M/s Super LPG Appliances, Solan V. DCIT, Chandigarh

ITA 302/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5196 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 02-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 04-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S KRISHAN

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.302/CHD/2016 ASSESSMENT YEAR: 2012-13 M/S SUPER LPG APPLIANCES VS. THE DCIT VILL-JHARMAJRI, P.O. BAROTIWALA CIRCL, PARWANOO BADDI, DIST.SOLAN PAN NO. ABDFS7491K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S. KRISHAN RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 02/03/2017 DATE OF PRONOUNCEMENT : 25/04/2017 ORDER PER ANNAPURNA GUPTA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), SHIMLA DT. 25/02/2016. 2. GROUND NO. 1 & 5 RAISED BY THE ASSESSEE ARE GENE RAL IN NATURE AND HENCE NEED NO ADJUDICATION. 3. GROUND NO. 2 & 3 RAISED BY THE ASSESSEE READS AS UNDER: 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING ACTION OF THE LD. ASSESSING OFFICER IN DENYING 100% DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 AND RESTRICTING IT TO 25% ONLY. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING ACTION OF THE LD. ASSESSING OFFICER IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS. 153,452,045/- U/S 80IC ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE SAID GROUNDS ARE AGAINST THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE AO IN RESTRICTING THE DEDUCTION CLAIMED BY THE ASSE SSEE UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 @ 100% OF THE ELIGIBLE PROFIT S TO 25% . 4. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE HAD FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 61,120/- AFTER CLAIMING DED UCTION UNDER SECTION 80IC AMOUNTING TO RS. 20,49,14,571/- @ 100% OF ITS ELIGI BLE PROFIT. THE ASSESSEE DERIVED INCOME 2 FROM MANUFACTURING OF LPG GAS STOVES AND HAD STARTE D ITS MANUFACTURING ACTIVITY / OPERATION ON 31/05/2005. FOR THE PURPOSE OF CLAIMIN G DEDUCTION UNDER SECTION 80IC, ASSESSMENT YEAR 2006-07 HAD BEEN CLAIMED AS INITI AL ASSESSMENT YEAR BY THE ASSESSEE AND DEDUCTION @100% OF ITS ELIGIBLE PROFIT WAS CLAIMED FOR A PERIOD OF FIVE YEARS THEREAFTER STARTING FROM ASSESSMENT YEAR 200 6-07 TO 2010-11. THE IMPUGNED YEAR BEING THE SEVENTH YEAR OF PRODUCTION FOR THE FIRM, THE ASSESSEE AGAIN CLAIMED DEDUCTION OF ITS ELIGIBLE PROFIT @ 100% ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN BY IT IN ASSESSMENT YEAR 2010-11. THE ASSESSING OF FICER FOR DETAILED REASONS MENTIONED IN THE ASSESSMENT ORDER HELD THAT THE ASSESSEE IS E LIGIBLE FOR DEDUCTION @ 25% ONLY AS AGAINST 100% CLAIMED BY IT AND THUS RESTRICTED THE CLAIM TO RS. 5,11,50,682/- AS AGAINST RS. 20,49,14,571/- CLAIMED BY THE ASSESSEE. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.C IT(A) WHO UPHELD THE ORDER OF THE AO RESTRICTING THE DISALLOWANCE TO 25% OF ELIGI BLE PROFIT FOLLOWING THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S HYCRON ELE CTRONICS VS. ITO IN ITA NO. 798/CHD/2012 AND OTHER RELATED CASES. 6. AGGRIEVED BY THE SAME THE ASSESSEE CAME IN APPEA L BEFORE US. 7. DURING THE COURSE OF HEARING IT WAS FAIRLY ADMIT TED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS COVERED AGAINST IT BY TH E DECISION OF THE ITAT CHANDIGARH BENCH IN CASE OF M/S HYCRON ELECTRONICS(SUPRA).LD. AR FURTHER RELIED ON SUBMISSIONS MADE BEFORE THE LD. CIT(A) AGAINST THE RESTRICTION OF DEDUCTION TO THE EXTENT OF 25% OF THE ELIGIBLE PROFIT. 8. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE LD. CIT(A). 9. HAVING HEARD THE RIVAL CONTENTIONS AND GONE THRO UGH THE ORDER OF THE AUTHORITIES BELOW WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE LD. CIT(A) ADJUDICATED THE ISSUE BY FOLLOWING THE DECISION OF ITAT CHANDIGARH BENCH IN THE CASE OF M/S HYCRON ELECTRONICS(SUPRA). LD. COUNSEL FOR THE ASSESSEE HA S NOT BROUGHT OUT ANY DISTINGUISHING FACTS IN THE PRESENT CASE NOR HAS POINTED OUT ANY E RROR IN THE ORDER PASSED BY THE LD. CIT(A) BY FOLLOWING THE ORDER OF THE ITAT CHANDIGAR H BENCH IN THE CASE OF M/S HYCRON 3 ELECTRONICS (SUPRA). MOREOVER WE FIND THAT THE FACT S IN THE PRESENT CASE CLEARLY DEMONSTRATE THAT THE ISSUE OF ALLOWABILITY OF DEDUC TION UNDER SECTION 80IC IS SQUARELY COVERED BY THE DECISION OF THE ITAT CHANDIGARH BENC H IN THE CASE OF M/S HYCRON ELECTRONICS. UNDISPUTEDLY THE ASSESSEE HAS COMMENCE D OPERATIONS ON 31/05/2005 I.E; AFTER SECTION 80IC WAS BROUGHT ON THE STATUTE BY FI NANCE ACT 2003 WITH EFFECT FROM 01/04/2003. FURTHER THE ASSESSEE HAS CLAIMED INITI AL ASSESSMENT YEAR AS A.Y 2006-07 AND CLAIMED DEDUCTION OF 100% OF ITS ELIGIBLE PROFI T FOR FIVE YEARS. THEREAFTER, IT IS ALSO UNDISPUTED FACT THAT THE ASSESSEE UNIT IS LOCATED I N THE STATE OF HIMACHAL PRADESH.THE ITAT CHANDIGARH BENCH IN THE CASE OF HYCRON ELECTRO NICS (SUPRA) WAS SEIZED WITH IDENTICAL ISSUE BEING CLAIM OF 100% DEDUCTION ON CA RRYING OUT SUBSTANTIAL EXPANSION BY A NEW UNDERTAKING SET UP AFTER SECTION 80IC WAS BRO UGHT ON THE STATUTE INTERPRETED THE PROVISION OF SECTION 80IC AND HELD IN THE SAID CASE THAT A NEW UNDERTAKING WHICH CAME INTO EXISTENCE AFTER SECTION 80IC WAS BROUGHT ON TH E STATUTE IS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF SUBSTANT IAL EXPANSION UNDERTAKEN. THE ITAT ALSO HELD THAT THERE CAN BE ONLY ONE INITIAL YEAR F OR THE PURPOSE OF SECTION 80IC IN THE CASE OF THE ASSESSEE AND THAT IN ANY CASE THE DEDUC TION @ 100% OF THE ELIGIBLE PROFIT CANNOT EXCEED OF PERIOD OF 5 YEARS FOR A UNIT SITUA TED IN HIMACHAL PRADESH. IN VIEW OF THE SAME WE HOLD THAT THE LD. CIT(A) HA S RIGHTLY UPHELD THE RESTRICTION OF DEDUCTION UNDER SECTION 80IC TO THE EXTENT OF 25% O F THE ELIGIBLE PROFIT AS AGAINST 100% CLAIMED BY THE ASSESSEE. GROUND NO. 2 & 3 RAISED BY THE ASSESSEE ARE THEREFORE DISMISSED. 10. GROUND NO. 4 RAISED BY THE ASSESSEE READS AS UN DER: 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING ADDITION OF RS. 72,917/- I.E. FROM SERVICE AND INSTALLATION WAS NOT BEING DIRECTLY DERIVED FROM MA NUFACTURING ACTIVITY AND SO NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT, BY REL YING ON DECISIONS NOT RELEVANT OR APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE AS SESSEE. 11. THE FACTS RELATING TO THE ISSUE ARE THAT THE AS SESSEE HAD SHOWN OTHER INCOME COMPRISING OF SERVICE AND INSTALLATION CHARGES AMOU NTING TO RS. 72,917/- AND CLAIMED DEDUCTION UNDER SECTION 80IC ON THE SAME. THE AO DE NIED THE SAME SINCE HE HELD THAT THERE WAS NO NEXUS OF FIRST DEGREE OF THE SAID INCO ME WITH THE INDUSTRIAL UNDERTAKING AND THE MANUFACTURING ACTIVITY OF THE ASSESSEE. HE RELIED ON THE DECISION OF THE HONBLE 4 SUPREME COURT IN THE CASE OF M/S LIBERTY INDIA LTD. AND OTHERS VS. CIT (317 ITR 218) IN THIS REGARD. LD. CIT(A) UPHELD THE DISALLOWANCE MADE STATING THA T NO SUBMISSION WERE MADE BY THE ASSESSEE TO POINT OUT HOW THE FINDINGS OF THE AO WE RE ERRONEOUS OR INCORRECT IN INTERPRETING THE LEGAL PROVISION OF THE ACT. 12. DURING THE COURSE OF HEARING BEFORE US LD. COUN SEL FOR THE ASSESSEE STATED THAT THERE WAS DIRECT NEXUS BETWEEN THE SERVICE AND INST ALLATION CHARGE RECEIVED AND THE MANUFACTURING ACTIVITY OF THE ASSESSEE AND THUS THE INCOME EARNED THEREFROM WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC. 13. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDE R OF THE LD. CIT(A) AND STATED THAT SINCE NO EVIDENCE OR EXPLANATION FOR ESTABLISH ING THE NEXUS HAD BEEN FILED BY THE ASSESSEE, LD. CIT(A) HAD RIGHTLY DENIED THE DEDUCTI ON UNDER SECTION 80IC TO THE ASSESSEE. 14. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND NO MERIT IN THE CONTENTION OF THE LD . COUNSEL FOR THE ASSESSEE.EXCEPT FOR STATING THE EXISTENCE OF FIRST DEGREE NEXUS BETWEEN THE INCOME EARNED AND THE MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE NO EVIDENCE ESTABLISHING THE SAME HAS BEEN FILED. IN THE ABSENCE OF THE SAME, IT CANN OT BE SAID THAT THE SAID INCOME HAS BEEN DERIVED FROM THE MANUFACTURING ACTIVITY OF THE ASSESSEE WHICH IS A SINE-QUA-NON FOR CLAIMING DEDUCTION UNDER SECTION 80IC. IN VIEW OF THE SAME WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), DENYING DEDUCTION UNDE R SECTION 80IC TO THE INCOME EARNED BY THE ASSESSEE FOR SERVICE AND INSTALLATION CHARGES AMOUNTING TO RS. 72,917/-. GROUND NO. 4 OF THE APPEAL RAISED BY THE ASSESSEE I S THEREFORE DISMISSED IN ABOVE TERMS. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25/04/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR