M/S.ADVANCE GRP COOLING TOWERS PVT.LTD, MUMBAI V. INCOME TAX OFFICER-12(1)(1), MUMBAI

ITA 3964/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8113 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA LD
• Assessee Lawyers: SANJAY R PARIKHLD
• Keywords: Set aside
• Section: 10AA; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 3964/MUM/2018 ASSESSMENT YEAR: 2011-12 ITA NO. 3965/MUM/2018 ASSESSMENT YEAR: 2013-14 M / S. ADVANCE GRP COOLING TOWERS PVT. LTD. 406 SPAN CENTER, R.K. MISSION MARG, MARG, SANTACRUZ (W), MUMBAI-400 054. PAN: AAECA8216G VS. I.T.O., 12(1)(1) , AAYKAR BHAVAN, M.K ROAD, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJAY R. PARIKH, LD.AR RESPONDENT BY : SHRI CHAITNYA ANJARIA, LD.DR DATE OF HEARING : 1 7 .07.2019 DATE OF PRONOUNCEMENT : 1 7 - 07 - 2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE SEPARATE ORDERS BOTH DATED 22-02-2018 PASSED BY LD CIT(A)-20, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEARS 2011-12 AND 2013-14. 2. SINCE COMMON ISSUE IS INVOLVED IN BOTH THE APPEA LS, THEY WERE HEARD TOGETHER AND THEY ARE BEING DISPOSED OF BY THIS COM MON ORDER, FOR THE SAKE OF CONVENIENCE. IN BOTH THE A.YS THE ASSESSEE IS AG GRIEVED BY THE DECISIONS OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEDUCT ION CLAIMED BY THE ASSESSEE U/S. 10AA OF THE INCOME TAX ACT, 1961. [2] ITA NO.3964/MUM/2018 ITA NO.3965/MUM/2018 M/S. ADVANCE GRP COOLING TOWERS PVT.LTD. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING/ASSEMBLING AND DEALING IN ALL KIND OF COOLING TOWERS. THE ASSE SSEE FILED ITS RETURN OF INCOME CLAIMING DEDUCTION U/S. 10AA OF THE INCOME T AX ACT, 1961 @ 100%. IT IS PERTINENT TO NOTE THAT THE DEDUCTION U/S 10AA OF THE ACT IS AVAILABLE @ 100% FOR THE FIRST FIVE YEARS AND @ 50% THEREAFTER. ACCORDINGLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE REST RICTED ITS CLAIM TO @50% AS THE CLAIM IS BEING MADE IN THE 6 TH AND 8 TH YEAR(S) OF COMMENCEMENT OF THE PRODUCTION. THE ASSESSING OFFICER NOTICED THAT THE DEVELOPMENT COMMISSIONER HAD GRANTED LICENCE TO THE ASSESSEE WI TH SEVERAL CONDITIONS AND THE ASSESSEE HAS NOT SHOWN THAT IT HAS FULFILLE D THOSE CONDITIONS. 4. THE ASSESSING OFFICER FURTHER NOTICED THAT THE A SSESSEE HAS COMMENCED ITS OPERATION ON 31-10-2005. THE ASSESSIN G OFFICER TOOK THE VIEW THE DEDUCTION U/S 10AA OF THE ACT IS AVAILABLE ONLY IF THE MANUFACTURE/PRODUCTION IS COMMENCED ON OR AFTER 01- 04-2006. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESSEE HA S NOT CREATED ANY RESERVE TO BE CALLED SPECIAL ECONOMIC ZONE RE-INVESTMENT R ESERVE ACCOUNT AS MANDATED U/S. 10AA OF THE INCOME TAX ACT, 1961. ACC ORDINGLY, HE HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 10A A OF THE INCOME TAX ACT, 1961. ACCORDINGLY, HE REJECTED THE CLAIM OF ASSESS EE. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 5. I HEARD THE PARTIES AND PERUSED THE RECORD. FOR THE SAKE OF CONVENIENCE, I EXTRACT BELOW PROVISIONS OF SECTION 10AA OF THE INCOME TAX ACT, 1961 RELEVANT FOR THE YEARS UNDER CONSIDERATIO N. 10AA. (1) SUBJECT TO THE PROVISIONS OF THIS SECTIO N, IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, BEING AN ENTREPRENEUR AS REFERRED TO IN CLAUSE (J) OF SECTIO N 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005, FROM HIS UNIT, W HO BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR PRO VIDE ANY [3] ITA NO.3964/MUM/2018 ITA NO.3965/MUM/2018 M/S. ADVANCE GRP COOLING TOWERS PVT.LTD. SERVICES DURING THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 2006 , A DEDUCTION OF- (I) HUNDRED PER CENT OF PROFITS AND GAINS DERIVED FROM THE EXPORT, OF SUCH ARTICLES OR THINGS OR FROM SERVICES FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNIT BEGINS TO MANUFACTURE OR PRODUCE SUC H ARTICLES OR THINGS OR PROVIDE SERVICES, AS THE CAS E MAY BE, AND FIFTY PER CENT OF SUCH PROFITS AND GAINS FOR FURTHER FIVE ASSESSMENT YEARS AND THEREAFTER ; (II) FOR THE NEXT FIVE CONSECUTIVE ASSESSMENT YEARS , SO MUCH OF THE AMOUNT NOT EXCEEDING FIFTY PERCENT OF T HE PROFIT AS IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH THE DEDUCTION IS TO BE ALL OWED AND CREDITED TO A RESERVE ACCOUNT (TO BE CALLED THE SP ECIAL ECONOMIC ZONE RE-INVESTMENT RESERVE ACCOUNT) TO BE CREATED AND UTILIZED FOR THE PURPOSES OF THE BUSINE SS OF THE ASSESSEE IN THE MANNER LAID DOWN IN SUB-SECTION (2) . 6. IT CAN BE NOTICED THAT THE CONDITION PRESCRIBED IS THAT THE ELIGIBLE UNIT SHOULD BEGIN TO MANUFACTURE OR PRODUCE ARTICLES/THI NGS OR PROVIDE ANY SERVICES DURING THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR COMMENCING ON OR AFTER 01-04-2006 . THE PREVIOUS YEAR FOR THE ASSESSMENT YEAR 2006-07 IS THE FINANCIAL YEAR 1-04- 2005 TO 31-03-2006, MEANING THEREBY, THE MANUFACTURE/PRODUCTION ETC., S HOULD BE COMMENCED FROM 01-04-2005 ONWARDS. IN THE INSTANT CASE, THE A SSESSEE HAS COMMENCED ITS OPERATION ON 31-10-2005. HENCE, IT FULFILLS THE FIRST CONDITION PRESCRIBED U/S. 10AA OF THE ACT. ACCORDINGLY, THE VIEW TAKEN BY THE TAX AUTHORITIES THAT THE PRODUCTION SHOULD HAVE COMMENCED ON OR AFTER 01 -04-2006 IS NOT IN ACCORDANCE WITH LAW AND THE SAME IS SET ASIDE. 7. FURTHER, IT CAN BE NOTICED THAT THE DEDUCTION U/ S. 10AA IS ALLOWED @ 100% FOR THE FIRST FIVE CONSECUTIVE ASSESSMENT YEAR S AND THEN @ 50% FOR [4] ITA NO.3964/MUM/2018 ITA NO.3965/MUM/2018 M/S. ADVANCE GRP COOLING TOWERS PVT.LTD. FURTHER FIVE ASSESSMENT YEARS AND THEREAFTER. IN CLAUSE (II), IT IS STATED THAT THE ASSESSEE IS ALSO ELIGIBLE FOR DEDUCTION FOR THE NEXT FIVE CONSECUTIVE ASSESSMENT YEARS ALSO AND IN THOSE YEARS THE ASSESS EE IS REQUIRED TO CREATE/RESERVE SPECIAL ECONOMIC ZONE RE-INVESTMENT RESERVE ACCOUNT , MEANING THEREBY SUCH KIND OF RESERVE IS NOT REQUIRE D TO BE CREATED DURING THE FIRST TEN YEARS CLAIM FOR DEDUCTION. THE WORD NEXT, IN OUR VIEW, REFERS TO THE YEARS AFTER COMPLETION OF TWO SETS OF FIVE YEAR S, MEANING THEREBY, FROM 11 TH YEAR ONWARDS. HENCE THE REQUIREMENT OF CREATING R ESERVE SHALL COMMENCE FROM 11 TH YEAR ONWARDS ONLY. ACCORDINGLY, THE VIEW EXPRESSE D BY THE TAX AUTHORITIES ON THIS ISSUE ALSO FAILS. 8. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT THE ASSESSEE HAS NOT SHOWN TO HAVE COMPLIED WITH VARIOUS CONDITIONS PRES CRIBED BY THE DEVELOPMENT COMMISSIONER. THE LD.AR SUBMITTED THAT APPROVAL GRANTED BY THE DEVELOPMENT COMMISSIONER HAS BEEN RENEWED BY A LETTER DT.20/11/2015. ACCORDINGLY, HE SUBMITTED THAT THE D EVELOPMENT COMMISSIONER COULD NOT HAVE EXTENDED APPROVAL WITHO UT COMPLIANCE OF VARIOUS CONDITIONS. THE LD. AR FURTHER SUBMITTED TH AT THE CLAIM MADE IN THE YEARS UNDER CONSIDERATION RELATED TO THE 6 TH & 8 TH OF COMMENCEMENT OF OPERATION/PRODUCTION. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIMPLE FOOD PRODUCTS (P) LTD VS. CIT REPORTED IN (2017) 8 4 TAXMANN.COM 239(BOM.) HAS HELD THAT THE ASSESSEES CLAIM FOR DE DUCTION, HAVING BEEN ACCEPTED IN THE FIRST YEAR OF OPERATION, THE RELIEF FOR SUBSEQUENT YEARS COULD NOT BE WITHHELD. HE FURTHER SUBMITTED THAT DELHI BE NCH IN THE CASE OF MACQUARIE GLOBAL SERVICES PVT. LTD VS. DCIT REPORTE D IN (2018) 62 ITR (TIRB) 666 (DEL.) HAS ALSO EXPRESSED AN IDENTICAL VIEW. A CCORDINGLY HE SUBMITTED THAT THE AO WAS NOT RIGHT IN EXAMINING THE COMPLIAN CE OF CONDITIONS IN 6 TH AND 8 TH YEAR OF OPERATION. [5] ITA NO.3964/MUM/2018 ITA NO.3965/MUM/2018 M/S. ADVANCE GRP COOLING TOWERS PVT.LTD. 9. SINCE THE YEAR OF DEDUCTION FOR THE A.YS UNDE R CONSIDERATION BEING 6 TH AND 8 TH OF THE OPERATION AND SINCE THE ASSESSEE HAS BEEN A LLOWED A DEDUCTION IN THE PRECEDING FIVE ASSESSMENT YEARS, F OLLOWING THE DECISIONS REFERRED ABOVE, I AM OF THE VIEW THAT THE TAX AUTH ORITIES ARE NOT JUSTIFIED IN DENYING THE CLAIM FOR DEDUCTION U/S. 10AA TO THE AS SESSEE. EVEN OTHERWISE, THE VERY FACT THAT THE DEVELOPMENT COMMISSIONER HAS EXTENDED APPROVAL WOULD SIGNIFY THAT THE ASSESSEE HAS COMPLIED WITH T HE CONDITIONS. 10. IN VIEW OF THE FOREGOING DISCUSSIONS, I SET ASIDE THE ORDERS PASSED BY THE LD. CIT(A) IN BOTH THE A.YS UNDER CONSIDERATION ON THE IMPUGNED ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM U/S 10AA OF THE ACT @ 50% AS CLAIMED BY THE ASSESSEE IN THE ASSESSMENT P ROCEEDINGS. 11. IN THE RESULT, BOTH THE APPEALS OF ASSESSES A RE ALLOWED. ORDER PRONOUNCED ON 17-07-2019 SD/- ( B.R. BASKARAN) ACCOUNTANT MEMBER MUMBAI, DATED : 17 TH JULY,2019 *PP/SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER (ASSISTANTREGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI [6] ITA NO.3964/MUM/2018 ITA NO.3965/MUM/2018 M/S. ADVANCE GRP COOLING TOWERS PVT.LTD. DATE INITIAL WHETHER DICTATION PAD ENCLOSED WITH THE FILE : YES 1. DRAFT DICTATED ON 18.07.2019 YES SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18/7 & 19/7 MATTER TYPED P.P SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 19.07.2019 P.P JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 19/07 PP SR.PS 6. DATE OF PRONOUNCEMENT 17/7 SR.PS 7. FILE SENT TO THE BENCH CLERK 19/7 PP SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER