Assistant Commissioner of Income tax, Pune V. Anusaya Auto Press Parts Pvt.Ltd, Pune

ITA 301/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8542 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-01-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 06-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO.301/PUN/2017 / ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-8, PUNE. ....... / APPELLANT / V/S. ANUSAYA AUTO PRESS PARTS PVT. LTD. GAT NO. 388, VILL : MAHALUNGE, TALEGAON, CHAKAN ROAD, TAL : KHED, PUNE-410 501 PAN : AACCA3246K / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI PANKAJ GARG / DATE OF HEARING : 02.01.2019 / DATE OF PRONOUNCEMENT : 03.01.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY REVENUE EMANATES FROM THE ORD ER OF THE LD. CIT(APPEALS)-9, PUNE FOR ASSESSMENT YEAR 2012-13 DATED 28.10.2016 AS PER FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) WAS CORRECT IN ALLOWING THE RS.5,71,71,244/- U/S.80 IC OF THE ACT, IRRESPECTIVE OF THE FACT THAT THE ASSESSEE COMPANY HAS NOT FULFILLED THE CONDITION LAID DOWN IN SECTION 80IC(4) OF THE ACT? 2 ITA NO.301/PUN/2017 A.Y.2012-13 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 2. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE-C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING M.S. STEEL PRESS PARTS REQUIR ED FOR AUTOMOBILE. IT HAS FILED RETURN FOR ASSESSMENT YEAR 2012-13 ON 28.09 .2012 DECLARING TOTAL INCOME OF RS.6,42,54,360/- AFTER CLAIMING DEDUCTION OF RS.5,78,6 3,479/- U/S.80IC OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. THE ASSESSME NT U/S.143(3) OF THE ACT WAS COMPLETED AT RS.12,21,38,844/- BY MAKING ADDITION O F RS.21,000/- ON ACCOUNT OF INTEREST AND ADDITION OF RS.5,71,71,244/- ON A CCOUNT OF DEDUCTION U/S.80IC OF THE ACT. 3. THE GRIEVANCE OF THE REVENUE IS WITH REGARD TO ALLOWING DEDUCTION U/S.80IC OF THE ACT BY THE LD. CIT(APPEALS). 4. THE ASSESSEE HAD MADE DETAILED WRITTEN SUBMISSIONS BE FORE THE FIRST APPELLATE AUTHORITY AND AFTER CONSIDERING THE ASSESSMENT ORDER, FACTS OF THE CASE AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE, THE LD . CIT(APPEALS) HAS HELD AS UNDER: 5.3 I HAVE CONSIDERED CAREFULLY THE FACTS OF THE CA SE AND THE LEGAL PROVISIONS AND RELATED CASE-LAWS ON THE ISSUE AND T HE APPEAL IS DECIDED AS UNDER: 5.3.1. THE APPELLANT HAS BEEN CLAIMING DEDUCTION U/S .80IC ON THE PROFITS OF THE RUDRAPUR UNIT SINCE AY 2009-10 ONWARDS. DURI NG THE PAST YEARS, APPELLANTS CLAIM OF DEDUCTION WAS TESTED WITH SOME ADDITIONS WITH RESPECT TO ISSUE OF ALLOCATION OF INTEREST AND OTHE R COSTS. THE BONAFIDES OF THE RUDRAPUR UNIT WERE NOT CHALLENGED IN THE EARLIE R YEAR/S AND EVEN IN THE CURRENT YEAR I.E. AY 2012-13. THE MAIN ISSUE INVOLVED HEREIN IS WHETHER;' THE CON DITION OF 80 : 20 RATIO REGARDING COMPOSITION OF NEW MACHINERY VIS -A-VIS USED MACHINERY IS TO BE SATISFIED FOR THE FIRST YEAR OF FORMATION OF THE UNDERTAKING OR FOR EVERY YEAR OF CLAIM OF DEDUCTION U/S. 80-IC. 3 ITA NO.301/PUN/2017 A.Y.2012-13 5.3.2. THE AO HAS REPRODUCED THE SUBMISSIONS OF THE APPPELLANT ONLY ISSUE, MADE BEFORE HIM, IN THE ASSESSMENT ORDER. AT PAGE-6, HE HAS REPRODUCED APPELLANT'S SUBMISSION AS REGARDS COMPAR ATIVE SALES AND PROFITS OF THE RESPECTIVE UNITS I.E. PUNE UNIT AND RUDRAPUR UNIT. AS PER THE SAID TABLE, IT APPEARS THAT SALES OF PUNE UNIT ARE INCREASING YEAR-ON- YEAR (EXCEPT ASSESSMENT YEAR 2010-11) AND ALSO THAT OF RUDRAPUR UNIT. SAME IS THE CASE WITH EMPLOYMENT OF LABOUR, WHEREIN , NUMBERS OF WORKERS OF BOTH THE UNITS ARE INCREASING YEARLY. NE W MACHINERIES TOO APPEAR TO HAVE BEEN, ACQUIRED EACH YEAR. CONSIDERIN G THE DIFFERENT PRODUCTS-OF THE TWO UNITS AND INCREASING SALES /LABOUR / NEW MA CHINERY ITEMS, NON-DISTURBANCE OF BONAFIDES OF THE RUDRAPUR UNIT BY THE AO FOR THE EARLIER YEARS, APPEARS TO BE LOGICAL. SOME OTHE R CONTENTIONS ARE ALSO RAISED BY THE AO AS REGARDS MISLEADING OF THE FIGUR ES BY THE APPELLANT, WHICH APPEAR TO HAVE BEEN MET WITH ADEQUATELY BY THE APPELLANT. AFTER CONSIDERING THE PROPOSITIONS OF THE APPELLANT AND T HE FACTS AND RECORDS, IT WAS THOUGHT FIT TO DEAL THE CORE ISSUE INVOLVED HER EIN, I.E. WHETHER THE 80:20 RATIO OF NEW MACHINERY VIS-A-VIS USED MACHINE RY IS REQUIRED TO BE SATISFIED EVERY YEAR OR OTHERWISE. 5.3.3 THE LD. AR OF APPELLANT HAS LED MUCH STRESS O N THE INTERPRETATION OF THE WORD FORMED AND SUBMITTED THAT , CONDITIONS A S TO FORMATION OUGHT TO BE TESTED ONLY IN INITIAL YEAR OF FORMATION I.E. 1 ST YEAR OF FORMATION OF THE UNIT OR UNDERTAKING. THE LD. AR OF THE APPELLAN T HAS RELIED ON NUMBER OF CASES IN THIS REGARD. HOWEVER, THE AO HAS DISMIS SED THESE SUBMISSIONS ON ONE POINT OR OTHER. HE HAS ARGUED TH AT CONSIDERING THE PHRASEOLOGY USED IN THE RELATED SECTION, ONE MUST M AKE A DISTINCTION BETWEEN SOME CONDITIONS AS THE TIME OF FORMATION AN D OTHERS ON YEAR TO YEAR BASIS. IN PARA 4.6 OF THE ASSESSMENT ORDER, THE AO HAS DEA LT W IT H THE VARIOUS ISSUES RAISED BY APPELLANT BEFORE HIM. IN T HE FIRST CASE CITED, I .E . VINTAGE CARDS, FOLLOWING WAS THE OBSERVATION OF THE HONORABLE ITAT , PUNE : ' ON THE CONTRARY, IT LEADS TO THE CONCLUSION THAT THE FULFILLMENT OF CONDITIONS IN THE YEAR OF CLAIM OF D EDUCTION IS NOT LINKED TO THE FULFILLMENT OF CONDITIONS IN INIT IAL YEAR.' THE HONORABLE PUNE ITAT REFUSED TO TEST THE SUBSEQU ENT YEARS SITUATION FOR THE FIRST YEAR'S POSITION OF COMPLIANCE. I HAVE ALSO PERUSED VARIOUS HIGH COURT DECISIONS ON THE ISSUE. IT APPEARS, THE JUDICIAL VIEWS ARE NOT UNIFORM AND DIF FERENT INTERPRETATIONS ARE AVAILABLE ON THE POINT UNDER DISPUTE. THE AR OF APPELLANT HAS ALSO PLACED BEFORE THIS OFFICE A COPY OF THE SLP DISMISS AL IN CASE OF SAMI LABS LIMITED ON THE HON'BLE KARNATAKA HIGH COURT'S DECIS ION REPORTED AT 334 ITR 157. NOW, PER SE, SLP DISMISSAL 'DOES NOT ADD T O A RATIO UNLESS THE JUDICIAL THINKING IN STATED IN THE ORDER OF DISMISS AL. AS PER THE SLP DISMISSAL ORDER, NO ANY FIRM MANDATE IS EMANATING F ROM THE SAID DECISION. THE OTHER CONTENTIONS OF THE APPELLANT ARE HOWEVER, WORTH CONSIDERING IN THE PRESENT CASE. AS PER FACTS, THE DEDUCTION FOR E ARLIER YEARS ARE NOT DISTURBED BY THE ASSESSING AUTHORITIES. THE HON'BLE BOMBAY HIGH COURT, IN THE CASE OF CIT V. WESTERN OUTDOOR INTERACTIVE P LTD - 349 ITR 309 HAS TAKEN A VIEW THAT UNLESS, PRIOR YEARS DEDUCTIONS AR E DISTURBED, THE SUBSEQUENT YEAR'S DEDUCTIONS OUGHT NOT TO BE DISTUR BED. THE SAID RATIO EMANATES FROM THE FOLLOWING HEAD-NOTE TOO. EXEMPTION U/S.10A- NEW INDUSTRIAL UNDERTAKING IN FREE TRADE ZONES-ALLOWABILITYASSESSEE DEVELOPED SOFTWARE FOR IN-FLIGHT 4 ITA NO.301/PUN/2017 A.Y.2012-13 ENTERTAINMENT FOR AIRCRAFTS AND HAD TWO DIVISIONS; ONE IN FORT, MUMBAI AND OTHER AT SANTACRUZ EXPORT PROCESSING ZONE (SEEP Z)- DEPARTMENT ALLOWED CLAIM FOR EXEMPTION OF SEEPZ UNIT U/S.10A F OR A.Y. 2000-01, 2001-02 AND 2002-03-SUBSEQUENTLY FOR A.Y. 2002- 03 AO REOPENED ASSESSMENT U/S.147/148 OF THE ACT AND REJECTED ASSE SSEE'S CLAIM FOR EXEMPTION FOR SEEPZ UNIT U/S.10A OF THE ACT ON GROU ND THAT UNIT WAS FORMED BY SPLITTING FORT UNIT SINCE SAME KIND OF SO FTWARE WAS BEING EXPORTED BY BOTH UNITS AND EXPORT REALIZATION WAS RECEIVED BY SINGLE PAYMENT BY FORT' UNIT AND TRANSFERRED TO SEEPZ UNIT -HOWEVER, CIT(A) AND TRIBUNAL ALLOWED EXEMPTION U/S. 10A TO ASSESSEE'S S EEPZ UNIT ON MERITS IN RESPECT OF ITS UNIT AT SEEPZ, MUMBAI-HELD, WHERE A BENEFIT OF DEDUCTION IS AVAILABLE FOR A PARTICULAR NUMBER OF Y EARS ON SATISFACTION OF CERTAIN CONDITIONS UNDER PROVISIONS OF THE ACT, THE N UNLESS RELIEF GRANTED FOR FIRST ASSESSMENT YEAR IN WHICH CLAIM WAS MADE A ND ACCEPTED IS WITHDRAWN OR SET ASIDE, AO CANNOT WITHDRAW RELIEF F OR SUBSEQUENT YEARS- SINCE REVENUE HAS NOT SUGGESTED THAT THERE WAS ANY CHANGE IN FACTS WARRANTING A DIFFERENT VIEW FOR SUBSEQUENT YEARS, D ISALLOWANCE CANNOT BE MADE-REVENUE 'S APPEAL DISMISSED' IN THE INSTANT CASE, IT IS CLEAR THAT APPELLANT'S R UDRAPUR UNIT WAS PASSING ALL THE TESTS OF DEDUCTION IN THE EARLIER Y EARS INCLUDING THE YEAR OF FORMATION. AS SUCH, THERE IS NO MERIT IN THE ANA LOGY OF THE AO THAT THE CONDITION WITH RESPECT TO FORMATION OF UNIT IS REQU IRED TO BE VISITED TO THE APPELLANT EVERY YEAR AFTER ITS FORMATION. IT IS HEL D BY THE JURISDICTIONAL PUNE ITAT, CONDITIONS AS TO FORMATION ARE TO BE TES TED /VISITED ONLY IN THE FIRST YEAR WHEN SUCH A UNIT IS FORMED. THEREAFTER, THE CONDITIONS OF FORMATION ARE NOT REQUIRED TO BE VISITED. IN SUBSEQ UENT YEARS WHAT IS REQUIRED TO BE TESTED ARE THE YEARLY COMPLIANCE CON DITIONS SUCH AS, SUBMISSION OF AUDIT REPORT, WORKING OF QUANTUM OF D EDUCTION W.R.T. TEST OF PROFITS DERIVED FROM THE UNDERTAKING, AND SO ON. TH E VIEW OF THE HONORABLE KARANATAKA HIGH COURT WAS THAT, VIOLATION OF THE FIRST YEAR'S CONDITION OF 80 :20 RATIO CANT BE IMPROVED BY THE ASSESSEE IN THE NEXT YEARS BY ADDING SOME FURTHER NEW PLANT & MACHINERY ITEMS, ETC. IN OTHER WORDS, THE PERIOD/YEAR IN WHICH THIS CONDITION IS T O BE TESTED IS ONLY YEAR 1 AND NOT ANY SUBSEQUENT YEARS. THIS VIEW GAINS SUP PORT FROM TWO POINTS, FIRST BEING THE SPECIFIC WORD USED I.E. FOR MED AND THE SECOND BEING, THE ACCOMPANIMENT OF THE OTHER CONDITION OF RECONSTRUCTION / SPLITTING-UP. ALL THESE CONDITIONS DENY AN OLD UNIT BEING FORMED INTO A NEW UNIT MERELY FOR CLAIMING OF DEDUCTION. NOW, IF T HIS BEING THE SITUATION, RATIO EMANATING IS THAT, ONLY YEAR-L IS TO BE TESTED FOR ALL SUCH CONDITIONS WHICH RELATE THEMSELVES OR WHICH ARE ATT RIBUTABLE TO THE ASPECT OF FORMATION OF UNIT I.E. YEAR-I AND NOT ANY SUBSEQUENT YEAR. IN ONE SITUATION, AN ASSESSEE VIOLATING THE SAME IN TH E FIRST YEAR WILL BE DENIED DEDUCTION FOR ALL YEARS AND IN OTHER SITUATI ON, AN ASSESSEE COMPLYING WITH THE SAME IN FIRST YEAR WILL BE ELIGI BLE FOR DEDUCTION IN SUBSEQUENT YEARS DESPITE VIOLATION OF THE TEST IN YEARS AFTER YEAR-I, SINCE, THE CONDITIONS THERETO RELATE TO THE WORD 'FORMED'. IN FACT, THESE TESTS ARE DISCUSSED IN DETAIL IN THE FOLLOWING TWO ITAT DECIS IONS A) ITO V. LAXMI PACKERS -14 SOT 303 (MUMBAI) B) ARYA TESTURISERS & TWISTERS V. JCIT - ITA NO. 6647 /MUM/2007 HERE IT IS RELEVANT TO REFER THE HON'BLE MADRAS HIG H COURT IN THE CASE OF LG BALAKRISHNAN & BROS. LTD. VS. CIT [(1985 ) 151 ITR 270 (MADRAS)] WHEREIN IT HAS BEEN HELD THAT 'SECTION 84 (2)(II) SAYS THAT THE NEW INDUSTRIAL UNDERTAKING SHOULD NOT HAVE BEEN FOR MED BY THE TRANSFER TO A NEW BUILDING OF A BUILDING, MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. IF THE TRANSFER OF USE MACHINERY HAS T AKEN PLACE AFTER ITS FORMATION, THEN, THE BAR UNDER SECTION 84(2)(II) WI LL NOT APPLY. BUT, THERE IS 5 ITA NO.301/PUN/2017 A.Y.2012-13 A TRANSFER OF MACHINERY AND IF THE TRANSFER HAS TAK EN PLACE IN THE PROCESS OF FORMATION OR SETTING UP OF THE NEW INDUSTRIES UN DERTAKING, THEN THE ASSESSEE MAY NOT BE ENTITLED TO CLAIM THE BENEFIT O F SECTION 84. 5.3.4 FURTHER, THE ARGUMENTS OF THE APPELLANT AS TO DISTINCTION BETWEEN THE TESTS, SOME AT THE INITIAL FORMATION STAGE, SOM E AT THE SUBSEQUENT YEARLY STAGES AND SOME AT THE CONCLUSION STAGE, ETC . ARE APT AND OUGHT TO BE GIVEN DUE CONSIDERATION. DIFFERENT PHRASEOLOGIES APPEAR TO HAVE BEEN USED FOR VARIOUS CONDITIONS/TESTS. THESE CONDITIONS AND TESTS NEED TO BE CONSIDERED FROM INTENT BEHIND THESE CONDITIONS. IN THIS REGARD, APPELLANTS FACTUAL MATRIX CULLED OUT IN PARA-5 OF THE APPELLANTS LETTER DATED 30.01.2015 FILED BEFORE THE AO AS REPRODUCED IN THE ASSESSMENT ORDER NEEDS APPRECIATION. THESE FACTS ARE AS UNDER: A.Y. SALES BODY SALE QUANTITY LABOR PLANT & MACHINERY ELECTRICITY PUNE RPUR (RS.CR) CR.) RPUR NOS. PUNE RPUR NOS. NO PUNE RPUR (RS. (RS. CR.) CR.) PUNE RPUR (RS. (RS. CR.) CR.) 2008-09 2009-10 2010-11 2011-12 2012-13 113.00 11.00 106.00 33.00 95.00 47.00 142.00 61.00 166.00 108.00 25,188 55,103 71,530 88,461 98,580 500 70 500 150 400 275 600 325 650 550 37.00 0.09 44.00 0.18 45.00 0.26 50.00 0.27 51.00 5.00 2.06 0.13 1.42 0.40 1.68 0.91 2.00 1.03 2.62 2.33 FROM THE ABOVE CHART, IT APPEARS THAT APPELLANTS P UNE UNIT IS SHOWING INCREASING SALES IN A.Y.2012-13 EVEN AFTER THE TRAN SFER OF MACHINERY TO RUDRAPUR UNIT. LABOUR EMPLOYMENT IS ALSO INCREASING AND EVEN THE NEW PLANT & MACHINERY ACQUISITION QUANTUM IS INCREASING . AS SUCH, THE SHIFTING OF SOME OF THE PLANT & MACHINERY ITEMS FRO M PUNE UNIT TO RUDRAPUR UNIT, DO NOT APPEAR TO BE AIMED TO CLAIM S OME EXTRA/ADDITIONAL BENEFIT U/S.80-IC OF THE ITA,1961. 5.3.5. IN VIEW OF THE ABOVE, CONSIDERING THE TOTALI TY OF THE FACTS OF THE CASE, WRITTEN SUBMISSIONS MADE ON BEHALF OF THE APP ELLANT AS WELL AS THE EXPLANATIONS PROVIDED BY HIS LD. AR DURING APPELLAT E PROCEEDINGS AND THE CASE LAWS RELIED UPON, I AM OF THE VIEW THAT TH E CONDITION OF THE TEST OF NEW MACHINERY VIS--VIS OLD MACHINERY HAS TO BE APPLIED IN THE YEAR OF THE FORMATION OF THE NEW UNDERTAKING I.E. THE YEAR ONE AND NOT IN THE SUBSEQUENT YEARS AND ACCORDINGLY, THE APPELLANTS C LAIM OF DEDUCTION U/S.80-IC DURING THE YEAR UNDER CONSIDERATION, IS J USTIFIED. AS SUCH, GROUND RAISED BY THE APPELLANT CHALLENGING DENIAL O F DEDUCTION U/S.80IC IS ALLOWED. 5 . WE HAVE PERUSED THE CASE RECORD, ANALYZED THE FACTS A ND CIRCUMSTANCES OF THIS CASE AND ALSO HEARD RIVAL CONTENTIONS. WE FIND THAT THE DECISION OF LD. CIT(APPEALS) IS BASED ON THE INTERPRETATION AND NEXUS U/ S.80IC OF THE ACT, 6 ITA NO.301/PUN/2017 A.Y.2012-13 WHEREIN, HE HAS CORRECTLY APPLIED THE TEST OF NEW MACHINE RY VIS--VIS OLD MACHINERY IN THE YEAR OF THE FORMATION OF THE NEW UNDERTA KING I.E. THE YEAR ONE AND NOT IN THE SUBSEQUENT YEARS AND THEREFORE, CLAIM OF DEDUCTION U/S.80IC DURING THE YEAR UNDER CONSIDERATION HELD TO BE JUSTIFIED. ACCORDINGLY, THE IMPUGNED ORDER IS UPHELD AND APPEAL OF T HE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 3 RD DAY OF JANUARY, 2019. SD/- SD/- R.S. SYAL PARTHA SARAT HI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 3 RD JANUARY, 2019. SB !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-9, PUNE. 4. THE PR. CIT-5, PUNE. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 7 ITA NO.301/PUN/2017 A.Y.2012-13 DATE 1 DRAFT DICTATED ON 02.01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 03 .01 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER