The ITO,Vapi Ward-4, Nani Daman V. M/s. Jalaram Plast Pack, Nani Daman

ITA 2764/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1681 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 28-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U S RAINA SRDR
• Section: 80IB; 6; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.N.PHAUJA, HONBLE ACCOUNTANT MEMBER ITA NO.2764/AHD/2010 ASSESSMENT YEAR:2007-08 DATE OF HEARING:18.3.11 DRAFTED:22.3.11 INCOME TAX OFFICER, VAPI, WARD-4, DAMAN V/S. M/S.JALARAM PLAST PACK SURVEY NO.200/4,GATE NO.1, PANCHAL UDHYOG NAGAR, BHIMPORE, NANI DAMAN PAN NO.AAEFJ3685L (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI U.S. RAINA, SR-DR RESPONDENT BY:- SHRI TUSHAR P HEMANI, AR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS REVENUES APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME-TAX(APPEALS)-VALSAD IN APPEAL NO. CIT(A)/VLS /288/09-10 DATED 19-07-2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCT ION U/S.80IB OF THE ACT STATING THAT DISALLOWANCE OF CLAIM OF DEDUC TION U/S.80IB OF THE ACT ON THE SOLE GROUND THAT THE ASSESSEE WAS NO T HAVING FACTORY LICENSE BEFORE IT STARTED MANUFACTURING ACT IVITIES IS WITHOUT ANY MERITS. ITA NO.2764/AHD/2010 A.Y. 2007-08 ITO VLS WD4, V. M/S JALARAM PLAST PA PAGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE POINT THAT THE ASSESSEE HAS FAILED TO PROVE THAT IT HAS COMMENCED THE MANUFACTURING ACTIVITY ON OR BEFORE 31.03.2004, AS STIPULATED IN SECTION 80IB OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCT ION U/S.80IB OF THE IT. ACT ON DISALLOWANCE OF RS. 67,585/- MADE ON SCRAP SALES INCOME. 3. THE GROUND NO.1 AND 2 RELATE TO DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IB OF THE ACT OF RS.26,97,512/-. TH E ASSESSING OFFICER REJECTED THE CLAIM OF DEDUCTION U/S.80IB OF THE ACT BY OBSERVING AS UNDER:- THE ASSESSEE HAS NOT OFFERED PLAUSIBLE REPLY TO TH E SHOW CAUSE NOTICE. THE DISALLOWANCE WAS MADE ON TECHNICAL GROU ND AND DECISION OF THE HONBLE CIT(A) WILL BE IN FAVOUR OF DEPARTMENT. FURTHER ON PERUSAL OF ALL THE DOCUMENTS I.E. DIC RE GISTRATION CERTIFICATE, POWER SANCTION LETTER, PURCHASE OF MAC HINERY AND RAW MATERIAL ETC. SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2006-07, IT WAS OBS ERVED THAT NO DATE OF COMMENCEMENT OF MANUFACTURING ACTIVITY IS M ENTIONED IN THE ABOVE LISTED DOCUMENTS. IT IS WORTHWHILE TO MEN TION HERE THAT ASSESSEE HAS NOT FURNISHED ANY 3 RD PARTY EVIDENCE IN RESPECT OF COMMENCEMENT OF MANUFACTURING ACTIVITY ON 29-03-200 4, THE FACTORY LICENSE IS THIRD PARTY EVIDENCE WHICH PROVE S THAT PRODUCTION WAS STARTED ON 12-10-2004. AS PER SECTION 6 OF FACT ORY ACT, FACTORY CANNOT START WORK OF MANUFACTURING WITHOUT OBTAININ G LICENSE. AS PER FACTORY RULES, NO PREMISES SHOULD BE TAKEN TO U SE AS A FACTORY WITHOUT PREVIOUS PERMISSION IN WRITING OBTA INED FROM CHIEF INSPECTOR OF FACTORY. THE ASSESSEE IS A GUILTY OF S ECTION 92 FOR NOT GETTING THE PREVIOUS REGISTERED IN ACCORDANCE WITH LAW 1979 (UP) CRI LR 621 (ALL) . WHEN LICENSE IS ISSUED BY THE CHIEF INSPECTOR OF FACTORY ON 12-10-2004 TO STAT THE FACTORY OR MAN UFACTURING ACTIVITY, HOW MANUFACTURING ACTIVITY CAN BE SAID TO HAVE BEEN STARTED ON 29-03-2004. THE ASSESSEE HAS FAILED TO P ROVE THAT MANUFACTURING PROCESS WAS STARTED ON OR BEFORE 31.0 3.2004, BUT THE DEPARTMENT HAS GOT THIRD PARTY EVIDENCE FROM TH E FACTORY DEPARTMENT WHICH PROVES THAT FACTORY HAS STARTED MA NUFACTURING ITA NO.2764/AHD/2010 A.Y. 2007-08 ITO VLS WD4, V. M/S JALARAM PLAST PA PAGE 3 ACTIVITY ON 12.10.2004. FURTHER, POWER RELEASE LETT ER AND PURCHASE BILL ENCLOSED BY THE ASSESSEE ARE NOT PROOF IN RESP ECT OF PRODUCTION BEING STARTED ON OR BEFORE 31.03.2004. THEREFORE, D EDUCTION CLAIMED U/S.80IB IS DISALLOWED. FURTHER, ON PERUSAL OF PURCHASE BILLS OF MACHINERY, DELIVERY CHALLAN AND ERECTION AND INSTALLATION REPORT SUBMITTED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 06-07, IT IS SEEN T HAT PRINTING MACHINE WAS PURCHASED FROM M/S. SANDIP MACHINERY & MFG. CO. LTD. VIDE BILL NO.34A DATED 25.03.2004, BUT MACHINE RY WAS DELIVERED ON 31.03.2004 TO THE ASSESSEE AND ERECTIO N REPORT DATED 28.03.2004 IS SUBMITTED BY M/S. SANDIP MACHINERY & MFG. CO. LTD. OTHER TWO MACHINES LLDPE FILM PLANT & CUTTING, SEAL ING MACHINES WERE PURCHASED DIN THE MONTHS OF MAY, 2005 AND JUNE, 2005 RESPECTIVELY. FROM THE ABOVE, IT IS CONCLUDED THAT PRODUCTION WAS NOT STARTED ON 29.03.2004 AS MACHINERY WAS DELIVERED ON 31.03.2004 AS PER CHALLAN AND ERECTION WORK WAS DONE ON 28.03.2004 AS PER ERECTION REPORT. IN VIEW OF THE ABOVE, CLAIM OF DEDUCTION U/ S.80IB OF THE IT ACT MADE FOR THE YEAR UNDER CONSIDERATION IS REJECT ED. 4. IN APPEAL LD. CIT(APPEALS) HAS FOLLOWED THE DECI SION OF ITAT AHMEDABAD BENCH IN THE CASE OF ITO VAPI V. SAMRATH HEALTH CARE IN ITA NO.1006/AHD/.2009 DATED -5-06-2008 DIRECTING TH E ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S.80IB OF THE ACT. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE THE TRIB UNAL. 5. AFTER HEARING BOTH THE PARTIES WE FIND THAT ISSU E IS NOW COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE O RDER OF ITAT IN THE CASE OF SAMRATH HEALTH CARE (SUPRA), WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED DR AND CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITI ES. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE I N THE ORDER OF THE LEARNED CIT(A). THE LEARNED CIT(A) HAS RIGHTLY MENT IONED THAT TO OBTAIN FACTORY LINCENSE IS NO A CONDITION PRECEDENT FOR CLAIMING ITA NO.2764/AHD/2010 A.Y. 2007-08 ITO VLS WD4, V. M/S JALARAM PLAST PA PAGE 4 DEDUCTION U/S.80 IB OF THE ACT. IF WE PRESUME HAT T HIS CONDITION IS ALSO REQUIRED TO BE FULFILLED BY THE ASSESSEE, THEN IT WOULD AMOUNT TO LEGISLATION BY INSERTING ANOTHER CONDITION IN SE CTION 80 IB FOR ALLOWING DEDUCTION UNDER THAT SECTION THOUGH NOT PR OVIDED IN THE STATUTE. THE AO DID NOT DOUBT ABOUT RAW MATERIAL CO NSUMPTION, POWER CONSUMPTION, SALES AND EMPLOYMENT OF WORKERS. FURTHER NO DOUBT WAS ALSO EXPRESSED BY THE AO THAT ASSESSEE DI D NOT CARRY ANY MANUFACTURING ACTIVITY. NONETHELESS, THE ASSESS EE HAS APPLIED FOR FACTORY LICENSE PRIOR TO COMMENCEMENT OF PRODUC TION THOUGH IT WAS GRANTED SUBSEQUENTLY. THE ASSESSEE HAS BEEN GIV EN A PERMANENT REGISTRATION AS A SMALL SCALE INDUSTRIAL UNDERTAKING AND HAS REGISTERED WITH THE SALES TAX AND EXCISE AUTHOR ITIES. FOR CLAIMING DEDUCTION U/S.80 IB OF THE ACT ONLY THE CO NDITIONS LAID DOWN UNDER THAT SECTION ARE REQUIRED TO BE FULFILLE D AND NO MORE. THE REQUIREMENT UNDER OTHER STATUTES CANNOT BE BORR OWED FOR ALLOWING / REFUSING DEDUCTION UNLESS IT IS SO PROVI DED IN THE IT ACT ITSELF. FOR EXAMPLE, THE LEGISLATURE THOUGHT IT FIT TO BRING THE CONDITION OF EMPLOYMENT OF 10 OR MORE WORKERS IF MANUFACTURING ACTIVITIES ARE CARRIED OUT WITH THE HELP OF POWER O R MORE THAN 20 WORKERS WITHOUT THE HELP OF POWER. SIMILARLY, IF TH E LEGISLATURE THOUGHT IT FIT TO OBTAIN FACTORY LICENSE BEFORE ALL OWING DEDUCTION U/S.80 IB OF THE ACT THEN THEY WOULD HAVE SO PROVID ED. IN FACT, THERE ARE SEVERAL OTHER REQUIREMENTS IN DIFFERENT A CT APPLICABLE TO AN INDUSTRY BUT ALL THESE REQUIREMENTS ARE NOT TO B E COMPLIED WIDTH FOR CLAIMING DEDUCTION U/S.80 IB OF THE ACT. WHAT I S ESSENTIAL IS THAT THE ASSESSEE SHOULD MANUFACTURE OR PRODUCE AN ARTIC LE OR THING. IF THERE IS ANY VIOLATION OF ANY PROVISIONS OF OTHER S TATUTES THEN THE ASSESSEE HAS TO EXPLAIN THE SAME TO THE AUTHORITIES EXECUTING THOSE ACTS / STATUTES. FURTHER FOR VIOLATION OF HE PROVISIONS UNDER OTHER ACTS THE ASSESSEE MAY FACE PENAL PROVISIONS A S PROVIDED UNDER THOSE ACTS. BUT FOR THAT COMMISSIONS / OMISSI ON UNDER OTHER ACTS THE DECISION UNDER THE IT ACT CANNOT BE AFFECT ED UNLESS SO PROVIDED UNDER THE IT ACT. WE HOWEVER, NOTICE THAT THIS APPEAL IS FOR AY 2005-06 AND AS PER FACTS STATED IN THE ORDER BY THE LEARNED CIT(A) THE ASSESSEE HAS OBTAINED FACTORY LICENSE ON 6-5-2004 WHICH IS FINANCIAL YEAR 2004-05. THEREFORE, THERE S HOULD BE NO CASE FOR DISALLOWING THE CLAIM OF THE ASSESSEE U/S. 80 IB ON THE QUESTION OF NOT OBTAINING FACTORY LICENSE. AS A RE SULT, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE GRO UNDS OF APPEAL OF THE REVENUE. ITA NO.2764/AHD/2010 A.Y. 2007-08 ITO VLS WD4, V. M/S JALARAM PLAST PA PAGE 5 IN VIEW OF THE ABOVE THE ORDER PASSED BY LD. CIT(A) IS HEREBY UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 6. THE GROUND NO.3 RELATES TO DEDUCTION U/S 80IB OF THE ACT ON DISALLOWANCE OF RS.67,585/- MADE ON SCRAP SALES INC OME. ON PERUSAL OF PROFIT AND LOSS ACCOUNT THE ASSESSING OFFICER OBSER VED THAT ASSESSEE HAS OFFERED SCRAP SALES INCOME OF RS.67,585/- AND T HIS INCOME WAS NOT EXCLUDED FROM THE TOTAL INCOME WHILE CALCULATING DE DUCTION U/S 80IB OF THE ACT. THE ASSESSEE WAS ASKED AS TO HOW DEDUCTION CLAIM ON SCRAP SALE IS ALLOWABLE U/S.80IB OF THE ACT. THE ASSESSEE FAILED TO EXPLAIN THE SAME AND THEREFORE THIS CLAIM OF ASSESSEE WAS DISAL LOWED BY AO AND THE INCOME ON ACCOUNT OF SELL OF SCRAP AMOUNTING TO RSS.67,585/- WAS EXCLUDED FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S . 80IB OF THE ACT. IN APPEAL, LD. CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING AS UNDER:- 8.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS M ADE BY THE AO IN HIS ASSESSMENT ORDER AS WELL AS THE CONTENTIONS RAISED BY THE AR OF THE APPELLANT IN HIS WRITTEN SUBMISSION. I FI ND FORCE IN THE ARGUMENTS OF THE APPELLANT THAT SINCE THE SCRAP IS GENERATED DURING THE COURSE OF MANUFACTURING ACTIVITY OF THE APPELLA NT AND THE INCOME IS CONSIDERED TO BE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AS DECIDED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF HARJIVANDAS JHUTHABHAI ZAVERI AND ANOTHER 2 58 ITR 785 AND THUS SCRAP SALE OF RS.67,575/- IS ELIGIBLE FOR DEDUCTION U/S.80IB. THUS, I ACCEPT THE AR'S ARGUMENT AND DIRE CT AO TO TAX SCRAP SALES UNDER THE HEAD PROFIT OR GAIN FROM BUS INESS OR PROFESSION AND THEREFORE, THESE INCOME BECOMES ELI GIBLE FOR DEDUCTION U/S.80IB OF THE ACT. HENCE, THIS GROUND O F APPEAL IS ALLOWED. SINCE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE B Y FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF DCIT V. ITA NO.2764/AHD/2010 A.Y. 2007-08 ITO VLS WD4, V. M/S JALARAM PLAST PA PAGE 6 HARJIVANDAS JHUTHABHAI AND ANOTHER (2002) 258 ITR 785 (GUJ) WE FIND NO INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISSE D. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31/03/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TYA GI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 31/03/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VALSAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD