The ITO,Vapi Ward-4, Daman V. M/s. Twina Polyplast, Nani Daman

ITA 3139/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80517 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Business income; Principle of natural justice
• Section: 143(3); 80IB; 6; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NOS. 27 76 & 3139 / AHD/ 20 1 0 (A SSESSMENT YEAR S : 2005 - 06 & 2006 - 07 ) INCOME - TAX OFFICER, VAPI WARD - 4, DAMAN V/S M/S. TWINA POLYPLAS T UNIT NO. G - 12, CHIRAG IND. COMPLEX, GOLDEN IND. ESTATE, DA BHEL, NANI DAMAN. (APPELLANT) (RESPONDENT) PAN: AADFT7341L APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI S.N. SOPARKAR, A.R. ( )/ ORDER DATE OF HEARING : 11 - 11 - 2014 DATE OF PRONOUNCEMENT : 21 - 11 - 2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A), VALSAD DATED 20.07.2010 & 11.08.2010 FOR A.YS. 2005 - 06 & 2006 - 07 RESPECTIVELY . 2. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE SIMILAR EXCEPT FOR THE AMOUNTS AND THE SUBMISSIONS ARE ALSO COMMON FOR BOTH THE APPEALS AND THEREFORE BOTH THE APPEALS CAN BE HEARD TOGETHER. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS TOGETHER FOR THE SAKE OF ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 2 CONVENIENCE. W E THUS PROCEED WITH THE FACTS IN ITA. NO. 2776/AHD/2010 FOR A.Y. 2005 - 06. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING PLASTIC ROLLS AND BAGS AND ITS MANUFACTURING UNIT IS LOCATED IN THE UNION TERRITORY OF DAMAN. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 05 - 06 ON 31.10.2005 DECLARING TOTAL INCOME AT RS. NIL AFTER CLAIMING DEDUCTION U/S 80IB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND THER EAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 19.12.2007 AND THE TOTAL INCOME WAS DETERMINED AT RS. 10,03,540/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 20.07.2010 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS; - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S. 801B OF THE ACT STATING THAT DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IB OF THE ACT ON THE SOLE GROUND THAT THE ASSESSEE WAS NOT HAVING FACTORY LICENSE BEFORE IT STARTED MANUFACTURING ACTIVITIES IS WITHOUT ANY MERITS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE POINT THAT THE ASSESSEE HAS FAILED TO PROVE THAT IT HAS COMMENCED THE MANUFACTURING ACTIVITY ON OR BEFORE 31.03.2004, AS STIPULATED IN SECTION 801B OF THE ACT. 3. ON THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW, THE LEARNED C1T(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF REMUNERATION TO THE PARTNERS WHICH WAS ALLOWED AS PER PARTNERSHIP DEED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C1T (A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB ON DISALLOWANCE OF RS. 6,77,112/ - U/S. 40(A)(IA) OF THE ACT , AS THE DISALLOWANCE BEING TECHNICAL IN NATURE AND ASSESSEE IS ENTITLED TO DEDUCTION OF SUCH DISALLOWANCE IN NEXT YEAR ON PAYMENT BASIS. THIS WOULD LEAD T O DOUBLE BENEFIT TO THE ASSESSEE. GROUND NO. 1 & 2 ARE INTERCONNECTED AND ARE WITH RESPECT TO DEDUCTION U/S 80IB THEREFORE CONSIDERED TOGETHER. ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS. 6,31,545 / - U/S 80IB OF THE ACT. A.O NOTICED THAT THE FACTORY LICENSE WAS ISSUED TO THE ASSESSEE ON 18.11.2004 AND AS PER SECTION 6 READ WITH RULE 3 & 4 OF THE FACTORY R ULES , NO PERSON CAN START MANUFACTURING WITH OUT PRIOR APPROVAL OF THE F ACTORY INSPECTOR. HE ALSO NOTICED THAT IN FORM 10CCB, IT WAS STATED THAT THE PRODUCTION WAS STAR TED ON 01.06.2003 WHEREAS THE FACTORY LICENSE WAS ISSUED ON 18.11.2004. THE ASSESSEE WAS THEREFORE ASKED TO JUSTIFY ITS CLAIM OF DEDUCTION IN RESPONSE TO WHICH ASSESSEE INTERALIA SUBM ITTED THE DEFAULT UNDER THE FACTORY ACT DOES NOT DEBAR, THE ASSESSEE FOR CLAIMING DEDUCTION UNDER INCOME TAX ACT AND F URTHER NOWHERE IN SECTION 80IB, I T IS STATED THAT THE FACTORY LICENSE IS A MANDATORY REQUIREMENT FOR CLAIMING DEDUCTION U/S 80IB. IT WAS F URTHER SUBMITTED THAT ASSESSEE HAS COMPLIED WITH ALL THE CONDITIONS PRESCRIBED U/S 80IB OF THE ACT AND THEREFORE THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION. THE SUBMISSIONS OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE TO THE A.O A S HE WAS OF THE VIEW THAT AS PER FACTORY RULES NO PREMISES CAN BE USED AS THE FACTORY WITHOUT THE PRIOR WRITTEN PERMISSION OF CHIEF INSPECTOR OF FACTORY. HE WAS FURTHER OF THE VIEW THAT SINCE THE LICENSE HAS BEEN ISSUED ON 18.11.2004, ASSESSEE COULD NOT HAVE STARTED THE PRODUCTION BEFORE 31 ST MARCH 2004 BEING THE DATE PRESCRIBED UNDER THE ACT. A.O ALSO NOTED THAT INSPECTOR WAS DEPUTED TO THE FACTORY PREMISES AND THE INSPECTOR HAS REPORTED THAT ONLY 3 WORKERS WERE WORKING. THE ASSESSEE WAS THEREAFTER ASKED TO PRODUCE THE WORKERS WHO HAD DON E WORK IN THE YEAR UNDER CONSIDERATION. A.O NOTED THAT ASSESSEE HAD FAILED TO PRODUCE THE WORKERS OR THE RECORDS M AINTAINED TO PROVE THAT MORE THAN 10 WORKERS WERE WORKING IN THE FACTORY. HE ACCORDINGLY REJECTED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) .CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE REMAND REPORT HELD THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT BY HOLDING AS UNDER: - 5.3 I HAVE CONSIDE RED THE ASSESSMENT ORDER, THE OBSERVATIONS IN THE RR BY THE AO AND ALSO THE SUBMISSIONS MADE BY THE ID. AR CAREFULLY. THE AO DISALLOWED THE CLAIM OF 80 - IB DEDUCTION ON MAINLY TWO REASONS. FIRST THE THIRD PARTY EVIDENCE IN THE FORM OF FACTORY LICENSE WAS OB TAINED MUCH LATER THEN 31.3.2004 AND THE SECOND CONTENTION WAS THE APPELLANT HAD EMPLOYED LESS THAN 10 EMPLOYEES DURING THE RELEVANT PERIOD. WITH REGARD TO THE THIRD PARTY EVIDENCE THE MATTER HAS BEEN DECIDED BY THE HON'BLE ITAT, AHMEDABAD IN THE ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 4 CASE OF S AMARTH HEALTHCARE HAS HELD THAT FACTORY LICENSE IS NOT THE NECESSARY CONDITIONS TOR THE ELIGIBILITY OF DEDUCTION U/S. 80 - LB. RESPECTFULLY, FOLLOWING THE DECISION OF THE HON'BLE ITAT, AND ALSO CONSIDERING THE EVIDENCES PRODUCED BEFORE ME I AM INCLINED TO AG REE WITH THE CONTENTION OF THE ID. AR. WITH REGARD TO THE SECOND REASON THAT THE APPELLANT HAD EMPLOYED LESS THAN 10 WORKER ON THE BASIS OF THE REPORT FROM THE INSPECTOR OF THE DEPARTMENT, THE POINT RAISED BY THE ID. AR WAS PLAUSIBLE THAT THE STRENGTH OF W ORKERS FOR F.Y.2004 - 05 CANNOT BE DECIDED ON THE BASIS OF THE INSPECTOR'S VISIT ON 17.9.2007 WHICH IS MUCH SUBSEQUENT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AR HAD SUBMITTED WAGES/SALARY REGISTER BEFORE THE AO DURING THE ASSESSMENT PROCEEDING THE C ONTENT OF IT WAS NOT DISPUTED BY THE AO. TAKING INTO CONSIDERATION THE FACTS OF THE APPELLANT CASE AND SUBMISSION OF THE AR AND KEEPING IN VIEW THE DECISION OF THE ITAT, AHMEDABAD IN THE CASE OF SAMARTH HEALTHCARE, 1 AM OF THE OPINION THAT THE APPELLANT IS ELIGIBLE FOR THE DEDUCTION U/S. 80IB OF THE INCOME TAX ACT AND HENCE THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US L D . D.R. TOOK US THROUGH THE ORDER OF A.O AND POINTED TO THE VARIOUS FINDINGS OF A.O. SHE FURTHER SUBMITTED THAT THE FACTORY LICENSE WAS ISSUED ON 18.11.2004 AND THE ASSESSEE THEREFORE COULD NOT HAVE START ED WORK OF MANUFACTURING BEFORE 31/03/2004 WITHOUT OBTAINING THE FACTORY LICENSE. SHE FURTHER SUBMITTED THAT THE INSPECT OR HAD VISITED THE PREMISES OF THE ASSESSEE AND IT WAS REPORTED THAT ONLY 3 PERSONS WERE WORKING. SHE FURTHER SUBMITTED THAT BEFORE A.O, THE ASSESSEE HAD EXPRESSED ITS INABILITY TO PRODUCE THE WORKERS AND HAD ALSO NOT FURNISHED ANY DO CUMENTARY EVIDENCE TO SUPPORT ITS STAND OF WORKING OF 3 SHIFTS BEING CARRIED OUT. SHE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND FURTHER POINTED TO THE VARIOUS EVIDENCES PRODUCED BEFORE CIT(A) TO PR OVE THAT THE PRODUCTION WAS IN FACT STARTED IN AUGUST, 2003. HE FURTHER SUBMITTED T HAT THE PERMANENT SSI REGISTRATION C ERTIFICATE WHICH SHOWED THAT THE DATE OF PRODUCTION ON 16.08.2003 WAS FURNISHED BEFORE CIT(A). HE ALSO POINTED TO THE VARIOUS DOCUMENTS S UBMITTED BEFORE CIT(A) AND WHICH HAVE BEEN REPRODUCED BY CIT(A) AT PAGE 3 TO 7 OF HIS ORDER TO SUPPORT THE ASSESSEE S CONTENTION THAT THE PRODUCTION HAD IN FACT STARTED BEFORE 31.03.2004. THE LD. A.R. SUBMITTED THAT LD. CIT(A) HAD CALLED FOR THE REMAND REP ORT FROM A.O AND AFTER CONSIDERING THE REMAND REPORT DECIDED THE ISSUE. WITH RESPECT TO A.O S OBSERVATION THAT ONLY 3 WORKERS WERE FOUND WORKING IN THE FACTORY, HE SUBMITTED THAT INSPECTOR VISITED THE FACTORY ON A HOLIDAY (HOLIDAY ON ACCOUNT OF GANAPATI FE STIVAL ) AND THEREFORE OTHER WORKERS WERE ON HOLIDAY. THE LD. A.R. FURTHER SUBMITTED THAT THE FACTORY OF THE ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 5 ASSESSEE IS LOCATED AT DA MAN AND ITS JURISDICTION IS UNDER THE BOMBAY HIGH COURT AN D FOR THE AFORESAID PROPOSITION, H E RELIED ON THE DECISION OF CIT VS. PACKWELL PACKAGING TAX APPEAL NO. 866/AHD/2012 ORDER DATED 18.06.2013 WHEREIN THE HON BLE GUJARAT HIGH COURT HAS HELD THAT AS PER SECTION 269 , IN CASE OF ASSESSEE SITUATED AT DAMAN, THE APPEAL WOULD BE MAINTAINABLE BEFORE BOMBAY HIGH COURT. HE FURTHER SUBMITTED THAT HON BLE BOMBAY HIGH COURT ON IDENTICAL FACTS, IN THE CASE OF CIT VS. JOLLY POLYMERS IN ITA(L) NO. 1622/AHD/2012 ORDER DATED 21.02.2013 HAD UPHELD THE ORDER OF HON BLE TRIBUNAL WHERE IN THE HON BLE TRIBUNAL RELYING UPON THE DECISION IN THE MA TTER OF ITO VS. SAMARTH HEALTH CARE HAD ALLOWED THE ASSESSEE THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. HE THEREFORE SUBMITTED THAT SINCE THE ASSESSEE IS OF DAMAN, T HE JURISDICTIONAL HIGH COURT IN THE PRESENT CASE WOULD BE HON BLE BOMBAY HIGH COURT AND TH E ISSUE HAS TO BE DECIDED IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY JURISDICTIONAL HIGH COURT . HE FURTHER SUBMITTED THAT SINCE ON IDENTICAL FACTS, THE ISSUE HAS BEEN DECIDED BY THE JURISDICTIONAL HON BLE BOMBAY HIGH COURT IN FAVOUR OF THE ASSESSEE, T HE G ROUND OF THE REVENUE NEEDS TO BE DISMISSED. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF ITO VS. AUTO TUFF SAFETY GLASS ITA NO. 3335/AHD/2010. HE THUS SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL O N RECORD. WE FIND THAT ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DEDUCTION U/S 80IB WHICH WAS DENIED BY THE A.O FOR THE REASON THAT THE FACTORY LICENSE WAS ISSUED TO THE ASSESSEE ON 18.11.2004 AND THEREOF THE ASSESSEE COULD NOT HAVE START ED THE PRODUCTI ON BEFORE 31 ST MARCH, 2004 . WE FIND THAT CIT(A ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT AND RELYING ON THE DECISION OF HON BLE AHMEDABAD TRIBUNAL IN THE CASE OF SAMARTH HEALTH CARE (SUPRA) HAS HEL D THAT FACTORY LICENSE IS NO T A NECESSARY CONDITION FOR ELIGI BILITY OF DEDUCTION U/S 80IB. FURTHER IT IS AN UNDISPUTED FACT THAT ASSESSEE IS LOCATED AT DAMAN AND HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PACKWELL PACKAGING (SUPRA) HAS HELD THAT FOR A SSESSEES SITUATED IN D AMAN , U/S 269 (VI) T HE JURISDICTIONAL HIGH COURT IS BOMBAY HIGH COURT . RESPECTFULLY FOLLOWING THE AFORESAID DECISION ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 6 OF HON BLE GUJARAT HIGH COURT WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE ISSUE HAS TO BE DECIDED IN THE LIGHT OF THE PRINCIPLES LAID D OWN BY JURISDICTIONAL HIGH COURT I.E. BOMBAY HIGH COURT . WITH RESPECT TO ALLOWABILITY OF DEDUCTION U/S 80IB, WE FIND THAT HON BLE BOMBAY HIGH COURT (BEING THE JURISDICTIONAL HIGH COURT) IN THE CASE OF CIT VS. JOLLY POLYMERS (SUPRA) HAD UPHELD THE ORDER OF T HE TRIBUNAL WHERE THE TRI BUNAL RELYING ON THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE O F SAMARTH HEALTH CARE HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE . THE RELEVANT FINDING OF BOMBAY HIGH COURT IS AS UNDER: - 2. BY THE IMPUGNED ORDER, THE TRIBUN AL UPHELD THE FINDING OF THE CIT(A) HOLDING THAT THE RESPONDENT - ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTION 80IB OF THE INCOME TAX ACT, 1961 (THE SAID ACT), THE OBJECTION OF THE REVENUE IS THAT AS THE FACTORY LICENSE WAS GRANTED ON 3 RD MAY, 2005, IT CAN NOT BE SAID THAT THE RESPONDENT - ASSESSEE HAD COMMENCED MANUFACTURING ACTIVITY PRIOR TO CUT OFF DATE 31 ST MARCH, 2004. IN THE IMPUGNED ORDER, THE TRIBUNAL RELIED UPON ITS DECISION IN THE MATTER OF ITO VAPI VS. SAMARTH HEALTH CARE IN ITA NO. 1006/AHD/2009 DA TED 5 TH JUNE, 2012 AND ALLOWED THE CLAIM FOR DEDUCTION UNDER SECTION 80IB OF THE SAID ACT. THE TRIBUNAL CAME TO FINDING OF FACT IN THE ABOVE CASE THAT THE ASSESSING OFFICER DID NOT DOUBT ABOUT RAW MATERIAL CONSUMPTION, POWER CONSUMPTION, SALES AND EMPLOYME NT OF WORKERS FOR THE PURPOSES OF DENYING T HE BENEFIT OF SECTION 80IB OF THE SAID ACT. IT WAS FURTHER HELD THAT FOR THE PURPOSE OF SECTION 80 IB OF THE SAID ACT, WHAT IS ESSENTIAL IS THAT THE ASSESSEE SHOULD MANUFACTURE OR PRODUCE AN ARTICLE OR THING AND IF THERE IS ANY VIOLATION OF ANY PROVISIONS OF ANY OTHER STATUTES THEN THE ASSESSEE HAS TO EXPLAIN THE SAME TO THE AUTHORITIES IMPLEMENTING THOSE ACTS/STATUTES AND THE SAME CANNOT BE THE BASIS OF DENIAL OF BENEFIT UNDER SECTION 80IB OF THE SAID ACT. THE REVE NUE HAS NOT BEEN ABLE TO POINT OUT WHY AND HOW THE DECISION OF THE TRIBUNAL IN THE MATTER OF SAMARTH HEALTH CARE (SUPRA) IS INAPPLICABLE TO THE PRESENT FACTS. IN ANY EVENT, THE CIT(A) WHILE SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER, DIRECTS THE ASSE SSING OFFICER TO VERIFY THE INCOME OF THE RESPONDENT - ASSESSEE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB BEFORE GRANTING RELIEF. 8. BEFORE US REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPORT N OR HAS BEEN ABLE TO DISTINGUISH THE JUDGMENTS RELIED U PON BY TH E CIT(A) OR THE ASSESSEE . IN VIEW OF AFORESAID FACTS , RELYING ON THE AFORESAID DECISIONS OF HON BLE HIGH COURTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 3 IS WITH R ESPECT TO DELETION OF DISALLOWANCE MADE ON ACCOUNT OF REMUNERATION TO PARTNERS. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSING THE PARTNERSHIP DEED A.O NOTICED THAT NO REMUNERATION HAS BEEN PAID TO THE PARTNERS. A.O WAS OF THE VIEW THAT SINCE T HE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S 80IB AT 100% AND TO CLAIM SUCH DEDUCTION , THE PARTNERS HAVE NOT DRAWN REMUNERATION. HE ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 7 THEREFORE ALLOWED THE REMUNERATION OF RS. 3,05,118/ - TO THE PARTNERS THOUGH THE SAME WAS NOT CLAIMED BY THE ASSESSEE. AG GRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A).CIT(A) DELETED THE REMUNERATION THRUSTED UPON THE ASSESSEE BY HOLDING AS UNDER: - 6. GROUND NO.2. THIS GROUND OF APPEAL RELATES TO THRUSTING UPON THE APPELLANT A DEDUCTION F RS. 3,05,118/ - AS REMUNERATION TO PARTNERS. 6.1 ALTHOUGH THE APPELLANT HAS NOT CLAIMED THE REMUNERATION IN THE PROFIT AND LOSS ACCOUNT THE ASSESSING OFFICER HAS ALLOWED REMUNERATION TO PARTNERS ON THE BASIS OF CLAUSE NO.17 OF THE PARTNERSHIP DEED OF THE APPELL ANT. THE AR OF THE APPELLANT VIDE HIS LETTER DT.26.08.2008 SUBMITTED AS UNDER : THE LEARNED ASSESSING OFFICER HAS THRUST UPON THE ASSESSEE A DEDUCTION FOR REMUNERATION TO PARTNERS ALTHOUGH THE ASSESSEE HAS NEITHER PAID NOT CREDITED ANY REMUNERATION TO THE PARTNER'S CAPITAL ACCOUNTS. WE WOULD LIKE TO DRAW YOUR KIND ATTENTION TO THE PROVISION OF SECTION 40(B) OF THE INCOME TAX ACT RELATING TO ALLOW ABILITY OF REMUNERATION TO PARTNERS. THE SECTION STATES 'NOT WITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 30 TO 38 THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION 6.2 IN CASE OF ANY FIRM ASSESSABLE AS SUCH ANY PAYMENT OF REMUNERATION TO ANY PARTNER WHO IS A WORKING PARTNE R OR OF INTEREST TO ANY PARTNER WHICH IN EITHER CASE, IS NOT AUTHORIZED BY, OR IS NOT IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED.' THE LEARNED ASSESSING OFFICER HAS INCORPORATED THE CLAUSE RELATING TO REMUNERATION FROM THE PARTNERSHIP DEED IN TH E ASSESSMENT ORDER ON PAGE 8 OF THE ORDER. FROM THE SIMPLE READING OF THIS CLAUSE, IT IS EVIDENT THAT THE CLAUSE IS VERY VAGUE AND DOES NOT SPECIFY ANY AMOUNT PAYABLE OR THE WAY IN WHICH THE AMOUNT PAYABLE AS REMUNERATION IS TO BE COMPUTED. THE ASSESSING O FFICER HAS HIMSELF CALCULATED THE AMOUNT OF REMUNERATION ON THE BASIS OF THE MAXIMUM LIMIT OF REMUNERATION ALLOWABLE UNDER SECTION 4(0B OF THE INCOME TAX ACT. THIS IS ABSOLUTELY AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND NEEDS TO BE DELETED. THE ISSUE OF INTEREST ON CAPITAL AND REMUNERATION BEING THRUST UPON THE ASSESSEE BY THE ASSESSING OFFICER IN CASES WHERE THE ASSESSEES' HAVE CLAIM DEDUCTION UNDER CHAPTER VI - A HAS BEEN SET TO REST BY THE DECISION OF THE AHMEDABAD TRIBUNAL IN THE CASE OF MUNDRA PACKAGI NG INDUSTRIES, SILVASSA AND THERMAL SYSTEMS AND ENGINEERS, SILVASSA, WHEREIN THE TRIBUNAL HAS CONCLUDED THAT INTEREST ON CAPITAL AND REMUNERATION CANNOT BE THRUST UPON THE ASSESSEE WHEN THE ASSESSEE HAS NEITHER CREDITED INTEREST OR REMUNERATION TO CAPITAL ACCOUNT NOR HAS IT PAID THE SAME TO ANY PARTNER. IN THE REMAND REPORT THE ASSESSING OFFICER HAS PRODUCED THE RELEVANT CLAUSE OF THE PARTNERSHIP DEED AND HAS CONTENDED THAT REMUNERATION IS PAYABLE TO PARTNERS BASED ON THIS CLAUSE OF PARTNERSHIP DEED. 6.3 ON GOING THROUGH THE CLAUSE RELATING TO REIMBURSEMENT IN THE PARTNERSHIP DEED IT IS EVIDENT THAT THE CLAUSE IS VAGUE IN NATURE AND DOES NOT EVEN PRESCRIBE THE METHOD OF CALCULATING THE REMUNERATION. MOREOVER KEEPING IN VIEW OF DECISION OF THE HON'BLE I TAT, A HMEDABAD IN THE CASE OF MUNDRA PACKAGING INDUSTRIES, SILVASSA AND THERMAL POWER SYSTEMS AND ENGINEERS, SILVASSA I AM OF THE OPINION THAT REMUNERATION CANNOT BE THRUST UPON THE APPELLANT SO THIS GROUND OF APPEAL IS ALLOWED. 10. AGGRIEVED BY THE ORDER OF CIT(A ), REVENUE IS NOW IN APPEAL BEFORE US. 11. BEFORE US, LD. D .R. SUPPORTED THE ORDER OF A.O AND FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT POINTED OUT ANY REASON FOR NOT CLAIMING THE REMUNERATI ON T HOUGH THE CLAUSE WITH RESPECT TO REMUNERATION EXIST IN THE PAR TNERSHIP DEED. SHE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND FURTHE R SUBMITTED THAT THE A.O HAD THRU STED UPON THE ASSESSEE DEDUCTION FOR REMUNERATION TO PARTNERS ALTHOUGH THE ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 8 A SSESSEE HAS NEITHER PAID NOR CREDITED ANY REMUNERATION TO THE PARTNERS CAPITAL ACCOUNT. HE FURTHER SUBMITTED THAT THE CLAUSE OF PARTNERSHIP DEED IS VERY VAGUE AND DOES NOT SPECIFY ANY AMOUNT PAYABLE OR THE WAY IN WHICH THE AMOUNT PAYABLE AS REMUNERATION IS TO BE COMPUTED . HE FURTHER SUBMITTED THAT REMUNERATION CANNOT BE THRUST UPON THE ASSESSEE BY THE A.O. HE ALSO PLACED RELIANCE ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. MUNDRA PACKAGING INDUSTRIES (TAX APPEAL NO. 615 TO 617/A/2006) AND A LSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION . HE THUS SUPPORTED THE ORDER OF CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, THOUGH ASSESSEE HAD NOT CLAIMED REMUNERATION TO PARTNERS, A.O HA D ALLOWED THE SAME. WE FIND THAT CIT(A) WHILE ALLOWING THE GROUND OF ASSESSEE HAS GIVEN A FINDING THAT THE CLAUSE RELATING TO REMUNERATION IN THE PARTNERSHIP DEED IS VAGUE IN NATURE AND DOES NOT PRESCRIBE THE METHOD OF CALCULATION OF REMUNERATION. HE HAD FURTHER RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF MUNDRA PACKAGING INDUSTRIES. BEFORE US REVENUE HAS NOT BROUGHT ANY CONTRARY BI NDING DECISION IN ITS SUPPORT N OR HAS BEEN ABLE TO DISTINGUISH THE JUDGMENTS RELIED UPON BY THE CIT(A) . IN VIEW OF T HESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 4 TH GROUND IS WITH RESPECT TO DELETION OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED T HAT ASSESSEE HAD PAID RS. 4,94,953/ - AS LABOUR CHARGES TO SHRI SATYASAI PRINTING AND RS. 1,82,159/ - AS TRANSPORTATION CHAR GES TO SHRI BALAJI BUT DID NOT DEDUCT TDS ON THE AFORESAID PAYMENTS. HE ACCORDINGLY DISALLOWED THE AGGREGATE PAYMENT OF RS. 6,77,112/ - U/S 40(A)(IA) OF THE ACT. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO DELETED THE ADDITION BY HOLDING AS UNDER: - 7.3 I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION BEFORE ME BY THE LD. AR OF THE APPELLANT. THE DED UCTION U/S.8 0 - IB WAS NOT GRANTED TO THE APPELLANT ON THE DISALLOWANCE MADE ON TECHNICAL GROUND. I AM OF THE OPINION THAT THE DEDUCTION U/S.8 0 - IB HAS TO BE GRANTED ON THE COMPUTED INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. ANY ADDITION / DISALLOWANCE M ADE DURING THE COURSE OF ASSESSMENT DO NOT LOSE THE CHARACTERISTIC OF BEING DERIVED FROM THE INDUSTRIAL UNDERTAKING AS ITS ORIGINAL SOURCE. ACCORDINGLY I AM ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 9 CONSTRAINED TO DISAGREE WITH THE ASSESSING OFFICER THAT SUCH DISALLOWANCE IS NOT ENTITLED FOR DEDUC TION U/S.8O - IB. THIS DEDUCTION IS TO BE ALLOWED ON THE COMPUTED INCOME OF THE INDUSTRIAL UNDERTAKING. THE SAME HAS BEEN CONFIRMED BY THE HON'BLE ITAT, AHMEDABAD IN THE CASE (I) I.T.O. WARD - 4 V/S. M/S. ANUPAM INDUSTRIES ITA NO.3571/AHD/2008, (2) I.T.O. WARD - 4, VAPI V/S.M/S. UNIMOLD INDIA ITA NO.4145/AHD/2008. SO THE APPELLANT SUCCEEDS IN THIS GROUND OF APPEAL AND THE ASSESSING OFFICER IS DIRECTED TO GRANT DEDUCTION U/S.8O - IB @ 100% OF COMPUTED INCOME FROM BUSINESS 14. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE I S NOW IN APPEAL BEFORE US. 15. BEFORE US,LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT( A) AND FURTHER SUBMITTED THAT DISALLOWANCE U/S 40(A)(IA) MADE WOULD RESULT IN INCREASE IN BUSINESS INCOME AN D THEREBY THE DEDUCTION U/S 80IB . HE THUS SUPPORTED THE ORDER OF CIT(A). 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) AFTER RELYING ON THE DECISIONS OF TRIBUNAL STATED IN HIS ORDER HAD DELETED THE ADDITION M ADE BY A.O. BEFORE US REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN I TS SUPPORT N OR HAS BEEN ABLE TO DISTINGUISH THE JUDGMENTS RELIED UPON BY THE CIT(A) . IN VIEW OF THESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS TH IS GROUND OF REVENUE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ITA NO. 3139/AHD/2010 ( FOR A.Y. 06 - 07 ) 18. THE GROUND RAISED BY THE REVENUE READS AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB OF THE ACT STATING THAT DISALLOWANCE OF CLAIM OF DEDUCTION U/S.801B OF THE ACT ON THE SOLE GROUND THAT THE ASSESSEE WAS NOT HAVING FACTORY LICENSE BEFORE IT STARTED MANUFACTURING ACTIVITIES IS WITHOUT ANY MERITS. 2. O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE POINT THAT THE ASSESSEE HAS FAILED TO PROVE THAT IT HAS COMMENCED THE MANUFACTURING ACTIVITY ON OR BEFORE 31.03.2004, AS STIPULATED IN SECTION 80IB OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN ALLOWING THE DEDUCTION U/S. 80IB OF THE ACT. THE EXTENSION FOR FILING RETURN OF INCOME WAS APPLICABLE TO THE ASSESSEE ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 10 OF GUJARAT ONLY, THERE IS NOT MENTIONED THAT EXTENSION FOR FILING RETURN OF INCOME FOR THE ASSESSEE OF DAMAN. 4. ON THE FACTS AND CIRCUMSTANCES THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN ALLOWING THE EXPENSES OF LABOUR CHARGES OF RS. 78,137/ - WHICH WAS DISALLOWED U/S. 40A(2)(B) OF THE ACT . 5. 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. 6,35,918/ - U/S. 40(A)(IA) OF THE ACT , AS THE DISALLOWANCE BEING TECHNICAL IN NATURE AND ASSESSEE IS ENTITLED T O DEDUCTION OF SUCH DISALLOWANCE IN NEXT YEAR ON PAYMENT BASIS. THIS WOULD LEAD TO DOUBLE BENEFIT TO THE ASSESSEE. 19. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THE GROUNDS NO. 1 & 2 ARE IDENTICAL TO GROUND NO. 1& 2 FOR A.Y. 05 - 06 EXCEPT FOR THE AMOUNTS AN D THE SUBMISSIONS MADE BY THEM WHILE AR G U ING THE GROUNDS FOR A.Y. 05 - 06 WOULD EQUALLY APPLY TO PRESENT GROUNDS. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, BOTH THE PARTIES HAVE ADMITTED THAT THE FACTS AND CIRCUMS TANCES OF CASE IN THE PRESENT GROUNDS ARE SIMILAR AND IDENTICAL TO THE GROUND NO. 1 & 2 OF THE REVENUE S APPEAL FOR A.Y. 05 - 06. WE HEREINABOVE, WHILE DECIDING THE APPEAL OF REVENUE FOR A.Y. 05 - 06 FOR THE REASONS STATED THEREIN HAVE DISMISSED THE GROUNDS OF REVENUE. SINCE THE FACTS AND CIRCUMSTANCES OF THE PRESENT GROUNDS RAISED BY REVENUE ARE SIMILAR TO THE GROUNDS FOR A.Y. 05 - 06, WE THEREFORE FOR SIMILAR REASONS STATED HEREIN, WHILE DECIDING THE GROUNDS FOR A.Y. 05 - 06 ALSO DISMISS THE GROUNDS OF REVENUE. GROUND NO. 3 IS WITH RESPECT TO THE ALLOWING THE DEDUCTION U/S 80IB(10). 21. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAS FILED THE RETURN OF INCOME FOR A.Y. 06 - 07 ON 30.12.2006 AND THEREFORE ACCORDING TO THE A.O IT WAS BEYOND THE DUE DATE PRESCRIBED U/S 139 . HE ACCORDINGLY DENIED THE DEDUCTION U/S 80IB(10) OF THE ACT. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A).CIT(A) WHILE ALLOWING THE CLAIM OF DEDUCTION UNDER 80IB HAS NOTED THAT AS PER CB DT S NOTIFICATION THE DUE DATE FOR FILING OF ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 11 RETURN FOR A.Y. 06 - 07 IN THE CASE OF STATE OF GUJARAT WAS EXTENDED U P TO 30.12.2006. FURTHER SINCE THE JURISDICTION OF DAMAN WAS WITH ITO VAPI, H E FOLLOWING THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF SAMA RTH HEALTHCARE (SUPRA) HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 22. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND SUPPORTED THE DECISION OF CIT(A) AND FURTHER PLACED RELIANCE ON THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF AJANTA PACKAGING IN ITA NO. 1641/AHD/2009 ORDER DATED 21.12.2011. 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WITH RESPECT TO THE DELAY IN FILING THE RETURN , WE FIND THAT THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF AJANTA PACKAGING (SUPRA) RELYING ON THE DECISION IN THE CASE OF ITO VS. PACKWELL PACKAGING ITA NO. 1634/AHD/2009 ORDER DATED 21.01.2011 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: - 6. AS AGAINST THIS, IT IS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION RENDERED IN THE CASE OF I TO VS PACKWELL PACKAGING IN I.TA NO. 1634/AHD/2009 DATED 21.01.2011. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE TRIBUNAL DECISION CITED BY THE LD. A.R. BEFORE DE ALING WITH THE VARIOUS OBJECTIONS BY THE LD. D.R., WE FEEL IT PROPER THAT WE SHOULD FIRST DECIDE APPLICABILITY OF THE TRIBUNAL DECISION CITED BY THE ASSESSEE. WE FIND THAT IN THAT CASE ALSO, ASSESSEE WAS ASSESSED BY THE ITO VAPI WARD 4, DAMAN AS IN THE PRE SENT CASE. IN THAT CASE ALSO, THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 01.12.2006 AND IT WAS THE CASE OF THE A.O. THAT THE SAME IS BEYOND THE DUE DATE SPECIFIED U/S 139(1) OF THE INCOME TAX ACT, 1961 AND, THEREFORE; THE ASSESSEE IS NOT ELIGIBLE FO R DEDUCTION U/S 80 - IB OF THE ACT. HENCE, IT IS SEEN THAT FACTS ARE IDENTICAL IN BOTH THE CASES. IN THAT CASE, THE ISSUE IN DISPUTE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND THE RELEVANT PARA OF THE TRIBUNAL DECISION IS PARA 7 WHICH IS REPRO DUCED BELOW: '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 THE CBDT CONSIDERING THE REPORTS ON DISRUPTION CAUSED DU E 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 STATE OF GUJARAT. THE ASSESSMENTS FRAMED IN THE CASES OF THE ASSESSEES WHO CARRIED ON BU SINESS IN DAMAN ARE ASSESSED OR ASSESSABLE IN THE STATE OF GUJARAT BY INCOME TAX OFFICE SITUATED AT VAPI. THE ASSESSEE ALSO EXPLAINED THAT DUE TO DIFFERENT CATEGORY OF AO, STATUS, INCOME AND IN CASES OF NON - COOPERATE, THE ASSESSEES HAVING INCOME OF MORE TH AN RS.5 LACS ARE ASSESSED AT 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 WITHIN THE JURISDICTION OF INCOME TAX OFFICER, VAPI WHO IS IN JURISDICTION OF CIT, VALSAD AND CCIT, SURAT AND CCIT, AHMEDABAD WHICH ARE SITUATED IN THE STATE OF GUJARAT. THE PAN AND TAN DETAILS SUBMITTED BY THE ASSESSEE CLEARLY INDICATED THAT THE JURISDICTION OF THE ASSESSEE LIES AT GUJARAT ONLY. EVEN THE LEARNED CI T(A) WHO DECIDED THE APPEAL OF ASSESSEE AT DAMAN IS SITUATED AT VALSAD (GUJARAT). THE COPY OF THE ACKNOWLEDGEMENT OF RETURN IS FILED IN THE PAPER BOOK TO SHOW THAT RETURN IS FILED IN THE OFFICE OF ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 12 INCOME TAX OFFICE, VAPI, WARD - 4, DAMAN ON 01 - 12 - 2006 AND TH E ASSESSING OFFICER IN THE CASE OF THE ASSESSEE IS ALSO DESIGNATED AS INCOME TAX OFFICER, VAPI, WARD - 4, DAMAN. THE CONTENTION OF THE ASSESSEE, IS THEREFORE, CORRECT THAT FOR ALL PURPOSES THE ASSESSEE IS ASSESSED AT VAPI (STATE OF GUJARAT). THE JURISDICTION OF THE ASSESSING AUTHORITY AT DAMAN AND 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, T HE ASSESSEE IS RIGHTLY HELD TO BE ASSESSED WITHIN THE JURISDICTION OF STATE OF GUJARAT. 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 PROVIS IONS EXTENDED TO THE ASSESSEE, RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE BY GRANTING DEDUCTION U/S 80 IB OF THE IT ACT. NO INFIRMITY 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 DISMISSED.' 8. SINCE THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND NO CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE, WE FEEL THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS I SSUE. REGARDING VARIOUS ARGUMENTS RAISED BY THE LD. D.R., WE WOULD LIKE TO OBSERVE THAT THE SAME ARE NOT RELEVANT IN VIEW OF THIS FACT THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION NOTED ABOVE. WE, THEREFO RE, REJECT THIS GROUND OF THE REVENUE. 24. BEFORE US REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPORT N OR HAS BEEN ABLE TO DISTINGUISH THE JUDGMENTS RELIED U PON BY THE CIT(A) . IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. GROUND NO. 4 IS WITH RESPECT TO THE EXPENSES OF LA BOUR CHARGES DISALLOWED U/S 40A (2 )( B). 23. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAS PAID LABOUR CHARGES TO ITS SISTER CONCERN , TWINA POLYMERS AT RS. 4 PER KG. WHEREAS TO OTHER CONCERNS IT WAS PAID AT RS. 5 PER KG. A.O WAS OF THE VIEW THAT BY PAYING LESS LABOUR CHARGES, THE ASSESSEE HAS INCREASED THE PROFIT AND THEREBY HAS CLAIMED EXCESS DEDUCTION U/S . 80IB. HE ACCORDINGLY WORKED OUT THE LABOUR CHARGES AT RS. 78,137/ - AND ALLOWED THE SAME. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A).CIT(A) DELETED THE ACTION OF THE A.O BY HOLDING AS UNDER: - 7.3 I HAVE CONSIDERED THE OBSER VATION OF THE A.O IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTIONS RAISED BY THE A.R OF THE APPELLANT IN THE WRITTEN SUBMISSION. I AGREE WITH THE CONTENTIONS RAISED BY THE A.R. OF THE APPELLANT THAT LABOUR CHARGES PAID FOR DIFFERENT GAUGE AND SPECIFICATI ON OF THE FINISHED GOODS AND THEREFORE THE WAGES RATE ARE DIFFERENT. THUS, THE APPELLANT S GROUND NO. 3 IS ALLOWED. 25. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 13 26. BEFORE US LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND L D. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND FURTHER SUB MITTED SECTION 40A (2 )( B) IS A SECTION FOR DISALLOWANCE OF EXPENSES AND THE A.O CANNOT TAKE THE LIBERTY OF DECREASING THE PROFIT UNDER THIS SECTION. HE THUS SUPPORTED THE ORDER OF CIT(A). 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE ALLOWING THE CLAIM OF ASSESSEE HAS HELD THAT THE LABOUR CHARGES PAID BY THE ASSESS EE WAS FOR DIFFERENT GAUGE SPECIFICATION OF FINISHED GOODS AND THEREFORE T HE WAGES RATES ARE DIFFERENT. BEFORE US REVENUE HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF CIT(A) NOR COULD CONTROVERT THE SUBMISSIONS OF ASSESSEE . IN VIEW OF THESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 5 TH GROUND IS WITH RESPECT TO DELETION OF DEDUCTION DISALLOWANCE U/S 40(A)(IA) 28. BEFORE US BOTH THE PARTIES SUBMITTED THAT THE GROUND NO. 5 RAISE IN THE PRESENT APPEAL IS IDENTICAL TO GROUND NO. 4 OF A.Y. 05 - 06 EXCEPT FOR THE AMOUNT S AND THE SUBMISSIONS MADE BY THEM WHILE ARUGING THE GROUND FOR A.Y. 05 - 06 WOULD EQUALLY APPLY TO PRESENT GROUND . 29. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, BOTH THE PARTIES HAVE ADMITTED THAT THE FACTS AND CIRCU MSTANCES OF CASE IN THE PRESENT GROUNDS ARE SIMILAR AND IDENTICAL TO THE GROUND NO. 4 OF THE REVENUE S APPEAL FOR A.Y. 05 - 06. WE HEREINABOVE, WHILE DECIDING THE APPEAL OF REVENUE FOR A.Y. 05 - 06 FOR THE REASONS STATED THEREIN HAVE DISMISSED THE GROUNDS OF R EVENUE. SINCE THE FACTS AND CIRCUMSTANCES OF THE PRESENT GROUNDS RAISED BY REVENUE ARE SIMILAR TO THE GROUNDS FOR A.Y. 05 - 06, WE THEREFORE FOR SIMILAR REASONS STATED HEREIN, WHILE DECIDING THE GROUNDS FOR A.Y. 05 - 06 ALSO DISMISS THE GROUNDS OF REVENUE. ITA NO S. 2776 & 3139/AHD/2010 . A.Y S . 2005 - 06 & 2006 - 07 14 30. I N THE RESULT, BOTH THE APPEALS OF REVENUES ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 11 - 201 4 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT AC COUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD