ITO Ward-3 (4), New Delhi V. Continental Engines Ltd, New Delhi

ITA 3017/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8431 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-05-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 01-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MURLI KUMAR
• Keywords: Depreciation; Benefit of exemption
• Section: 80HHC; 10B

Judgement Text

ITA NOS.2284,2285 & 3017/DEL./2008 (A.YS. : 2003-04, 04-05 & 05-06) 1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `B : NEW DELHI) BEFORE HONBLE SR. VICE PRESIDENT SHRI R.P. GARG A ND HONBLE JUDICIAL MEMBER, SHRI A.D. JAIN ITA NOS.2284, 2285 & 3017/DEL./2008 (ASSESSMENT YEARS : 2003-04, 04-05 & 05-06) ITO, WARD 3(4), VS. M/S CONTINENTAL ENGINES LTD. , NEW DELHI. 22, COMMERCIAL COMPLEX, MALCHA MARG, NEW DELHI-110 021. (PAN/GIR NO.AAACC0513D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.V.S.R. KRISHNA, C.A., REVENUE BY : SHRI MURLI KUMAR, CIT(DR) ORDER PER R.P. GARG, SR.VP THESE APPEALS BY THE REVENUE ARE AGAINST THE ORDE RS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR ASSESSMENT YEARS 2003-04 , 04-05 & 05-06. ITA NO.2284 & 3017/DEL./2008 2. SINCE THE FIRST ISSUE RAISED IN ITA NO.2284 AND ALL THE GROUNDS TAKEN IN ITA NO.3017 ARE COMMON REGARDING DISALLOWANCE UNDER SEC TION 10B OF THE ACT IN BOTH THE APPEALS, WE PROCEED TO DISPOSE OF THE SAME AS FOLLO WS. 3. THE ASSESSING OFFICER DISALLOWED EXEMPTION U/S 1 0B IN RESPECT OF 100% EXPORT ORIENTED UNIT (CEL II) AT BHIWADI ON THE GROUND THA T THE CONDITIONS PRESCRIBED IN THE SAID SECTION WAS NOT FULFILLED BY THE UNIT II OF THE ASS ESSEE FIRM. THE ASSESSEE CLAIMED THAT THE ASSESSING OFFICER WAS NOT RIGHT IN DISALLOWING THE BENEFIT OF EXEMPTION U/S 10B ON ASSUMPTIONS AND SURMISES IN RESPECT OF 100% EXPORT ORIENTED UNIT (CEL II) AT BHIWADI. THE ASSESSEE ALSO CLAIMED THAT THE ASSESSING OFFICE R WAS NOT JUSTIFIED TO REJECT THE CLAIM OF DEDUCTION U/S 10B WITHOUT GIVING ANY REASON AND WITHOUT HAVING ANY MATERIAL TO THE ITA NOS.2284,2285 & 3017/DEL./2008 (A.YS. : 2003-04, 04-05 & 05-06) 2 CONTRARY. THE ASSESSEE ALSO STATED THAT THE ASSESS ING OFFICER DEVIATED FROM THE STAND OF THE PREVIOUS ASSESSMENT YEAR WHEREIN THE CLAIM UNDE R SECTION 10B WAS DULY ALLOWED TO THE SAID UNIT-II, BHIWADI. THE ASSESSEE FURTHER ST ATED THAT THE ASSESSING OFFICER WAS NOT CORRECT IN REJCTING THE BOOKS ALLEGEDLY U/S 145(3) OF THE ACT AND RE-ESTIMATING THE PROFIT MADE BY THE ASSESSING OFFICER WITHOUT JURISDICTION . THE ASSESSEE FURTHER STATED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT EOU UNI T AND OTHER 3 NON EOU UNITS WERE INDEPENDENT UNITS WITH SEPARATE SET OF BOOKS OF ACC OUNT HAVING INDEPENDENT PREMISES, PLANTS AND MACHINERY, OPERATIONAL SET UP AND WERE U SED DURING THE ASSESSMENT YEARS UNDER CONSIDERATION FOR THEIR OPERATIONS. THE ASSE SSEE ALSO STATED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT EOU UNIT AT BHIWA DI BEING NEW UNIT WAS MORE EFFICIENT AND HAVING MORE VOLUMES OF EXPORT BUSINESS THAN THE NON-EOU UNIT AT GURGAON. THE ASSESSEE CLAIMED THAT THIS BEING THE FACTUAL POSITI ON OF THE COMPUTATION OF INCOME AS FILED BY THE ASSESSEE SHOULD BE ACCEPTED AND, THEREFORE, THE CLAIM U/S 10B SHOULD BE ALLOWED. THE ASSESSEE ALSO STATED THAT THE ALLOCATION OF EXP ENDITURE OF ALL THE UNITS BASED ON THE TURNOVER OF UNITS AS OPERATION OF CEL I & CEL II UN ITS WERE ENTIRELY DIFFERENT TO EACH OTHER AND HENCE, THE ASSESSING OFFICER WAS NOT JUST IFIED IN DISALLOWING THE DEDUCTION CLAIMED U/S 10B BY THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) ALLOWED THE GROUND OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS BY OBSERVING IN PARA.7 OF HIS ORDER AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND CONTE NTION OF THE ASSESSING OFFICER AND THE SUBMISSIONS MADE BY THE ASSESSEE. I T IS WORTHWHILE TO NOTE THAT THE ASSESSEE IS AN APPROVED EOU UNIT BY THE NEPZ AUTHOR ITIES WHICH IS NOT IN DISPUTE. FURTHER, THE ASSESSING OFFICER HAS ACCEPT ED THE EXPORTS MADE BY THE ASSESSEE FROM THE CEL II UNIT AS IN THE ASSESSMENT ORDER ITSELF HE HAS ADMITTED AND AGREED AT PAGE 16 THAT THE ASSESSEE IS MAKING EXPOR TS WHICH IS NOT DISPUTED. NOW THE QUESTION REMAINS WHETHER THE ASSESSEE HAS MANUF ACTURED OR PRODUCED ANY ARTICLE OR THING WITHIN THE MEANING OF SECTION 10B OF THE I.T. ACT, 1961. FROM THE FACTS, I FIND THAT THERE ARE DIFFERENT PROCESSES WH ICH ARE CARRIED OUT IN THE EOU UNDERTAKING LISTED OUT AT PAGE 110 OF THE PAPER BOO K. AS A RESULT OF THIS PROCESS A RAW CASING BECOMES A FINISHED GOODS WHICH IS A MARK ETABLE COMMODITY. THEREFORE, IN MY CONSIDERED OPINION THE ASSESSEE H AS CARRIED OUT MANUFACTURING OF AN ARTICLE OR THING. SO FAR AS TH E ASSESSING OFFICERS OBSERVATIONS RELATING TO CERTAIN JOBS BEING DONE BY SISTER CONCERN DOES NOT STAND IN THE WAY OF ASSESSEE FOR CLAIMING THE EXEMPTION U/S 10B AS THERE IS NOTHING IN THE SECTION PREVENTING HIM FROM GETTING JOB WORK DONE F ORM OUTSIDE. ITA NOS.2284,2285 & 3017/DEL./2008 (A.YS. : 2003-04, 04-05 & 05-06) 3 THE ASSESSEE HAS ALSO EXPLAINED THAT THE PROPER BOO KS OF ACCOUNTS OF THE UNIT ARE BEING MAINTAINED. THE ASSESSEE ALSO CONTENDED THAT THE OTHER UNIT NAM ELY CEL I ON A STAND ALONE BASIS, THE PROFITABILITY IS COMPARABLE WITH THAT OF THE EARLIER YEARS AND THAT THERE IS NO CASE FOR BOOKING MORE EXPENSES IN CEL I AND LESS IN CEL II. HOWEVER, TO BUY PEACE, THE ASSESSEE DURING THE COURSE OF HEARING BE FORE THE ASSESSING OFFICER HAS ALSO FAIRLY GIVEN THE ALTERNATIVE WORKING OF THE TO TAL EXPENDITURE BASED ON THE TOTAL TURNOVER OF CEL I AND CEL II TO THE ASSESSING OFFIC ER AND ALSO REDUCED THE CLAIM UNDER 10B TO AN EXTENT OF RS.1 CORERS APPROXIMATELY BY REALLOCATING THE EXPENSES BASED ON TURNOVER. THE ASSESSEE HAS ALSO DRAWN MY ATTENTION TO THE ASS ESSMENT ORDER FOR ASSESSMENT YEAR 2004-05 IN THE ASSESSEE S OWN CASE WHEREIN TH E ASSESSING OFFICER IMSEF HAS CATEGORICALLY MENTIONED THAT THE CONDITIONS FOR CLA IM OF DEDUCTION U/S 10B FOR CEL II ARE FULFILLED. CONSEQUENTLY, THE ASSESSING OFFICER HAS ALLOWED THE DEDUCTION U/S 10B. CONSIDERING ALL THE ABOVE FACTS AND THE LEGAL CASE LAWS, I AM OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING EXEMPTION U/S 10B OF THE I.T. ACT, 1961 FOR ITS UNIT NO.CEL-II AT BHIWADI. AS A RESULT THE CLAIM O F THE ASSESSEE U/S 10B OF RS.541,40,772 (AS REVISED BY THE ASSESSEE BEFORE TH E ASSESSING OFFICER) IS ALLOWED. CONSEQUENTLY, THE DEDUCTION U/S 80HHC WHI CH THE ASSESSING OFFICER HAS ALLOWED ON THE EXPORT TURNOVER OF CEL-II WOULD BE WITHDRAWN. 4. SIMILARLY, THE COMMISSIONER OF INCOME-TAX (APPEA LS) ALLOWED THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 AS WELL FO LLOWING THE SAME OBSERVATIONS MADE THEREIN. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL PLACED ON RECORD. WE ARE SATISFIED THAT THE COMMISSIONER OF INCOME-TAX (APPE ALS) WAS RIGHT AND PROPER IN ALLOWING THE CLAIM OF THE ASSESSEE U/S 10B FOR BOTH THE ASSE SSMENT YEARS UNDER CONSIDERATION. WE, THEREFORE, UPHOLD THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND ALLOW THE CLAIM OF THE ASSESSEE MADE U/S 10B OF THE ACT IN B OTH THE APPEALS. 6. THE SECOND GROUND RAISED BY THE REVENUE IN THE A PPEAL FOR ASSESSMENT YEAR 2003- 04 IS AGAINST THE DELETION OF ADDITION OF RS.12,589 ,118 UNDER THE HEAD UNCONFIRMED LIABILITY. THIS GROUND DESERVES TO BE RESTORED BA CK TO THE FILE OF THE ITO TO EXAMINE WHETHER THE LIABILITY HAS OCCURRED IN THE YEAR UNDE R CONSIDERATION OR NOT AND THEN ALLOW THE CLAIM OF THE ASSESSEE ACCORDINGLY. ITA NOS.2284,2285 & 3017/DEL./2008 (A.YS. : 2003-04, 04-05 & 05-06) 4 ITA NO.2285/DEL./2008 7. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.80,26,659 MADE UNDER TH E HEAD FOREIGN EXCHANGE FLUCTUATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES FO THE CAS E, THE LD.CIT(A) HAS ERRED IN ALLOWING DEPRECIATION ON PERIPHERALS AT A HIGHER RA TE. 8. AFTER HEARING THE PARTIES, WE FIND THAT THE FIRS T ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST HE REVENUE BY THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P. LTD., 294 ITR 45 1 (DEL.) AND CONFIRMED BY THE SUPREME COURT IN THE SAID CASE REPORTED IN 223 CTR PAGE 07. THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS, THEREFORE, JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE AND HIS ORDER IS ACCORDINGLY UPHELD. FOLLOWING THE DEC ISION OF THE SUPREME COURT IN THE CASE OF WOODWARD GOVERNOR INDIA P. LTD., CITED SUPRA, TH IS GROUND OF THE REVENUE IS, ACCORDINGLY DISMISSED. 9. AS REGARDS SECOND GROUND, WE FIND THAT THE ASSES SING OFFICER OBSERVED THAT DEPRECIATION @ 60% AS PER APPENDIX 1 RULE 5 IS AVAI LABLE ON COMPUTER AND COMPUTER SOFTWARE AND NOT ON THE COMPUTER ACCESSORIES AND PE RIPHERALS LIKE SCANNERS, WORKSTATION, PRINTERS, ETC. 10. THE COMMISSIONER OF INCOME-TAX (APPEALS) ALLOWE D THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. SAMIRAN MAJUMDAR, 98 ITD 119 (KOL.) WHEREIN IT IS HELD THAT PRINTER AND SCAN NER ARE INTEGRAL PART OF COMPUTER SYSTEM. AS THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS) IS BASED ON THE DECISION OF THE TRIBUNAL CITED SUPRA, NO INTERFERENCE IS CALLED FOR IN HIS ORDER WHICH IS ACCORDINGLY UPHELD. THIS GROUND OF THE APPEAL RAISED BY THE RE VENUE IS ALSO DISMISSED. ITA NOS.2284,2285 & 3017/DEL./2008 (A.YS. : 2003-04, 04-05 & 05-06) 5 11. IN THE RESULT, THE APPEALS OF THE REVENUE IN 1. ITA NO.2284 IS PARTLY ALLOWED FOR STATISTICAL P URPOSE; AND 2. ITA NOS.2285 AND 3017 ARE DISMISSED. 12. ORDER PRONOUNCED IN OPEN COURT ON 31.07.2009. (A.D. JAIN) (R.P. GARG) JUDICIAL MEMBER SR. VICE PRESIDENT DATED: JULY 31, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XVIII, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT