Adarsh Packaging, Nani Daman V. The Income tax Officer,Vapi Ward-1, Vapi

ITA 2254/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0275 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 22-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANAN
• Section: 80IB; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA NO.2253 AND 2254/AHD/2009 [ASSTT.YEAR : 2005-2006 AND 2006-2007] ADARSH PACKAGING SURVEY NO.54/3B-7B, DAMAN INDL. ESTATE, KADAIYA NANI DAMAN. VS. ITO, VAPI WARD-4 DAMAN. ASSESSEE BY : NONE REVENUE BY : SHRI M.MATHIVANAN O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THESE ARE APPEALS BY THE ASSESSEE RELATING TO THE ASSESSMENT YEARS 2005-2006 AND 2006 -2007. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN MANUFACTURE OF CORRUGAT ED BOXES. THE UNIT IS LOCATED IN THE UNION TERRITORY OF DAMAN, A BACKWARD AREA AS SPECIFIED IN SCHEDULE-VIII TO THE INCOME TAX ACT. 2. THE GROUNDS TAKEN BY THE ASSESSEE IN BOTH THE YE ARS ARE IDENTICAL. THEY RELATE TO THE CLAIM FOR DEDUCTION UNDER SECTION 80I B OF THE ACT IN THE AMOUNTS OF RS.10,92,250/- AND RS.28,47,913/- FOR THE ASSESS MENT YEARS 2005-2006 AND 2006-2007 RESPECTIVELY. THE ISSUE IS DISCUSSED IN PARA-5 OF THE ASSESSMENT ORDERS. THE ASSESSING OFFICER HAS NOTED THAT IT WA S THE ASSESSEES CLAIM THAT THE PRODUCTION STARTED ON 27-3-2004 AS PER THE SSI REGISTRATION CERTIFICATE AND ON 26-3-2004 AS PER THE AUDIT REPORT IN FORM NO.10C CB, WHEREAS UNDER THE FACTORIES ACT, THE ASSESSEE WAS ISSUED LICENCE TO W ORK THE FACTORY ONLY ON 24-6- 2004. THE LICENCE ACCORDING TO THE AO, IS ISSUED B EFORE SETTING UP THE INDUSTRY. ON THESE FACTS THE AO CALLED UPON THE ASSESSEE TO S HOW CAUSE WHY THE DEDUCTION CANNOT BE DISALLOWED ON THE GROUND THAT T HE MANUFACTURING ACTIVITY DID NOT START ON OR BEFORE 31-3-2004, A CONDITION W HICH WAS REQUIRED TO BE FULFILLED UNDER SUB-SECTION(4) OF SECTION 80IB. T HE ASSESSEE WAS ALSO REQUIRED TO PRODUCE THE BILLS RAISED BY THE ELECTRICAL CONTR ACTOR FOR INSTALLATION OF PAGE - 2 ITA NO.2253 AND 2254/AHD/2009 -2- MACHINERY AND FITTINGS AND BILLS FOR PURCHASE OF RA W MATERIAL IN THE MONTH OF MARCH, 2004. THE ASSESSEE DOES NOT APPEAR TO HAVE COMPLIED WITH THE DIRECTION. THE AO OBSERVED THAT AS PER SECTION 6 R EAD WITH RULES 3 AND 4 OF THE FACTORIES ACT AND THE RULES FRAMED THEREUNDER, NO P ERSON CAN START MANUFACTURING ACTIVITY WITHOUT THE PRIOR APPROVAL O F THE FACTORY INSPECTOR. HE THEREFORE HELD THAT THE ASSESSEES CLAIM THAT IT ST ARTED MANUFACTURING CORRUGATED BOXES EVEN BEFORE OBTAINING THE FACTORY LICENCE WAS AN ILLEGAL CLAIM. THE AO ALSO HELD THAT THE ASSESSEE HAS NOT SUBMITTED ANY D OCUMENT FROM THE THIRD PARTY TO PROVE THAT THE MANUFACTURING ACTIVITY WAS STARTE D ON 26-3-2004, EXCEPT ITS OWN DOCUMENTS. THE AO THEREFORE HELD THAT THE MANU FACTURING ACTIVITY DID NOT START ON OR BEFORE 31-3-2004. HE ACCORDINGLY DISAL LOWED THE CLAIM. 3. THE CIT(A) IN HIS CONSOLIDATED ORDER PASSED ON 3 -6-2009 DISMISSED THE ASSESSEES CLAIM AGREEING WITH THE AOS REASONING. 4. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL FOR BOTH THE YEARS. WE FIND FROM THE APPELLATE ORDER THAT THE FOLLOWING DOCUMENTS WERE ADDUCED BEFORE THE AO IN SUPPORT OF ITS CLAIM FOR THE DEDUC TION. I) COPY OF CHALLAN OF FACTORY REGISTRATION FEES PA ID ON 29.03.2004 & COPY OF ACKNOWLEDGEMENT OF APPLICATION OF FACTORY L ICENSE REGISTRATION AS MENTIONED ABOVE. II) POWER RELEASE LETTER ISSUED ON 10.03.2004 & FIRST P OWER BILL FOR MARCH, 2004 ISSUED IN THE MONTH OF APRIL 2004. III) REGISTRATION CERTIFICATE ISSUED BY DIRECTORATE OF I NDUSTRIES DATED 23.01.2004. IV) PROVISIONAL REGISTRATION CERTIFICATE OF SSI ISSUED ON 23.01.2004. V) COPIES OF BILLS OF PLANT & MACHINERIES PURCHASED. VI) COPIES OF BILLS OF RAW MATERIAL PURCHASED ALONG WIT H CHALLAN. VII) WAGES REGISTER FOR THE MONTH OF MARCH 2004. PAGE - 3 ITA NO.2253 AND 2254/AHD/2009 -3- VIII) FIRST SALES BILL ALONG WITH TRANSPORTATION BILL AND DELIVERY CHALLAN DATED 31.03.2004 DULY SIGNED BY RECEIVING PARTY. IX) COPY OF SALES TAX REGISTRATION CERTIFICATE & EXCISE REGISTRATION CERTIFICATE ISSUED BEFORE MARCH, 2004. X) ORIGINAL EXCISE RECORD SHOWING DETAILS OF PURCHASE OF RAW MATERIAL, ISSUANCE OF GOODS FOR PRODUCTION, ITEMS A ND QUANTITY MANUFACTURED AND GOODS SOLD. THE SAID DETAILS WERE SUBMITTED & DULY VERIFIED BY THE OFFICER OF CENTRAL GOVERNMENT OF INDIA. THE CIT(A) HAS NOT DISPUTED THE ASSESSEES CLAIM TH AT THE AFORESAID DOCUMENTARY EVIDENCE WAS ADDUCED BEFORE THE AO. TH E POSITION THUS IS THAT BOTH THE DEPARTMENTAL AUTHORITIES HAVE TAKEN THE VI EW THAT IT IS THE DATE ON WHICH THE FACTORY LICENCE WAS ISSUED THAT IS DECISI VE AND IF THE ASSESSEE HAD STARTED THE MANUFACTURING ACTIVITY BEFORE THIS DATE , THE CLAIM WOULD BE ILLEGAL AND UNLAWFUL AS COMMENCING MANUFACTURING ACTIVITY B EFORE OBTAINING THE FACTORY LICENCE IS PUNISHABLE UNDER THE FACTORIES A CT AND THE RULES. 5. THE AHMEDABAD BENCHES OF THE TRIBUNAL HAVE DEALT WITH THE IDENTICAL QUESTION IN A FEW CASES AND HAVE TAKEN THE VIEW THA T IF THERE IS EVIDENCE TO SHOW THAT THE ASSESSEE ACTUALLY COMMENCED THE MANUF ACTURING ACTIVITY ON OR BEFORE 31-3-2004, THEN IRRESPECTIVE OF THE FACT THA T THE FACTORY LICENCE WAS OBTAINED LATER THAN 31-3-2004, THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IB CANNOT BE DENIED. IT HAS BEEN OBSERVED IN THE SE ORDERS THAT THE ASSESSEE MAY BE PUNISHABLE UNDER THE FACTORIES ACT AND RULES MADE THEREUNDER FOR VIOLATION OF A CONDITION, BUT SO LONG AS FACTUALLY THE PRODUCTION HAS COMMENCED ON OR BEFORE 31-3-2004, THE DEDUCTION CANNOT BE REF USED. THE LEAD ORDER IS THE ONE DATED 5-6-2009 IN ITA NOS.1004 AND 1005/AHD/200 9 IN THE CASE OF ITO VS. PADMEY IMPEX (ASSESSMENT YEARS 2005-2006 AND 20 06-2007). IN THIS CASE ALSO THE AO HAD DENIED THE DEDUCTION UNDER SEC TION 80IB ONLY ON THE GROUND THAT THE ASSESSEE WAS NOT HAVING THE FACTORY LICENCE BEFORE IT STARTED THE MANUFACTURING ACTIVITY. THE CIT(A) HAD HELD THAT T HIS WAS NOT MATERIAL WHILE PROCESSING THE CLAIM UNDER SECTION 80IB OF THE IT A CT AND WHAT WAS MATERIAL PAGE - 4 ITA NO.2253 AND 2254/AHD/2009 -4- WAS WHETHER MANUFACTURING ACTIVITIES WERE CARRIED O UT BY THE ASSESSEE DURING THE YEAR OR NOT. AFFIRMING THIS VIEW OF THE CIT(A) AND DISMISSING THE APPEALS FILED BY THE DEPARTMENT, THE TRIBUNAL HELD THAT THE FACT THAT THE FACTORY LICENCE WAS GRANTED SUBSEQUENT TO THE COMMENCEMENT OF THE P RODUCTION WAS NOT RELEVANT FOR THE PURPOSE OF PROCESSING THE CLAIM UN DER THE SECTION AND THAT IF THERE IS ANY VIOLATION OF ANY PROVISIONS OF OTHER S TATUTES THEN THE ASSESSEE MAY HAVE TO EXPLAIN THE SAME TO THE AUTHORITIES EXECUTI NG THOSE LAWS AND THE ASSESSEE MAY EVEN FACE PENAL CONSEQUENCES UNDER THO SE LAWS BUT THAT CANNOT AFFECT THE CLAIM UNDER THE INCOME TAX ACT WHICH ONL Y REQUIRES THE ASSESSEE TO MANUFACTURE OR PRODUCE AN ARTICLE OR THING. THUS T HE TRIBUNAL UPHELD THE ORDER OF THE CIT(A) GRANTING THE DEDUCTION. A SIMILAR OR DER WAS PASSED BY THE SAME BENCH ON THE SAME DAY IN THE CASE OF ITO VS. M/S. S AMRAT HEALTHCARE, IN ITA NO.1006/AHD/2009 FOR THE ASSESSMENT YEAR 2005-2006. THE ORDER OF THE TRIBUNAL IN THE CASE OF PADMEY IMPEX (SUPRA) WAS FO LLOWED BY ANOTHER BENCH IN AHMEDABAD IN ITA NO.1536/AHD/2009 DATED 28-8-200 9 FOR THE ASSESSMENT YEAR 2005-2006. IN THIS ORDER, IT WAS ALSO OBSERVE D THAT IT IS WELL SETTLED POSITION OF THE LAW THAT A CONDITION (THAT MANUFACT URE OR PRODUCTION CAN BE CARRIED OUT ONLY AFTER OBTAINING THE FACTORY LICENC E) WHICH HAS NOT BEEN IMPOSED BY THE LEGISLATURE FOR GRANTING CERTAIN DED UCTIONS CANNOT BE IMPOSED BY ANY OTHER AUTHORITIES. IN THIS VIEW OF THE MATT ER, THE TRIBUNAL ALLOWED THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IB T HOUGH THE PRODUCTION HAS STARTED IN THE ACCOUNTING YEAR RELEVANT TO THE ASSE SSMENT YEAR 2004-2005 FOR WHICH THE FACTORY LICENCE WAS OBTAINED ONLY ON 3-6- 2004. 6. IN THE LIGHT OF THE AFORESAID ORDERS OF THE AHME DABAD BENCHES OF THE TRIBUNAL THE FACT THAT IN THE PRESENT CASE THE ASSE SSEE OBTAINED THE FACTORY LICENCE ONLY ON 24-6-2004, AFTER 31-3-2004 IS IRREL EVANT FOR THE PURPOSE OF SECTION 80IB. THE QUESTION HOWEVER REMAINS AS TO W HETHER THE ASSESSEE ACTUALLY STARTED PRODUCTION BEFORE 31-3-2004. IN T HIS CONNECTION, THE ASSESSMENT ORDER ITSELF MENTIONED THAT ON PERUSAL O F THE SSI REGISTRATION CERTIFICATE IT IS SEEN THAT THE PRODUCTION STARTED ON 27-3-2004. IT THEREFORE PAGE - 5 ITA NO.2253 AND 2254/AHD/2009 -5- APPEARS TO US THAT THE SSI REGISTRATION CERTIFICATE WAS PRODUCED BEFORE THE AO. EVEN BEFORE THE CIT(A) THE ASSESSEE HAS REFERRED TO VARIOUS DOCUMENTS, NOTED IN THE EARLIER PART OF OUR ORDER, SUCH AS POWER REL EASE LETTER ISSUED ON 10-3- 2004, FIRST POWER BILL FOR MARCH, 2004, COPIES OF B ILLS FOR RAW MATERIALS PURCHASED, WAGES REGISTER FOR MARCH, 2004, FIRST SA LES BILL ALONG WITH TRANSPORTATION BILL AND DELIVERY CHALLAN DATED 31-3 -2004 ETC. THE CIT(A) HAS NOT HELD THAT THE AFORESAID DOCUMENTS WERE NOT FILE D IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, DESPITE A SPECIFIC PLEA MAD E BY THE ASSESSEE AND REFERRED TO IN PARA-3.2 OF THE APPELLATE ORDER TO T HE EFFECT THAT IT HAS SUBMITTED VOLUMINOUS DOCUMENTS BEFORE THE AO TO PROVE THAT PR ODUCTION ACTUALLY STARTED BEFORE 31-3-2004. THE CIT(A) HAS HOWEVER TAKEN THE VIEW THAT SINCE THE FACTORY LICENCE WAS ISSUED ONLY ON 24-6-2004 AND IT IS AN OFFENCE PUNISHABLE UNDER THE FACTORIES ACT AND THE RULES FRAMED THEREU NDER TO COMMENCE MANUFACTURING ACTIVITY BEFORE ISSUE OF THE SAID LIC ENCE, IT WOULD BE AGAINST PUBLIC POLICY TO ALLOW THE BENEFIT OF DEDUCTION UND ER ONE STATUTE IN RESPECT OF ANY EXPENDITURE INCURRED BY THE ASSESSEE IN VIOLATI ON OF THE PROVISIONS OF ANOTHER STATUTE WHICH ALSO INVITES PENALTY UNDER TH AT STATUTE. THUS EVEN THE CIT(A) DOES NOT APPEAR TO HAVE DOUBTED THE CLAIM OF THE ASSESSEE THAT THE MANUFACTURING ACTIVITY ACTUALLY COMMENCED BEFORE TH E 31-3-2004. THE REASONING OF THE CIT(A) HAS NOT BEEN ACCEPTED AS CO RRECT IN THE AFORESAID ORDERS PASSED BY THE AHMEDABAD BENCHES OF THE TRIBU NAL. THEREFORE RESPECTFULLY FOLLOWING THEM, WE HOLD THAT THE ASSES SEE IS ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IB AS CLAIMED AND ACCORDI NGLY DIRECT THE AO TO ALLOW THE SAME FOR BOTH THE YEARS. 7. THE APPEALS OF THE ASSESSEE ARE ALLOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 16 TH OCTOBER, 2009. SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PAGE - 6 ITA NO.2253 AND 2254/AHD/2009 -6- PLACE : AHMEDABAD DATE : 16-10-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD