M/S. ACIT CIR 6(3), MUMBAI V. THE METRO POLYMERS P. LTD,

ITA 4466/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1482 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 07-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MOHANTY
• Keywords: Gift; Business income; Depreciation; Opportunity of being heard; Rule of consistency; Corroborative evidences
• Section: 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI A.L. GEHLO T ,(AM) ITA NO.4466/MUM/2008 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-6(3) ROOM NO.522, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ..( APPELLANT ) VS. M/S. METRO PLOYMERS P. LTD. 214, UNITED INDUSTRIES PREMISES MOGUL LANE, MAHIM MUMBAI-400 016. ..( RESPONDENT ) P.A. NO. (AABCM 5866 A) C.O. NO.209/MUM/2009 AND C.O. NO.104/MUM/20 10 ARISING OUT OF ITA NO.4466/MUM/2008 ASSESSMENT YEAR: 2005-06 M/S. METRO PLOYMERS P. LTD. 214, UNITED INDUSTRIES PREMISES MOGUL LANE, MAHIM MUMBAI-400 016. ..( CROSS OBJECTOR ) VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-6(3) ROOM NO.522, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ..( APPELLANT IN APPEAL ) ASSESSEE BY : SHRI KIRA N MEHTA DEPARTMENT BY : SHRI S. K. MOHANTY ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 2 O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 6.4.2008 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2005-06 AGAINST WHICH THE ASSESSEE HAS FILED TWO CROSS OBJECTIONS I.E, ONE AGAINST THE ORIGINAL GROUNDS OF A PPEAL AND OTHER AGAINST THE ADDITIONAL GROUNDS OF APPEAL RAISED BY TH E REVENUE AGAINST THE DELETION OF DISALLOWANCE OF DEDUCTION U/S.80-IB OF THE INCOME TAX ACT 1961, (THE ACT). THE REVENUES APPEAL AND ASSESSEE' S CROSS OBJECTIONS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GIFT ARTICL ES, LEATHER, PVC STITCHING ARTICLES MAINLY FOR EXPORTS. IT FILED RETUR N DECLARING TOTAL INCOME OF RS.1,83,10,730/- AFTER CLAIMING DEDUCTION U/ S.80-IB (3)(II) RS.80,87,464/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT A N INCOME OF RS.2,80,98,130/- INCLUDING THE ADDITION U/S.1 45A RS.12,01,082/-, DISALLOWANCE OF DEPRECIATION RS.1,38,863 /-, SUPERVISION CHARGES RS.3,60,000/- AND DISALLOWANCE OF DED UCTION U/S.80-IB VIDE ORDER DATED 18.12.2007 PASSED U/S.143( 3) OF THE ACT. ON APPEAL, THE LD. CIT(A) WHILE ALLOWING SUBSTANTIAL RELIEF TO THE ASSESSEE, PARTLY ALLOWED THE APPEAL. ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 3 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US. 4. GROUND NO.1 AND 2 ARE AGAINST THE DIRECTION OF THE LD. CIT(A) TO ALLOW THE PROFIT ON TRANSFER OF DEPB AS INCOME OF THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S.80-IB. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING T HE COURSE OF ASSESSMENT, IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAS INCLUDED THE INTEREST AND INCENTIVE RE CEIVED I.E. DEPB FOR CALCULATING THE DEDUCTION U/S.80-IB OF THE ACT. THE ASSESSING OFFICER IN VIEW OF THE JUDGMENT IN PANDIAN CHEMICALS LTD. VS. CIT 262 ITR 278; CIT VS. STERLING FOOD 237 ITR 579 AND IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT 227 ITR 17 2, WHEREIN IT HAS BEEN HELD THAT INTEREST RECEIPT AND EXPORT INCENTIVES A RE NOT DERIVED BY THE INDUSTRIAL UNDERTAKING, ASKED THE ASSESSEE AS TO HOW INTEREST, INCENTIVES RECEIVED AND DEPB CAN BE CONSIDERED AS DERIVED FROM INDUSTRIAL UNDERTAKING FOR CALCULATING THE DEDUCTION U /S.80-IB. IN THE ABSENCE OF ANY SPECIFIC REPLY, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AMOUNT OF RS.57,81,112/-AS DEPB RECEIVED AND RS.18,174/- AS INTEREST RECEIVED AGGREGATING TO RS.57,99,286/- CANNO T BE CONSIDERED AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKIN G AND ACCORDINGLY THE SAME ARE INELIGIBLE FOR CALCULATING DEDU CTION U/S.80-IB ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 4 OF THE ACT. ON APPEAL, THE LD. CIT(A) HELD THAT AS PER PROVISIONS OF SECTION 28 (III)(D) ONLY THE PROFIT ON TRANSFER OF DEP B IS TO BE CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE AND NOT THE ENTI RE DEPB AND HENCE, HE DIRECTED THE ASSESSING OFFICER TO ALLOW THE PROFIT ON TRANSFER OF DEPB AS INCOME OF THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S.80-IB. 6. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS NOT JUST IFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE PROFIT ON T RANSFER OF DEPB AS INCOME OF THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S.80-IB . HE, THEREFORE, SUBMITS THAT THE DISALLOWANCE MADE BY THE A SSESSING OFFICER BE UPHELD. 7. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUP PORTS THE ORDER OF THE LD. CIT(A). 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL P ARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE ARE OF T HE OPINION THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS NO MORE RES INTEGRA AND IS COVERED BY THE RECENT DECISION OF THE HONBLE APEX COUR T IN LIBERTY INDIA VS. CIT (2009) 317 ITR 218 (SC) WHEREIN IT HAS BEEN HELD (PLACITUM 24 AT PAGE 235) ...THAT THE DUTY DRAWBACK RECEIPT/DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF ELIGI BLE INDUSTRIAL ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 5 UNDERTAKING FOR THE PURPOSES OF SECTION 80-IA/80-IB OF THE 1961 ACT. RESPECTFULLY FOLLOWING THE SAID AUTHORITATIVE PRONOUNCE MENT WE REVERSE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ORDER PASSED BY THE ASSESSING OFFICER ON THIS ISSUE. 9. WITH REGARD TO THE DEDUCTION U/S.80-IB ON THE AMOU NT OF INTEREST WE FIND THAT THE SAME DOES NOT ARISE FROM THE ORDER OF THE LD. CIT(A), AND HENCE, REJECTED. THE GROUNDS TAKEN BY THE REVENU E ARE, THEREFORE, PARTLY ALLOWED. 10. GROUND NO.3 IS AGAINST THE DELETION OF DISALLOWAN CE OF SUPERVISION CHARGES RS.3,60,000/- 11. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIME D AN AMOUNT OF RS.3,60,000/- AS SUPERVISION CHARGES. THE ASSE SSEE WAS ASKED TO GIVE DETAILS AS WELL AS TO JUSTIFY THE SAME. T HE ASSESSEE VIDE ITS REPLY DATED 21.11.2007 HAS ONLY GIVEN THE NAME OF TWO PERSONS BOTH LADIES ONE THILOKANI NAMRATA AND OTHER THILOKAN I VIDYA AND HAS NOT GIVEN ANY JUSTIFICATION OF THE SAME. ACCORDING TO THE ASSESSING OFFICER AS BOTH THE LADIES ARE FAMILY MEMBERS OF THE PR OMOTER OF THE COMPANY AND IN THE ABSENCE OF ANY JUSTIFICATION OF THE P AYMENT HE CONSIDERED THE SAME FOR NON-BUSINESS PURPOSES, NOT ALLOWAB LE UNDER THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . ON APPEAL, ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 6 BEFORE THE LD. CIT(A) IT WAS CONTENDED BY THE ASSESSEE T HAT LADIES ARE QUALIFIED PERSONS AND LOOKING AFTER THE ACCOUNTS AND AD MINISTRATION OF THE COMPANY. THE SUPERVISION CHARGES WERE PAID AS PER TE RMS OF APPOINTMENT IN THE COMPANY, HENCE, IT CANNOT BE SAID TH AT THE ASSESSEE HAS PAID ANY AMOUNT TO THESE LADIES WITHOUT JUSTIF ICATION AND HENCE, THE SAME SHOULD BE ALLOWED. THE LD. CIT(A) AFT ER CONSIDERING THE ASSESSEE'S SUBMISSION FOUND MERIT IN THE SAME AND DELETE D THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 12. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT TH E LD. CIT(A) WITHOUT ANY EVIDENCE OF ACTUAL SERVICES HAVING BEEN REND ERED BY THE SAID TWO LADIES, HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HE, THEREFORE, SUBMITS THAT THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER BE RESTORED. 13. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE W HILE RELYING ON THE ORDER OF THE LD. CIT(A) FURTHER SUBMITS THAT B OTH THE LADIES ARE RENDERING SERVICES RIGHT FROM THE INCEPTION OF THE COMPA NY IN 1999 AND ARE IN FACT ACTIVELY ENGAGED IN THE BUSINESS OF THE COMPANY. HE FURTHER SUBMITS THAT NO SUCH DISALLOWANCE WAS MADE BY TH E ASSESSING OFFICER IN THE PAST AS WELL AS IN THE SUBSEQUENT ASSESSME NT YEARS. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT (A) IN DELETING THE DISALLOWANCE BE UPHELD. ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 7 14. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAI NST THE FINDING OF THE LD. CIT(A) AND KEEPING IN VIEW THAT EVEN AT THIS STAGE THE REVENUE HAS NOT CONTROVERTED THE ASSESSEE'S PLEA THAT BOTH THE LADIES ARE RENDERING SERVICES RIGHT FROM THE INCEPTION OF THE COMPANY IN 1999 AND ARE IN FACT ACTIVELY ENGAGED IN THE BUSINESS OF THE COMPANY AND NO SUCH DISALLOWANCE WAS MADE IN PAST, AND ALSO KEEPING I N VIEW THE RULE OF CONSISTENCY, WE ARE OF THE VIEW THAT THE DISALLO WANCE MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE IN LAW AND ACCORDIN GLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE SAME. THE GROUND TAKEN BY THE REVENUE IS, THEREFORE, REJECT ED. 15. ADDITIONAL GROUND NO. 1 AND 2 ARE AGAINST THE DE LETION OF DISALLOWANCE OF DEDUCTION U/S.80-IB OF THE ACT. 16. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE ASSE SSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80-IB(3)( II) RS.80,87,464/-. HE FURTHER NOTED THAT DURING THE YE AR THE ASSESSEE HAS PURCHASED PLANT AND MACHINERY OF RS.9,20,000/- EXCLUSI VE OF DUTIES (RS.10,62,769/- INCLUSIVE OF DUTIES ) FROM MONGA ELECTRONIC PVT. LTD., PUNE ON 26.4.2004 WHICH HAS BEEN SUBSEQUENTLY SOL D BY THE ASSESSEE . ACCORDINGLY THE ASSESSEE WAS ASKED TO SHOW CAUSE THAT ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 8 AS PER AUDIT REPORT U/S.10CCB RULE 18BBB FOR 80I(7)/ 80IA(7)/80IB(7) ON POINT NO.18(C), THE COST OF PLANT AND MACHINERY WAS SHOWN AT RS.99,76,835/- ON 31.3.2005. AS ASSESSEE HAS PURCHASED AND SO LD A MACHINERY OF RS.10,62,769/- DURING THE YEAR, THEREFOR E, FOR PART OF THE YEAR PLANT AND MACHINERY FOR THE COMPANY BECOMES MORE THAN RS.1 CRORE. THEREFORE, THE COMPANY COMES OUT OF THE PURVIEW OF SSI, THEREFORE, WHY THE DEDUCTION CLAIMED U/S.80IB SHOULD N OT BE DISALLOWED. IN REPLY IT WAS SUBMITTED THAT INDUSTRIAL UNDERTAKING OF THE ASSESSEE WAS STARTED IN 1999 AND AT THAT POINT OF TIM E THE QUALIFYING LIMIT OF SSI UNITS WAS RS.3 CRORES AND ASSESSEE W AS OF THE VIEW THAT IN CASE OF INDUSTRIAL UNDERTAKING REGISTERED AT THAT POINT OF TIME THE LIMIT WILL CONTINUE TO BE AT RS.3 CRORES. T HE ASSESSEE WAS THEREFORE ONCE AGAIN ASKED ANY SUPPORTING EVIDENCE REGA RDING ITS STATEMENT THAT FOR UNITS WHICH WERE INSTALLED IN THE PE RIOD WHEN THE LIMIT WAS RS.3 CRORES BUT THEIR PLANT AND MACHINERY WAS L ESS THAN RS.1 CRORES AND LATER ON EVEN AFTER THE AMENDMENT IN THE SA ID SECTION WHEN LIMIT WAS DECREASED TO RS.1 CRORE IF THEY INCREASE THEIR P LANT AND MACHINERY BEYOND RS.1 CRORE LIMIT WILL STILL ENJOY SSI BENEFIT. THE A.R. OF THE ASSESSEE AGAIN ATTENDED THE HEARING ON 17.12.200 7 AND SUBMITTED ONE PAGE REPLY ALONG WITH ITS LETTER WRITTE N TO GENERAL MANAGER, DISTRICT INDUSTRIAL CENTRE, NASIK, CONTENT OF THE SAME LETTER ARE BEING REPRODUCED AS UNDER : ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 9 A. RE: SSI STATUS: 1. WE HAVE ALREADY SUBMITTED THE SSI CERTIFICATE ISSUE D BY GENERAL MANAGER INDUSTRIES CENTRE IN OUR SUBMISSION DATED 21.11.2007 WHICH IS VALID ON 31.3.2005 AS ALSO THE TILL DATE. 2. THE ASSESSEE HAS ALREADY REQUESTED TO THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, NASIK VIDE LET TER DATED 06.12.2007 TO CONFIRM THE STATUS OF THE ASSESSEE AS SSI. (KINDLY FIND ENCLOSED HEREWITH THE COPY OF LETTER). HOWEVER, IT WAS INSTRUCTED BY THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, NASIK THAT THE SSI CERTIFICATE I TSELF IS ENOUGH TO PROVE THE STATUS OF THE ASSESSEE AS SSI A ND THERE IS NO SUCH PROCEDURE TO CONFIRM THE SAME. 3. DUE TO THE SAID CERTIFICATE YOUR ASSESSEE WAS ABLE TO GET THE BENEFIT LIKE REFUND OF OCTROI DUTY AS ALSO SALES TA X BENEFITS. THE ABOVE BENEFIT GIVEN BY THE GOVERNMENT ITSELF PR OVES THAT FOR THE YEAR UNDER REFERENCE THE ASSESSEE WAS ENJOYING THE STATUS OF SSI. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSE SSEE COMPANY DURING THE YEAR WAS HAVING PLANT AND MACHINERY OF MORE THAN RS.1 CRORES, AS AGAINST PLANT AND MACHINERY OF RS. 5 LACS APPROVED BY DISTRICT INDUSTRIAL CENTRE, NASIK, THEREFO RE, CAN NOT BE REGARDED AS SMALL SCALE INDUSTRY U/S.11B OF INDUSTRIES (D EVELOPMENT AND REGULATION) ACT, 1951 AND ACCORDINGLY HE DISALLOWE D THE CLAIM OF THE ASSESSEE OF DEDUCTION U/S.80IB OF THE ACT OF RS.80,87, 464/-. 17. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE SUBMI TTED THAT : A) THE APPELLANT HAD SET UP ITS SSIU IN NASIK, MAHARASHTRA, IN THE YEAR 1999. B) THE SSUI OF THE APPELLANT WAS REGISTERED, AS SUC H, WITH DIC AND IT HAS ENJOYED ALL THE BENEFITS OF SSU I RIGHT FROM 1999 TILL TO DAY. C) SINCE THE APPELLANT FULFILLED ALL THE CONDITIONS OF SECTION 80IB IT CLAIMED THE DEDUCTION UNDER SECTION 80IB ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 10 FOR ALL THE PAST YEARS AND THE SAME WAS DULY ALLOWE D TO IT AFTER DUE SCRUTINY. D) THE SSI CERTIFICATE ON WHICH THE ASSESSING OFFIC ER HAS PLACED HEAVY RELIANCE ON IS THE INITIAL ELIGIBI LITY CERTIFICATE ISSUED ON 18.2.2000 BY THE DIC. THIS I S THE INITIAL CERTIFICATE ISSUED FOR THE ELIGIBILITY OF T HE SSUI OF THE APPELLANT FOR THE SALES TAX INCENTIVES UNDER TH E 1993 SCHEME OF INCENTIVES. E) THAT AS ON 31.3.2005 THE COST OF PLANT AND MACHI NERY WAS RS.95,21,890/- AND THE SAME WAS BELOW THE LIMIT OF RS.1. CRORE SPECIFIED FOR A SSIU. F) THE ONLY GROUSE OF THE LD. ASSESSING OFFICER IS THAT FOR A PART OF THE YEAR THE COST OF PLANT AND MACHIN ERY HAD EXCEEDED THE LIMIT OF RS.1 CRORE. G) SECTION 80IB (14)(G) DEFINES SMALL SCALE INDUSTR IAL UNDERTAKING FOR THE PURPOSES OF SECTION 80IB TO MEA N, AN UNDERTAKING WHICH ON THE LAST DAY OF THE PREVIO US YEAR IS REGARDED AS A SMALL SCALE INDUSTRIAL UNDERT AKING UNDER SECTION 11B OF THE INDUSTRIES (DEVELOPMENT AN D REGULATIONS) ACT, 1951. IN THE CASE OF THE APPELL ANT AS AT 31.3.2005, I.E. THE LAST DAY OF THE PREVIOUS YEA R THE COST OF MACHINERY WAS WELL BELOW THE LIMIT OF RS.1 CRORE SPECIFIED BY THE INDUSTRIES (DEVELOPMENT AND REGULATIONS) ACT, 1951. IN VIEW OF THIS EVEN IF FO R A PART OF THE YEAR THE INVESTMENT EXCEEDED THE 1.0 CRORE L IMIT, IT REALLY WOULD NOT MATTER IN VIEW OF THE EXPRESS PROV ISION OF SECTION 80IB(14)(G) AFORESAID. H) THE ASSESSING OFFICER HAS CLEARLY MISUNDERSTOOD THE ELIGIBILITY CERTIFICATE ISSUED BY THE DIC IN 20 00 AND HE HAS MADE A MOUNTAIN OUT OF NOTHING. THE ELIGIBILIT Y CERTIFICATE IS THE INITIAL CERTIFICATE ISSUED IN 20 00 AND IT ENTITLED THE APPELLANT TO THE BENEFITS OF THE 1993 SCHEME OF INCENTIVES. IT CONTAINED THE FIGURES AND ESTIMA TED OF THE INITIAL PERIOD OF 1999-00 AND NOTHING ELSE NEED S TO BE READ IN TO IT. THERE IS NOTHING IN ANY LAW THAT TH E APPELLANT WAS BOUND BY THE FIGURES GIVEN IN THE SAI D CERTIFICATE ISSUED IN 2000 AND THAT HE COULD NOT EX PAND ANY FURTHER IN THE FUTURE YEARS. THE CERTIFICATE O NLY MEANT THAT FOR ANY FURTHER EXPANSION THE APPELLANT WOULD NOT GET THE SUBSIDY AS THE CUT OFF DATE FOR THE SCH EME WAS 1999-00. ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 11 I) THE APPELLANT WAS REQUIRED TO AND IT DID FILE WI TH THE DIC FROM TIME TO TIME THE DETAILS OF INVESTMENT IN PLANT AND MACHINERY. THUS, THE DIC WAS WELL AWARE OF AND WAS ENABLED TO MONITOR THE STATUS OF THE APPELL ANT AS A SSIU. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE MATERIAL AVAILABLE ON RECORD WHILE HOLDING THAT IN THE CASE OF THE APPELLANT AS ON 31.3.2005 I.E. LAST DAY OF THE PREVIO US YEAR THE COST OF MACHINERY WAS WELL BELOW THE LIMIT OF RS.1 CRORES SPECIFIE D BY THE INDUSTRIES (DEVELOPMENT AND REGULATIONS) ACT, 1951 AND HENCE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80-IB. 18. AT THE TIME OF HEARING THE LD. DR WHILE RELYING ON THE ORDER OF THE ASSESSING OFFICER FURTHER SUBMITS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S.80-IB RS.80,87,464/- BY WRONGLY TREATING THE ASSESSEE'S UNIT AS SMALL SCALE UNDERTAKING U/S.80-IB(14) ( G) OF THE ACT EVEN WHEN THE ASSESSEE COMPANY WAS HAVING PLANT AND MACHI NERY WORTH MORE THAN RS.1.00 CRORES. HE FURTHER SUBMITS THAT THE PLANT AND MACHINERY APPROVED BY DISTRICT INDUSTRIAL CENTRE, NASIK WAS MERE RS.5.00 LACS AND AS PER PROVISIONS OF SECTION 11B OF THE IN DUSTRIES (DEVELOPMENT AND REGULATIONS) ACT, 1951 THE ASSESSEE COMP ANY CANNOT BE CONSIDERED AS SMALL SCALE INDUSTRY. HE THEREFORE, SUBMITS THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE RE STORED. ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 12 19. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT THERE IS NO DISPUTE THAT THE PLANT AND MACHINERY OF RS.9,20,000/- WAS PURCHASED AND SOLD DURING THE YEAR, THEREFORE, THE COST OF PLANT AND MAC HINERY WAS SHOWN AT RS.95,21,890/- AS ON 31.3.2005, WHICH IS LESS THAN RS.1 CRORES, SPECIFIED FOR SSIU. REFERRING TO THE LETTER OF CLARIFI CATION NO.4(I)/2000- SSI BD. & POL. DATED 19.10.2000 APPEARING AT PAGE-2 1 OF ASSESSEE'S PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUB MITS THAT : ANY UNIT WHICH HAS RECEIVED PROVISIONS/PERMANENT REGISTRATION PRIOR TO 24 TH DECEMBER, 1999 AND HAS TAKEN CONCRETE STEPS FOR IMPLEMENTING THE PROJECT WOULD CONTINUE TO ENJOY THE SSI STATUS SO LONG AS INVESTM ENT IN PLANT AND MACHINERY DOES NOT EXCEED RS.300.00 LAKHS . NO TIME LIMIT IS PRESCRIBED FOR SUCH UNITS TO REACH THE CEILING OF RS.300.00 LAKHS. HE FURTHER SUBMITS THAT NO SUCH DISALLOWANCE WAS MADE IN P AST AND IN SUBSEQUENT ASSESSMENT YEARS. HE THEREFORE, SUBMITS THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE DISALLOWANCE U/S.80-IB AND THEREFORE, HIS ORDER BE UPHELD. 20. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SECTIO N 80IB (14)(G) DEFINES SMALL SCALE INDUSTRIAL UNDERTAKING FOR THE PUR POSES OF SECTION 80IB TO MEAN, AN UNDERTAKING WHICH ON THE LAST DAY OF THE PREVIOUS YEAR IS REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKI NG UNDER SECTION ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 13 11B OF THE INDUSTRIES (DEVELOPMENT AND REGULATIONS) ACT , 1951. IT MEANS THAT AN INDUSTRIAL UNDERTAKING SHALL BE REGARDE D AS SMALL SCALE UNDERTAKING IN WHICH THE INVESTMENT IN FIXED ASSETS IN P LANT AND MACHINERY DOES NOT EXCEED RS.1 CRORES. IN THE CASE BEFORE US, AS PER AUDIT REPORT THE COST OF PLANT AND MACHINERY AFTER EXCL UDING THE PURCHASE AND SALE OF MACHINERY RS.10,62,769/- INCLUSIVE OF DUTIES DURING THE YEAR WAS SHOWN AT RS.99,76,835/- AS ON 31.3. 2005, THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE WAS HA VING PLANT AND MACHINERY BELOW RS.1 CRORES AS ON THE LAST DAY OF THE PR EVIOUS YEAR AND THE SAME IS REGARDED AS SMALL SCALE UNDERTAKING U/S. 80IB(14)(G) OF THE ACT. THIS BEING SO AND CONSIDERING THE FACT T HAT NO SUCH DISALLOWANCE WAS MADE IN PAST YEARS AND AS WELL AS SUBSEQUEN T YEARS AND ALSO KEEPING IN VIEW THE RULE OF CONSISTENCY WE HOLD THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN HOLDING THAT THE ASSESSEE I S ELIGIBLE FOR DEDUCTION U/S.80-IB OF THE ACT. THE GROUNDS TAKEN BY T HE REVENUE ARE THEREFORE, REJECTED. C.O. NO.209/MUM /2008 (BY ASSESSEE): 21. GROUND NO.1 IS AGAINST THE SUSTENANCE OF DISALLOWANCE ON DEPRECIATION ON ELECTRICAL INSTALLATION AT 15%. 22. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 14 DEPRECIATION @ 25% ON ELECTRICAL INSTALLATION RATHER T HAN 15%. ON BEING ASKED IT WAS SUBMITTED BY THE ASSESSEE THAT THE ELECT RICAL INSTALLATIONS ARE FOR MACHINERIES, THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION @ OF 25%. HOWEVER, THE ASSESSING OFFICER WAS O F THE VIEW THAT AS PER INCOME TAX RULES ELECTRICAL FITTINGS ARE CLEARLY A PART OF FURNITURE AND FITTINGS, THUS ELIGIBLE FOR DEPRECIAT ION @ 15% ONLY AND ACCORDINGLY HE ALLOWED DEPRECIATION @ 15% RS.2,08,294/- AS AGAINST RS.3,47,153/- CLAIMED BY THE ASSESSEE. ON APPEAL, THE L D. CIT(A) UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 23. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE ELECTRICAL INSTALLATION ARE FOR MACHINERIES, T HEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION @ 25% AND NOT 15%. HE THEREFORE, SUBMITS THAT THE DISALLOWANCE MADE BY THE A SSESSING OFFICER AND SUSTAINED BY THE CIT(A) BE DELETED. 24. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(A). 25. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT ELECTRICAL INSTALLATION IS PART O F PLANT AND MACHINERY, WE DO NOT FIND ANY MERIT IN THE PLEA OF T HE LD. COUNSEL FOR THE ASSESSEE THAT ELECTRICAL INSTALLATION ARE FOR MACHINERI ES AND ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 15 ACCORDINGLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER A ND SUSTAINED BY THE LD. CIT(A) IS UPHELD. THE GROUND TAKE N BY THE ASSESSEE IS, THEREFORE, REJECTED. 26. GROUND NO.2 IS AGAINST THE SUSTENANCE OF ADDITION O F RS.12,01,082/- MADE U/S.145A OF THE ACT AND IN SETTING ASIDE THE ISSUE BACK TO THE ASSESSING OFFICER. 27. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE ASSE SSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN RAW MATERIALS, WORK IN PROGRESS, STOCK OF STORES INCLUDING DUTY AVAILED UNDER THE PROVISIO N OF SECTION 145A OF THE ACT. THE ASSESSEE WAS REQUIRED TO ADD EXCISE DUTY IN ITS INVENTORY OF ITS BOOKS. SINCE NO SUBMISSION WAS MADE ON T HIS BEHALF, THE ASSESSING OFFICER ADDED RS.12,01,082/- U/S.145A OF TH E ACT. ON APPEAL, THE LD. CIT(A) OBSERVED THAT IN A CASE WHERE E XCLUSIVE METHOD IS FOLLOWED IF THE MODVAT ELEMENT WHICH IS REQUIRED TO BE ADDED IN THE CLOSING STOCK IS SAME AS THE MODVAT CREDIT YET TO BE AVAILED ON ACCOUNT OF PURCHASES SHOWN IN THE BALANCE SHEET, NO ADDIT ION ON ACCOUNT OF APPLICABILITY OF 145A COULD BE MADE. HOWEVER , IF THE MODVAT ELEMENT TO BE INCLUDED IN THE CLOSING STOCK IS MORE THA N THE MODVAT BALANCE AVAILABLE IN THE MODVAT CREDIT ACCOUNT OCCURRING ON THE ASSET SIDE OF THE BALANCE SHEET, THE BALANCE IS REQUIR ED TO BE ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 16 ADDED AND ACCORDINGLY HE DIRECTED THE ASSESSING OFFICER TO VERIFY THE FACTS AND MAKE SUITABLE ADDITION IN THE LIGHT OF ABOVE DIRECTION. 28. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT EVEN I F INCLUSIVE METHOD IS EMPLOYED, THERE WOULD BE NO IMPACT ON THE P&L ACCOUN T AND THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICER A ND SUSTAINED BY THE LD. CIT(A) BE DELETED. 29. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER OF THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 30. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDER T HE PROVISIONS OF SECTION 145A OF THE ACT, ADJUSTMENTS ON ACCOUNT OF MODVAT ARE REQUIRED TO BE MADE IN RESPECT OF PURCHASES, SALES AND INV ENTORY IN THE CLOSING STOCK. WE FIND THAT RECENTLY THE HONBLE JURI SDICTIONAL HIGH COURT IN CIT VS. MAHALAXMI GLASS WORKS PVT. LTD. (2009) 318 ITR 116(BOM.) WHILE AGREEING WITH THE REASONING AND FI NDING GIVEN BY THE HONBLE DELHI HIGH COURT IN CIT VS. MAHAVIR ALUMINIU M LTD. (2008) 297 ITR 77(DEL.) THAT TO GIVE EFFECT TO SECTION 145A, IF THERE IS ANY CHANGE IN THE CLOSING STOCK AT THE END OF THE YEAR THE N THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPE NING STOCK ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 17 OF THAT YEAR AND THIS WOULD NOT AMOUNT TO GIVE DOUBL E BENEFIT TO THE ASSESSEE AND WOULD BE NECESSARY TO COMPUTE THE TRUE AND CORR ECT PROFIT FOR THE PURPOSE OF ASSESSMENT, UPHELD THE ORDER OF THE TRIBUNAL IN DIRECTING THE ASSESSING OFFICER TO MAKE NECESSARY CORRESPON DING ADJUSTMENT IN THE OPENING STOCK OF NEXT YEAR. IN TH E ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE ASSESSEE W E RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICT IONAL HIGH COURT SUPRA, DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) IN SETTING ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SH ALL DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND ACCORDING TO LAW AFTER PROVIDING A REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUN D TAKEN BY THE ASSESSEE IS, THEREFORE, REJECTED. C.O. NO.104/MUM /2010 (BY ASSESSEE ): 31. THE GROUNDS TAKEN BY THE ASSESSEE IN THE ABOVE C.O. ARE THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT GIVING ANY FI NDINGS THAT EVEN IF THE INVESTMENT IN PLANT AND MACHINERY EXCEEDS RS.1.00 CR ORES IT WOULD CONTINUE TO BE SSIU AND, HENCE, ELIGIBLE FOR DEDUCTION U/S.80-IB. FURTHER THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT FOR THE PURPOSE OF SSIU THE INVESTMENT COST ATTRIBUTABLE TO DIES AND MOULD S, ACCESSORIES, ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 18 GENERATORS AS ALSO COST OF TRANSPORT OF MACHINERY, COST OF I NSTALLATION ETC. NEED TO BE EXCLUDED. 32. HOWEVER, AT THE TIME OF HEARING THE LD. COUNSEL F OR THE ASSESSEE SUBMITS THAT THE PLEA TAKEN BY HIM IN THE REVENUES AP PEAL IN THIS REGARD MAY BE CONSIDERED WHILE DECIDING THE ABOVE GRO UNDS OF C.O. 33. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER O F THE ASSESSING OFFICER. 34. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW OF OUR FINDI NG RECORDED IN PARA-20 OF THIS ORDER, AND IN THE ABSENCE OF ANY SUPPOR TING MATERIAL PLACED ON RECORD BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE GROUNDS RAISED BY THE ASSESSEE IN THE ABOVE C.O. DO NOT REQUIRE ANY FRESH ADJUDICATION AND ACCORDINGLY THE SAME ARE REJECTED. 35. IN THE RESULT, REVENUES APPEAL STANDS PARTLY ALLOW ED AND THE ASSESSEE'S CROSS OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.6.2010 SD/- SD/- (A.L. GEHLOT) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.6. 2010. JV. ITA NO.4466/M/08& COS 104/10 AND 209/08 A.Y:05-06 19 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.