M/s Aqua Plumbing Pvt. Ltd., Mathura V. Addl.CIT, Mathura

ITA 31/AGR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6995 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 31/AGRA/2010 ASSTT. YEAR : 2006-07 M/S. AQUA PLUMBING (P) LTD. VS. ADDL. C.I.T., DELHI MATHURA BYE PASS RANGE-3, MATHURA. CHHATIKARA, MATHURA. (PAN : AACCA 5366 Q) (APPELLANT) (RESPONDENT) FOR APPELLANT : WRITTEN SUBMISSIONS FOR RESPONDENT : SHRI VINOD KUMAR, JR. D.R. ORDER PER P.K. BANSAL, A.M. : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 15.12.2009 OF CIT(A), RAISING THE FOLLOWING GROUNDS : 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN NOT ALLOWING DEDUCTION U/S. 80IB IN FULL AS CLAIMED BY THE ASSESSEE AND HAS FURTHER ERRED IN RESTRICTING THE CLAIM U/S. 80IB TO RS.33,59,939/- AS AGAINST RS.54,72,083/- AS CLAIMED BY THE ASSESSEE IN THE RE TURN OF INCOME. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN MAKING DISALLOWANCE OF RS.79,087/- ON ACCOUNT OF VEHICLE EXPENSES. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN MAKING DISALLOWANCE OF RS.1,21,170/- ON ACCOU NT OF TELEPHONE EXPENSES. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN NOT QUASHING THE IMPUGNED ORDER PASSED BY LD. AO BEING ILLEGAL, VOID AB INITIO, CONTRARY TO LAW AND FACTS AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN CHARGING INTEREST U/S 234A, 234B, 234C AND 23 4D. 2. NONE IS PRESENT ON BEHALF OF THE ASSESSEE. WE HA VE HEARD THE LEARNED DR AND HAVE PERUSED ENTIRE MATERIAL ON RECORD AS WELL AS THE OR DERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THIS BENCH OF TRIBUNAL HAS DECIDED THE IDENTICAL IS SUES IN ASSESSEES OWN CASES FOR ASSESSMENT YEAR 2004-05 AND 2005-06 IN ITA NOS.447/AGRA/2006 A ND 698/AGRA/2008 WHEREIN VIDE ORDER DATED 31.05.2011, WE HAVE DECIDED THE IDENTICAL ISS UE AS INVOLVED IN GROUND NO.1 OF THIS APPEAL IN FAVOUR OF THE ASSESSEE IN THE SIMILAR SET OF FAC TS AND CIRCUMSTANCES AS UNDER : 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE AGREEMENT BY WHICH THE ASSESS EE HAS TAKEN OVER MOST OF THE ASSETS OF THE ERST WHILE FIRMS, BUT CERTAIN ASSETS REMAINED WITH THE FIRM. THE ASSESSEE COMPANY WAS FORMED IN THE ASSESSMENT YEAR 1997-98. THIS FACT IS NOT DENIED AND WAS ALLOWED DEDUCTION U/S. 80IA / 80IB S INCE THEN IN THE SUBSEQUENT YEARS ALSO. THIS IS THE 7 TH YEAR OF CLAIM OF THE DEDUCTION U/S. 80IA / 80IB OF THE ASSESSEE. SO FAR AS THE PROVISIONS OF SECTION 80IA / 80IB ARE CONCERNED, ANY INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER THESE SECTIONS MUST FULFILL CERTAIN CONDITIONS. THESE CONDITIONS U/S. 80IB ARE LAID DOWN UNDER SUB-SECTION (2). THIS IS SETTLED LAW THAT THE CONDITIONS AS LAI D DOWN FOR CLAIMING THE DEDUCTION US. 80IB ARE TO BE COMPLIED WITH IN THE INITIAL YEA R AND NOT IN ALL THE ASSESSMENT YEARS IN WHICH THE ASSESSEE IS ELIGIBLE FOR DEDUCTI ON IN VIEW OF THE DECISION OF CO- ORDINATE BENCH IN THE CASE OF JAIN UDHAY HOSIERY (P ) LTD. VS. ACIT (SUPRA) AND THAT OF THE DECISION OF CO-ORDINATE BENCH, PUNE IN THE CASE OF DESAI BROTHERS LTD. VS. DCIT, 66 ITD 203 (PUNE). NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE. IN THE INITIAL YEAR, THE CONDITIONS AS L AID DOWN U/S. 80IA / 80IB FOR THE CLAIM OF DEDUCTION WERE DULY COMPLIED WITH BY THE A SSESSEE AND THEREFORE, THE ASSESSEE WAS ALLOWED DEDUCTION U/S. 80IA / 80IB IN THE INITIAL YEAR. THE DEDUCTION WAS EVEN THOUGH ALLOWED DURING THE YEAR, BUT WAS RE DUCED ON THE PLEA THAT THE ASSESSEE HAS TAKEN OVER TWO OTHER UNITS DURING THE YEAR. THE FACTS ON RECORD CLEARLY PROVE THAT THE ASSESSEE HAS NOT TAKEN OVER THE COMPLETE UNITS, BUT HAS PURCHASED MOST OF THE ASSETS OF THOSE UNITS AND THE UNITS GOT MERGED WITH THE UNIT OF THE ASSESSEE. IT IS A CASE OF SUBSTANTIAL EXPANS ION AND EXTENSION OF THE INDUSTRIAL UNIT NOT OF RUNNING THREE SEPARATE UNITS . THE EXPANSION OR EXTENSION OF A EXISTING UNIT, IN OUR OPINION, WILL NOT DISENTITL E THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA / 80IB SO THAT THE PROFIT INCREASED TO TH E EXPANSION OR EXTENSION OF THE INDUSTRIAL UNDERTAKING WILL NOT BE ELIGIBLE FOR DED UCTION U/S. 80IA / 80IB OF THE ACT. BOTH THE CONCERNS, M/S. FAUCET INDUSTRIES AND AARKEY PLUMBING FIXTURE REMAINED IN EXISTENCE EVEN AFTER THE SALE OF CERTAI N ASSETS OF THE ASSESSEE AS IS APPARENT FROM THE BALANCE SHEET FILED BEFORE US AVA ILABLE BEFORE US AT PAGES 1C- 3 24 AND 25 TO 53 OF THE PAPER BOOK. IN OUR OPINION, IT IS A CASE OF SUBSTANTIAL EXPANSION AND EXTENSION OF THE EXISTING UNIT WHICH HAS COMPLIED WITH THE CONDITIONS AS STIPULATED U/S. 80IA /80IB ELIGIBLE F OR EDUCATION UNDER THOSE PROVISIONS WHEN THE ASSESSEE COMPANY WAS FORM. THER EFORE, IN OUR OPINION, THE ASSESSEE CANNOT BE DENIED DEDUCTION U/S. 80IA / 80I B ON THE PROFIT AND GAINS DERIVED BY HIM FROM MERGED INDUSTRIAL UNDERTAKING. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION TO THE ASSESSEE U/S. 80IA / 80IB ON THE PROFIT DERIVED BY THE ASSESSEE FROM THE INDUSTRIAL UNDERTAKING TREATING IT TO BE THE SINGLE INDUSTRIAL UNDERTAKING. THUS, GROUND NO. 1 STANDS ALLOWED. RESPECTFULLY FOLLOWING THE ORDER OF THIS TRIBUNAL, WE, THEREFORE, ALLOW GROUND NO. 1 OF THIS APPEAL. 3. AS REGARDS GROUND NO.2 & 3, WHICH RELATE TO DIS ALLOWANCE OF RS.79,087/- ON ACCOUNT OF VEHICLE EXPENSES AND DISALLOWANCE OF RS.1,21,170/- ON ACCOUNT OF TELEPHONE EXPENSES, WE HAVE DECIDED THIS ISSUE WHILE DISPOSING OF GROUND NO. 2 IN ASSESSEES APPEAL NO. 447/AGRA/2006 FOR A.Y. 2004-05 IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE AS UNDER : 14. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL ON RECORD. WE NOTED THAT THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO PRODUCE LOG BOOK FOR RUNNING OF THE CAR AND THE DETAILS OF THE MOBILE/PHONE CALLS, BUT THE ASSESSEE COULD NOT PROD UCE THE SAME. THE ASSESSING OFFICER ALSO OBSERVED THAT THE PERSONAL USE OF THE PHONE/CAR BY THE DIRECTORS AS WELL AS EMPLOYEES OF THE COMPANY CANNOT BE RULED OU T AND, THEREFORE, HE DISALLOWED 10% OF THESE EXPENSES. IN OUR OPINION, W HENEVER AN ASSESSEE CLAIMS AN EXPENDITURE TO HAVE BEEN INCURRED FOR THE PURPOS E OF BUSINESS, THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPEND ITURE. THE ASSESSEE WAS BOUND TO PRODUCE THE LOG-BOOK FOR RUNNING OF THE CAR AND THE DETAILS OF MOBILE / PHONE CALLS WHICH HE FAILED TO DO. BUT IN CASE, THE DIREC TORS AND THE EMPLOYEES OF THE COMPANY AS PER THE TERMS AND CONDITION OF THEIR APP OINTMENT ARE ENTITLED TO USE THE CASE FOR PERSONAL PURPOSE AS WELL AS TO AVAIL F ACILITIES OF MOBILE / PHONE CALLS IN VIEW OF THE DECISION OF GUJRAT HIGH COURT AS HAS BEEN RELIED BY THE LEARNED AR IN THE CASE OF SYAJI IRON AND ENGINEERING CO. VS. C IT(SUPRA), THE ASSESSEE WILL BE ENTITLED FOR DEDUCTION OF THESE EXPENSES. SINCE NO EVIDENCE IS BROUGHT ON RECORD TO SHOW THE TERMS AND CONDITIONS ON WHICH THE DIRECTOR S AND EMPLOYEES WERE APPOINTED TO AVOID THE USE OF CAR AND MOBILE/PHONE BY THEM, WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTI ES, SET ASIDE THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH TH E DIRECTION THAT THE ASSESSING OFFICER SHALL RE-DECIDE THIS ISSUE AFTER LOOKING IN TO THE TERMS AND CONDITIONS OF THE EMPLOYEES AS WELL AS THE DIRECTORS WHETHER THEY ARE ENTITLED TO USE THE CAR AND 4 MOBILE/PHONE FOR THEIR PERSONAL USE OR NOT. THE ASS ESSEE IS ALSO DIRECTED TO PROVIDE ALL THE DETAILS ALONG WITH CAR NUMBER, NAME OF THE DIRECTORS OR THE PERSONS, WHO HAVE USED THE CAR, DETAILS OF MOBILE / PHONE CALLS ALONG WITH THE NAME OF THE DIRECTORS AND NAME OF THE EMPLOYEES WHO HAD USED THEM ALONG WITH THE TERMS AND CONDITIONS OF THEIR EMPLOYMENT. IF TH E TERMS AND CONDITIONS OF THE EMPLOYEES SO PROVIDE, NO PART OF THE EXPENDITURE SH OULD BE DISALLOWED. IN CASE THE ASSESSEE FAILS TO DISCHARGE ITS ONUS, THE ASSES SING OFFICER IS DIRECTED TO DISALLOW 10% OF THESE EXPENSES AS HAS BEEN REASONAB LY ESTIMATED BY HIM. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE ORDER OF THIS TRIBUNAL, WE, THEREFORE, ALLOW GROUND NO. 2 & 3 OF THIS APPEAL FOR STATISTICAL PURPOSES 4. GROUND NO. 4 IS GENERAL IN NATURE AND GROUND NO. 5 RELATING TO CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE. THE ASSESSING OFFICER IS, ACCORDINGLY, DIRECTED TO RE-COMPUTE THE INTEREST U/S 234A, 234B, 234C AND 234D AFTER GIVING EFFECT OF THIS ORDER. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.06.11. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 TH JUNE, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY