ACIT, Ludhiana V. M/s Cremica Agro Foods Pvt. Ltd., Ludhiana

ITA 40/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6526 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Section: 11A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.39 & 40/CHD/2017 (ASSESSMENT YEARS : 2006-07 & 2007-08) THE A.C.I.T, VS. M/S CREMICA AGRO FOODS PVT. LTD., CIRCLE-3, B-XXXIII-324, G.T. ROAD (WEST), LUDHIANA. LUDHIANA. PAN: AAACC6717H (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.CHANDER KANTA, CIT, DR RESPONDENT BY : SHRI SUBHASH AGGARWAL DATE OF HEARING : 12.09.2017 DATE OF PRONOUNCEMENT : 08.12.2017 ORDER PER ANNAPURNA GUPTA, A.M. : BOTH THE APPEALS FILED BY THE REVENUE RELATE TO THE SAME ASSESSEE AND HAVE BEEN PREFERRED AGAINST SEPAR ATE ORDERS PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-1, LUDHIANA DATED 26.10.2016 RELATING TO ASSESSMENT YEARS 2006-07 AND 2007-08. 2. THE PRESENT APPEALS HAVE COME UP BEFORE US IN TH E SECOND ROUND AFTER CERTAIN GROUNDS WERE SET ASIDE TO THE CIT(A) FOR ADJUDICATING AFRESH, VIDE ORDER OF THE I .T.A.T. DATED 14.10.2015 IN ITA NO.714/CHD/2011 & C.O NO.61/CHD/2011 RELATING TO A.Y 2006-07 AND ITA NO.3 44 & 459/CHD/2013 RELATING TO A.Y 2007-08. 2 3. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT TH E ISSUES INVOLVED IN BOTH THE APPEALS WERE IDENTICAL, THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY A COMMON ORDER. FOR THE SAKE OF CONVENIENCE, WE SHALL BE DEALING WI TH THE FACTS IN ITA NO.39/CHD/2017 RELATING TO A.Y 200 6-07. ITA NO.39/CHD/2017 (A.Y. 2006-07): 4. BRIEFLY STATED, THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF BISCUITS, NAMKEEN AND BUNS, ETC. AND TRADING OF CONFECTIONARY BISCUITS, RUSK AN D BREAD. THE ASSESSEE IS RUNNING FOUR SEPARATE INDUSTRIAL UN ITS I.E. ONE AT NOIDA, ONE AT TAHLIWAL, AND TWO AT PHILLAUR. DURING THE IMPUGNED A.Y THE ASSESSEE CLAIMED DEDUCTION OF PROFITS EARNED FROM NOIDA UNIT U/S 80IB & TAHLIWAL UNIT U/S 80IC OF THE ACT. 5. GROUND NOS.1, 2 AND 3 RAISED BY THE REVENUE RELA TE TO THE ISSUE OF ELIGIBILITY OF THE ASSESSEE TO CLAIM D EDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AMOUNTING TO RS.39,14,380/- WITH RESPECT TO THE PRO FITS EARNED BY ITS NOIDA UNIT. THE ASSESSING OFFICER DEN IED THE SAME TO THE ASSESSEE SINCE HE FOUND THAT THE NOIDA UNIT DID NOT FULFILL THE BASIC CRITERIA FOR CLAIMING THE SAME, BEING AN SSI UNIT NOT MANUFACTURING ANY ITEM PROHIBITED B Y THE SECTION AS LISTED IN SCHEDULE XI OF THE ACT. THE AS SESSING OFFICER HELD THAT THE NOIDA UNDERTAKING WAS NOT AN SSI UNIT 3 AS PER ITS DEFINITION IN THE SECTION, SINCE ITS INV ESTMENTS AND ALSO COMBINED INVESTMENTS OF ALL THE UNDERTAKIN GS OF THE ASSESSEE EXCEEDED THE LIMIT SPECIFIED UNDER THE INDUSTRIES (DEVELOPMENT AND REGULATION )ACT, 1951AN D FURTHER THAT IT WAS MANUFACTURING BUNS WHICH WAS A CONFECTIONARY ITEM AND WHICH WAS PROHIBITED FOR MAN FACTURE BY SSI UNITS IN SCHEDULE XI OF THE ACT FOR THE PURP OSE OF CLAIMING DEDUCTION U/S 80 IB. 6. BEFORE THE LD.CIT(APPEALS) THE ASSESSEE FILED DE TAILED SUBMISSIONS CONTESTING THE DISALLOWANCE MADE AND WH ICH ARE REPRODUCED AT PARA 2.1 OF THE CIT(APPEALS) ORDE R ON THE GROUND: A) THAT IT HAD BEEN CONSISTENTLY ALLOWED THE SAID C LAIM IN THE PRECEDING YEARS FROM ASSESSMENT YEAR 2003-04 TO ASSESSMENT YEAR 2005-06 AND THERE BEING NO CHANG E IN THE FACTS, THERE WAS NO REASON TO DISALLOW THE S AME IN THE IMPUGNED YEAR; B) THAT IT HAD BEEN ISSUED A CERTIFICATE OF BEING AN SSI UNIT UNDER THE INDUSTRIES DEVELOPMENT REGULATION ACT, 1951 (HEREINAFTER REFERRED TO AS IDR ACT), W HICH WAS VALID FOR THE IMPUGNED YEAR ALSO; C) THAT WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSE E QUALIFIED AS AN SSI UNDERTAKING AS PER THE IDR ACT AND CIRCULARS AND NOTIFICATIONS ISSUED THEREUNDER SINCE ITS INVESTMENTS IN PLANT AND MACHINERY DID NOT EXCEED T HE SPECIFIED LIMIT OF RS.1 CRORE UNDER THE SAID ACT AN D 4 NEITHER WAS CLUBBING ALL INVESTMENTS OF ALL UNDERTAKINGS OF THE COMPANY REQUIRED FOR THE PURPOS E OF DETERMINING WHETHER THE INVESTMENT IN PLANT AND MACHINERY EXCEEDED THE SPECIFIED LIMIT. IT WAS POI NTED OUT THAT THE CIRCULARS/NOTIFICATIONS RELIED UPON BY THE ASSESSING OFFICER FOR STATING THAT THE CLUBBING OF INVESTMENTS MADE BY ALL UNDERTAKINGS OF THE COMPANY WAS REQUIRED TO BE CONSIDERED, WAS IRRELEVANT SINCE THE ASSESSING OFFICER HAD REFERRED TO THE WRONG CIRCULA R; D) THAT THE BUNS MANUFACTURED BY THE NOIDA UNDERTAKING OF THE ASSESSEE DID NOT QUALIFY AS A CONFECTIONARY ITEM AND, THEREFORE, WERE NOT PROHIBI TED ITEMS AS PER THE 11 TH SCHEDULE OF THE INCOME TAX ACT, 1961 FOR UNDERTAKINGS WHICH WERE ELIGIBLE FOR DEDUCTION OF THEIR PROFITS U/S 80IB OF THE ACT. 7. THE LD.CIT(APPEALS) AFTER CONSIDERING ASSESSEES SUBMISSIONS AGREED WITH THE SAME HOLDING AT PARA 2. 2 OF HIS ORDER AS UNDER: 2.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE BASIS OF THE DISALLOWANCE MADE AND THE ARGUMENTS OF THE AR. THE DEDUCTION HAS BEEN ALLOWED IN THE PAST AND THE A R HAS CONTENDED THAT THERE IS NO JUSTIFICATION TO REFUSE T HE SAME IN THE SUBSEQUENT YEARS. IN THIS REGARD RELIANCE HAS BEE N PLACED ON THE JUDGMENT IN THE CASE OF ACE MULTI AXIS SYSTEMS LTD VS DCIT 367 ITR 266 (KAR) AT (BANG) IN SUPPORT OF HIS CONTENTION THAT DEDUCTION UNDER SECTION 80IB IS ALLOW ABLE FOR 10 YEARS AND IF THE CONDITIONS ARE SATISFIED INITIALLY , THE BENEFIT IS TO BE ALLOWED FOR 10 YEARS EVEN IF THE INV ESTMENT IN MACHINERY EXCEEDS RS.1 CRORE DUE TO THE GROWTH IN TH E INDUSTRY. THE AR CONTENDED THAT SINCE THE DEDUCTION U /S 80IB HAS BEEN ALLOWED RIGHT FROM THE BEGINNING, THE RE IS NO JUSTIFICATION TO DISALLOW IT DURING THE YEAR UNDE R CONSIDERATION. RELIANCE IN THIS REGARD WAS ALSO PLACED ON THE CASE OF GLAXO SMITHKLINE CONSUMERS HEALTH CARE LTD. VS. CIT 2007 112 TTJ 94 (CHD) AND MICRO INSTRUMENTS CO. VS. ITO 5 (2008) 112 TTJ 94 (CHD) BESIDES OTHER CASE-LAWS. FURTHER, THE APPELLANT FILED SSI CERTIFICATE ISSUED BY THE APPROPR IATE AUTHORITY WHICH THE AR STRESSED, IS THE FINAL AUTHORIT Y, REGARDING THE SAME. THE AR CLARIFIED THAT THE SAID C ERTIFICATE WAS VALID DURING THE YEAR UNDER CONSIDERATION. AS R EGARDS THE CIRCULARS OFT997 AND 1999; IT WAS EXPLAINED THAT THE APPELLANT'S CASE IS OF A LIMITED COMPANY AND SUB CLAU SE (III) OF THE CIRCULAR DATED 10.12.1997 IS APPLICABLE WHEREIN AS PER CLAUSE (V) SUB CLAUSE (III) STANDS OMITTED. FURTHER, ITEM S SIX OF THE 11 TH SCHEDULE MENTIONS 'CONFECTIONERY AND CHOCOLATES'. THE WORD 'CONFECTIONERY' AS PER WEBSTER DICTIONARY MEANS 'CANDY, SWEETS AND OTHER CONFECTIONS COLLECTIVELY 'W HILE A 'BUN' IS A PURELY BAKERY ITEM. SCHEDULE 11 IS NOT APP LICABLE. THE AR FURTHER DREW ATTENTION TO THE FACT THAT BREA D AND BUNS WHICH FALL IN PRODUCT NO. 20-21 ARE THE ITEMS R ESERVED FOR EXCLUSIVE MANUFACTURE BY MICRO AJJD-'SMALL ENTER PRISE SECTOR AND THE SSI CERTIFICATE ISSUED MENTIONS THE S AME. STILL, FURTHER, THE AO HAS WRONGLY CONSIDERED THE ITEMS SUC H AS CRATES, MOULDS, GENERATOR, MISCELLANEOUS FIXED ASSETS , AND TRANSFORMER AS PART OF THE PLANT AND MACHINERY. THE AR CLARIFIED THAT THE VALUE OF THE ITEMS LEASED IS NEGLI GIBLE. THE AR HAS FURTHER CLARIFIED THAT THE CIRCULAR ISSUED B Y THE MINISTRY OF INDUSTRY VIDE ORDER DATED 10.12.97 CLEARLY EXCLUDES THE SAID ITEMS FOR THE PURPOSE OF CALCULATING THE VALUE OF PLANT AND MACHINERY THUS THE VALUE OF THE PLANT AND MACHINERY IS BELOW RUPEES 1.00 CRORE. FURTHER, A PE RUSAL OF S.0.2(E) DATED 01.01.1993 STATES THAT A CORPORATE ENTITY HAVING DIFFERENT UNITS WOULD NOT BE TREATED AS ONE, FOR DECIDING THE ELIGIBILITY AS A SMALL-SCALE UNIT. EACH SEP ARATE UNDER THE SAME MANAGEMENT OF THE COMPANY IS TO BE EVALUATED FOR ITS ELIGIBILITY AS A SMALL-SCALE UNDER TAKING. IN THIS REGARD THE HON'BLE MADRAS HIGH COURT IN THE CASE OF MADRAS MACHINE TOOLS MANUFACTURERS LIMITED VS CIT, 98 ITR 119 HAS CLEARLY BROUGHT OUT THE DISTINCTION BETWEEN THE COMPANY AND ITS UNDERTAKING. THE VIEW OF VARIOUS JUDI CIAL DECISIONS HAS BEEN THAT THE GRANT OF AN INCENTIVE DEDUCTION IS LINKED TO THE ELIGIBLE UNDERTAKING. THE CONCEPT OF THE TAXPAYER AND THAT OF AN UNDERTAKING IS DIFFERENT AND THE TAXPAYER CAN HAVE MORE THAN ONE UNDERTAKINGS/ENTERP RISES, SOME OF WHICH MAY NOT QUANTIFY FOR TAX DEDUCTION. TH E HON'BLE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORP. LTD. VS. CIT (1977) 107 ITR 195 AND IN THE CA SE OR CIT VS CANARA WORKSHOP PRIVATE LIMITED (1986) 161 I TR 320 HAVE EXPLAINED AND RECOGNIZED THE IDENTITY OF EACH INDIVIDUAL UNDERTAKING FOR THE PURPOSE OF GIVING EFFECT T O INCENTIVE PROVISIONS. THE TAX INCENTIVES PROVIDED UNDER SECTION 80IB AND SECTION 80IC OF THE ACT HAVE NOWHE RE BEEN LINKED IN THE ACT WITH THE OWNERSHIP OF THE UNDERTA KING. IN VIEW OF THE SAME THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER IS NOT JUSTIFIED AND THE SAME IS HEREBY ORD ERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 8. AGGRIEVED BY THE SAME THE REVENUE HAS RAISED GRO UND NO.1,2 &3 BEFORE US ,WHICH READ AS UNDER: 6 1. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB BY HOLDING THE ASSESSEE UNIT TO BE SMALL SCA LE INDUSTRIAL UNIT BY SIMPLY RELYING SOLELY ON THE SUBMISSIONS OF THE ASSESSEE AND NOT BY GIVING ANY INDEPENDENT FINDINGS?' 2. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB BY HOLDING THE ASSESSEE UNIT TO BE SMALL SCALE INDUSTRIAL UNIT AND BY NOT GIVING ANY FINDING AS TO WHY SOME MACHINERIES HAVE BEEN EXCLUDED FROM THE TOTAL PLANT ID MACHINERY FOR MAKING IT ELIGIBLE FOR A SMALL SCALE INDUSTRY? 3. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/ S 80IB BY HOLDING THE ASSESSEE UNIT TO BE SMALL SCALE INDUSTRIAL UNIT AND BY NOT GIVING ANY FINDING THAT WHETHER THE VALUE OF MACHINERY IS TO BE CONSIDERED AS ON THE LAST DAY OF THE PREVIOUS YEAR OR IN THE Y EAR IN WHICH THE ASSESSEE WAS REGISTERED AS A SMALL SCALE INDUSTRIAL UNIT ALTHOUGH IT IS CLEARLY PROVIDED IN CLAUSE (G) OF SUB-SECTION 14 OF SECTION 80IB THAT THE VALUE OF PLANT AND MACHINERY HAS TO BE CONSIDERED ON THE LAST DAY OF PREVIOUS YEAR?' 9. BEFORE US, DETAILED ARGUMENTS WERE MADE BOTH BY THE LD. DR AND LD. COUNSEL FOR ASSESSEE PLACING RELIANC E ON A NUMBER OF CASE LAWS AND ALSO DRAWING ATTENTION TO DOCUMENTS PLACED IN THE PAPER BOOK. 10. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND GON E THROUGH THE DOCUMENTS AND CASE LAWS RELIED UPON BEF ORE US. 11. WE FIND THAT ONE OF THE REASONS FOR HOLDING TH AT THE NOIDA UNDERTAKING OF THE ASSESSEE WAS INELIGIBLE TO CLAIM DEDUCTION U/S 80IB OF THE ACT IS THAT IT DID NOT QU ALIFY AS AN SSI UNDERTAKING AS REQUIRED UNDER THE SECTION. AT THIS JUNCTURE, IT IS PERTINENT TO REPRODUCE THE RELEVANT DEFINITION 7 OF SMALL SCALE INDUSTRIAL UNDERTAKING AS PROVIDED U NDER SUB-SECTION (14), SUB-CLAUSE (G) WHICH READS AS UND ER: (G) SMALL-SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUSTRIAL UNDERTAKING WHICH IS, AS ON THE LAST DAY OF THE PREVIOUS YEAR, REGARDED AS A SMALL- SCALE INDUSTRIAL UNDERTAKING UNDER SECTION 11B OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT,, 1951 (65 OF 1951). CLEARLY, TO QUALIFY AS AN SSI UNDERTAKING IT SHOUL D BE REGARDED AS SUCH U/S 11B OF THE IDR ACT, 1951. 12. THE CONTENTION OF THE REVENUE IS THAT AS PER TH E SAID ACT THE INVESTMENT IN PLANT AND MACHINERY OF AN UNDERTAKING SHOULD NOT EXCEED RS.1 CRORE AND FOR T HIS PURPOSE EVEN LEASED ASSETS ARE TO BE INCLUDED IN TH E INVESTMENTS. THE LD. DR REFERRED TO THE DECISION O F THE HON'BLE DELHI HIGH COURT IN THE CASE OF PRAVEEN SO NI VS. CIT IN ITA NO.1145 OF 2009 DATED 29.3.2011 AND REFE RRED TO PARA 12 OF THE ORDER WHEREIN HE HON'BLE HIGH COURT HELD THAT THE OWNERSHIP IN TERMS OF ON LEASE OR ON HIRE PURCHASE IS ALSO TO TAKEN INTO CONSIDERATION FOR DETERMINING THE QUANTUM OF INVESTMENTS MADE IN FIXED ASSETS BY AN UNDERTAKING. THE RELEVANT PARA OF THE ORDER READS AS UNDER: 12. AT THE END OF THIS NOTIFICATION, IT IS PROVIDED THAT EVERY INDUSTRIAL UNDERTAKING WHICH HAS BEEN ISSUED A CERTIF ICATE OF REGISTRATION UNDER SECTION10 OF THE SAID ACT OR A L ICENSE UNDER SECTIONS, 11, 11A AND 13 OF THE I.D.R. ACT BY THE C ENTRAL GOVERNMENT AND ARE COVERED BY THE PROVISIONS OF PARAGRAPH S (L) AND (2) ABOVE RELATING TO THE ANCILLARY OR SMALL SCALE I NDUSTRIAL UNDERTAKING, MAY BE REGISTERED AT THE DISCRETION OF THE OWNER AS SUCH WITHIN A PERIOD OF 180 DAYS FROM THE DATE O F PUBLICATION OF THIS NOTIFICATION. TWO THINGS FOLLOW FROM THE READING OF THE AFORESAID NOTIFICATION: (A) TO BE REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKI NG - SUCH AN UNDERTAKING SHOULD BE GIVEN WHICH HAS INVES TED IN 8 FIXED ASSETS IN PLANT AND MACHINERY EITHER ON OWNER SHIP TERMS OF ON LEASE OR ON HIRE PURCHASE. 13. LD.DR CONTENDED THAT AS PER THE AO THE VALUE OF THE ASSETS BOTH OWNED AND LEASED BY THE ASSESSEE WOULD EXCEED RS. 1 CRORE, THE LIMIT SPECIFIED AS PER THE IDR AC T. 14. BESIDES, THE LD. DR FURTHER STATED THAT IN TERM S OF CERTIFICATE NO.S.O.1288(E) DATED 24.12.1999 READ WI TH S.O.857(E) DATED 10.12.1997 ISSUED BY THE MINISTRY OF COMMERCE & INDUSTRY, THE INVESTMENT IN PLANT AND MACHINERY IS TO BE CONSIDERED OF ALL THE UNDERTAKIN GS RUN OR CONTROLLED BY THE ASSESSEE AND SINCE THE COMBINED INVESTMENT OF ALL THE UNDERTAKINGS EXCEEDS RS.1 CRO RE, THE ASSESSEE DOES NOT QUALIFY AS AN SSI UNDERTAKING AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER. 15. TO THIS, THE LD. COUNSEL FOR ASSESSEE COUNTERED BY STATING THAT FIRSTLY EVEN IF AGREEING WITH THE CON TENTION OF THE LD. DR THAT EVEN LEASED ASSETS ARE TO BE CONSID ERED FOR THE PURPOSE OF DETERMINING QUANTUM OF INVESTMENTS M ADE IN PLANT AND MACHINERY, THE INVESTMENTS DO NOT EXCEED RS.1 CRORE SINCE AS PER THESE VERY NOTIFICATIONS, PLANT AND MACHINERY WOULD NOT INCLUDE CRATES, MOULDS, GENERAT OR, MISCELLANEOUS FIXED ASSETS, AND TRANSFORMER, WATER CHILLING PLANT, PLANT AND MACHINERY (LETTUCE PLANT) AND WATE R CHILLING PLANT (LETTUCE PLANT). THE LD. COUNSEL FO R ASSESSEE DREW OUR ATTENTION TO S.O.857(E) ISSUED BY THE MINI STRY OF COMMERCE & INDUSTRY DATED 10.12.1997 WHICH STATED S O AT NOTE-2 AS UNDER: 9 A. IN CALCULATING THE VALUE OF PLANT AND MACHINERY FOR THE PURPOSES OF PARAGRAPHS (1) AND (2) OF THIS NOTIFICATI ON, THE ORIGINAL PRICE THEREOF, IRRESPECTIVE OF WHETHER T HE PLANT AND MACHINERY ARE NEW OR SECOND HAND, SHALL BE TAKEN INTO ACCOUNT. B. IN CALCULATING THE VALUE OF PLANT AND MACHINERY, THE FOLLOWING SHALL BE EXCLUDED, NAMELY:- I. THE COST OF EQUIPMENTS SUCH AS TOOLS, JIGS, DI ES, MOULDS AND SPARE PARTS FOR MAINTENANCE AND THE COST OF CONSUMABLE STORES; II. THE COST OF INSTALLATION OF PLANT AND MACHINERY; III. THE COST OF RESEARCH AND DEVELOPMENT EQUIPMENT AND POLLUTION CONTROL EQUIPMENT; IV. THE COST OF GENERATION SETS AND EXTRA TRANSFORMER INSTALLED BY THE UNDERTAKING AS PER THE REGULATIONS O F THE STATE ELECTRICITY BOARD; V. THE BANK CHARGES AND SERVICE CHARGES PAID TO THE NATIONAL SMALL INDUSTRIES CORPORATION OR THE STATE SMA LL INDUSTRIES CORPORATION; VI. THE COST INVOLVED IN PROCUREMENT OR INSTALLATION OF CABLES, WIRING, BUS BARS, ELECTRICAL CONTROL PANELS (NOT THOSE MOUNTED ON INDIVIDUAL MACHINES), OIL CIRCUIT BREAKERS OR MINIATURE CIRCUIT BREAKERS WHICH ARE NECESSARILY TO B E USED FOR PROVIDING ELECTRICAL POWER TO THE PLANT AND MACHINERY OR FOR SAFETY MEASURES; VII. THE COST OF GAS PRODUCER PLANTS; VIII. TRANSPORTATION CHARGES (EXCLUDING OF SALES-TAX AND EXCISE) FOR INDIGENOUS MACHINERY FROM THE PLACE OF MANUFACTURING TO THE SITE OF THE FACTORY; IX. CHARGES PAID FOR TECHNICAL KNOW-HOW FOR ERECTION OF PLANT AND MACHINERY; X. COST OF SUCH STORAGE TANKS WHICH STORE RAW MATERIALS, FINISHED PRODUCTS ONLY AND ARE NOT LINKED WITH THE MANUFACTURING PROCESS; AND XI. COST OF FIRE FIGHTING EQUIPMENTS. 16. THE LD. COUNSEL FOR ASSESSEE THEREAFTER REFERRE D TO THE DETAIL REFLECTING THE FIXED ASSETS BOTH OWNED AND L EASED BY THE ASSESSEE AND THE ASSETS WHICH ARE TO BE CONSIDE RED AS PLANT AND MACHINERY AS PER THE AFORESAID NOTIFICATI ON PLACED 10 BEFORE THE CIT(A) AND BEFORE US AT PAPER BOOK PAGE NO.37 AS UNDER: PARTICULARS OF ASSETS GROSS BLOCK BALANCE AS ON 31.03.2008 TO BE CONSIDERED FOR PURPOSES OF SSI NOT TO BE CONSIDERED FOR THE PURPOSE SSI LAND & LAND 11903847 11903847 DEVELOPMENT(NOIDA) AIR CONDITIONER 143000 143000 BICYCLES 2940 2940 BUILDING 13649941 13649941 CAR & PICKUP VAN 243521 243521 COMPUTER 134855 134855 CRATES AND MOULDS 3938644 3938644 ELECTRIC FITTING 449383 449383 FAN & COOLERS 98384 98384 FIRE EXTINGUISHERS 22810 22810 FURNITURE & FIXTURE 304730 304730 GENERATOR 186916 186916 LAB EQUIPMENTS 81176 81176 MISC FIXED ASSETS 1865078 1865078 OFFICE EQUIPMENT 64190 64190 PLANT & MACHINERY 5596008 5596008 RICKSHAW 3479 3479 SCOOTERS 37201 37201 TRANSFORMER 147859 147859 TROLLEYS 130776 130776 TUBEWELL 35048 35048 WATER CHILLING PLANT 362554 362554 WEIGHING SCALES 46117 46117 PLANT & MACHINERY (LETTUCE PLANT) 104611 104611 WATER CHILLING PLANT (LETTUCE PLANT) 329200 329200 WEIGHING SCALES (LETTUCE PLANT) 31000 31000 SUB TOTAL 39913267 5596008 34317259 WORK IN PROGRESS BUILDING UNDER CON.NOIDA 3243640 3243640 FLAT(DLF UNDER CONSTRUCTION 811750 811750 MACHINERY UNDER INST 3023895 3023895 SUB TOTAL 7079285 0 7079285 TOTAL 46992552 46992552 11 17. FROM THE ABOVE THE LD. COUNSEL FOR ASSESSEE POI NTED OUT THAT EVEN AFTER TAKING INTO CONSIDERATION THE A SSETS TAKEN ON LEASE BY THE ASSESSEE, THE INVESTMENT IN P LANT AND MACHINERY WAS WELL WITHIN THE LIMIT OF RS.1 CRORE A S REQUIRED UNDER THE IDR ACT, 1951 TO QUALIFY AS AN S SI UNIT. 18. THE LD. COUNSEL FOR ASSESSEE THEREAFTER COUNTER ED THE ARGUMENTS OF THE LD. DR THAT THE INVESTMENT IN PLAN T AND MACHINERY IS TO BE CONSIDERED OF ALL THE UNDERTAKIN GS RUN OR CONTROLLED BY THE ASSESSEE FOR THE PURPOSE OF DETER MINING WHETHER THEY WERE WITHIN THE LIMIT OF RS.1 CRORE AS SPECIFIED BY THE IDR ACT, 1951. THE LD. COUNSEL FOR ASSESSEE STATED THAT THE ASSESSING OFFICER HAD RELIED UPON S.O.1288 DATED 24.12.1999 READ WITH S.O. 857(E) DATED 10.12.1997 B UT HAD REPRODUCED CIRCULAR NO.S.O.2(E) DATED 1.1.1993 TO D EFINE THE EXPRESSION CONTROLLED FOR CLUBBING OF THE INV ESTMENTS IN FIXED ASSETS. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO CLAUSE (V) OF S.O.2(E) DATED 1.1.1993 WHICH READS AS UNDER: WHERE ON INDUSTRIAL UNDERTAKING IS A SUBSIDIARY OF, O R IS OWNED OR CONTROLLED BY ANY OTHER INDUSTRIAL UNDERTAK ING OR UNDERTAKINGS IN TERMS OF SUB CLAUSE(I), SUB CLAUSE ( II) OR SUB CLAUSE (III) AND IF THE TOTAL INVESTMENT IN FIXED ASSETS IN PLAN T AND MACHINERY OF THE FIRST MENTIONED INDUSTRIAL UNDERTAKINGS AND THE OTHER INDUSTRIAL UNDERTAKING OR UNDERTAKING CLUBBED TOGETHER EXCEEDS THE LIMIT OF I NVESTMENT SPECIFIED IN PARAGRAPH I OR II OF THIS TABLE, AS TH E CASE MAY BE, NONE OF THESE INDUSTRIAL SHALL BE CONSIDERED TO BE A SMALL SCALE OR ANCILLARY INDUSTRIAL UNDERTAKING. 19. THE LD. COUNSEL FOR ASSESSEE THEREAFTER POINTED OUT THAT IN THE CASE OF THE ASSESSEE BEING A LIMITED CO MPANY IT 12 WAS COVERED UNDER SUB-CLAUSE (III) FOR DECIDING THE ISSUE OF CLUBBING OF INVESTMENT. THE LD. COUNSEL FOR ASSESS EE THEREAFTER DREW OUR ATTENTION TO CIRCULAR NO.S.O.85 7(E) DATED 10.12.1997 AND POINTED OUT THEREFROM THAT IN THE SAID CIRCULAR IN CLAUSE (V) SUB-CLAUSE (III) WAS ST OOD OMITTED. THE RELEVANT PORTION OF THE CIRCULAR S.O. 857(E) IS PLACED AT PAPER BOOK PAGE NO.47 AND IS REPRODUCED HEREUNDER: V. WHERE AN INDUSTRIAL UNDERTAKING IS A SUBSIDIARY OF , OR IS OWNED OR CONTROLLED BY, ANY OTHER INDUSTRIAL UNDERTAKING OR UNDERTAKINGS IN TERMS OF SUB-CLAUSES( I); (II)_AND IF THE TOTAL INVESTMENT IN FIXED ASSETS M PL ANT AND MACHINERY OF THE FIRST MENTIONED INDUSTRIAL UNDERTAKING AND THE OTHER INDUSTRIAL UNDERTAKING OR UNDERTAKINGS CLUBBED TOGETHER EXCEEDS THE LIMIT OF INVESTMENT SPECIFIED IN PARAGRAPHS (1) OR (2) OF THI S NOTIFICATION AS THE CASE MAY BE. NONE OF THESE INDUS TRIAL UNDERTAKINGS SHALL BE CONSIDERED TO BE A SMALL SCALE OR ANCILLARY INDUSTRIAL UNDERTAKING. 20. THUS THE LD. COUNSEL FOR ASSESSEE POINTED OUT T HAT CLUBBING OF INVESTMENTS OF ALL UNDERTAKINGS OWNED B Y THE ASSESSEE AS REQUIRED IN THE EARLIER CIRCULAR DATED 1.1.1993 HAD BEEN DONE AWAY WITH BY CIRCULAR 857(E),WHICH WA S APPLICABLE FOR THE IMPUGNED YEAR AND, THEREFORE, TH E CONTENTION OF THE REVENUE THAT THE ASSESSEE DID NOT QUALIFY AS AN SSI UNDERTAKING SINCE THE INVESTMENTS IN PLAN T AND MACHINERY OF ALL THE UNDERTAKINGS OWNED BY IT EXCEE DED THE SPECIFIED LIMIT FELL FLAT. 21. FINALLY, THE LD. COUNSEL FOR ASSESSEE POINTED O UT THAT IT HAD BEEN ISSUED CERTIFICATE OF BEING AN SSI UNIT BY DIRECTORATE OF INDUSTRIES WHICH WAS VALID FOR THE I MPUGNED YEAR AND HAD BEEN ISSUED BY THE CONCERNED AUTHORITI ES BY EXAMINING ITS ELIGIBILITY UNDER IDR ACT, 1951. THER EFORE 13 ALSO, THERE WAS NO REASON TO QUESTION THE CORRECTNE SS OF THE CERTIFICATE AD GO BEHIND THE CERTIFICATE TO FIND OU T WHETHER THE ASSESSEE QUALIFIES AS AN SSI UNIT AS PER IDR AC T, 1951. 22. WE HAVE HEARD BOTH THE PARTIES. WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. AS POI NTED OUT ABOVE, THE ELIGIBILITY CRITERIA FOR CLAIMING DEDUCT ION U/S 80IB AS AN SSI UNIT IS THAT IT SHOULD BE REGARDED A S AN SSI UNDERTAKING U/S 11B OF THE IDR ACT, 1951. ADMITTED LY, THE ASSESSEE HAS BEEN ISSUED SUCH A CERTIFICATE BY THE DIRECTORATE OF INDUSTRIES AND WHICH IS VALID FOR TH E IMPUGNED YEAR ALSO. THE SAID FACT HAS NOT BEEN CONTROVERTED BY THE REVENUE. THEREFORE, HAVING BEE N ISSUED SUCH A CERTIFICATE BY THE CONCERNED MINISTRY ITSELF , IT IS OBVIOUS THAT THE ASSESSEE FULFILLS ALL THE CONDITIO NS REQUIRED UNDER THE SAID ACT TO QUALIFY AS AN SSI UNDERTAKING . THE REVENUE, THEREFORE, COULD NOT HAVE BRUSHED ASIDE TH E CERTIFICATE ISSUED BY THE CONCERNED MINISTRY AND EX AMINED WHETHER THE ASSESSEE ACTUALLY QUALIFIED AS SUCH UND ER THE IDR ACT, 1951. EVEN OTHERWISE, WE FIND THAT IT HAS BEEN ESTABLISHED BEYOND DOUBT THAT THE ASSESSEE FULFILLS THE ELIGIBILITY CRITERIA OF INVESTMENTS IN PLANT AND MA CHINERY BEING BELOW THE SPECIFIED LIMIT OF RS.1 CRORE AS RE QUIRED UNDER THE IDR ACT, 1951. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR ASSESSEE, NOT ALL ASSETS QUALIFY AS PLA NT AND MACHINERY, THEREFORE, AFTER EXCLUDING THOSE ASSETS SPECIFICALLY POINTED OUT BY THE CIRCULAR OF THE MIN ISTRY OF INDUSTRIES IN S.O.857(E), THE INVESTMENT IN PLANT A ND 14 MACHINERY AMOUNTED TO ONLY RS.55,96,008/-. THE REV ENUE HAS NEITHER CONTROVERTED THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT NOT ALL ASSETS QUALIFIED AS PLANT AND MACHINERY, NOR HAS DISPUTED THE DETAIL OF QUALIFYIN G ASSETS FILED BEFORE US. THEREFORE, FOR ALL PURPOSES, THE INVESTMENTS IN PLANT AND MACHINERY OF THE NOIDA UNDERTAKING IS WELL WITHIN THE SPECIFIED LIMIT OF RS.1 CRORE TO QUALIFY AS AN SSI UNDERTAKING. FURTHER, THE LD. COUNSEL FOR ASSESSEE HAS ALSO DEMONSTRATED THAT AS PER THE APPLICABLE CIRCULAR OF THE MINISTRY OF COMMERCE CLUBBING OF INVESTMENTS OF UNDERTAKINGS OF THE ASSESSEE IS NOT REQUIRED. THIS FACT HAS ALSO NOT BEEN CONTROVERTED BY THE REVENUE. THEREFOR E, WE FIND NO MERIT IN THE CONTENTION OF THE REVENUE THAT FOR THE PURPOSE OF DETERMINING QUANTUM OF INVESTMENTS IN PL ANT AND MACHINERY BY THE ASSESSEE UNDERTAKING, INVESTME NTS BY ALL UNDERTAKINGS OWNED BY THE ASSESSEE ARE TO BE CONSIDERED. FOR THE AFORESAID REASONS, WE HOLD THA T THE LD.CIT(APPEALS) HAS RIGHTLY HELD THE ASSESSEE TO QU ALIFY AS AN SSI UNDERTAKING AS PER SECTION 11B OF THE IDR AC T, 1951. 23. THE NEXT CONTENTION OF THE REVENUE FOR DENYING DEDUCTION U/S 80IB OF THE ACT IS THAT MANUFACTURING OF BUNS UNDERTAKEN BY THE NOIDA UNIT IS PART OF CONFEC TIONERY ITEM WHICH IS A PROHIBITED ITEM FOR MANUFACTURE BY SSI UNITS CLAIMING DEDUCTION U/S 80IB, AS PER SCHEDULE XI OF INCOME TAX ACT, 1961. 24. ON THIS ISSUE, THE LD. COUNSEL FOR ASSESSEE REI TERATED THE CONTENTION MADE BEFORE THE LD.CIT(APPEALS) THAT THE 15 WORD CONFECTIONERY AS PER THE WEBSTERS DICTIONAR Y MEANS A CANDY SWEETS AND OTHER CONFECTIONS COLLECTIVELY , WHILE THE WORD BUN WHICH IS PURELY A BAKERY ITEM IS DEF INED AS A SMALL, SOFT, SLIGHTLY SWEETENED ROLL, OFTEN WITH RAISINS, A SOFT BREAD ROLL. THE LD. COUNSEL FOR ASSESSEE STAT ED THAT INTERPRETATION OF THE ASSESSING OFFICER, THEREFORE, IS MIS- CONCEIVED. IT WAS FURTHER BROUGHT TO OUR NOTICE TH AT THE BREAD AND BUNS FALL IN PRODUCT CODE NO.20-21 WHICH WERE ITEMS RESERVED FOR EXCLUSIVE MANUFACTURED BY MICRO AND SMALL ENTERPRISE SECTOR. IT WAS POINTED OUT THAT S SI CERTIFICATE ISSUED TO THE ASSESSEE CLEARLY MENTION THE MANUFACTURE OF BREAD, BUNS, ETC. 25. WE HAVE HEARD BOTH THE PARTIES. WE CONCUR WITH THE LD. COUNSEL FOR ASSESSEE THAT THE ASSESSEE IS NOT MANUFACTURING A CONFECTIONERY ITEM WHICH IS PROHIBI TED AS PER 11 TH SCHEDULE OF THE INCOME TAX ACT. THE MEANING OF WORD CONFECTIONERY AND BUNS AS PER WEBSTERS DI CTIONARY COUPLED WITH THE FACT AS POINTED OUT BY THE LD. COU NSEL FOR ASSESSEE THAT THE BREADS AND BUNS FALL UNDER THE IT EMS WHICH ARE RESERVED EXCLUSIVELY FOR MANUFACTURE BY M ICRO AND SMALL ENTERPRISE AND WHICH FACT HAVE NOT BEEN CONTROVERTED BY THE REVENUE ADEQUATELY PROVES THE ASSESSEES CASE AS RIGHTLY HELD BY THE LD.CIT(APPEA LS). WE, THEREFORE, HOLD THAT THE BREADS AND BUNS DO NOT QUA LIFY AS CONFECTIONERY ITEMS AND ARE THUS NOT PROHIBI TED TO BE 16 MANUFACTURED BY SSI UNITS AS PER THE 11 TH SCHEDULE OF THE ACT. 26. IN VIEW OF THE ABOVE, WE UNHESITATINGLY HOLD TH AT THE ASSESSEE IS AN SSI UNIT AS DEFINED U/S 80IB(14(G) O F THE ACT AND IS NOT MANUFACTURING A PROHIBITED ITEM SPECIFIE D IN THE 11 TH SCHEDULE OF THE ACT AND THUS QUALIFIES FOR DEDUCTI ON OF ITS PROFITS U/S 80IB OF THE ACT AS RIGHTLY HELD BY THE LD.CIT(APPEALS). 27. IN VIEW OF THE ABOVE, THE ORDER OF THE LD.CIT(A PPEALS) IN DELETING THE DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT CLAIMED BY THE ASSESSEE OF RS.39,14,180/- IS UP HELD. GROUND OF APPEAL NOS.1, 2 AND 3 RAISED BY THE REVEN UE ARE, THEREFORE, DISMISSED. 28. GROUND NO.4 RAISED BY THE REVENUE READS AS UNDE R: '4.WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE RS.12,16,332/- MADE BY THE A.O. ON DEDUCTION U/S 80IC CLAIMED BY THE ASSESSEE ON TAHLIWAL UNIT WITHOUT GIVING ANY REASONS AND BY SIMPLY STATING THAT THE A.O. IS HIGHLY UNJUSTIFIED IN DENYING DEDUCTION U/S 80IC TO THE ASSESSEE ON THE BASIS OF SOME NOTIONAL EXPENSES SUCH AS KNOWHOW, GOODWILL, TRADE NAME ETC. WHERE THE A.O. HAS VERY CLEARLY HELD THAT THE PROVISIONS OF THE SECTION 80I A (8) AND (10) READ WITH SECTION 80IC ARE APPLICABLE TO THE ASSESSEE'S TAHLIWAL UNIT ONLY?' 29. THE ABOVE GROUND IS WITH RESPECT TO THE DEDUCTI ON CLAIMED U/S 80IC AMOUNTING TO RS.1,21,63,320/- IN R ESPECT OF TAHLIWAL UNIT WHICH HAS BEEN REDUCED BY THE ASSE SSING OFFICER BY 10% OF THE AMOUNT OF NET PROFITS FOR THE REASON 17 THAT THE ASSESSEE IS MANUFACTURING BISCUITS ON ITS OWN ACCOUNT AS WELL AS DOING JOB WORK FOR ITC LIMITED A T TAHLIWAL, H.P. AND FURTHER IT IS ALSO MANUFACTURING BISCUITS AT PHILLAUR UNIT, WHICH IS NOT ELIGIBLE FOR ANY DED UCTION OF ITS PROFITS. THE ASSESSING OFFICER HAS HELD THAT S INCE SAME BUSINESS IS BEING DONE AT PHILLAUR UNIT, TAHLIWAL U NIT HAS DERIVED BENEFITS BY WAY OF KNOWHOW, GOODWILL, TRADE NAME, ETC. OF PHILLAUR UNIT AND HELD THAT 10% OF THE PROF ITS EARNED BY THE TAHLIWAL UNIT WERE INDIRECT BENEFITS DERIVED FROM THE PHILLAUR UNIT AS PER THE PROVISIONS OF SECTION 80IA (8) & (10) OF THE ACT.THE ASSESSING OFFICER REDUCED THE SAME FROM THE DEDUCTION CLAIMED U/S 80IC OF THE ACT AMOUNTING TO RS.12,16,332/- 30. BEFORE THE LD.CIT(APPEALS) THE ASSESSEE CONTEND ED THAT IT HAD SPECIFIED ALL CONDITIONS LAID DOWN U/S 80IC( 2)(A)(II) OF THE ACT AND HAD RIGHTLY CLAIMED THE DEDUCTION, WHI LE THE ASSESSING OFFICER HAD WRONGLY INTERPRETED THE PROVI SIONS OF SUB-SECTION (8) & (10) OF SECTION 80IA OF THE ACT S INCE THESE SUB-SECTIONS REFERRED TO TRANSFER OF GOODS AND SERV ICES TO ANY OTHER BUSINESS OR TO ANY OTHER PERSON WHILE IN THE CASE OF THE ASSESSEE THERE WAS NO TRANSFER OF GOODS OR S ERVICE TO ANY OTHER BUSINESS OR TO ANY OTHER PERSON. IT WAS POINTED OUT THAT THE ASSESSEE HAD ALREADY ALLOCATED THE COM MON EXPENSES INCURRED TO VARIOUS UNITS ON THE BASIS OF TURNOVER AND, THEREFORE, THE DENIAL OF DEDUCTION TO THE EXTE NT OF 10% OF THE PROFITS ON THE BASIS OF SOME NOTIONAL EXPENS ES SUCH 18 AS KNOWHOW, GOODWILL, TRADE NAME, ETC. WAS HIGHLY UNJUSTIFIED. 31. THE LD.CIT(APPEALS) AFTER CONSIDERING ASSESSEE S SUBMISSIONS HELD THE DEDUCTION OF ELIGIBLE PROFITS BY THE ASSESSING OFFICER AS UNWARRANTED DELETING THE SAME BY HOLDING THAT THE ENTIRE EXERCISE OF THE ASSESSING O FFICER WAS DONE ON ESTIMATE BASIS WITHOUT BRINGING ANY EVIDENC E ON RECORD TO SHOW WHETHER THERE WAS ANY TRANSACTION BE TWEEN THE TWO UNITS. THE LD.CIT(APPEALS) HELD THAT THE A SSESSEE HAVING ALLOCATED ALL COMMON EXPENSES ON TURNOVER BA SIS AND THE ASSESSING OFFICER HAVE NOT POINTED OUT AS T O WHICH EXPENSES HAD NOT BEEN CONSIDERED, THIS ALLOCATION O F NOTIONAL EXPENSES BY THE ASSESSING OFFICER WAS UNJU STIFIED AND UNWARRANTED. RELEVANT FINDINGS OF THE LD.CIT(A PPEALS) AT PARA 3.2 ARE AS UNDER: 3.2 I HAVE CONSIDERED THE FACTS OF THE CASE, THE B ASIS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR. THE AO HAS REWORKED THE CLAIM UNDER SECTION 80IC BETWEEN THE TAHLIWAL UNIT AND THE PHILL AUR UNIT ON ESTIMATED BASIS WITHOUT BRINGING ANY EVIDENCE ON RECORD TO SHOW WHETHER THERE HAS BEEN ANY TRANSACTION BETW EEN THE TWO UNITS. THE APPELLANT HAS MADE THE ALLOCATION OF A LL COMMON EXPENSES ON TURNOVER BASIS AND THE AO HAS FA ILED TO MENTION ANY EXPENSE WHICH HAS NOT BEEN CONSIDERED I N THE SAID EXERCISE. THUS, THE REDUCING OF THE ELIGIBLE PROFIT S TO THE EXTENT OF 10% BY THE AO WITHOUT ANY SOUND BASIS IS UNWARRANTED AND IS HEREBY ORDERED TO BE DELETED. 32. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHILE THE LD. COUNSEL FOR ASSESSE E REITERATED THE CONTENTION MADE BEFORE THE LD.CIT(AP PEALS) AND RELIED UPON THE ORDER OF THE LD.CIT(APPEALS). 19 33. WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS). UNDENIABLY, THE REDUCTION OF PROF ITS TO THE EXTENT OF 10% HAS BEEN DONE BY THE ASSESSING OFFICE R ON ESTIMATE BASIS WITHOUT DEMONSTRATING BY WAY OF EVID ENCE WHETHER ANY EXPENSES ON ACCOUNT OF KNOWHOW, GOODWIL L, TRADE NAME, ETC. HAD BEEN INCURRED BY THE PHILLAUR UNIT WITH RESPECT TO TAHLIWAL UNIT. THE SAME HAS NOT BE EN DEMONSTRATED EVEN BEFORE US. FURTHER AS RIGHTLY HE LD BY THE LD.CIT(A), THE PROVISIONS OF SECTION 80IA (8) AND 8 0IA (10) CANNOT BE INVOKED IN THE PRESENT CASE IN THE ABSENC E OF ANY TRANSACTION BETWEEN THE TWO UNITS. THE LD. DR HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS). WE, THEREFORE, UPHOLD THE ORDER O F THE LD.CIT(APPEALS) IN DELETING THE REDUCTION OF PROFIT S OF THE TAHLIWAL UNIT BY 10% OF THE PROFITS AMOUNTING TO RS.16,16,332/-. THE GROUND OF APPEAL NO.4 RAISED B Y THE REVENUE IS, THEREFORE, DISMISSED. 34. GROUND OF APPEAL N.5 RAISED BY THE REVENUE READ S AS UNDER: 5. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.16,36,199/- MADE BY THE A.O. ON DEDUCTION U/S 80IC ON JOB WORK CHARGES BY SIMPLY RELYING ON THE SUBMISSIONS OF THE ASSESSEE AND NOT BY GIVING ANY INDEPENDENT FINDINGS?' 35. THE ABOVE GROUND OF APPEAL IS REGARDING DISALLO WANCE OF DEDUCTION OF PROPORTIONATE PROFITS OF RS.16,36,1 99/- ON THE JOB CHARGES EARNED BY THE ASSESSEE FROM ITC LIM ITED AT 20 THE TAHLIWAL UNIT. THE ASSESSEE HAD RECEIVED JOB C HARGES OF RS.6,21,91,396/- FROM ITC LIMITED FOR THE MANUFACTU RE OF BISCUITS. THE ASSESSING OFFICER HELD THAT THE ASSE SSEE IS NOT ENTITLED TO DEDUCTION U/S 80IC OF THE ACT ON TH E PROFITS DERIVED FROM THE SAME WHICH WAS COMPUTED ON PROPORTIONATE BASIS AT RS.16,36,199/-. 36. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE RELIED UPON ON A NUMBER OF CASE LAWS IN SUPPORT OF ITS CONTENTI ON THAT EVEN VIS--VIS PROFITS DERIVED FROM JOB WORK CHARGE S THE ASSESSEE IS ENTITLED U/S 80IC OF THE ACT. THE LD.CIT(APPEALS) RELYING UPON THE DECISION OF THE HO N'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. IM PEL FORGE & ALLIED INDUSTRIES LTD., 326 ITR 27 AND THE DECISI ON OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOR THERN AROMATICS LTD. (2005) 196 CTR 479 HELD THAT THE ASS ESSEE WAS ENTITLED TO CLAIM DEDUCTION ON PROFITS EARNED O N ACCOUNT OF JOB WORK UNDERTAKEN BY IT HOLDING AS UN DER: FURTHER, THE BASIC PROCESS IS CARRIED OUT BY THE APPELLANT IS THE SAME WHETHER THE PRODUCTION IS DONE FOR ITSELF OR JOB WORK. THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS IMPEL FORGE AND ALLIED INDUSTRIES LTD 326 ITR 27 HAS HELD THAT THE ASSESSEE IS AT LIBERTY TO MANUFACTURE FOR ITSELF OR OTHERS WHICH MA KES NO DIFFERENCE FOR THE PURPOSE OF DEDUCTION UNDER SECTI ON 80IB OF THE ACT. SIMILAR VIEW WAS TAKEN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS NORTHERN AROMATICS LTD (2005) 196 CTR (DELHI) 479. IN VIEW OF THE SAME, THE REDUCTION IN THE CLAIM MADE BY THE APPELLANT UNDER SECTION 80IC ON THIS ACCOUNT DESERVES TO BE DELETED. THESE GROUNDS OF AP PEAL ARE ALLOWED. 37. BEFORE US, THE LD. DR DID NOT POINT OUT ANY INF IRMITY IN THE ORDER OF THE LD.CIT(APPEALS), NOR DID HE BRI NG TO OUR NOTICE ANY CONTRARY DECISION OF THE JURISDICTIONAL HIGH 21 COURT AS OPPOSED TO THAT RELIED UPON BY THE LD.CIT( APPEALS) WHILE ADJUDICATING THE ISSUE. IN VIEW OF THE SAME, WE UPHOLD THE ORDER OF THE LD.CIT(APPEALS) IN DELETING THE REDUCTION IN THE CLAIM MADE BY THE ASSESSEE ON ACCO UNT OF JOB WORK CHARGES AMOUNTING TO RS.16,36,199/- THE G ROUND OF APPEAL NO.5 RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. 38. GROUND NO.6 RAISED BY THE REVENUE READS AS UNDE R: 6. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.15 LAKH MADE ON ACCOUNT OF DISALLOWANCE OUT OF CLAIM OF INTEREST U/S 36(L)(III) OF THE INCOME-TAX ACT, 1961 SIMPLY RELYING ON THE SUBMISSIONS OF THE ASSESSEE IGNORING THE FACTS THAT THE ASSESSEE COULD NOT PROVIDE THE COPIES OF ACCOUNTS OF VARIOUS PERSONS COVERED U/S 40A(2)(B) OF THE INCOME-TAX ACT, 1961 DESPITE BEING GIVEN AMPLE OPPORTUNITY TO DO SO? 39. THIS GROUND IS AGAINST THE DISALLOWANCE OF RS.1 5 LACS U/S 36(1)(III) OF THE ACT OUT OF CLAIM OF INTEREST ON ALLEGED INTEREST FREE ADVANCES WHICH HAVE BEEN MADE BY THE ASSESSEE BY APPLYING JUDGMENT OF THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES VS. C IT REPORTED IN 286 ITR 1. THE LD.CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY HOLDING THAT THE ASSESSEE HAS DEMONSTRATED THE AVAILABILITY OF ENOUGH SURPLUS FUN DS FOR THE PURPOSE OF MAKING THE IMPUGNED INTEREST FREE AD VANCES AND FOLLOWING THE DECISION OF THE HON'BLE JURISDICT IONAL HIGH COURT IN A NUMBER OF CASES. 40. BEFORE US, THE LD. DR DID NOT CONTROVERT THE FA CT THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVA ILABLE FOR 22 THE PURPOSE OF MAKING ADVANCE. THE FINDING OF THE LD.CIT(APPEALS) THAT THE ASSESSEE COMPANY HAD DECLA RED INCOME OF RS.1,54,70,605/- BESIDES SHARE CAPITAL OF RS.1,49,85,000/- AND RESERVES & SURPLUS OF RS.12,32,75,800/- WHICH WERE SUFFICIENT FOR THE PUR POSE OF MAKING THE IMPUGNED INTEREST FREE ADVANCES, HAS NOT BEEN CONTROVERTED BY THE REVENUE. THE LD. DR HAS ALSO NO T BROUGHT TO OUR NOTICE ANY JUDGMENT OF EITHER JURISD ICTIONAL HIGH COURT OR THE HON'BLE APEX COURT CONTRARY TO TH E PROPOSITION LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. I N ITA NO.224 OF 2013 DATED 24.7.2015 RELIED UPON BY THE LD.CIT(APPEALS) HOLDING THAT NO DISALLOWANCE U/S 36 (1)(III) OF THE ACT IS WARRANTED WHERE SUFFICIENCY OF INTERE ST FREE OWN FUNDS FOR THE PURPOSE OF MAKING INTEREST FREE A DVANCES IS DEMONSTRATED. IN VIEW OF THE ABOVE, WE FIND NO REASON TO DISTURB THE ORDER OF THE LD.CIT(APPEALS) ON THE ISS UE AND, THEREFORE, UPHOLD THE DELETION OF DISALLOWANCE OF I NTEREST AMOUNTING TO RS.15 LACS MADE BY THE LD.CIT(APPEALS) . THE GROUND NO.6 RAISED BY THE REVENUE IS, THEREFORE, DI SMISSED. 41. GROUND NO.7 RAISED BY THE REVENUE READS AS UNDE R: 7. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.25 LAKH BEING COMMON EXPENSES OF HEAD OFFICE AGAINST THE INCOME OF TAHLIWAL UNIT WHILE COMPUTING DEDUCTION U/S 80IB OF THE INCOME-TAX ACT, 1961 WITHOUT GIVING ANY REASONS?' 42. THE ABOVE GROUND IS AGAINST THE ALLOCATION OF R S.25 LACS BEING COMMON EXPENSES OF THE HEAD OFFICE AGAIN ST THE 23 INCOME OF TAHLIWAL UNIT WHILE COMPUTING THE DEDUCTI ON U/S 80IC OF THE ACT. THE ASSESSING OFFICER HELD THAT T HE TRANSPORTATION EXPENSES INCURRED FOR EXPORTING BISC UITS TO AFGANISTAN HAVE BEEN INCURRED BY PHILLAUR UNIT THE EXPENSES ON TRANSPORTATION SHOULD BE APPORTIONED ON THE RATIO OF SALES TO AFGANISTAN. FURTHER IN THE ABSEN CE OF ANY DETAIL OF SALES MADE TO AFGANISTAN AN AMOUNT OF RS. 25 LACS WAS ADDED ON ACCOUNT OF WRONG DISTRIBUTION OF COMMO N EXPENSES BY THE HEAD OFFICE. 43. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE CONTEN DED THAT ALL EXPENSES BOTH DIRECT AND INDIRECT HAD BEEN PROPERLY APPORTIONED BETWEEN DIFFERENT UNITS RUN BY IT. THE LD. COUNSEL FOR ASSESSEE STATED THAT SEPARATE BOOKS OF ACCOUNT WERE MAINTAINED FOR EACH UNIT AND ALL EXPENSES RELA TING TO PARTICULAR UNIT WERE DEBITED TO THAT UNIT. AS FAR THE COMMON EXPENSES INCURRED, SAME WERE APPORTIONED IN THE RATIO OF TURNOVER. THE LD. COUNSEL FOR ASSESSEE SU BMITTED THAT COMPLETE LIST OF ALLOCATION OF EXPENSES WAS FI LED TO THE ASSESSING OFFICER AND WITHOUT POINTING ANY ERROR IN THE SAME THE ASSESSING OFFICER HAD DISTURBED THE ALLOCA TION MAKING AN ADDITION OF RS.25 LACS ON ESTIMATE BASIS BY ALLOCATING EXPENSES TO TAHLIWAL UNIT. 44. THE LD.CIT(APPEALS) AFTER CONSIDERING ASSESSEE S SUBMISSIONS HELD THAT THE BASIS OF ALLOCATION OF CO MMON EXPENSES BY THE ASSESSEE HAD BEEN ACCEPTED IN SUBS EQUENT YEARS AND THE ASSESSING OFFICER COULD NOT HAVE DIST URBED THE SAME AND MADE ALLOCATION ON ESTIMATE BASIS IN T HE 24 IMPUGNED YEAR. RELYING UPON THE JUDGMENT OF THE BAN GALORE TRIBUNAL IN THE CASE OF WIPRO LIMITED VS. JCIT, 5 S OT 805 AND THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF DCIT VS. DELHI PRESS SMACHAR PATRA LTD., 10 1 ITD 253,THE LD.CIT(A) DELETED THE ADDITION MADE. 45. BEFORE US, THE LD. DR FAILED TO POINT OUT ANY I NFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS). THE FACT THAT THE ALLOCATION OF EXPENSES MADE BY THE ASSESSING OFFICE R WAS ON ESTIMATE BASIS, WAS NOT CONTROVERTED, NOR WAS THE F ACT THAT THE BASIS OF ALLOCATION OF COMMON EXPENSES BY THE A SSESSEE ON THE BASIS OF TURNOVER HAD BEEN ACCEPTED IN SUBSE QUENT YEARS. WE, THEREFORE, AGREE WITH THE LD.CIT(APPEAL S) THAT THE ASSESSEE HAVING ADOPTED REASONABLE BASIS FOR AL LOCATION OF COMMON EXPENSES, THE ASSESSING OFFICER COULD NOT HAVE DISTURBED THE SAME WITHOUT GIVING ANY COGENT REASON AND MERELY BY RESORTING TO ESTIMATES. WE, THEREFORE, U PHOLD THE ORDER OF THE LD.CIT(APPEALS) IN DELETING THE DISALL OWANCE MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.25 LA CS IN THIS REGARD. THE GROUND OF APPEAL NO.7 RAISED BY T HE REVENUE IS, THEREFORE, DISMISSED. 46. THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.40/CHD/2017 (A.Y. 2006-07): 47. GROUND NO.1 RAISED BY THE REVENUE READS AS UNDE R: 1. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB BY HOLDING THE ASSESSEE UNIT TO BE SMALL SCALE INDUSTRIAL UNIT BY SIMPLY RELYING SOLELY ON THE SUBMISSIONS OF THE ASSESSEE AND 25 NOT BY GIVING ANY INDEPENDENT FINDINGS?' 48. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE IN GRO UND NO.1 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 39/CHD/2017 DEALT WITH BY US ABOVE. THE FINDINGS GI VEN THEREIN AT PARAS 22 TO 27 OF OUR ORDER ABOVE SHALL APPLY TO THIS GROUND ALSO MUTATIS MUTANDIS. GROUND NO.1 R AISED BY THE REVENUE, THEREFORE, STANDS DISMISSED. 49. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDE R: 2. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE RS.17,41,964/- MADE BY THE A.O. ON DEDUCTION U/S 80IC BETWEEN THE TAHLIWAL UNIT AND PHILLAUR UNIT WITHOUT APPRECIATING THE DETAILED FACTS MENTIONED IN THE ASSESSMENT ORDER WHERE THE A.O. HAS VERY CLEARLY HELD THAT THE PROVISIONS OF THE SECTION 80IA (8) AND (10) READ WITH SECTION 80IC ARE APPLICABLE TO THE ASSESSEE'S TAHLIWAL UNIT ONLY?' 50. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE IN GRO UND NO.4 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 39/CHD/2017 DEALT WITH BY US ABOVE. THE FINDINGS GI VEN THEREIN AT PARA 33 OF OUR ORDER ABOVE SHALL APPLY T O THIS GROUND ALSO MUTATIS MUTANDIS. GROUND NO.2 RAISED BY THE REVENUE, THEREFORE, STANDS DISMISSED. 51. GROUND NO.3 RAISED BY THE REVENUE READS AS UNDE R: 3. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.34,31,320/-MADE BY THE A.O. ON DEDUCTION U/S 80IC ON JOB WORK CHARGES BY SIMPLY RELYING ON THE 26 SUBMISSIONS OF THE ASSESSEE AND NOT BY GIVING ANY INDEPENDENT FINDINGS?' 52. IT WAS COMMON GROUND BETWEEN THE PARTIES THAT T HE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE IN GRO UND NO.5 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 39/CHD/2017 DEALT WITH BY US ABOVE. THE FINDINGS GI VEN THEREIN AT PARA 37 OF OUR ORDER ABOVE SHALL APPLY T O THIS GROUND ALSO MUTATIS MUTANDIS. GROUND NO.3 RAISED BY THE REVENUE, THEREFORE, STANDS DISMISSED. 53. THE APPEAL OF THE REVENUE IS DISMISSED. 54. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 8 TH DECEMBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH 27