ITO, New Delhi V. M/s. Chrysalis Plasso, New Delhi

ITA 222/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58915 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GOPAL NATHANI
• Keywords: Depreciation; Additional evidence; Assessment record
• Section: 143(3)

Judgement Text

ITA NO. 222/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 222/DEL/2012 A.Y. : 2008-09 INCOME TAX OFFICER, WARD 24(2), ROOM NO. 192, CR BUILDING, NEW DELHI - 110002 VS. M/S CHRYSALIS PLASSO, 105, RAKESH DEEP, 11, COMMERCIAL COMPLEX, GULMOHAR ENCLAVE, NEW DELHI 110 049 (PAN/GIR NO. : AADFC7350A) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. GOPAL NATHANI, CA DEPARTMENT BY : SH. ALOK SINGH, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 25.10. 2011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- (I) ON THE FACTS AND ON THE CIRCUMSTANCES OF THE C ASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GRANTING ELIGIBILITY FOR CLAIM OF DEDUCTION U/S. 80 IC IN RESPECT ITA NO. 222/DEL/2012 2 OF PROFIT AND GAINS FROM THE INDUSTRIAL UNDERTAKINGS ESTABLISHED AT PARWANOO AND NALAGARH (BADI) IN HIMACH AL PRADESH. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN AL LOWING THE CLAIM OF DEPRECIATION AMOUNTING TO ` 6,09,398/-. (III) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR A MEND ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F HEARING OF APPEAL. 3. IN THIS CASE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.9.2008 DECLARING NIL INCOME FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ENT IRE AMOUNT OF THE GROSS TOTAL INCOME OF ` 19,64,676/-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF BOTTLE CAPS AND MOULDING O F BOTTLES AND OF LIQUID FILLING THEREIN OF AIR FRESHNERS, CLEANING A GENTS, ETC. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER FOUND THAT THE ASSESSEE DERIVES ITS INCOME FROM TWO MANUFACTURING UNITS SITUATED AT PARWANOO AND NALAGARH (BADDI) IN HIMACHAL PRADESH. THE PARWANOO UNITY COMMENCED PRODUCTION ON 08.12.2003 AND THE BADDI COMMENCED PRODUCTION ON 25.6.2004, AND BOTH UN ITS ARE LOCATED ITA NO. 222/DEL/2012 3 IN AREAS ENTITLED TO DEDUCTION UNDER SECTION 80IC. AFTER EXAMINING VARIOUS DETAILS CALLED FOR AND FILED, THE ASSESSIN G OFFICER HELD THAT DEDUCTION UNDER SECTION 80IC WAS NOT ALLOWABLE ON A CCOUNT OF THE FOLLOWING REASONS:- (I) EACH UNIT EMPLOYED ONLY 9 EMPLOYEES, OF WHOM ONE, SHRI DEBASHISH, BRANCH MANAGER OF BOTH UNITS, WAS RESIDING AT GURGAON. IT WAS HELD THAT A PERSON RESIDING AT GUR GAON COULD NOT HAVE SUPERVISED THE UNITS SITUATED 300 KI LOMETERS AWAY, HENCE, HIS EMPLOYMENT WAS NOT BELIEVED. AS S UCH, THE MANPOWER EMPLOYED WAS LESS THAN 10. (II) SALARY AND WAGES HAVE BEEN PAID TO ADMINISTRATI VE AND SUPERVISORY STAFF ONLY AND NO WAGES HAS BEEN PAID F OR LABOUR FOR THE MANUFACTURING PROCESS. (III) IT WAS NOT ASCERTAINABLE AS TO WHETHER THE JOB WORK WAS CARRIED OUT AT THE ASSESSEES PREMISES OR ELSEWHERE. THE JOB WORK BILLS DID NOT SHOW DETAILS OF WORK DONE. (IV) THE ASSESSEE APPEARED TO HAVE MERELY PURCHASED THE GOODS AND RESOLD THEM, AS THE ASSESSEE WAS NOT REGI STERED UNDER CENTRAL EXCISE REGULATIONS. 3.1 THE ASSESSING OFFICER DISALLOWED THE DEPRECIA TION CLAIMED ON MACHINERY AND PLANT OF AN AMOUNT OF ` 6,09,398/- HOLD ING THAT NO ITA NO. 222/DEL/2012 4 MANUFACTURING ACTIVITY HAD BEEN CARRIED OUT AND THE ASSETS HAD NOT BEEN PUT TO USE. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE MADE ELABORATE SUBMISSION. CONSIDERING THE SAME, LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- I HAVE CAREFULLY CONSIDERED THE APPELLANTS WRITT EN SUBMISSIONS AND PERUSED THE ASSESSMENT ORDER AND REMA ND REPORT OF THE ASSESSING OFFICER. AT GROUND OF APPE AL NO.1, THE APPELLANT HAS OBJECTED TO THE DISALLOWANCE OF CL AIM FOR DEDUCTION UNDER SECTION 80IC OF ` 19,12,324/-. IT IS SEEN THAT THE APPELLANT HAS MANUFACTURED, UNDER CONTRACT, GOODS FOR A NUMBER OF REPUTED COMPANIES SUCH AS RECKITT BENCKISER INDIA LTD., TTK HEALTHCARE LTD., CAVINCAR E LTD., VI JOHN GROUP, AND PIDILITE INDUSTRIES LTD. THE MANUFAC TURED PRODUCTS COMPRISE MOULDED COMPONENTS SUCH AS AIR FRESHNER BLOCKS AND LIQUID FILLED IN MOULDED PLASTI C CONTAINERS SUCH AS TOILET CLEANERS, FLOOR CLEANERS ETC. FROM THE MANUFACTURING AGREEMENTS BETWEEN THE APPELLAN T AND ITS CUSTOMERS, IT IS SEEN THAT THE CUSTOMERS REGULARL Y INSPECT AND AUDIT THE MANUFACTURING FACILITIES. THESE AGR EEMENTS ALSO PROHIBIT SUB CONTRACTING OF THE MANUFACTURE, OR ITA NO. 222/DEL/2012 5 MANUFACTURE IN ANY PREMISES OTHER THAN THE APPROVED FACTORY PREMISE. THE APPELLANT HOLDS THE NECESSARY APPROVALS ISSUED UNDER THE DRUGS CONTROL ACT FOR THE MANUFACTURING OF THESE PRODUCTS. THE MANUFACTURING PROCESS FLOW CHART HAS BEEN SUBMITTED WHICH SHOWS T HE VARIOUS PROCESSES FOR MANUFACTURE. DETAILS OF SUPPL IERS FROM WHOM VARIOUS RAW MATERIALS ARE PURCHASED ARE AL SO ON RECORD. THE APPELLANT HAS FILED NUMEROUS EVIDEN CES FOR ESTABLISHMENT OF THE MANUFACTURING UNITS INCLUDING TH E LEASE DEED AGREEMENT OF THE INDUSTRIAL PLOT FROM TH E HIMACHAL PRADESH INDUSTRIAL DEVELOPMENT CORPORATION L TD., DETAILS OF PLANT AND MACHINERY AT THE UNITS, REGIST RATION AS SMALL SCALE INDUSTRY WITH THE GOVERNMENT OF HIMACHAL PRADESH, REGISTRATION UNDER FACTORIES ACT, FILING OF DECLARING OF EXCISE AUTHORITIES OF PARWANOO AND BADDI, COPIES OF QUARTERLY STATEMENTS OF PRODUCTION TO EXCISE, CERTI FICATE OF ELECTRICITY LOAD SANCTION, AND BILLS OF ELECTRICITY CONSUMPTION. ALL THESE EVIDENCES, INCLUDING THOSE ALREADY AVAIL ABLE IN THE ASSESSMENT RECORDS, HAVE BEEN FORWARDED TO T HE ASSESSING OFFICER, WHO HAS SIMPLY STATED IN THE REMAN D REPORT DATED 5.9.2011 THAT THE SAME ARE NOT RELEVANT IN ITA NO. 222/DEL/2012 6 VIEW OF THE ASSESSING OFFICERS FINDINGS THAT NO MANUFACTURING ACTIVITY HAD BEEN CARRIED OUT AT THE T WO UNITS. I FIND MYSELF UNABLE TO AGREE WITH THE FI NDINGS IN THE ASSESSMENT ORDER IN THIS RESPECT. THE REASONS PR OVIDED BY THE ASSESSING OFFICER FOR DISALLOWANCE OF DEDUCTI ON UNDER SECTION 80IC HAVE BEEN ADEQUATELY REBUTTED BY THE APPELLANT. THE ASSESSING OFFICERS FINDING THAT L ESS THAN TEN WORKERS WERE EMPLOYED AT EACH OF THE UNITS, IS IMMATERIAL AS THERE IS NO SUCH REQUIREMENT UNDER SECT ION 80IC. MOREOVER, A LARGE NUMBER OF CONTRACT WORKERS ARE PROVE TO HAVE CARRIED OUT THE MANUFACTURING ACTIVIT IES, AND THE AGREEMENTS WITH THE LABOUR CONTRACTORS SHOW THE REGULAR AND MONTHLY SUBMISSION OF BILLS. THERE CAN BE NO DOUBT THAT THE MANUFACTURING ACTIVITY HAS TAKEN PLA CE AT THE APPELLANTS FACTORY PREMISES IN VIEW OF THE VENDOR EVALUATION AUDIT REPORTS OF THE PRODUCTION UNITS B Y THE CUSTOMERS, WHO ARE REPUTED COMPANIES IN THE FIELD O F HOUSEHOLD CHEMICAL PRODUCTS. THE APPELLANT HAS DISTINGUISHED THE CASE LAWS RELIED ON BY THE ASSESS ING OFFICER WHICH RELATE TO CASES OF INDUSTRIAL UNDERT AKINGS LEASED TO AND RUN BY PERSONS OTHER THAN THE ASSESSE E. THE ITA NO. 222/DEL/2012 7 ASSESSING OFFICER HAS ALSO WRONGLY UNDERSTOOD THA T THE JOB WORK CHARGES DEBITED TO THE PROFIT AND LOSS ACCOUNT WERE ON ACCOUNT OF MANUFACTURE CARRIED ON ELSEWHERE, WHEREAS THEY PERTAINED TO LABOUR CHARGES. THE BRANCH MANAGER, SHRI DEBASHISH BANERJEE IS RESIDING AT KALKA, NOT GURGAON , AND THIS HAS ALSO BEEN MISCONCEIVED BY THE ASSESSING OFF ICER. IT IS EVIDENT THAT THE ASSESSING OFFICER DID NOT C ALL FOR AN EXPLANATION ON THESE ISSUES BEFORE MAKING THE DISALLOWANCE. NOR HAS HE AVAILED THE OPPORTUNITY GRANTED DURING REMAND PROCEEDINGS TO VERIFY THE EVIDENCES FURNISHED IN SUPPORT OF THE MANUFACTURING ACTIVITY. HAVING CAREFULLY EXAMINED THE ADDITIONAL EVIDENCES FILED BY THE APPELLANT, IT IS HELD THAT THE APPELLANT HAS BEEN E NGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS HOUSEHOLD CHEMICAL PRODUCTS, AND THEIR CONTAINERS AT THE TWO UNITS AT PARWANOO AND BADDI. THE APPELLANT IS ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80IC IN RESPECT OF THE P ROFITS AND GAINS FROM THE INDUSTRIAL UNDERTAKINGS ESTABLISHED I N THE SPECIAL CATEGORY STATE OF HIMACHAL PRADESH. THE APP ELLANT, THEREFORE, SUCCEEDS AT GROUND OF APPEAL NO. 1. ITA NO. 222/DEL/2012 8 GROUND NOS. 2 PERTAINS TO THE DISALLOWANCE OF CL AIM OF DEPRECIATION OF ` 6,09,398/- ON THE GROUNDS THAT NO MANUFACTURING ACTIVITY HAD BEEN CARRIED OUT. FOLLOWI NG THE DETAILED REASONING PROVIDED AT PARA (5) ABOVE, IT IS HELD THAT THE APPELLANT IS ENTITLED TO THE CLAIM OF DEPR ECIATION AND SUCCEEDS AT GROUND OF APPEAL NO. 2. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT LD . COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT ASSES SEE HAS MANUFACTURED, UNDER CONTRACT, GOODS FOR A NUMBER OF REPUTED COMPANIES. THE MANUFACTURED PRODUCTS COMPRISE MOULDED COMPONENTS SUCH AS AIR FRESHNER BLOCKS AND LIQUID FI LLED IN MOULDED PLASTIC CONTAINERS SUCH AS TOILET CLEANERS, FLOOR C LEANERS ETC. LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER FOUND T HAT FROM THE MANUFACTURING AGREEMENTS BETWEEN THE ASSESSEE AND IT S CUSTOMERS, IT IS SEEN THAT THE CUSTOMERS REGULARLY INSPECT AND AUD IT THE MANUFACTURING FACILITIES. THESE AGREEMENTS ALSO PR OHIBIT SUB CONTRACTING OF THE MANUFACTURE, OR MANUFACTURE IN ANY PREMISES OTHER THAN THE APPROVED FACTORY PREMISES. THE LD. COMMISSI ONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT ASSESSEE HOLD S THE NECESSARY ITA NO. 222/DEL/2012 9 APPROVALS ISSUED UNDER THE DRUGS CONTROL ACT FOR THE MANUFACTURING OF THESE PRODUCTS. THE MANUFACTURING PROCESS FLOW CHAR T HAS BEEN SUBMITTED WHICH SHOWS THE VARIOUS PROCESSES FOR MANU FACTURE. DETAILS OF SUPPLIERS FROM WHOM VARIOUS RAW MATERIALS ARE PURCHASED ARE ALSO ON RECORD. THE ASSESSEE HAS FILED NUMEROU S EVIDENCES FOR ESTABLISHMENT OF THE MANUFACTURING UNITS. CONSIDERI NG THE ABOVE, LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT H E FOUND HIMSELF UNABLE TO AGREE WITH THE FINDINGS IN THE ASSESSMENT ORDER GIVEN BY THE ASSESSING OFFICER . LD. COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE REASONS PROVIDED BY THE ASSESSING OFFICE R FOR DISALLOWANCE OF DEDUCTION UNDER SECTION 80IC HAVE BEEN ADEQUATE LY REBUTTED BY THE ASSESSEE. HE OPINED THAT ASSESSING OFFICERS FINDING THAT LESS THAN TEN WORKERS WERE EMPLOYED AT EACH OF THE UNITS, IS I MMATERIAL AS THERE IS NO SUCH REQUIREMENT UNDER SECTION 80IC. MOREOVER , A LARGE NUMBER OF CONTRACT WORKERS WERE PROVED TO HAVE CARRIED OUT THE MANUFACTURING ACTIVITIES, AND THE AGREEMENTS WITH THE LABOUR CONTR ACTORS SHOW THE REGULAR AND MONTHLY SUBMISSION OF BILLS. THUS, LD. COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THERE CANNOT BE ANY DOUBT THAT THE MANUFACTURING ACTIVITY HAS TAKEN PLACE AT THE ASSESS EES FACTORY PREMISES IN VIEW OF THE VENDOR EVALUATION AUDIT REPO RTS OF THE PRODUCTION UNITS BY THE CUSTOMERS, WHO ARE REPUTED COMPANIES. ITA NO. 222/DEL/2012 10 CONSIDERING THE ENTIRE GAMUT OF SUBMISSION AND ADDI TIONAL EVIDENCES FILED BY THE ASSESSEE, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT ASSESSEE HAS BEEN ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS HOUSEHOLD CHEMICAL PRODUCTS, AND THEIR C ONTAINERS AT THE TWO UNITS AT PARWANOO AND BADDI. HE HAS CATEGORIC ALLY FOUND THAT ASSESSEE IS ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDE R SECTION 80IC IN RESPECT OF THE PROFITS AND GAINS FROM THE INDUSTRIAL UNDERTAKINGS ESTABLISHED IN THE SPECIAL CATEGORY STATE OF HIMAC HAL PRADESH. 6.1 AS REGARDS THE DISALLOWANCE OF CLAIM OF DEPRECIA TION OF ` 6,09,398/- ON THE GROUNDS THAT NO MANUFACTURING ACTI VITY HAD BEEN CARRIED OUT, FOLLOWING THE DETAILED REASONING PROV IDED IN THE PRECEDING PARAGRAPHS. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIAT ION. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A VE RY REASONABLE ORDER, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY IN THE SAM E. ACCORDINGLY, WE UPHOLD THE SAME. WE ALSO NOTE THAT IN ASSESSMEN T FRAMED U/S. 143(3) OF THE IT ACT FOR THE ASSESSMENT YEARS 2007- 08 & 2008-09, THE ASSESSEE HAD BEEN GRANTED DEDUCTION U/S. 80IC. THI S FURTHER SUPPORTS THE CASE OF THE ASSESSEE THAT THE ASSESSEE IS ELIGI BLE FOR CLAIM OF DEDUCTION U/S. 80IC. ITA NO. 222/DEL/2012 11 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/3/2012. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 23/3/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES