M/s. Liners India Limited, Vijayawada V. The ACIT, Vijayawada

ITA 310/VIZ/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2827 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONAWAL
• Keywords: Depreciation; Assessment record
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 310 / VIZ /201 7 (ASST. YEAR: 20 12 - 13 ) M/S. LINERS INDIA LIMITED, R.S.NO. 205/2A, AUTO NAGAR, VIJAYAWADA. V S . A CIT, CIRCLE - 1(1), VIJAYAWADA . PAN NO. AAACL 3810 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI D.K. SONAWAL CIT DR DATE OF HEARING : 25 / 1 0 /201 8 . DATE OF PRONOUNCEMENT : 06 / 1 1 /201 8 . O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF PRINCIPAL COMMISSIONER OF INCOME TAX , VIJAYAWADA , DATED 1 4 /0 3 /201 7 UNDER SECTION 263 OF INCOME TAX ACT FOR THE ASSESSMENT YEAR 20 12 - 13 . 2. THE ASSESSEE HAS RAISED AS MANY AS 10 GROUNDS , IN WHICH G ROUND NOS. 5 TO 9 ARE NOT PRESSED BY THE ASSESSEES COUNSEL DURING THE APPEAL HEARING, THEREFORE, SAME ARE DISMISSED AS NOT 2 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) PRESSED . GROUND NOS. 1 & 10 ARE GENERAL IN NATURE, WHICH D O NOT REQUIRE ANY SPECIFIC ADJUDICATION, THEREFORE, SAME ARE DISMISSED. 3 . GROUND NOS. 2 TO 4 ARE RELATING TO THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT'). 4 . IN THIS CASE, THE ASSESSEE FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF RS. 43,13,820/ - AFTER CLAIM ING DEDUCTION UNDER SECTION 80IC TO THE EXTENT OF RS. 1,27,81,458/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER ALLOWED THE DEDUCTION CLAIMED UNDER SECTION 80IC AND THERE IS NO DISPUTE THAT THE ASSESSEE IS ENTITLED FOR THE SAME. SUBSEQUENT TO THE COMPLETION OF THE ASSESSMENT, PR.CIT , VIJAYAWADA HAS CALLED FOR THE RECORD AND OBSERVED THAT THE ASSESSING OFFICER HAS NOT EXAMINED CERTAIN ISSUES PROPERL Y , HENCE, ASSE SSMENT ORDER HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE. THEREFORE, HE ISSUED SHOW - CAUSE NOTICE UNDER SECTION 263 , DATED 30/11/2016 STATING THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IC FROM RUDRAPUR PLANT , AMOUNTING TO RS. 1,25,93,958/ , AGAINST THE AGGREGATE TOTAL INCOME OF ALL THE UNITS AT RS. 1,70,95,278/ - , WHICH IS EXCESSIVE . THE LD. PR.CIT FURTHER OBSERVED TH A T THE TURNOVER OF RUDRAPUR PLANT WAS RS. 3 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) 22,06,73,657/ - AND THAT OF VIJAYAWADA PLANT WAS RS.51,77,15,033/ - , AGGREGAT E TOTAL TURNOVER OF ALL THE UNITS WAS RS. 1,21,83,20,721/ - INCLUDING PORUR UNIT WHICH IS ENGAG E D IN TRADING ACTIVITY . T HE NET PROFIT OF RUDRAPUR PLANT WAS WORKED OUT TO 4.79% AND THAT OF VIJAYAWADA PLA NT WAS AT 0.27%, THEREBY SHOWING MARGINAL PROFIT IN VIJAYAWADA PLANT AND HUGE PROFIT IN RUDRAPUR PLANT, WHICH IS ENTITLED FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. THE LD. PR.CIT FURTHER OBSERVED TH A T THE ASSESSEE DEBITED THE ENTIRE EXPENDITURE RELATING TO MANAGERIAL REM UNERATION OF RS. 14,27,122/ - ONLY TO VIJAYAWADA UNIT AND NIL EXPENDITURE TO RUDRAPUR UNIT . SIMILARLY, THE ASSESSEE DEBITED LABOUR CHARGES OF RS.1,78,73,773/ - TO VIJAYAWADA UNIT AND NIL TO RUDRAPUR UNIT . I N THE CASE OF POWER AND FUEL AGAINST THE TOTAL EXP ENDITURE OF RS. 4,77,16,431/ - , THE EXPENDITURE DEBITED TO VIJAYAWADA PLANT WAS RS. 4,57,02,276/ - AND TO RUDRAPUR UNIT WAS RS. 20,14,155/ - . THE LD. PR.CIT FURTHER OBSERVED THAT FINANCE COSTS DEBITED TO VIJAYAWADA UNIT WAS AT RS. 2,83,89,878/ - AND TO RUDRAPUR UNIT WAS ONLY OF RS.59,11,678/ - . FROM NET PROFIT POINT OF VIEW AS WELL AS EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT, THE LD.PR.CIT OBSERVED DI SCREP A NC IES . THE LD. PR.CIT FURTHER OBSERVED T H A T THE ASSESSEE DECLARED HUGE PROFIT IN THE CASE OF RUDRAPUR PLANT AND MARGINAL PROFIT IN THE CASE OF VIJAYAWADA PLANT 4 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) THEREBY THE LD. PR.CIT SUSPECTED CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE UNDER SECTION 80IC OF THE ACT . ACCORDINGLY, THE LD. PR.CIT ISSUED SHOW - CAUSE NOTICE, FOR WHICH THE ASSESSEE HAS FILED A DETAILED EXPLA NA TION , EXPLAINING THE REASONS FOR LESS PROFIT IN VIJAYAWADA UNIT AND SUBSTANTIAL PROFIT IN RUDRAPUR PLANT STATING THAT THE EXEMPTION FROM CENTRAL E XCISE DUTY AS THE UNIT IS LOCATED IN BACKWARD AREA AND SUBMITTED THE INFORMATION ITEM WISE IN TABULATED FORM SUPPORTING THE CLAIM AND THE REASONS FOR DERIVING MORE PROFIT FROM RUDRAPUR PLANT, BOTH ON TECHNICAL AS WELL AS THE ITEMS OF EXPENDITURE . THE ASSESSEE COMPANY ALSO FILED THE COMPARATIVE EXPENDITURE STATEMENT UNDER VARIOUS HEADS WITH THE REASONS FOR INCURRING EXCESS AMOUNT IN VIJAYAWADA PLANT AND THE REASONS FOR LESS EXPENDITURE IN THE CASE OF RUDRAPUR PLANT . THE ASSESSEE FURTHER SUBMITTED A DETAILED NOT E ON THE ITEMS OF EXPE NDITURE WHERE IN RUDRAPUR PLANT HAS BEEN INCURRED MORE EXPENDITURE COMPARED TO THE VIJAYAWADA UNIT ALSO . THE ASSESSEE ALSO EXPLAINED THE REASONS FOR NOT DEBITING THE MANAGERIAL REMUNERATION TO RU DRAPUR PLANT. THE ASSESSEE FURTHER EXPLAINED THAT THE LABOUR CHARGES WERE NOT INCURRED FOR RUDRAPUR PLANT AND INCURRED ONLY FOR VIJAYAWADA PLANT. IN THE CASE OF POWER AND FUEL, THE ASSESSEE HAS EXPLAINED THE REASONS FOR LESS EXPENDITURE IN THE CASE OF RUDRAPUR PLANT STATING THAT VIJAYAWADA UNIT IS OPERATING 5 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) E LECT RICAL FLAMELESS FURNACES FOR THE PURPOSE OF MANUFACTURING ROUGH CASTINGS AND THERE IS NO SUCH ACTIVITY IN RUDRAPUR UNIT . NOT BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE LD. PR.CIT HELD THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AS THE ASSESSMENT RECORD REVEALED THAT THE AO HAS NOT CALLED FOR ALL THE RELEVANT DETAILS/DOCUMENTS ALONG WITH VOUCHERS AND EXAMINED THE SAME. THE LD. PR.CIT ALSO RELIED ON THE ADDITIONS MADE BY THE ASSESSING OFFICER WHILE G IVING EFFECT TO THE ORDER OF THE LD. PR. CIT PASSED SECTION 143(3) R.W.S. 263 OF THE ACT FOR THE ASSESSMENT YEAR 2011 - 12. 5. AGGRIEVED BY THE ORDER OF THE LD. PR.CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 6 . DURING THE AP P EAL HEARING, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. PR.CIT AND THE LD.DR SUPPORTED THE ORDER PASSED BY THE LD. PR.CIT AND ARGUED THAT LD. PR.CIT HAS RIGHTLY TAKEN THE ASSESSEES CASE FOR REVISION UNDER SECTION 263 OF THE ACT. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. I N THIS CASE, THE ASSESSEE HAS FILED THE RETURN OF INCOME , WHICH WAS SCRUTINIZED AND THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT. THE LD. PR.CIT TAKEN - UP THE CASE FOR RE VISION UNDER SECTION 263 WITH A REASON THAT THE 6 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) ASSESSEE HAS CLAIMED EXCESS DEDUCTION IN THE CASE OF RUDRAPUR PLANT UNDER SECTION 80IC AND THE AO HAS NOT EXAMINED THE ISSUE PROPERLY . THE LD. PR.CIT WAS OF THE VIEW THAT THE ASSESSEE HAS SHIFTED THE EXPENDI TURE PERTAINING TO RUDRAPUR UNIT TO THE TAXABLE UNITS, THEREBY REDUCED THE EXPENDITURE AND INFLATED THE PROFIT OF THE RUDRAPUR PLANT TO CLAIM THE EXCESS DEDUCTION . IN THIS CASE, AS STATED EARLIER, THE CASE WAS TAKEN FOR SCRUTINY AND IN THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER HAS CALLED FOR THE DETAILS REGARDING THE CLAIM OF DEDUCTION UNDER SECTION 80IC AND ALSO THE REPORT UNDER SECTION 10CCB, WHICH WAS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. COUNSEL FOR THE ASSESSEE , DREW OUR ATTENTION AT PAGE NO. 2 OF THE PAPER BOOK AND SUBMITTED THAT AS PER THE COMPUTATION OF TOTAL INCOME , THE GROSS TOTAL INCOME WAS WORKED OU T TO RS.1,70,95,278/ - AND THE DEDUCTION UNDER SECTION 80IC WAS WORKED OUT TO RS.1,25,93,958/ - BOTH THE COMPUTATION OF TOTAL INCOME AS WELL AS ADJUSTED STATEMENT OF INCOME FOR RUDRAPUR PLANT WAS PLACE D BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT . THE ASSESSING OFFICER, BY ISSUING NOTICE UNDER SECTION 142 ALONG WITH QUESTIONNAIRE, HAS CALLED FOR THE DETAILS OF THE EXPENDITURE DEBITED UNDER VARIOUS HEADS VIDE LETTER DATED 21/10/2013 , WHICH WAS FURNISHED BY THE ASSESSEE. THE ASSESSING 7 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) OFFICER ALSO FURTHER CALLED FOR THE DETAILS VIDE LETTER DATED 15/04/2014 IN RESPECT OF CLAIM OF EXEMPTION UNDER SECTION 80IC WITH A SPECIFIC REFER EN CE TO THE QUERIES RAISED BY THE LD. PR.CIT IN THE PROCEEDINGS UNDER SECTION 263 FOR THE ASSESSMENT YEAR 2009 - 10 . REFERRIN G TO THE PAGE NO. 118 OF THE PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THE UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC , WHICH WAS DULY AUDITED AND SUBMITTED THE REPORT IN FORM10CCB IN PAGE NO. 118 TO 124 . THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED PROFIT & LOSS ACCOUNT OF RUDRAPUR PLANT, VIJAYAWADA PL ANT AND PORUR INDEPENDENTLY IN THE PAPER BOOK AND SUBMITTED THAT THE SAID INFORMATION WAS AL SO PLACED BEFORE THE AO . BY REFERRING TO PAGE NO. 99 OF THE PAPER BOOK, THE LD. CO U NSEL FOR THE ASSESSEE HAS SHOWN THE FORM NO. 10CCB SUBMITTED BEFORE THE LD. PR.CIT WHEREIN THE STATUTORY AUDITORS AFTER DUE VERIFICATION HAS QUANTIFIED THE PROFIT OF RS. 1,2 5,93,958/ - RELATING TO RUDRAPUR PLANT ON THE TOTAL TURNOVER OF RS. 22,06,73,657/ - , WHICH WAS PLACED BEFORE THE ASSESSING OFFICER , WHO EXAMINED THE ISSUE IN DETAIL AT THE TIME OF MAKING THE ASSESSMENT. THE ASSESSING OFFICER ALSO CALLED FOR THE DETAILS OF MAINTENANCE OF BOOKS OF ACCOUNT SEPARATELY, WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 16/07/2014, COPIES OF WHICH ARE 8 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) PLACED BEFORE US AT PAGE NO. 109 TO 1 17 OF THE PAPER BOOK. THE ASSESSEE EXPLAINED BEFORE THE LD. PR.CIT THAT THERE ARE VARIOUS REASONS FOR GETTING MORE PROFIT FROM THE RUDRAPUR PLANT, SUCH AS DIFFERENCE IN MANUFACTURING OF THE ARTICLES, DETAILS OF THE REINFORCES , LESS STAFF, NON INCURRENCE OF EXPENSES RELATING TO LABOUR A ND EXEMPTION FROM SALES TAX ETC . T HE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED COMPARABLE CHART IN A TABULAR FORMAT BEFORE THE LD. PR.CIT, WHICH WAS REPRODUCED AS UNDER: - SI. DIFFERENTIATING VIJAYAWADA UNIT RUDRAPUR UNIT NO. 1 MANUFACTURING RIGHT FROM RAW - MATERIAL TO THE FINISHED GOODS AGAINST VEHICLE MANUFACTURERS SPECIFICATIONS AND ORDERS INCLUDING EXPORT ORDERS CONVERSION OF PROOF - MACHINE LINERS INTO FINISHED GOODS AS PER THE MARKET FORECAST PROCESS 2 PLANT CAPACITY 200000 PIECES PER MONTH 75000 PIECES PER MONTH 3 LOCATION OF THE AUTONAGAR, VIJAYAWADA, RUDRAPUR, UTTARAKHAND UNIT ANDHRA PRADESH 4 FINISHED PRODUCT LINERS WITHIN TOLERANCE OF 10 MICRONS WITH BHARAT - IV SPECIFICATIONS LINERS WITH OPEN TOLERANCE AS PER THE MARKET DEMAND WITH BHARAT - 11 SPECIFICATIONS 5 CUSTOMERS VEHICLE MANUFACTURERS LIKE ASHOK LEYLAND, TATA MOTORS, MAHINDRA, EICHER, ETC., & INTERNATIONAL CUSTOMERS LIKE JOHNDEERE REPLACEMENT MARKET LIKE MECHANICS, RE - BORING WORKSHOPS AND AUTOMOBILE SPARE PARTS 6 QUALITY OF THE OUTPUT TS 16949 CERTIFIED NO SUCH CERTIFICATION 7 YEAR OF ESTABLISHMENT 1974 2007 8 PRIVILEGES NO PRIVILEGES EXCISE DUTY EXEMPTION & CST CONCESSION & POWER CONCESSION ENJOYED BY THE UNIT 9 AREA OF THE UNIT 2.25 ACRES 14000 SFT. 9 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) 10 NUMBER OF EMPLOYEES 500 EMPLOYEES ( NO MARKETING STAFF) 100 EMPLOYEES (OUT OF WHICH 50 ARE MARKETING STAFF) 11 FOCUS OF TOP BECAUSE OF QUALITY S TANDARDS TO BE MAINTAINED, TOP MANAGEMENT FOCUS SHOULD BE KEEN. ONLY THE MARKETING MANAGER AND SALES STAFF TAKES CARE OF THE UNIT MANAGEMENT 12 USAGE OF FURNACE (WHICH CONSUMES HIGH ELECTRICITY 1.5 TONS / 1600 KVA NO FURNACE ELECTRIC FURNACES 13 RENTAL BECAUSE OF SPACE CONSTRAINT, FOUR PREMISES HAVE BEEN TAKEN ON LEASE FOR DOING THE SOME OF THE ROUGHING OPERATIONS ONLY THE FACTORY IS TAKEN ON LEASE IN THE INDUSTRIAL AREA EXPENDITURE 14 POWER CONSUMPTION (IN UNITS) AVERAGE 800000 UNITS PER MONTH AVERAGE 18000 UNITS PER MONTH . 15 POWER BACKUP 1 GENERATOR OF 625 KVA & 1 GENERATOR OF 110 KVA 1 GENERATOR OF 70 KVA QUALITY OF STAFF HIGHLY SKILLED STAFF TO MAINTAIN STANDARDS CASUAL LABOUR PAID ON PIECE WAGES 16 17 EXCISE DUTY 388.24 LAKHS NIL 18 DEPRECIATION 384.41 LAKHS 53.35 LAKHS 19 ADVERTISEMENT & SALES PROMOTION 6.95 LAKHS 190.73 LAKHS 20 TRAVELLING & CONVEYANCE 28.71 LAKHS 59.71 LAKHS 8 . SIMILARLY, THE ASSESSEE ALSO SUBMITTED THE DETAILS EXPLAINING THE EXCESS EXPENDITURE AT VIJAYAWADA PLANT , THE DETAILS OF WHICH ARE AS FOLLOWS : - S. NO DESCRIPTION OF EXPENDITURE AMOUNT INCURRED IN VIJAYAWADA UNIT DURING FY 2011 - 12 (IN RS) AMOUNT INCURRED IN RUDRAPUR UNIT DURING F. Y 2011 - 12 REASONS FOR INCURRING EXCESS AMOUNT IN VIJAYAWADA UNIT 1. EMPLOYEES 1. STRENGTH OF EMPLOYEES IS MORE. 2. LABOUR COST PER HEAD IS MORE IN VIJAYAWADA 3. THE STAFF WELFARE COST IS MORE BENEFIT 6,32,67,719 1,52,82,472 EXPENSES 10 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) BECAUSE THE WORKER HOVE TO WORK BEFORE ELECTRICAL FURNACE IN VIJAYAWADA . 4. DRESS CODE AND OTHER AMENITIES HAVE TO BE PROVIDED TO WORKERS IN VIJAYAWADA AS PER THE NORMS OF ISO/QS 9000. 5. SINCE THE PLANT AREA IS LARGE IN VIJAYAWAD A , MORE LABOUR IS REQUIRED. 6. BASIC WAGE STRUCTURE IS HIGH BECAUSE OF AGED WORKFORCE. 2 . DEPRECIATION 3,84,41,046 53,35,536 1. THE COST OF MACHINERY IS MORE IN VIJAYAWAD A BECAUSE SOPHISTICATED MACHINERY IS REQUIRED TO MAINTAIN QUALITY STANDARDS. 2. THE MACHINERY IN VIJ AYAWA DA IS REQUIRED FOR PROCESSING RIGHT FROM AW MATERIAL TO FINISHED PRODUCTS. 3. SINCE THE QUANTITY OF PRODUCTION IS IS MORE THAN THAT OF RUDRAPUR UNIT. 3 FINANCE COSTS 2,83,89,878 59,11,678 1. SINCE THE OUT PUT IS MORE IN VIJAYAWADA, AUTOMATICALLY FI N ANC E COST ALSO BECOMES MORE. 2. SINCE THE UNIT IS EXISTING FOR THE PAST FOUR DECADES, NEW MACHINERY AND THE REPLACEMENT OF MACHINERY IS REQUIRED FREQUENTLY WHICH RESULTED IN MORE FINANCE COSTS. 3. THE WORKING CAPITAL REQUIREMENT IS VERY MEAGER AT RUDRAPUR PLANT AND THE FUNDS ARE BEING UTILIZED MAINLY AT VIJAYAWADA UNIT. 4. SINCE THE IBI BANK DEBITS INTEREST AT RUDRAPUR BRANCH FOR BOTH THE DIVISIONS, INTEREST CHARGES TRANSFERRED TO HEAD OFFICE ACCOUNT. 5. THE WORKING CAPITAL AT VIJAYAWADA IS MORE THAN THAT OF RUDRAPUR UNIT. 4 CONSUMPTION OF STORES 1. 6,71,03,206 1,26,31,489 2. QUANTITY OF PRODUCTION MORE. 3. VIJAYAWADA UNIT MANUFACTURES RIGHT FROM ROUGH CASTINGS TO FINISHED PRODUCTS. 1. VIJAYAWADA UNIT USED TO ENTRUST SOME OF ITS MACHINING OPERATIONS TO OTHER PARTIES ON SUB CONTRACT BASIS WHEREAS IN RUDRAPUR UNIT IT IS MEAGER. 2. THE VERY NATURE OF SUB - CONTRACT WORKS IS DIFFERENT BETWEEN VIJAYAWADA UNIT AND THAT OF RUDRAPUR UNIT. 3. AT VIJAYAWADA SUB CONTRACTORS DO THE MACHINING OF ROUGH CASTINGS TO SEMI FINISHED GOODS STAGE. CASTING IS SUPPLIED BY LINERS INDIA. 5 SUB - CONTRACTING EXPENSES 2,91,74,224 54,35,950 11 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) 6 REPAIRS & MAINTENANCE 1,39,88,824 9,00,288 1. SINCE THE UNIT IS EXISTING FOR THE PAST FOUR DECADES, THE COST OF REPAIRS AND MAINTENANCE OF MACHINERY SHALL BE MORE WHEN COMPARED TO RUDRAPURT UNIT. 2. THE NUMBER OF MACHINES ARE MORE BECAUSE OF HIGH VOLUME OF PRODUCTIONS AND TO MAINTAIN QUALITY OF THE PRO DUCTION. SO, THE MAINTENANCE CAST BECOMES MORE. 7 SALES COMMISSION 46,90,663 16,30,979 1. SALES COMMISSION IN VIJAYAWADA, THOUGH APPEARING TO BE MORE IN ABSTRACT TERMS BUT ON COMPARISON WITH THE TURNOVERS, THE SALES COMMISSION IN RUDRAPUR UNIT IS MORE THAN THAT OF VIJAYAWADA. THE VIJAYAWADA UNIT INCURS SALES COMMISSION ON EXPORT ORDERS PROCURED BY FOREIGN AGENCIES IN ORDER TO GET ORDERS FROM SOME OF OEMS CUSTOMERS, AND ALSO COMMISSION PAID TO PROCURE OEM ORDERS. 8 MISCELLANEOUS EXPENSES 85,37,576 19,45,237 THE OTHER EXPENSES UNDER THIS HEAD ARE ALSO HIGH IN VIJAYAWADA UNIT BECAUSE OF HIGH VOLUME OF PRODUCTION AND THIS IS HEAD OFFICE OF THE A SSESSEE - COMPANY. 9. IN RESPECT OF MANAGERIAL REMUNERATION TO THE VIJAYAWADA UNIT, IT WAS EXPLAINED BY THE ASSESSEE THAT AFTER COMMENCEMENT OF RUDRAPUR PLANT, THERE WAS NO INCREASE IN MANAGERIAL REMUNERATION, THEREFORE, NO EXPENDITURE IS REQUIRED TO BE ALLOCATED AND DEBITED TO RUDRAPUR PLA NT . IN THE CASE OF LABOUR EXPENSES, LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT LABOUR EXPENSES WERE TOTALLY RELATED TO THE VIJAYAWADA PLANT. REGARDING P OWER AND FUEL , THE ASSESSEE EXPLAINED THAT IT WAS DEPEND ENT ON THE PLANT CAPACITY, USAGE OF THE PLANT AND AVERAGE CONSUMPTION, POWER BACKUP ETC. AND THE DETAILS FURNISHED IN THE TABULAR 12 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) INFORMATION. THE ASSESSEE ALSO SUBMITTED BEFORE THE LD. PR.CIT THAT VIJAYAWADA UNIT IS OPERATING E LECTRICAL FLAMELESS FURNACES FOR THE PURPOSE OF MANUFACTURING ROUGH CASTINGS WHICH ACTIVITY IS ABSENT IN RUDRAPUR PLANT . THERE ARE POWER BACKUP DG S SETS AT VIJAYAWADA UNIT THAT WERE IN USE DURING THE F .Y. 2011 - 12 WHICH COSTS HEAV Y AND ALSO IN THE COST OF POWER CONSUMPTION . 10 . FROM THE ABOVE, IT IS APPARENT THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS EXAMINED THE CLAIM OF THE ASSESSEE WITH RESPECT TO THE DEDUCTION CLAIMED UNDER SECTION 80IC IN THE CASE OF RUDRAPUR PLANT AND CALLED FOR THE DETAILS OF EXPENDITURE UNDE R VARIOUS HEADS INCLUDING THE REPORT IN FORM NO. 10CCB. THE ENTIRE BOOKS OF ACCOUNT WERE PLACED BEFORE THE ASSESSING OFFICER FOR EXAMINATION WHICH WERE EXAMINED AND RETURNED . DURING THE ASSESSMENT YEARS 2009 - 10, THE LD. PR.CIT HAS TAKEN THE CASE FOR REVIS ION UNDER SECTION 263 ON SPECIFIC ISSUE OF DEDUCTION U/S 80IC AND THE ISSUES CONSIDERED BY THE LD.PR. CIT WERE ALSO EXAMINED BY THE ASSESSING OFFICER AT THE TIME OF FRAMING ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE PR.CIT HAS LANDED AND SUSP ICION DUE TO LESS PROFIT IN VIJAYAWADA UNIT AND SUBSTANTIAL PROFIT IN RUDRAPUR UNIT . A FTER HAVING EXAMINED THE DETAILS OF EXPENDITURE AND CLAIM MADE BY THE ASSESSEE AT THE TIME OF ORIGINAL ASSESSMENT, THERE IS NO REASON TO SUSPECT THE 13 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) CORRECTNESS OF THE CL AIM OF THE ASSESSEE. MERELY B ECAUSE OF PERCENTAGE OF PROFIT IS LESS IN VIJAYAWADA UNIT AND MORE IN RUDRAPUR PLANT THE ASSESSMENT MADE UNDER SECTION 143(3) CANNOT BE HELD AS ERRONEOUS . T HOUGH LD. PR.CIT WAS OF THE VIEW THAT THE ASSESSEE HAS NOT DEBITED ANY EXPENDITURE IN RESPE CT OF MANAGERIAL REMUNERATION AND LESS EXPENDITURE IN THE CASE OF POWER AND FUEL AND NIL EXPENDITURE IN THE CASE OF LABOUR, THE SAME WAS EXPLAINED BY THE ASSESSEE STATING THAT NO EXCESS EXPENDITURE WAS INCURRED BY THE ASSESSEE AFTER CO MMENCEMENT OF RUDRAPUR PLANT IN RESPECT OF MANAGERIAL REMUNERATION. SIMILARLY, IN THE CASE OF LABOUR EXPENDITURE, THE ASSESSEE HAS CATEGORICALLY STATED THAT THERE WAS NO EXPENDITURE RELATING TO THE RUDRAPUR PLANT. THE REASON FOR DIFFERENCE IN POWER & FUE L EXPENSES WAS EXPLAINED BY THE ASSESSEE STATING THAT VIJAYAWADA UNIT IS SUPPORTED BY BACKUP OF DG SETS AND IT WAS OPERATING ELECTRICAL FLAMELESS FURNACES FOR VIJAYAWADA UNIT . THE AO HAS CALLED FOR THE DETAILS AND EXAMINED THE BOOKS OF ACCOUNTS AT THE TIME OF ASSESSMENT. T HE LD. PR.CIT S RELIANCE ON THE ADDITIONS FOR THE ASSESSMENT YEAR 2011 - 12 IS MISPLACED AND INCORRECT TO INVOKE THE REVISION U/S 263 . T HE LD . PR.CIT SHOULD NOT HAVE TAKE UP THE CASE FOR REVISION BASING ON THE ADDITIONS MADE IN ASSESSMENT YEARS 2011 - 12 . EACH A.YR . IS INDEPENDENT AND RECORD ALSO IS SEPARATE. FROM THE ASSESSMENT ORDER , ORDER 14 I TA NO. 310/VIZ/2017 ( M/S. LINERS INDIA LTD. ) UNDER SECTION 263 AND THE INFORMATION PLACED BY THE LD. COUNSEL IN PAPER BOOK BEFORE US , IT IS OBSERVED THAT THE ASSESSING OFFICER HAS CALL ED FOR ALL THE DETAILS NECESSARY BEFORE ALLOWING THE DEDUCTION UNDER SECTION 80IC AND THERE IS NO ERROR IN THE ASSESSMENT ORDER. THE LD. PR.CIT WAS UNABLE TO SPECIFY ANY ISSUE WHICH MADE THE ASSESSMENT AS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. T HEREFORE, WE HOLD THAT THERE IS NO ERROR WHICH CAUSED PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HENCE , WE ARE UNABLE TO SUSTAIN THE ORDER PASSED BY THE LD. PR.CIT UNDER SECTION 263 AND THE SAME IS QUASHED. 11 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 0 6 T H DAY OF NOV ., 201 8 . S D / - S D / - (V. DURGA RAO) ( D.S. SUNDER SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 0 6 T H NOVEMBER , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE M/S. LINERS INDIA LIMITED, R.S.NO. 205/2A, AUTO NAGAR, VIJAYAWADA. 2. THE REVENUE ACIT, CIRCLE - 1(1), VIJAYAWADA. 3. THE PR. CIT , VIJAYAWADA. 4. THE D.R . , VISAKHAPATNAM. 5. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.