANY OF THE UNIT A S DIFFERENT TYPES OF MACHINES ARE INSTALLED IN DIFFERENT UNITS. A DETAILED NOTE ON THE ACTIVITIES/ OPERATIONS UNDERTAKEN AT DIFFERENT UNITS ARE PLACED IN THE PAPER BOOK. SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED IN ALL THE UNITS WHICH ARE ALSO AUDITED AS PER LAW. THE A.O. CALCULATED THE IN COME OF EXEMPTED UNIT BY CALCULATING TOTAL TURNOVER OF ALL THE UNITS OF ASSESSEE-FIRM AND TOTA L PROFIT DECLARED BY ALL THE UNITS AND 3 ITA.NO.1194/DEL./2015 M/S. MICRO TURNERS ROHTAK. RE DUCED THE DEDUCTION UNDER SECTION 80IC OF THE ACT BY AN AMOUNT OF RS.7,44,41,112/-. 3. THE ASSESSEE CHALLENGED THE ORDER OF THE A.O. B EFORE LD. CIT(A). IT WAS SUBMITTED THAT IN A.Y. 2009-2010 THE LD. CIT(A) DELETED THE ADDITI ON WHICH HAVE BEEN CONFIRMED BY THE ITAT. IT WAS ALSO SUBMITTED THAT THE EXEMPTED UNITS ARE D OING JOB-WORK WHICH IS MANUFACTURING ACTIVITY AND JOB-WORK INCOME EARNED FROM MANUFACTUR ING IS ALSO COVERED UNDER SECTION 80IC OF 5 ITA NO. 2181/DEL/2016 THE I.T. ACT. IT WAS ALSO SUBMITTED THAT THESE INCO MES ARE GENERATED OUT OF MANUFACTURING ACTIVITY. THE SHORT AND EXCESS IS THE DIFFERENCE IN BILLING AND PAYMENTS MADE AND AS SUCH THE INCOME DERIVED IS FROM INDUSTRIAL UNDERTAKING. THE LD. CIT(A) CONSIDERING THE PROFIT ELEMENT ALSO NOTED THAT THERE HAS BEEN NO INVESTIGATION OR SPECIFIC EXERCISE TO SHOW THAT THE AMOUNT CLAIMED AS DEDUCTION UNDER SECTION 80IC OF THE ACT WAS WRONG. THE LD. CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR FOR A.Y. 2009-2010, ALLOWE D THE APPEAL OF THE ASSESSEE AND DELETED THE 4 ITA.NO.1194/DEL./2015 M/S. MICRO TURNERS ROHTAK. ADDITION OF RS.7.44 CRORES. THE APPEAL OF ASSESSEE HAS BEEN ALLOWED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN A.Y. 2010-2011, THE DEPARTMENT ON THE SAME GROUND FILED THE APPEAL BEFO RE THE TRIBUNAL IN ITA.NO.2369/DEL./2014 WHICH HAVE BEEN DISMISSED BY THE TRIBUNAL VIDE ORDE R DATED 9TH AUGUST, 2016. THE FINDINGS OF THE TRIBUNAL IN PARAS 7.1 TO 9 ARE REPRODUCED AS UN DER : 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD. CI T(A), AS AFORESAID, WE ARE OF THE VIEW THAT THE AO HAS REDUCED THE DEDUCTION ADMISSIBLE U/S. 80 IC OF THE IT ACT BY RS.10,04,37,557/- ON THE GROUND THAT OUT OF THE 3 EXEMPTED AND 3 NON-EXE MPTED UNITS OWNED BY THE ASSESSEE IN DIFFERENT STATES THE MAXIMUM N.P. RATE FOR A TAXABL E UNIT WAS 6.90% WHILE THAT FOR AN EXEMPTED UNIT THE MINIMUM NP RATE WAS 13.4%. WE FURTHER FIND THAT THE AO HELD THAT ALL UNITS DERIVE INCOME FROM THE SAME BUSINESS ACTIVITY AND THEREFOR E, THE GAP BETWEEN THE PROFITS OF THE TAXABLE UNITS AND NON EXEMPTED UNITS 'APPEARS' TO B E UNREALISTIC. REFERENCE HAS ALSO BEEN MADE TO TRANSACTIONS MADE IN RESPECT OF PURCHASES A ND JOB WORK EXPENSES MADE WITH RELATED CONCERNS OR UNITS OF THE ASSESSEE'S FIRMS. TAKING A LL THESE FACTORS INTO ACCOUNT THE AO HAS STATED THAT NO EVIDENCE IN 5 ITA.NO.1194/DEL./2015 M/S. MICRO TURNERS ROHTAK. RESPECT OF MANUFACTURING, TRADING AND P&L A/C HAVE BEEN SUBMIT TED DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE ASSESSEE HAS PRODUCED ALL THE BOOKS OF ACCOUNTS AND VOUCHERS BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. IN FACT, NO SHOW CAUSE QUERY WAS ISSUED BY THE AO ON THIS ACCOUNT DURING THE ASSESSMENT PROCEEDINGS. THE AO H AS NOT CONSIDERED THE FACT THAT THE UNITS IN EXEMPTED ZONES ARE MAINLY ENGAGED IN MANUFACTURI NG ON JOB WORK BASIS WHERE THERE IS EITHER NEGLIGIBLE OR NO INPUT COST OF RAW MATERIAL INVOLVED. IT WAS NOTED THAT IF THE SALES WERE MADE USING THEIR OWN RAW MATERIAL, THERE WOULD BE S UBSTANTIAL DIFFERENCE IN THE GP RATE INSOFAR AS, IF THE COST OF RAW MATERIAL WAS EXCLUDE D, THE GP RATE IN ALL THE UNITS WOULD REMAIN THE SAME. THE FACT THAT THE EXEMPTED UNIT AT HARIDW AR HAS SHOWN A LOSS HAS NOT BEEN REFERRED TO BY THE AO. THEREFORE, IT IS CLEAR THAT NO PROFIT HAS BEEN DIVERTED TO THIS UNIT. IT WAS FURTHER NOTED THAT THERE HAS BEEN NO INVESTIGATION OR SPECI FIC EXERCISE TO SHOW THAT THE AMOUNT CLAIMED AS DEDUCTION U/S 80-IC WAS WRONG. WE FIND CONSIDERA BLE COGENCY IN THE FINDING OF THE LD. CIT(A) THAT THERE IS NO GROUND FOR DISALLOWING CLAI M FOR JOB WORK EXPENSES FOR THE ELIGIBILITY U/S 80-IC AS THE SAME IS ALLOWABLE AS PER THE DECIS ION OF HIS PREDECESSOR IN APPEAL NO. 467 /RTK/2011-12 FOR THE AY 2009-10. THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION 10,04,37,872/-. WE ALSO NOTE THAT THE ADDITION IN D ISPUTE RELEVANT TO PRECEDING ASSESSMENT YEAR 2009-10, THE TRIBUNAL ALSO UPHELD THE DELETION OF A DDITION BY HOLDING AS UNDER, (AS MENTIONED AT PAGE NO. 4 OF THE IMPUGNED ORDER PASSED BY THE L D. CIT(A)). 6 ITA.NO.1194/DEL./2015 M/S. MICRO TURNERS ROHTAK. THE LD. COMMISSIONER OF INCO ME TAX (A), IT IS SEEN, LD. CIT(A) HAS FOLLOWED THE PRINCIPLE OF CONSISTENCY IN DELETING T HE ADDITION MADE BY THE AO. NO CHANGES IN FACTS FROM THE EARLIER YEARS HAVE BEEN BROUGHT ON R ECORD. MOREOVER, THE LD. CIT(A) HAS FOLLOWED THE DECISION OF DELHI TRIBUNAL, THIRD MEMB ER, DELHI IN THE CASE OF DCIT VS. DELHI PRESS SAMACHAR PATRA 103 TTJ (DEL) 45 WHEREIN IT WA S HELD THAT APPORTIONMENT OF EXPENSES BETWEEN DIFFERENT UNITS WITHOUT ANY INVESTIGATION A ND COLLECTION ANY MATERIAL IS ARBITRARY. 7.2 WE FURTHER NOTE THAT ITAT, DELHI F BENCH IN A SSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO. 554/DEL/2009 VIDE ORDER DATED 17 .9.2009 HAS UPHELD THE ORDER OF THE LD. CIT(A) BY CITING THE EXACTLY THE SAME CASE LAW OF T HE ITAT I.E. DCIT VS. DELHI PRESS SAMACHAR PATRA 103 TTJ (DEL) 45 (SUPRA). 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS A ND RESPECTFULLY FOLLOWING THE PRECEDENTS OF THE COORDINATE BENCH IN ASSESSEES OWN CASE RELEVAN T FOR THE ASSESSMENT YEAR 2005-06 AND 2009-10, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, H ENCE, WE UPHOLD THE SAME. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 7 ITA.NO.1194/DEL./2015 M/S. MICRO TURNERS ROHTAK. 6 ITA NO. 2181/DEL/2016 5. THE LD. D.R. ALSO STATED THAT THE ISSUE IS COVER ED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT ABOVE. 6. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ORDER OF THE TRIBUNAL DATED 9TH AUGUST, 2016 (SUPRA), WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL. THE DEPARTMENTAL APPEAL HAS NO MER IT AND THE SAME IS ACCORDINGLY DISMISSED. 7.2 IN THE FACTS AS THEY STAND WE SEE THAT THE ISSU E RAISED IN GROUND NO. 1 STANDS COVERED IN FAVOUR OF THE AASSESEE CONSISTENT LY ON SAME SET OF FACTS AND CIRCUMSTANCES OVER THE YEARS. ACCORDINGLY IN TH E ABSENCE OF ANY INFIRMITY ON FACTS AND LAW WE FIND NO GOOD REASON T O INTERFERE WITH THE IMPUGNED ORDER. THE SAID GROUND ACCORDINGLY IS DISM ISSED. 8. FOR THE NEXT GROUND AS NOTED THE LD. AR RELYING UPON THE IMPUGNED ORDER SUBMITTED THAT THOUGH THE LD. CIT(A) HAS GRAN TED RELIEF CONSIDERING THE ORDER OF THE ITAT IN THE CASE OF HYCRON ELECTRO NICS AND THE DECISION OF DELHI BENCH IN THE CASE OF TIRUPATI LPG INDUSTRIES DATED 29.10.2014 IN ITA NO. 991/D/2013. HOWEVER AT THE PRESENT STAGE HE WO ULD WANT TO RELY UPON THE DECISION OF APEX COURT IN THE CASE OF MAHABIR I NDUSTRIES VS PR. CIT (2018) 406 ITR 315 (SC). INVITING ATTENTION TO THE LATEST DECISION OF APEX COURT IN THE CASE OF CIT VS. CLASSIC BINDING INDUST RIES (2018) 407 ITR 429 (SC) IT WAS SUBMITTED THAT THE POSITION IN REGARD T O THE CASE WHERE CLAIM U/S 80IB WAS CONSIDERED IN THE INITIAL YEAR WAS NOTICED FOR WHICH PURPOSES RELIANCE WAS PLACED UPON PARA 21 OF THE SAID DECISI ON OF THE SAID DECISION (PAGE 65 OF THE PAPER BOOK) 21. WE ARE CONSCIOUS OF OUR RECENT JUDGMENT RENDER ED BY THIS VERY BENCH IN MAHABIR INDUSTRIES V. PRINCIPAL COMMISSIONER OF INCOME TAX (CIVIL APPEAL NOS. 4765-4766 OF 2018 DECIDED ON MAY 18, 2018). HO WEVER, A FINE DISTINCTION NEEDS TO BE NOTED BETWEEN THE TWO SETS OF CASES. IN MAHABIR INDUSTRIES, THE ASSESSEES HAD AVAILED THE INITIAL D EDUCTION UNDER A DIFFERENT PROVISION, NAMELY, SECTION 80-IA OF THE ACT, I.E. B Y FULFILLING THE CONDITIONS MENTIONED IN SUB-SECTION (4) OF SECTION BO-IA. THOS E CONDITIONS ARE ALTOGETHER DIFFERENT. DEDUCTION IN RESPECT OF PROFI TS AND GAINS UNDER THE SAID PROVISION IS ADMISSIBLE WHEN THESE PROFITS AND GAIN S ARE FROM INDUSTRIAL 7 ITA NO. 2181/DEL/2016 UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTU RE DEVELOPMENT ETC. EVEN THIS AVAILMENT STARTED AT A TIME WHEN SECTION BO-IC WAS NOT EVEN ON THE STATUTE BOOK. AS MENTIONED ABOVE, SECTION BO-IC WAS INSERTED BY THE FINANCE ACT,] 2003 WITH EFFECT FROM APRIL 01, 2004. THE ASSESSEES IN THOSE CASES :LAD STARTED CLAIMING AND WERE ALLOWED DEDUCT IONS FROM THE ASSESSMENT YEARS 199B-99 AND 1999-2000 UNDER SECTIO N BO-IA AND FROM THE ASSESSMENT YEAR 2000-01 TO ASSESSMENT YEAR 2005 -06 UNDER SECTION 80-1B OF THE ACT. THE DEDUCTION WAS, THUS, CLAIMED BY THE ASSESSEES IN THOSE APPEALS UNDER THE NEW PROVISION I.E. SECTION 80-IC ON FULFILLING CONDITIONS CONTAINED IN SUB-SECTION- (2) OF SECTION 80-IC FOR THE FIRST TIME FOR THE ASSESSMENT YEAR 2006-07. THUS, INSOFAR AS THOSE CASES ARE CONCERNED, THE INITIAL ASSESSMENT YEAR UNDER SECTION BO-IC STA RTED ONLY FROM THE ASSESSMENT YEAR 2006-07. IN CONTRAST, POSITION HERE IS ALTOGETHER DIFFERENT. THESE ASSESSEES HAVE AVAILED DEDUCTION UNDER SECTIO N 80-IC ALONE. INITIALLY, THEY CLAIMED THE DEDUCTION ON THE GROUND THAT THEY HAD SET UP THEIR UNITS IN THE STATE OF HIMACHAL PRADESH AND AF TER AVAILING THE DEDUCTION @ 100% THEY WANT CONTINUATION OF THIS RAT E OF 100% FOR THE NEXT 5 YEARS ALSO UNDER THE SAME PROVISION ON THE GROUND T HAT THEY HAVE MADE SUBSTANTIAL EXPANSION. AS POINTED OUT ABOVE, ONCE T HE ASSESSEES HAD STARTED CLAIMING DEDUCTION UNDER SECTION BO-IC AND THE INITIAL ASSESSMENT YEAR HAS COMMENCED WITHIN THE AFORESAID PERIOD OF 1 0 YEARS, THERE CANNOT BE ANOTHER INITIAL ASSESSMENT YEAR THEREBY ALLOWING 100% DEDUCTION FOR THE NEXT 5 YEARS ALSO WHEN SUB-SECTION (3), IN NO UNCER TAIN TERMS, PROVIDES FOR DEDUCTION @ 25% ONLY FOR THE NEXT 5 YEARS. IT MAY B E ASSERTED AGAIN THAT THE ASSESSEES ACCEPT THE LEGAL POSITION THAT THEY C ANNOT CLAIM DEDUCTION OF MORE THAN 10 YEARS IN ALL UNDER SECTION 80-IC. 9. LD. CIT(DR) ON THE OTHER HAND AS NOTED HAD SUBMI TTED THAT IN ACCORDANCE WITH THE DECISION OF LAW AS APPRECIATED BY THE APEX COURT IN THE CASE OF MAHABIR INDUSTRIES VS PR. CIT AND CLASSIC B INDING INDUSTRIES SHE WOULD NOT WANT TO STATE ANYTHING FURTHER HOWEVER WH ETHER SUBSTANTIAL EXPANSION HAS BEEN CARRIED ON OR NOT IT WAS SUBMITT ED IS A FACT WHICH HAS NOT BEEN EXAMINED. ACCORDINGLY, FOR THE SAID PURP OSES THE ISSUE MAY BE 8 ITA NO. 2181/DEL/2016 REMANDED BACK. THE SAID REQUEST FOR VERIFICATION WA S NOT OPPOSED BY THE LEARNED AR. 10. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. ON PERUSAL OF PARA 5.2 AT PAGE UNNUMBERED P AGE 5 OF THE ASSESSMENT ORDER IT IS SEEN THAT THE FOLLOWING FACT S WERE TAKEN INTO CONSIDERATION BY THE AO DURING THE PREVIOUS YEAR, THE ASSESEE HAD SHOWN TH E PROFIT FROM THE BAROTIWALA UNIT AS RS 12,95,35,776/- AND CLAIMED DE DUCTION U/S 80LC @100% ON THE SAME. VIDE QUESTIONNAIRE DT 3.12. 2014, THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM FOR 80IC FO R THE UNITS CLAIMING DEDUCTION. VIDE REPLY DT 22.12.2014, THE ASSESSEE R EPLIED THAT SAME IS AS PER EVIDENCES FILED IN EARLIER YEARS. AS PER THE FORM NO 10CCB FILED .BY THE ASSESSEE, IT IS SEEN THAT THE ASSESS EE UNIT HAD ITS INITIAL YEAR OF CLAIMING DEDUCTION AS AY 2003-04 AND FROM POINT NO 25.D, IT IS SEEN THAT THE ASSESSEE UNIT HAD NOT UNDERTAKEN A NY SUBSTANTIAL EXPANSION IN ANY OF THE YEAR. THIS AY 2012-13 BEING THE 10 TH & FINAL YEAR OF CLAIMING DEDUCTION, THE RATE OF DEDUCTION S HOULD NOT BE 100% WRT THE INITIAL YEAR. HENCE, VIDE ORDERSHEET ENTRY DT 11.03.2015, THE ASSESSEE WAS SHOWCAUSED AS TO WHY THE RATE OF DEDU CTION MAY NOT BE RESTRICTED TO 25% BY TAKING THE INITIAL AY AS 20 03-04. THE ASSESSEE STATED THAT HIS UNIT STARTED CLAIMING DEDUCTION U/S 80LB @100%WITH INITIAL YEAR AS AY 2003-04 AND THEREAFTER HE CARRI ED OUT SUBSTANTIAL EXPANSION AND STARTED CLAIMING DEDUCTION U/S 80LC @ 100%. ON 18.03.2015, THE ASSESSEE FILED REPLY WHEREIN HE ST ATED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION @100% ON SUBSTANT IAL EXPANSION AND PRODUCED COPY OF THE SECTION 80LC WITH LETTER F ROM CIT SHIMLA WITH CLARIFICATION. 10.1 ON A PERUSAL OF THE SAME IT IS SEEN THAT THE A SSESEE AS PER ITS CLAIM ON RECORD CLAIMED DEDUCTION U/S 80IB WITH INITIAL YEAR AS 2003-04. THE YEAR UNDER CONSIDERATION IS 2012-13 AND IT IS CLAIMED TH AT SUBSTANTIAL EXPANSION HAS BEEN CARRIED OUT IN TERMS OF SECTION 80IC. IT I S SEEN THAT AGAIN AS TO 9 ITA NO. 2181/DEL/2016 WHEN THE SUBSTANTIAL EXPANSION WAS CARRIED OUT THER E IS NOT DISCUSSION IN THE ORDER . TO SUM UP, IT IS NOTED THAT THE ASSESSEE HAD SUBSTA NTIALLY EXPANDED ITS NEW BUSINESS ALREADY CLAIMING DEDUCTION U/S 80I B SINCE AY 2003- 04 AND REFIXED ITS INITIAL AY FOR CLAIMING DEDUCTIO N AT HIGHER RATE WHICH IS NOT PERMISSIBLE AS PER LAW AND THE LEGISLATIVE I NTENT. THUS, THE DEDUCTION CLAIMED BY THE ASSESSEE IS RESTRICTED TO 25% (RS. 12,95,35,776 @25% = RS. 3,23,83,944/-) AND ACCORDI NGLY ADDITION OF RS. 9,71,51,832/- (=12,95,35,776 - RS. 3,23,83,944/ -) IS BEING MADE TO THE TOTAL INCOME. 10.2. ON PERUSAL OF THE IMPUGNED ORDER IT IS SEEN T HAT THE LD. CIT(A) AFTER CARRYING OUT A LENGTHY DISCUSSION ON THE POSITION O F LAW AS IT PREVAILED ON 3.2.20016 GRANTED RELIEF TO THE ASSESSEE HOLDING AS UNDER :- EVEN THE RATE OF DEDUCTION ON BAROTIWALA UNIT HAS BEEN REDUCED WITHOUT ACTUALLY DIFFERENTIATING THE INITIAL YEAR I N TERMS OF EXPANSION. THERE IS ACTUALLY NO CLARITY IN DIFFERENTIATING THE TWO CATEGORIES, VIZ INITIAL BUSINESS VIS--VIS EXPANSION AND ISOLATION OF THE LATTER. THE CASE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE DELHI ITAT IN TIRUPATI LPG INDUSTRIES LTD. VS DCIT IN ITA NO. 991/D/2013 DATED 29.01.2014. THE APPELLANT HAS SQUARELY DISTIN GUISHED ITS CASE FROM THAT OF THE CASE OF THE HYCRON ELECTRONICS VS. ITO IN ITA NO. 798/CHD/2012 DATED 29.5.2015. DEDUCTION HAS BEEN ALLOWED IN THE PREVIOUS YEARS AN D CANNOT BE DISTURBED IN THIS YEAR WHICH IS THE FIFTH YEAR OF C LAIM. THE DISALLOWANCE IN THE CASE OF HYCRON ELECTRONICS RELATES TO THE FI RST YEAR AND THEREFORE THE FACTS IN QUESTION ARE, THEREFORE NOT SIMILAR TO THIS CASE. 10.3. ACCORDINGLY IT IS SEEN THAT ADMITTEDLY ON FAC TS THERE IS NO DISCUSSION. HAVING SO OBSERVED IT IS SEEN THAT THE POSITION OF LAW AS APPRECIATED BY THE APEX COURT IN THE DECISION RENDERED IN THE CASE OF MAHABIR INDUSTRIES WHICH WAS IN THE CASE OF ASSESEES MANUFACTURING & JOB WORK OF PRECISION TURNED COMPONENTS AND FASTENERS, THE HONBLE COURT NOTICED THE DIFFERENCE BETWEEN THE THREE TYPES OF DEDUCTION SPECIFIED U/S 80-IA, 8 0-IB AND 80-IC. IN PARA 12 OF THIS AFORESAID DECISION IN THE FOLLOWING MANN ER:- 10 ITA NO. 2181/DEL/2016 12. THE MATTER CAN BE LOOKED INTO FROM ANOTHER ANG LE. UNDER SECTION 80-IA, DEDUCTION IS PROVIDED TO SUCH INDUSTRIAL UND ERTAKINGS OR ENTERPRISES WHICH ARE ENGAGED IN INFRASTRUCTURE DEV ELOPMENT ETC. PROVIDED THEY FULFILL THE CONDITIONS MENTIONED IN S UB-SECTION (4) THEREOF. SECTION 80-IS MAKES PROVISIONS FOR DEDUCTI ON IN RESPECT OF THOSE INDUSTRIAL UNDERTAKINGS, OTHER THAN INFRASTRU CTURE DEVELOPMENT UNDERTAKINGS, WHICH ARE ENUMERATED IN THE SAID PROV ISION. ON THE OTHER HAND, THE INTENTION BEHIND SECTION 80-IC IS T O GRANT DEDUCTION TO THE UNITS MAKING NEW INVESTMENTS IN THE STATE BY ESTABLISHING NEW MANUFACTURING UNIT OR EVEN TO THE EXISTING MANU FACTURING UNIT WHICH CARRIED OUT SUBSTANTIAL EXPANSIONS. THE PURPO RT BEHIND THE THREE TYPES OF DEDUCTIONS SPECIFIED IN SECTION 80-I A, SECTION 80-IB AND SECTION 80-IC IS, THUS, DIFFERENT. SECTION 8T-C STIPULATES THE PERIOD FOR WHICH HUNDRED PER CENT DEDUCTION IS TO B E GIVEN AND THEN DEDUCTION AT REDUCED RATES IS TO BE GIVEN F THE ASS ESSEE HAD EARLIER AVAILED DEDUCTION UNDER SECTION 80-IA AND SECTION 8 0-IS, THAT WOULD BE OF NO CONCERN INASMUCH S ON CARRYING OUT SUBSTAN TIAL EXPANSION, WHICH WAS CARRIED OUT AND COMPLETED IN THE ASSESSME NT YEAR 2006- 07, THE ASSESSEE BECAME ENTITLED TO DEDUCTION UNDER SECTION 80-IC FROM THE INITIAL YEAR. THE TERM' INITIAL YEAR IS RE FERABLE TO THE YEAR IN WHICH SUBSTANTIAL EXPANSION HAS BEEN COMPLETED, WHI CH LEGAL POSITION IS STATED BY THE HIGH COURT ITSELF AND EVE N ACCEPTED BY THE DEPARTMENT AS IT HAS NOT CHALLENGED THAT PART OF TH E JUDGMENT. THE INCLUSION OF PERIOD FOR THE DEDUCTION IS AVAILED UN DER SECTION 80-IA AND SECTION 80-IB, FOR THE PURPOSE OF COUNTING TEN YEARS, IS PROVIDED IN SUB-SECTION(6) OF SECTION 80-IC AND IT IS LIMITE D TO THOSE INDUSTRIAL UNDERTAKINGS OR ENTERPRISES WHICH ARE SET-UP IN THE NORTH-EASTERN REGION. BY MAKING SPECIFIC PROVISION OF THIS KIND, THE LEGISLATURE HAS SHOWN ITS INTENT, NAMELY, WHERE THE INDUSTRY IS NOT LOCATED IN NORTH- EASTERN STATE, THE PERIOD FOR WHICH DEDUCTION IS AV AILED EARLIER BY AN ASSESSEE UNDER SECTION 80-IA AND SECTION 80-IB WILL NOT BE RECKONED FOR THE PURPOSE OF AVAILING BENEFIT OF DEDUCTION UN DER SECTION 80-IC OF THE ACT 11 ITA NO. 2181/DEL/2016 10.4. ON A PERUSAL OF PARA 21 OF THE DECISION RENDE RED IN THE CASE OF CIT VS. CLASSIC BINDING INDUSTRIES REPRODUCED EARLIER IT IS SEEN THAT THE SAID POSITION OF LAW HAS NOT BEEN VARIED. ACCORDINGLY UP HOLDING THE ORDER TO THE EXTENT AS FAR AS POSITION OF LAW IS CONCERNED THE I SSUE IS RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO GRANT RELIEF AFTER V ERIFICATION OF FACTS IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE ASSES SEE SHALL BE GRANTED A REASONABLE OPPORTUNITY OF BEING HEARD. 10.5 ACCORDINGLY THE GROUND RAISED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 08 .03.2019. SD/- SD/- (R.K. PANDA) (DIVA SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08.03.2019 *VEENA / AG(CHD)/ SHAMSHAD(DEL)/R.NAHEED(DEL) 12 ITA NO. 2181/DEL/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI THIS ORDER WAS DIRECTLY DICTATED ON COMPUTER TO THE P.S. 03.01.2019 DRAFT DICTATED ON 0 4 .01.2019 06.02.2019 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 08.03.2019 KEPT FOR PRONOUNCEMENT ON 08.03.2019 FILE SENT TO THE BENCH CLERK 08.03.2019 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.