The ITO,Vapi Ward-4, Daman V. Shri Pramod Bapurao Deshmukh, Nani Daman

ITA 3138/AHD/2010

• Counselvise Citation: 313820514 RSA 2010
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K VOHRA
• Assessee Lawyers: S N L AGARWALA
• Keywords: Business income; Business expenditure
• Section: 143(3); 80HHC; 80IB; 56; 28; 139

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' [BEFORE SHRI G D AGARWAL VICE-PRESIDENT] [AND SHRI MUKUL KR. SHRAWAT JM] ITA NO.3138/AHD/2010 (ASSESSMENT YEAR:-2006-07) THE INCOME-TAX OFFICER, VAPI WARD-4, DAMAN V/S SHRI PRAMOD BAPURAO DESHMUKH, PROP. M/S PARTH INDL. FABRIC, GALA NO.9, LAXMI INDL. ESTATE, OPP. LALJI MULJI TRANSPORT SOMNATH ROAD, DABHEL, NANI DAMAN. PAN: AAHPD 7081 R [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI R K VOHRA, SR. DR RESPONDENT BY:- SHRI S N L AGARWALA, AR DATE OF HEARING:- 16-09-2011 DATE OF PRONOUNCEMENT:- 30-09-2011 O R D E R PER BENCH : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST AN ORDER DATED 11-08-2010 OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS), VALSAD [THE CIT(A)] FOR ASSESSMENT YEAR (AY) 2006-07. THE FOLLOWING TWO EFFECTIVE GROUNDS HAVE B EEN RAISED BY THE REVENUE:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION OF RS.7,85,635/- U/S 80IB OF THE ACT. THE EXTENSION FOR FILING RETURN OF INCOME WAS APPLICABLE TO THE ASSESSEE OF GUJARAT ONLY, THERE IS NOT MENTIONED THAT EXTENS ION FOR FILING RETURN OF INCOME FOR THE ASSESSEE OF DAMAN. 2 ITA NO.3138/AHD/2010 [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S 80IB ON DISALLOWANCE OF RS.1,19,115/- MADE U/S 40(A)(IA) OF THE ACT, AS THE DISALLOWANCE BEING TECHNICAL IN NATURE AND ASSESSEE IS ENTITLED TO DED UCTION OF SUCH DISALLOWANCE IN NEXT YEAR ON PAYMENT BASIS. THIS WOULD LEAD TO D OUBLE BENEFIT TO THE ASSESSEE. 2 ADVERTING FIRST TO GROUND NO.1 IN THE REVENUES APPEAL, THE FACTS IN BRIEF AS EMERGED FROM THE ASSESSMENT O RDER PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] ARE THAT RETURN OF INCOME DECLARING TOTA L INCOME OF RS. NIL WAS FILED ON 01-12-2006, WHEREIN AN AMOUNT OF RS.7,85,635/- IS CLAIMED AS DEDUCTION U/S 80IB OF T HE ACT. 2.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS O F MANUFACTURING OF SPECIALIZED FILTER BAGS AND DOING JOB WORK OF SUCH FILTER BAGS MANUFACTURED. IT EMERGES FROM THE ASSESSMENT ORDER THAT THE MANUFACTURING UNIT OF THE ASSESSEE IS LOCATED IN THE UNION TERRITORY OF DAMAN, WHICH IS A BACKWARD AREA AS SPECIFIED IN THE VIIITH SCHEDULE TO THE ACT. THE AS SESSEE HAD STARTED ITS MANUFACTURING ACTIVITY FROM ASSESSMENT YEAR 2004-05. AS SUCH, THE YEAR CONSIDERATION IS THE 3RD YEAR OF MANUFACTURING ACTIVITY. 2.2 ON PERUSAL OF RETURN OF INCOME, IT WAS O BSERVED BY THE ASSESSING OFFICER [AO] THAT RETURN OF INCOME WAS FI LED ON 01-12- 2006 I.E. AFTER DUE DATES. THE AO HAS OBSERVED THAT AS PER PROVISIONS OF SECTION 80AC, DEDUCTION U/S 80IB IS N OT ALLOWABLE IF ASSESSEE FILES RETURN OF INCOME AFTER DUE DATES AS PRESCRIBED IN SECTION 139(1). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS SHOW CAUSED AS FOLLOW S:- YOU HAVE FILED RETURN OF INCOME ON 01-12 -06 AND CLAIMED DEDUCTION OF RS.7,85,635/- U/S 80-IB. ONE OF THE CONDITIONS O F SECTION 80-IB IS THAT TO BE ELIGIBLE TO CLAIM DEDUCTION U/S 80-IB, THE ASSES SEE SHOULD FILE RETURN OF 3 ITA NO.3138/AHD/2010 INCOME ON OR BEFORE THE DUE DATES. BUT YOU HAVE FIL ED RETURN OF INCOME AFTER DUE DATES. THEREFORE, YOU ARE SHOW CAUSED AS TO WHY YOUR CLAIM OF DEDUCTION U/S 80-IB SHOULD NOT BE DISALLOWED? IN RESPONSE, THE ASSESSEE SUBMITTED AS UND ER:- FOR THE A.Y. 2006-07, THE DUE DATES FOR FILING THE RETURN FOR THE YEAR UNDER CONSIDERATION HAD BEEN EXTENDED FROM 31-10-2006 TO 31- 12-2006 AND THE ASSESSEE HAD FILED THE RETURNS ON 01-12-200 6. THEREFORE THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTIO N U/S. 80IB OF THE INCOME TAX ACT, 1961.' 2.3 HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSION O F THE ASSESSEE AND PROCEEDED TO REJECT THE CLAIM OF DEDUC TION U/S 80IB WITH THE FOLLOWING OBSERVATIONS:- ASSESSEE'S SUBMISSION IS PERUSED AND THE SAME IS N OT TENABLE AS THERE IS NO MENTION OF EXTENSION OF FILING RETURN OF INCO ME FOR THE ASSESSEES OF DAMAN. THE EXTENSION OF FILING RETURN OF INCOME IS APPLICABLE TO THE ASSESSEES FROM GUJARAT ONLY. DAMAN, A UNION TERRITO RY IS A SEPARATE ENTITY AND INCOME TAX OFFICE IS SITUATED AT DAMAN A ND FACTORY OF THE ASSESSEE HAS ALSO BEEN SET UP IN DAMAN ITSELF. THE BOARD HAS NOT EXTENDED DUE DATE IN DAMAN. THEREFORE, IN VIEW OF ALL THE ABOVE FACTS, CLAIM OF DEDUCTION U/S. 80-IB IS REJECTED. 2.4 ON APPEAL, THE LEARNED CIT(A) HAS DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING MANNER:- 5.1 I HAVE PERUSED THE ASSESSMENT ORDER PASSED BY THE LEARNED A.O CAREFULLY. THE MAIN REASON FOR WHICH THE AO DISALLO WED THE CLAIM U/S.80-IB WAS THAT THE APPELLANT HAD FILED BELATED R/I AND THE PROVISIONS U/S. 80-IB CLEARLY PROHIBITS ALLOWANCE O F 8O-IB UNDER SUCH SITUATION. THE APPELLANT FILED HIS RETURN OF INCOME FOR THE PERIOD UNDER CONSIDERATION ON 01-12-2006. THE AO HELD THAT THE A PPELLANT HAD FILED R/I AFTER DUE DATES. FURTHER THE AO OBSERVED THAT A S PER PROVISION OF 'SECTION 8OAC, AN ASSESSEE CLAIMING DEDUCTION U/S 8 OIB OF THE ACT HAS TO FILE ITS RETURN OF INCOME WITHIN DUE DATES P RESCRIBED IN THE SECTION 139 (I) OF THE ACT.' HERE IT IS CLEARLY EVI DENT THAT THERE IS CONTRAVENTION OF THE ABOVE SAID PROVISION. THEREFOR E, A SHOW CAUSE 4 ITA NO.3138/AHD/2010 NOTICE WAS ISSUED TO THE ASSESSEE ON 29-04-2008, AS KING WHY THE CLAIM OF DEDUCTION U/S 80IB SHOULD NOT BE DISALLOW. IN RE PLY OF THAT THE ID. A.R. OF THE ASSESSEE FURNISHED IN HIS SUBMISSION TH AT 'FOR THE A.Y. 2006-07, THE DUE DATE FOR FILLING RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION HAD BEEN EXTENDED FROM 31-10-2006 TO 31-12-2006 AND THE ASSESSEE HAD FILED THE RETURNS ON 01-12-2006 I. E. WITHIN DUE DATE. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTI ON U/S 80IB OF THE ACT.' 5.2 THE AO WHILE REJECTING THE ARGUMENT OF THE APPELLANT HELD THAT THE EXTENSION OF DUE DATE FOR FILLING OF R/I WAS AP PLICABLE TO THE ASSESSEE FROM GUJARAT ONLY AS THERE WAS NO MENTION OF DAMAN IN THE CIRCULARS OF THE CBDT. FURTHER HE OBSERVED THAT DAMAN, A UNION TERRI TORY, IS A SEPARATE TERRITORY AND INCOME TAX OFFICE IS SITUATED AT DAMA N. THE FACTORY OF THE ASSESSEE HAS ALSO BEEN SITUATED AT DAMAN. THE BOARD HAS NOT EXTENDED DUE DATE IN DAMAN. THEREFORE, ASSESSEE HAS MADE CONTRAV ENTION OF REQUIREMENT OF THE SAID SECTION AND NOT ELIGIBLE FOR THE DEDUCT ION U/S 80IB OF THE ACT. 5.3 BEFORE ME THE ID. AR CONTENDED THAT APPELLANT I S HAVING ITS FACTORY AT DAMAN AND PLACE OF RESIDENCE IN VAPI. RETURNS OF IN COME ARE REGULARLY FILLED AT DAMAN. FURTHER, ID. A.R. STATED THAT DAMAN FALLS UNDER THE JURISDICTION OF JCIT, VAPI RANGE, CIT,VAL SAD CHARGE AND CCIT, SURAT CIRCLE AND ULTIMATE JURISDICTION OF CCI T, AHMEDABAD. THE DUE DATE FOR FILLING RETURN OF INCOME FOR THE A .Y. 2006-07, WHO WERE REQUIRED TO GET THEIR BOOKS OF AUDITED U/S. 44 AB, WAS 31-10- 2006. HOWEVER, DUE TO THE HEAVY RAIN FALL IN GUJARA T THE DUE DATE FOR THE ASSESSEE IN THE GUJARAT JURISDICTION WAS EXTEND ED TO 31.12.2006. THE ID. A.R. SUBMITTED THAT THE APPELLANT HAS THE A DMINISTRATIVE OFFICE IN VAPID, HE SHOULD BE CONSIDERED AS THE ASSESSEES IN GUJARAT. IT IS ALSO SUBMITTED THAT, WITHIN THE MEANING OF SECTION 120 O F THE IT ACT, THE A.O. OF VAPI CHARGE ARE VESTED WITH JURISDICTION OV ER ALL PERSONS CARRYING BUSINESS OR PROFESSION FROM THE PLACE SITU ATED WITHIN THE AREAS OF DAMAN. NON CORPORATE ASSESSEES OF U.T. OF DAMAN HAVING TAXABLE INCOME UP TO RS.5 LACS ARE REQUIRED TO FILE RETURNS AND ARE ASSESSABLE BY THE INCOME TAX OFFICER VAPI WARD 4, D AMAN AND CASES WHOSE TOTAL INCOME, EXCEED RS.5 LACS ARE REQUIRED T O FILE THEIR RETURNS WITH AND ARE ASSESSABLE BY ASSTT. COMMISSIONER OF I NCOME TAX, VAPI. FURTHER CORPORATE ASSESSES OF U.T. OF DAMAN ARE, IR RESPECTIVE OF INCOME, REQUIRED TO FILE THEIR RETURNS OF INCOME WI TH A.C.I.T, VAPI. HENCE THE AR PLEADED THAT FOR ADMINISTRATIVE PURPOS E STATE OF GUJARAT AND U.T. OF DAMAN ARE DIFFERENT ONE, BUT FOR I.T. P URPOSE ASSESSES HAVING PLACE OF BUSINESS IN DAMAN ARE THE TAX RESID ENT OF THE STATE OF GUJARAT ONLY AND HENCE ASSESS IN THE STATE OF GUJAR AT. 5 ITA NO.3138/AHD/2010 5.4 FURTHER THE ID. AR SUBMITTED THAT 'CBDT HAS VID E ORDER UNDER SECTION 119, F. NO.220/5/2006-ITA-II, DATED 13 TH OCTOBER 2006, EXTENDED THE DUE DATE IN CASE OF INCOME TAX ASSESSEE IN THE STAT E OF GUJARAT, FOR FILLING RETURNS AS WELL AS FOR OBTAINING TAX AUDIT REPORT ON GROUND OF DISRUPTION CAUSED DUE TO THE HEAVY RAIN IN THE STAT E OF GUJARAT FROM 31 ST DAY OF OCTOBER, 2006 TO 31ST DAY OF DECEMBER, 2006 . FURTHER, CBDT HAS VIDE ORDER U/S 119 F. NO. 133/38/2006-TPL( PL) DATED 24.10.2006 EXTENDED THE DUE DATE IN THE CASE OF COM PANIES, FOR FILLING OF RETURN AS WELL AS FOR OBTAINING TAX AUDIT REPORT ON GROUND OF DISRUPTION CAUSED DUE TO HEAVY RAINS IN THE STATE O F GUJARAT FROM 3ISL DAY OF OCTOBER, 2006 TO 30 TH DAY OF NOVEMBER, 2006. IN THIS CIRCULAR, CBDT HAS SPECIALLY EXCLUDED COMPANIES ASSESSED OR A SSESSABLE IN THE STATE OF GUJARAT. IN THE CIRCULAR DATED 13-10-2006 CBDT HAS USED THE WORDS 'INCOME TAX ASSESSEE IN THE STATE OF GUJARAT, ' AND THAT IN CIRCULAR DATE 24-10-2006 IT HAS USED THE WORDS 'OTH ER THAN THE COMPANIES ASSESSED OR ASSESSABLE IN THE STATE OF GU JARAT.' COMBINE READING OF BOTH THE CIRCULARS, IT BECOMES CLEAR THA T THE DUE DATE FOR ALL NON CORPORATE ASSESSEE ASSESSED OR ASSESSABLE IN TH E STATE OF GUJARAT WAS EXTENDED TO 31-12-2006. IT IS ALSO SUBMITTED TH AT ALL THE CIRCULARS / INSTRUCTION / NOTIFICATIONS ISSUED BY CBDT RELATING TO THE STATE OF GUJARAT WILL EQUALLY APPLICABLE TO THE U.T. OF DAMA N AND U.T. OF DADRA & NAGAR HAVELI, UNLESS SPECIFICALLY EXCLUDED. IN THIS CIRCUMSTANCES THE ID. A.R. OF THE APPELLANT PLEADED THAT THE APPELLANT HAD FILED ITS RETURN OF INCOME WITH IN THE DUE DATE SPECIFIED U/S 139(1), HENCE ELIGIBLE FOR DEDUCTION U/S 80IB. 5.5 FINDINGS: I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS MADE BY THE ID. AR. THERE IS NO DOUBT THAT DAMAN COMES UNDER THE ADMINISTRATIVE CONTROL OF CCI T, AHMEDABAD WHO HAS JURISDICTION OVER STATE OF GUJARAT AND THE UNION TERRITORY OF DAMAN, DIU, DADRA & NAGAR HAVELLI. THE COMBINED REA DING OF THE CIRCULARS NO. 220/5/20O6-ITA-II DATED 13-10-2006 AN D CIRCULAR NO. 133/38/2006-TPL(PL) DATED 24-10-2006 CLEARLY INDICA TE THAT THE DUE DATES FOR FILLING RETURNS AND FOR OBTAINING AUDIT R EPORTS ARE APPLICABLE FOR ALL ASSESSES IN THESE AREAS. IN THIS CIRCUMSTAN CES, I FULLY AGREE WITH STAND TAKEN BY THE APPELLANT THAT DEDUCTION U/S 80I B IS ALLOWED TO HIM AS THERE IS NO CONTRAVENTION OF ANY PROVISION OF TH E SECTION 80AC DEFINED IN THE ACT. THEREFORE, THE APPEAL ON THIS G ROUND IS ALLOWED. 3 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST TH E AFORESAID FINDINGS OF THE LEARNED CIT(A). ON BEHALF OF THE 6 ITA NO.3138/AHD/2010 REVENUE, SHRI R K VOHRA APPEARED AND SUPPORTED THE ORDER OF THE A.O. 4 ON THE OTHER HAND, ON BEHALF OF THE ASSESSEE, THE LEARNED AR SHRI S N L AGARWALA APPEARED AND SUPPORTED THE O RDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT AHMEDABAD BENCH- B IN THE CASE OF ITO VS. M/S PACKWELL PACKAGING [IT A NO.1634/AHD/2009; ITO VS. M/S A KUMAR INDUSTRIES [I TA NO.1635/AHD/2009, ORDER DATED 26-08-2011( A CONSOLI DATED ORDER), WHEREIN IT HAS BEEN HELD THAT THE BENEFIT OF THE OR DER OF THE CBDT F. NO. 220/5/2006-ITA-II DATED 13-10-200 6 IS AVAILABLE TO THE ASSESSEE OF DAMAN. 5 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE ORDE RS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF THE IT AT AHMEDABAD BENCH-B IN THE CASE OF ITO VS. M/S PACKWELL PACKAGI NG & ITO VS. M/S A KUMAR INDUSTRIES(SUPRA). WE FIND THAT THE ISSUE IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE SAID DECIS ION OF THE TRIBUNAL, WHEREIN THE TRIBUNAL VIDE PARA 7 OF THE O RDER, HAS HELD AS UNDER:- 7 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE DO NOT FIND MERIT IN THE APPEAL OF THE REVENUE. THE FACTS NOTED IN THE IMPUGNED ORDER HAVE NOT BEEN DISPUTED. IT IS NOT IN DISPUTE THAT T HE CBDT CONSIDERING THE REPORTS ON DISRUPTION CAUSED DUE TO HEAVY RAINS AND FLOODS IN THE STATE OF GUJARAT EXTENDED THE DUE DATE FOR FILING OF RETURN FROM 31-10-2006 TO 31-12- 2006 IN THE CASE OF INCOME TAX ASSESSEES IN THE STA TE OF GUJARAT. THE ASSESSMENTS FRAMED IN THE CASES OF THE ASSESSEES WH O CARRIED ON BUSINESS IN DAMAN ARE ASSESSED OR ASSESSABLE IN THE STATE OF GU JARAT BY INCOME TAX OFFICE SITUATED AT VAPI. THE ASSESSEE ALSO EXPLAINE D THAT DUE TO DIFFERENT CATEGORY OF AO, STATUS, INCOME AND IN CASES OF NON- COOPERATE, THE ASSESSEES HAVING INCOME OF MORE THAN RS.5 LACS ARE ASSESSED A T VAPI AND THE SMALL ASSESSEES ARE ASSESSED AT THE OFFICE AT VAPI, WARD -4, DAMAN. IT IS NOT IN DISPUTE THAT THE OFFICE OF INCOME TAX OFFICE, VAPI, WARD-4, DAMAN FALLS 7 ITA NO.3138/AHD/2010 WITHIN THE JURISDICTION OF INCOME TAX OFFICER, VAPI WHO IS IN JURISDICTION OF CIT, VALSAD AND CCIT, SURAT AND CCIT, AHMEDABAD WHI CH ARE SITUATED IN THE STATE OF GUJARAT. THE PAN AND TAN DETAILS SUBMI TTED BY THE ASSESSEE CLEARLY INDICATED THAT THE JURISDICTION OF THE ASSE SSEE LIES AT GUJARAT ONLY. EVEN THE LEARNED CIT(A) WHO DECIDED THE APPEAL OF A SSESSEE AT DAMAN IS SITUATED AT VALSAD (GUJARAT). THE COPY OF THE ACKNO WLEDGEMENT OF RETURN IS FILED IN THE PAPER BOOK TO SHOW THAT RETURN IS FILE D IN THE OFFICE OF INCOME TAX OFFICE, VAPI, WARD-4, DAMAN ON 01-12-2006 AND T HE ASSESSING OFFICER IN THE CASE OF THE ASSESSEE IS ALSO DESIGNATED AS I NCOME TAX OFFICER, VAPI, WARD-4, DAMAN. THE CONTENTION OF THE ASSESSEE, IS T HEREFORE, CORRECT THAT FOR ALL PURPOSES THE ASSESSEE IS ASSESSED AT VAPI (STAT E OF GUJARAT). THE JURISDICTION OF THE ASSESSING AUTHORITY AT DAMAN AN D CONCURRENTLY AT VAPI WHICH ADMITTEDLY FALLS IN THE JURISDICTION OF STATE OF GUJARAT AS NOTED ABOVE. FOR ALL PRACTICAL INTENT AND PURPOSES THE CASES OF DAMAN FALLS IN THE JURISDICTION OF VAPI AND VALSAD. THEREFORE, THE ASS ESSEE IS RIGHTLY HELD TO BE ASSESSED WITHIN THE JURISDICTION OF STATE OF GUJARA T. THUS, THE CIRCULAR OF CBDT APPLIES TO THE CASE OF THE ASSESSEE ALSO. THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS AND CBDT CIRCULAR AND THE BENEFICIAL PROVISIONS EXTENDED TO THE ASSESSEE, RIGHTLY ALLOWED THE APPEA L OF THE ASSESSEE BY GRANTING DEDUCTION U/S 80 IB OF THE IT ACT. NO INFI RMITY IS POINTED OUT IN THE ORDER OF THE LEARNED CIT(A). WE, THEREFORE, DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISM ISSED. FACTS BEING IDENTICAL AND THE ISSU E IS THE SAME , THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DEC ISION OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND REJECT THE GROUND NO.1 RAISED BY THE REVENUE. 6 NOW, COMING TO GROUND NO.2 IN THE REVENUES APPEAL, THE FACTS IN BRIEF ARE THAT ON VERIFICATION OF DETAILS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS PAID REPAIR AND MAINTE NANCE PAYMENTS OF RS.1,19,115/- TO TEXTILE &. FIREFIGHTIN G DURING THE YEAR AND NO TDS WAS DEDUCTED. THE AO OBSERVED THAT BY NOT DEDUCTING THE TDS THE ASSESSEE HAS CONTRAVENED THE PROVISIONS OF SECTION 40(A) OF THE ACT. THEREFORE, REPAIR AND MAI NTENANCE EXPENSES OF RS. 1,19,115/- ARE DISALLOWED AND ADDED TO THE TOTAL INCOME. 8 ITA NO.3138/AHD/2010 7 ON APPEAL, THE LEARNED CIT(A) ALLOWED THE DEDUCTI ON WITH THE FOLLOWING OBSERVATIONS:- 6.2 THE ID. AR SUBMITTED THAT THE PROFIT COMPUTED AS PER THE PROVISION OF THE I.T. UNDER HEAD 'INCOME FROM BUSIN ESS/PROFESSION' IS THE PROFIT ELIGIBLE FOR DEDUCTION U/S. 8O-IB READ WITH SECTION 80AB & SECTION 808(5). SECTION 80AB READS AS ' WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLOWED UNDER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEADING C.- DEDUCTION IN RESPECT OF CERTAIN INCOMES IN RESPECT OF ANY INCOME OF THE NATURE SPECIFIED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWITHSTANDING ANYTHING CON TAINED IN THAT SECTION , FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT S ECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPARED IN ACCORDANCE WIT H THE PROVISION OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) S HALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WH ICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN H IS GROSS TOTAL INCOME'. SECTION 80B(5) READS AS 'GROSS TOTAL INCOME MEANS THAT TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, BEFORE MAKING ANY DEDUCTION UNDER THIS 'A.R. OF THE APPELLANT HAS TAK E REFERENCE FROM THE CASE LAW OF [1998] 232 ITR 0350-COMMISSIONER OF INCOME TAX VS. S WAR AN SINGH KANWAR (SC) IT WAS HELD THAT, THE EXPRESSION 'GROSS TOTAL INCO ME' IS DEFINED IN CLAUSE (5) OF SECTION 80IB TO MEAN THAT TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISION OF THE ACT BEFORE MAK ING ANY DEDUCTION UNDER CHAPTER VI-A. IT MEANS THAT BEFORE APPLYING PROVISI ON OF THE ACT INCLUDING SECTION 56 READ WITH SECTION 57(III) OF THE ACT AND ONLY THEREAFTER THE DEDUCTION UNDER THE SECTION HAS TO BE MADE. SAME WA S HELD IN OTHER CASE CIT VS. ATAM BALLABH FINANCE PVT. LTD. (2002) DELHI HIGH COURT, [2006] 280 ITR 0282- CIT VS. BARODA PEOPLES CO-OPER ATIVE BANK LTD. (GUJARAT HIGH COURT) . 6.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF THE AO AND THE SUBMISSIONS MADE BY THE ID. AR. THERE IS A FORCE IN THE ARGUMENTS OF THE ID. AR IN THIS CASE. THERE IS NO DOUBT THAT THE PROFIT COMPUTED AS PER THE PROVISION OF THE I.T. UNDER HEAD 'INCOME FR OM BUSINESS/PROFESSION' IS THE PROFIT ELIGIBLE FOR DED UCTION U/S. 8O-IB READ WITH SECTION 80AB & SECTION 80B(5). THE CASE L AWS REFERRED BY THE ID. AR AMPLY SUPPORT THE CONTENTION OF THE APPE LLANT. IN THIS CIRCUMSTANCES, I AM CONSTRAINED TO AGREE WITH THE A PPELLANT AND DIRECT THE A.O. TO INCLUDE THE AMOUNT DISALLOWED U/S. 4O(A )(IA) FOR THE 9 ITA NO.3138/AHD/2010 COMPUTATION OF DEDUCTION U/S 80IB OF THE ACT. HENCE APPEAL OF THE APPELLANT ON THIS GROUND IS ALLOWED. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). ON BEHALF OF THE REVENUE, SHRI R K VOHRA APPEARED AND SUPPORTED THE ORDER OF THE A.O. 9. ON THE OTHER HAND, ON BEHALF OF THE ASSESSEE, TH E LEARNED AR SHRI S N L AGARWALA SUPPORTED THE ORDER OF THE L EARNED CIT(A) AND SUBMITTED THAT THE ISSUE IS COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT AHMEDABAD BENCH-D IN THE CASE OF M/S JITSAN ENTERPRISE VS. ITO [ITA NO.1652/AHD/2009, ORDER DATED 13-04-2010, WHEREIN I T HAS BEEN HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB IN RESPECT OF ADDITION MADE U/S 40(A)(IA) AS IT INCREASES THE ELIGIBLE PROFIT OF THE UNDERTAKING. 10. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE OR DERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF THE IT AT AHMEDABAD BENCH-D IN THE CASE OF M/S JITSAN ENTERPRISE VS. IT O ORDER DATED 13-04-2010(SUPRA), WHEREIN THE TRIBUNAL VIDE PARAS 9 AND 10 OF THE ORDER, HAS HELD AS UNDER:- 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE TRIBUNAL VIDE THEIR ORDE R DATED 1 8-09-2009 IN THE CASE OF CHIRAG PLAST IN ITA NO. 2196/AHD/200 9 FOR THE AY 2005-06, WHILE ADJUDICATING A SIMILAR ISSUE, CONCLU DED AS UNDER:- '6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ELI GIBLE FOR DEDUCTION OF 100% OF THE PROFITS AND GAINS DERIVED FROM ITS INDU STRIAL UNDERTAKING. THE LEARNED AO FOUND THAT A SUM OF RS.7,25,073/- IS NOT ALLOWABLE AS BUSINESS EXPENDITURE OF THE YEAR UNDER CONSIDERA TION BECAUSE OF 10 IT A NO.3138/AHD/2010 THE PROVISIONS OF SECTION 40(A)(IA) ARE THAT DEDUCT ION IN RESPECT OF THIS BUSINESS EXPENDITURE WILL BE ALLOWED TO THE AS SESSEE IN THE SUBSEQUENT YEAR WHEN TDS IN RESPECT OF THIS EXPENDI TURE IS DEPOSITED BY THE ASSESSEE. HOWEVER, THE LEARNED ASS ESSING OFFICER HAS TREATED THIS AMOUNT OF DISALLOWABLE EXPENDITURE AS INCOME FROM OTHER SOURCES AND THEREBY NOT ALLOWED DEDUCTION UND ER SECTION 80IB IN RESPECT OF THAT AMOUNT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO CONFIRMED THE ABOVE ACTION OF THE LE ARNED ASSESSING OFFICER ON THE GROUND THAT ALLOWANCE OF DEDUCTION U NDER SECTION 80IB IN THE YEAR WILL TANTAMOUNT TO DOUBLE DEDUCTIO N TO THE ASSESSEE. WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE T HAT BUSINESS EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOW IN THE YEAR UNDER CONSIDERATION DUE TO APPLICATION OF PROVISIONS OF S ECTION 40(A)(IA). THUS, IN OTHER WORDS, THE SAID AMOUNT IS DEEMED AS EXPENDITURE NOT INCURRED BY THE ASSESSEE FOR COMPUTING ITS BUSINESS INCOME. THUS, AS THE EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOWED CONSEQUENTLY THE SAME RESULTS IN INCREASE OF THE PROFIT OF THE ELIGI BLE UNIT. THE DEDUCTION UNDER SECTION 80/8 IS ALLOWABLE IN RESPEC T OF PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING. SUCH AND GAINS ARE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SE CTION 28 TO 44 AC WHICH INCLUDES SECTION 40(A)(IA) ALSO. THEREFORE , ANY DISALLOWANCE OF BUSINESS EXPENDITURE OF THE ELIGIBL E UNIT WILL LOGICALLY RESULT IN ENHANCEMENT OF DEDUCTION ALLOWA BLE UNDER SECTION 80IB OF THE ACT. THE FEAR EXPRESSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN OUR CONSIDERED OPINION IS UN FOUNDED AND BASELESS. DURING THE YEAR AS THE EXPENDITURE OF THE ELIGIBLE BUSINESS IS DISALLOWED THE ASSESSEE'S BUSINESS INCOME DERIVE D FROM THE ELIGIBLE, BUSINESS OF THE INDUSTRIAL UNDERTAKING ST ANDS AT INCREASED FIGURE AND THEREFORE, THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCTION OF ENHANCED AMOUNT UNDER SECTION 80IB OF THE ACT. HOWE VER, IN THE SUBSEQUENT YEAR IN WHICH TDS IS PAID BY THE ASSESSE E, THE EXPENDITURE WILL BE ALLOWED AS DEDUCTION FROM THE E LIGIBLE PROFITS OF THE SUBSEQUENT YEAR AND THEREBY THE ELIGIBLE PROFIT OF THE INDUSTRIAL UNDERTAKING WILL BE REDUCED IN THE SUBSEQUENT YEAR AND CONSEQUENTLY THE ASSESSES WILL BE ELIGIBLE FOR DEDUCTION UNDER S ECTION 80IB AT THE REDUCED AMOUNT ONLY. THUS, THERE CANNOT BE A DOUBLE DEDUCTION TO THE ASSESSEE. IN VIEW OF THE ABOVE, WE SET ASIDE TH E ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IB IN RESPECT OF ENTIRE P ROFIT DERIVED FROM INDUSTRIAL UNDERTAKING AFTER TAKING INTO CONSIDERAT ION THE PROVISIONS UNDER SECTION 40(A)(IA). THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED . 9.1 SIMILAR FINDINGS HAVE BEEN RECORDED IN AY 2006- 07 IN THE CASE OF THE AFORESAID ASSESSEE. HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS. HMT LTD., 203 ITR 811( KAR) HELD 11 IT A NO.3138/AHD/2010 THAT FOR THE PURPOSES OF SECTIONS 80J AND 80HH OF T HE. ACT, PROFITS AND GAINS OF NEW UNDERTAKINGS ARE NOT COMME RCIAL PROFITS BUT ONLY SUCH PROFITS AS ARE COMPUTED IN TH E MANNER LAID DOWN UNDER THE ACT IN PURSUANCE OF SECTION 80AB: AS IF EACH UNDERTAKING WAS A SEPARATE ASSESSEE. WE FIND THAT T HE DELHI BENCH OF THE TRIBUNAL IN THE CASE KOMAL EXPORTS VS ACIT, 19 SOT 602 (DEL.)) IN THE CONTEXT OF PROVISIONS OF SEC 80HHC OF THE ACT HELD AS UNDER:- '11. IN THE INSTANT CASE, WE FOUND FROM THE RECORD THAT THE TAX PAYER IS AN EXPORTER AND HAD FILED A RETURN AT LOSS OF RS.47,27 ,650/-. THE TAX PAYER .BEING EXPORTER IS ELIGIBLE TO CLAIM DEDUCTION U/S 80HHC S UBJECT TO THE STIPULATED IN THE SAID SECTION. SINCE THE DEDUCTION UNDER CHAPTER VIA IS ADMISSIBLE ONLY WHEN THERE IS POSITIVE GROSS TOTAL INCOME, THE TAX PAYER COULD NOT HAVE CLAIMED DEDUCTION UNDER SECTION 80HHC WHILE FILING THE RETURN OR BEFO RE THE A. O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS SEEN THAT AS AGAINS T THE LOSS RETURNED AT RS.47,27,650/- ASSESSMENT HAS BEEN MADE AS POSITIVE INCOME OF RS.33,37,050/-. THEREFORE, THE CLAIM OF THE TAX PAYER REGARDING THE DEDUCTION UNDER SECTION 80HHC NEEDS TO BE, RE-COMPUTED WITH REFERENCE TO TH E FINALLY ASSESSED INCOME. WE DIRECT ACCORDINGLY .' 9.2 SIMILAR VIEW WAS TAKEN BY THE ITAT, MUMB AI BENCH IN THE CASE OF M/S. ZENITH RUBBER & PLASTIC WORK, 35 TTJ 259. 9.3 ON A SIMILAR ISSUE IN THE CONTEXT OF CL AIM FOR DEDUCTION U/S 80HHC OF THE ACT ORT THE ADDITIONS TO THE INCOME MA DE BY THE AO, HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS . BAWA SKIN COMPANY, 294 ITR 537(PUNJAB & HARYANA) HELD THAT IF THE PROF ITS SO ARRIVED AT BY THE ASSESSING OFFICER ARE RELATED TO THE BUSINESS OF TH E ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA OF A NY GOODS OR MERCHANDISE TO WHICH SECTION 80HHC IS APPLICABLE, THEN THE APPE LLANT IS COMPLETELY JUSTIFIED TO MAKE THE CLAIM OF DEDUCTION OF SUCH PR OFITS AS DETERMINED BY THE ASSESSING OFFICER. 10. IN VIEW OF THE FOREGOING AND IN THE LIGHT OF AFORESAID DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT, WE HAVE NO HES ITATION IN REVERSING THE FINDINGS OF THE LOWER AUTHORITIES AND ACCORDING LY, HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB ON THE AMOUNT DIS ALLOWED WHILE WORKING OUT THE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING. THEREFORE, GROUND NO.2 IN THE APPEAL IS ALLOWED. SINCE THIS VERY ISSUE HAS ALREADY BE EN DECIDED THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DEC ISION OF THE 12 IT A NO.3138/AHD/2010 TRIBUNAL, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND REJECT THE GROUND I.E. GROUND NO.2 RAISED BY THE REVENUE. 11 IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE COURT TODAY ON 30-09-2011 SD/- SD/- (G D AGARWAL) VICE-PRESIDENT (MUKUL KR. SHRAWAT) JUDICIAL MEMBER DATE : 30-09-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI PRAMOD BAPURAO DESHMUKH, PROP. M/S PARTH IN DL. FABRIC, GALA NO.9, LAXMI INDL. ESTATE, OPP. LALJI M ULJI TRANSPORT SOMNATH ROAD, DABHEL, NANI DAMAN. 2. THE INCOME-TAX OFFICER, VAPI WARD-4, DAMAN 3. CIT CONCERNED 4. CIT(A), VALSAD 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD