ACIT, New Delhi V. M/s. Ayurvedant (P) Ltd., New Delhi

ITA 3874/DEL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5067 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 26-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R C DANDAY
• Assessee Lawyers: SUBODH GUPTA; MUKHES AGRAWAL
• Section: 115JB

Judgement Text

1 ITA NO. 3874/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 3874/DEL/2 012 (A.Y .2007-08) ACIT CIRCLE-2(1), ROOM NO. 398D, C. R. BUILDING NEW DELHI (APPELLANT) VS AYURVEDANT (P) LTD. B-6/5, SAFDARJUNG ENCLAVE, NEAR HDFC BANK NEW DELHI AADCA3197Q (RESPONDENT) APPELLANT BY SH. R.C. DANDAY, SR. DR RESPONDENT BY SH. SUBODH GUPTA, CA & SH. MUKHES AGRAWAL, CA ORDER PER SUCHITRA KAMBLE, JM THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDE R DATED 08/05/2012 PASSED BY THE CIT(A)-V, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IC IS ALLOWABLE. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF AYURVEDIC MEDICINE & COSMETICS FROM ITS UNITS SITUATED AT NAGPUR (MH) AND BADDI (HP).THE INCOME TAX RETURN DECLARING NIL INCOME AFTER CLAIMING DEDU CTION UNDER CHAPTER VIA AT RS. 36,80,828/- WAS TRANSMITTED ELECTRONICALLY W ITHOUT DIGITAL SIGNATURE ON DATE OF HEARING 14.06.2017 DATE OF PRONOUNCEMENT 04.08.2017 2 ITA NO. 3874/DEL/2012 31.10.2007. THE ASSESSEE COMPANY PAID TAX UNDER THE PROVISIONS OF SEC. 115JB OF THE INCOME TAX ACT, 1961 ON BOOK PROFIT OF RS. 78,61,516/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THE CAS E WAS SELECTED FOR SCRUTINY AND ACCORDINGLY, INITIAL NOTICE U/S 143(2) WAS ISSU ED. THE ASSESSEE WAS ASKED TO FURNISH DETAILS ALONGWITH SUPPORTING DOCUMENTS T HAT ARE PRE-REQUISITE CONDITIONS UNDER THE PROVISIONS OF SECTION 80IC OF THE ACT TO CLAIM THE DEDUCTION. THE ASSESSEE FILED DETAILS/ DOCUMENTS. T HERE ARE TWO UNITS OF THE COMPANY ONE AT NAGPUR (MH) AND ANOTHER AT BADDI (HP ) AND ASSESSEE WAS CLAIMING DEDUCTION U/S 80IC WITH ITS UNIT AT BADDI (HP). THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED U/S 80IC ON THE GR OUND THAT THE ASSESSEE IS NOT CARRYING OUT ANY MANUFACTURING/PRODUCTION ACTIV ITIES AT BADDI (HP) AND OBSERVED THAT IT IS CARRYING OUT ITS BUSINESS ACTIV ITY IN A RENTED HALL MEASURING 78X38 SQ. FT. FROM WHERE IT IS NOT POSSIBLE TO PROD UCE/MANUFACTURE ITEMS SHOWN IN THE P&L ACCOUNT AND FURTHER SUCH A SMALL S PACE CANNOT HAVE INSTALLED CAPACITY OF MACHINERY OF RS. 18,26,057/- THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESSEE HAD SHOWN CLOSING ST OCK OF LABEL AND SLEEVES AND BOTTLE CAPS ONLY AT BADDI UNITS AND NOT AT THE OTHE R UNIT I.E. NAGPUR. THUS, THE AO HELD THAT THERE IS NO PRODUCTION/MANUFACTURING A CTIVITY BEING CARRIED OUT AT BADDI, THE SPECIFIED AREA FOR THE PURPOSE OF SEC TION 80IC AND (IV) THE PURCHASES MADE BY THE ASSESSEE AND THE DECLARATION ISSUED BY THE EXCISE AND TAXATION DEPT. DATED 11.05.2006 SHOWS THE PURCHASES BEING MADE FOR TRADING ACTIVITY ONLY. 4. BEING AGGRIEVED BY THE SAID ASSESSMENT ORDER THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL. 5. THE LD. DR SUBMITTED THAT SINCE THE ASSESSEE COM PANY HAS NOT MANUFACTURED/PRODUCED THE SPECIFIED GOODS IN BADDI (HP) AND ITS ACTIVITY AT BADDI WAS LIMITED TO THE PACKING OF THE GOODS/ARTIC LE, WHICH IS NOT ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 80IC OF THE ACT WA S RIGHTLY DISALLOWED BY THE ASSESSING OFFICER. THE CIT(A) IS INCORRECT IN ALLOW ING CLAIM OF THE ASSESSEE. THE 3 ITA NO. 3874/DEL/2012 LD. DR RELIED UPON THE DECISION OF THE HONBLE MADH YA PRADESH HIGH COURT IN CASE OF AARTECH SOLONICS LTD. VS. CIT (2013)32 TAXM ANN.COM 207 WHEREIN IT WAS HELD THAT UNLESS SOME TECHNICAL EXPERT PERSON E XAMINES THE ASPECT OF THE MANUFACTURING/ASSEMBLING PROCESS, THE FINDING CANNO T BE GIVEN IN RESPECT OF GRANTING CLAIM OF SECTION 80IC OF THE ACT. 6. THE LD. AR SUBMITTED THAT ALL THE RELEVANT EVIDE NCES WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE CIT(A) HAS TAKEN PROPER COGNIZANCE OF THE SAID EVIDENCES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. THE LD. AR RIGHTLY POINTED OUT THE EVIDENCES WHICH WERE PRODUC ED BEFORE THE REVENUE AUTHORITIES. IT IS PERTINENT TO NOTE THAT ALL THE R ECORDS WERE AVAILABLE TO THE DEPARTMENT AT THE TIME OF THE ASSESSMENT PROCEEDING S BUT THE ASSESSING OFFICER MERELY ON PRESUMPTION GIVEN THE FINDING THA T THERE IS NO MANUFACTURING PROCESS INVOLVED IN SMALL PLACE OF WORK. IN FACT, T HE ASSESSING OFFICER IGNORED THE EVIDENCE RELATING TO WORKERS AS WELL. THE CIT(A ) HAS GIVEN A PROPER FINDING AS TO THE MANUFACTURING PROCESS CARRIED OUT BY THE ASSESSEE. THE CIT(A) HELD IN PARA 5 AS UNDER: 5. THE ISSUE INVOLVED AND THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDERED. THE AO EVEN IN THE REMAND REPORT H AS QUESTIONED THE APPELLANTS VERSION THAT NO MANUFACTURING/PRODUCTIO N IS BEING CARRIED OUT AT BADDI; AND AGAIN REFERRED TO THE MEASUREMENT OF THE RENTED HALL FROM WHERE THE INSTALLED CAPACITY OF PLANT AND MACHINERY TO THE EXTENT OF RS.18,26,057/- HAS BEEN CONTENDED TO BE NOT ADEQUAT E FOR PRODUCTION TO THE TUNE OF RS. 2,50,94,880/- AND USE; AGAIN DRAWN ATTENTION TO THE LETTER DATED 11.5.2006 OF THE EXCISE AUTHORITIES SHOWING T HE ITEMS PURCHASED BY THE ASSESSEE FOR TRADE AND HAS REFERRED TO THE VERS ION OF SHRI BIR SINGH CONVEYING THAT THE UNIT WAS CLOSED, AND A BOILER PE RTAINING TO THE EARLIER COMPANY I.E. THE APPELLANT WHICH HAS CLOSED HIS BUS INESS IN MARCH, 2008 4 ITA NO. 3874/DEL/2012 WAS AVAILABLE THERE.-SHRI BIR SINGHS VERSION WAS T AKEN IN SEPT., 2011 I.E. THREE YEARS AFTER THE UNIT WAS CLOSED. THE APPELLANTS VERSION ON THE AOS REPORT HAS BEE N REPRODUCED AS ABOVE. THE BASIC QUESTION INVOLVED IS WHETHER THERE WAS ANY MANUFACTURING/PRODUCTION ACTIVITY BEING CARRIED OUT AT BADDI. DURING APPEAL PROCEEDINGS, THE APPELLANT WAS ASKED TO PROD UCE ELECTRICITY BILLS PERTAINING TO APPEAL UNDER CONSIDERATION WHICH IT H AS DULY PRODUCED SHOWING ELECTRICITY EXPENSES OF RS. 1,18,391/- AND ELECTRICITY MISC. EXPENSES AT RS. 1,397/-. THESE BILLS ARE IN THE NA ME OF THE APPELLANT AND RECEIPTS HAVE BEEN DULY GIVEN BY HIMACHAL PRADESH S TATE ELECTRICITY BOARD FOR THE PAYMENTS MADE BY THE APPELLANT. THE AFORESA ID BILLS WERE ASKED TO ASCERTAIN WHETHER THERE WAS ANY PERSON IN THE NAME OF THE APPELLANT. AS REGARDS, THE BUSINESS ACTIVITY BEING CARRIED OUT BY THE APPELLANT FROM BADDI, THE SPECIFIED AREA IN HIMACHAL PRADESH, IT H AS BEEN SEEN: (I) KEEPING IN VIEW THE ACTIVITY BEING CARRIED OUT BY THE APPELLANT I.E. GRINDING, BEATING, MIXING, HEATING ETC. OF VARIOUS INGREDIENT OF NATURAL HERBS WITH ADDITIVES AND CHEMICALS ETC.; IT IS IMMA TERIAL WHETHER THE SPACE IS ABOUT 3000 SQ. FT. (78X38) OR MORE. SUCH AN ACTI VITY CAN BE CARRIED OUT FROM EVEN A SMALLER PLACE. THE EXISTENCE OF BOILER IDENTIFIED BY SHRI BIR SINGH EVEN THREE YEARS AFTER THE CLOSURE OF THE ACT IVITY, SHOWS THAT /PRODUCTION ACTIVITY WAS BEING CARRIED OUT AT THE PLACE MENTIONED BY THE APPELLANT. (II) WHETHER THE RAW MATERIAL USED FOR MANUFACTURE/ PRODUCTION OF FINALLY TRADABLE ITEMS WAS PURCHASED IN THE NAME OF TRADE ONLY AS PER THE CERTIFICATE GIVEN BY THE EXCISE AUTHORITY OR IT WAS FOR THE PURPOSE OF BEING USED AS RAW MATERIAL IS IMMATERIAL; FACT REMAINS TH AT THE MATERIAL WAS USED IN THE PROCESS OF BRINGING NEW PRODUCT (MARKET ABLE) INTO EXISTENCE AND THAT ALSO AT BADDI. (III) AVAILABILITY OF CLOSING STOCK OF THE LABEL, S LEEVES AND BOTTLE CAPS AT BADDI ONLY AND NO CLOSING STOCK AT OTHER UNIT AT NA GPUR; RATHER ESTABLISHES 5 ITA NO. 3874/DEL/2012 THAT AFTER CARRYING OUT THE MANUFACTURING/PRODUCTIO N PROCESS AT BADDI THE PRODUCT WAS PACKED AND BOTTLED AT BADDI TO MAKE IT MARKETABLE. (IV) WHETHER MACHINERY IS USED IN THE PRODUCTION/MA NUFACTURING PROCESS; IS IMMATERIAL SO LONG AS HUMAN ELEMENT IS INVOLVED IN BRINGING INTO EXISTENCE A NEW MARKETABLE PRODUCT, DIFFERENT FROM THE RAW MATERIAL. THE APPELLANT HAS SUBMITTED DETAILS AND DOCUMENTARY EVIDENCE OF PAYMENT OF WAGES DURING THE YEAR TO ITS WORKERS NAM ELY; SHRI PRAFUL SAMAL, SHRI SHIVANAND TRIPATHI AND SHRI RAJESH THAK UR. THE DETAILS OF PAYMENTS OF WAGES DURING THE RELEVANT YEAR ARE AVAI LABLE AT PAGE 63 TO 109 PB AND THE DETAILS OF MAKING FULL AND FINAL PAY MENTS AT THE TIME OF CLOSURE OF THE UNIT ON 28.3.2008 ARE AVAILABLE AT P AGES 3 TO 6 SUBMITTED ALONGWITH SUBMISSION DATED 27.03.2012. IN VIEW OF THE ABOVE, THE CLAIM OF THE APPELLANT F OR DEDUCTION U/S. 80IC IS HELD AS ALLOWABLE. MORE SO, WHEN THERE IS A CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT (PG 128 TO 134 OF PB) FOR THIS PURPOSE. THEREFORE, THE AO IS DIRECTED TO ALLOW DEDUCTION U/S 80IC OF T HE ACT. THE GROUNDS OF APPEAL ARE ALLOWED. THUS, THE CIT(A) HAS GIVEN A PROPER FINDING AND THE RE IS NO NEED TO INTERFERE WITH THE SAID FINDING. 8. IN RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH AUGUST, 2017 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 04/08/2017 R. NAHEED * 6 ITA NO. 3874/DEL/2012 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 14/06/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 14/06/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 4.08.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 4 .0 8 .2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 3874/DEL/2012