DCIT 5(1), MUMBAI V. CLASSIC DIAMONDS (I) LTD, MUMBAI

ITA 2536/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7687 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 20-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: R R VORA
• Section: 143(3); 80IA; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 2536/MUM/2009 (ASSESSMENT YEAR: 2005-06) DCIT 5(1) M/S. CLASSIC DIAMONDS (I) LTD. ROOM NO. 525, AAYAKAR BHAVAN 1002, PRASAD CHAMBERS M.K. ROAD, MUMBAI 400020 VS. OPERA HOUSE, MUMBAI 400026 PAN - AAACC 4602 M APPELLANT RESPONDENT APPELLANT BY: SHRI R.K. SAHU RESPONDENT BY: SHRI R.R. VORA O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) V, MUMBAI DATED 02.02.2009 ALLOWING THE DEDUCTION UNDE R SECTION 10-A OF THE I.T. ACT. 2. BRIEFLY STATED, THE ASSESSEE FILED THE RETURN OF IN COME ON 31.10.200 DECLARING INCOME OF RS.16,93,14,410/- AFTER CLAIMIN G DEDUCTION UNDER SECTION 10A OF RS.,4,27,68,090/-. THE SAME WAS PROC ESSED UNDER SECTION 143(1). THE CASE WAS SELECTED FOR SCRUTINY. THE ASS ESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) ON 11.06.2008 ASSESS ING THE TOTAL INCOME AT RS.21,20,82,500/-. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND EXPORT OF POLISHED DIAMONDS AND STUDDED JEWELLERY. THE ASSESSEE HAS TWO UNITS AND MAINTAINED BOOKS OF ACCOUNTS SEPARATELY F OR THE HEAD OFFICE (DIAMOND DIVISION), UNIT NO. 1 (JEWELLERY DIVISION) AND UNIT NO. II (JEWELLERY DIVISION). THE UNITS ARE SITUATED AT SEEPZ ZONE AT ANDHERI, MUMBAI. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10A AMOUNT ING TO RS.4,27,68,090/- ON UNIT II AT ANDHERI. DURING THE COURSE OF ASSESSMENT IN A.Y. 2004-05 THE A.O. FORMED AN OPINION THAT UNIT N O. II, ESTABLISHED IN A.Y. 2001-02, WAS FORMED BY SPLITTING UP OR RECONSTRUCTI ON OF UNIT NO. 1. ACCORDINGLY, IT WAS HELD THAT IT IS ONLY ON EXTENSI ON OF ITS ALREADY EXISTING UNIT AND SINCE THE ASSESSEE HAS NOT COMPLIED WITH T HE CONDITION LAID DOWN ITA NO. 2536/MUM/2009 M/S. CLASSIC DIAMONDS (I) LTD. 2 UNDER SECTION 10A, IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A FOR THE YEAR UNDER CONSIDERATION. THE A.O. IN HIS ORDER AT PARA NO. 3.4 ALSO OBSERVED THAT: 3.4 THE SAME ISSUE AROSE IN THE IMMEDIATE PROCEEDI NG ASSESSMENT YEAR AND THE LD. CIT(A) ALLOWED THE CLAIM OF THE AS SESSEE. HOWEVER, THE DEPARTMENT IS IN APPEAL BEFORE THE HON 'BLE ITAT, MUMBAI WHICH IS STILL PENDING FOR DISPOSAL. 3. AGGRIEVED BY THE DISALLOWANCE MADE, THE ASSESSEE FI ELD AN APPEAL BEFORE THE CIT(A). THE CIT(A) HAS ALLOWED THE APPEA L IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER IN THE IMMEDIATELY PRECEDING YEAR. THE OBSERVATION OF THE CIT(A) IS AS UNDER: - 3.2 THE ISSUE HAS BEEN ALREADY DECIDED IN THE CASE OF APPELLANT IN ASSESSMENT YEAR 2004-05 BY THE CIT(A) IN THE APPEAL OF THE APPELLANT. THE CIT(A) VIDE APPELLATE ORDER NO. CIT( A)V/5(1)/456/ 06-07 DATED 30.05.2007 HELD THAT THE APPELLANT IS E NTITLED TO DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT. ACCORDINGLY, IT IS HELD THAT THE APPELLANT IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT ON THE PROFITS OF THE UNIT NO. II. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 4. IT IS SUBMITTED THAT THE ISSUE HAS ALREADY BEEN DEC IDED BY THE HON'BLE ITAT, MUMBAI IN ASSESSEES OWN CASE FOR A.Y. 2004-0 5 IN ITA NO. 5120/MUM/2007 DATED 13.07.2009 WHEREIN AFTER APPREC IATING THE FACTUAL MATRIX AND AFTER GIVING A DETAILED FINDING, HELD TH AT THE UNIT NO. II OF THE ASSESSEE IS NOT AN EXTENSION OF EXISTING UNIT NO. 1 AND ACCORDINGLY RELIEF WAS GRANTED TO THE ASSESSEE. THE OBSERVATION OF THE ITA T IN PARA 10 OF ITS ORDER IS AS UNDER: - 10 SINCE IN THE INSTANT CASE THE ASSESSEE HAS STAR TED THE SECOND UNIT AT A DIFFERENT LOCATION, INSTALLED NEW PLANT AND MA CHINERY, OBTAINED NECESSARY APPROVALS FROM VARIOUS GOVERNMENT DEPARTM ENTS, MAINTAINED SEPARATE BOOKS OF ACCOUNT AND STARTED PRODUCING A N EW PRODUCT WITH A NEW TECHNOLOGY, THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. (SUPRA), WE HOLD THAT THERE IS NO RECONSTRUCTION/SPLITTING OFF OF TH E EXISTING UNIT AND THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 10A FOR THE S ECOND UNIT. WE, THEREFORE UPHOLD THE ORDER OF THE CIT(A) AND THE GR OUND RAISED BY THE REVENUE IS DISMISSED. ITA NO. 2536/MUM/2009 M/S. CLASSIC DIAMONDS (I) LTD. 3 5. IN VIEW OF THIS, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR THE ASSESSEE BY THE HON'BLE ITAT ORDER AND R ESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE CIT(A). ACCORDINGLY THE GROUND OF THE REVENUE IS REJECTED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH FEBRUARY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) V, MUMBAI 4. THE CIT V, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.