ACIT 9(3), MUMBAI V. STRAPPING SOLUTIONS P. LTD, MUMBAI

ITA 5314/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55052 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 28-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.5314/MUM/2010 (ASSESSMENT YEAR: 2006-07) ACIT -9(3), 2ND FLOOR, ROOM NO.229, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ....... APPELLANT VS M/S. STRAPPING SOLUTIONS PVT. LTD., 703, AUTUMN GROVE LOKHANDWALA TOWNSHIP, KANDIVALI (E), MUMBAI -400 101 ..... RESPONDENT PAN: AAFCS 5628 C APPELLANT BY: SHRI V.V. SHASTRI RESPONDENT BY: SHRI BHUPENDRA SHAH DATE OF HEARING: DATE OF PRONOUNCEMENT: 24.08.2011 30.08.2011 O R D E R PER R.S. PADVEKAR, JM: IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-20, MUMBAI DATED 21.04.2010. THE R EVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO RELIEF U/S.80IB OF THE I.T. ACT, 196 1 IGNORING THE FACT THAT THE ASSESSEE HAD NOT FULFILLED THE CO NDITIONS OF SECTION 80IB IN THE INITIAL ASSESSMENT YEAR AND THA T AS A ITA 5314/MUM/2010 M/S. STRAPPING SOLUTIONS PVT. LTD. 2 CONSEQUENCE, THE ASSESSEE WAS NOT ENTITLED TO THE R ELIEF IN THE SUBSEQUENT YEARS INCLUDING THE ASSESSMENT YEAR 2006- 07. 2. BRIEFLY STATED THE FACTS ARE AS UNDER. THE ASSESSE E IS MANUFACTURER OF POLYESTER LASHING BELT. THE CONTRO VERSY IS IN RESPECT OF ALLOWABILITY OF DEDUCTION U/S.80IB. 3. THE ASSESSEE CLAIMED THE DEDUCTION OF ` 25,30,451/- U/S.80IB(4) IN THE YEAR 2006-07. BUT THE SAME WAS DENIED ON THE REASON THAT THE ASSESSEE HAS NOT FULFILLED CRITERIA PRESCRIBED U/S.80IB(4) OF THE ACT IN RESPECT OF NUMBER OF WORK ERS EMPLOYED. THE ASSESSEE WAS ALSO NOT GRANTED DEDUCTION FOR THE A.Y S. 2004-05 & 2005-06 ALSO. IN THE A.Y. 2006-07 IN THE PRESENT A SSESSMENT YEAR, THE ASSESSEE HAS CLAIMED THAT HE HAS FULFILLED ALL THE CONDITIONS OF ELIGIBILITY FOR CLAIMING DEDUCTION U/S.80IB INCLUDI NG THE NUMBER OF EMPLOYEES. THE ASSESSEE ALSO FILED THE PROOF OF SH OWING THE NUMBER OF TOTAL WORKERS EMPLOYED IN THE INDUSTRIAL UNDERTAKIN G. THE A.O. RELIED ON THE DECISION OF THE HONBLE HIGH COURT OF KARNAT AKA IN THE CASE OF CIT VS. NIPPON ELECTRONICS (INDIA) PVT. LTD. 181 IT R 518 (KAR) AND HELD THAT THE ASSESSEE HAS FULFILLED CONDITIONS IN THE I NITIAL ASSESSMENT YEAR FOR CLAIMING THE DEDUCTION AND IF IN THE INITIAL AS SESSMENT YEAR THE DEDUCTION U/S.80IB IS NOT ALLOWED THEN IN THE SUBSE QUENT YEARS THE SAME CANNOT BE CLAIMED. THE A.O., THEREFORE, DENIE D THE ENTIRE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80IB(4) OF TH E ACT. 4. THE ASSESSEE CHALLENGED THE DENIAL OF THE DEDUCTIO N BEFORE THE LD. CIT (A) AND LD. CIT (A) ALLOWED THE CLAIM OF TH E ASSESSEE. THE OPERATIVE PART OF THE FINDINGS OF THE LD. CIT (A) I S AS UNDER:- 5.2 SECTION 80IB AND SECTION 80J OF THE ACT AFFORD RELIEF TO THE ASSESSEE IN THE FORM OF A DEDUCTION IN RESPECT OF P ROFITS AND GAINS FROM NEWLY ESTABLISHED INDUSTRIAL UNDERTAKINGS, HOT EL BUSINESS, ITA 5314/MUM/2010 M/S. STRAPPING SOLUTIONS PVT. LTD. 3 ETC IN BACKWARD AREAS AND CERTAIN OTHER SPECIFIED A REAS. THE STAND OF THE AO IS THAT, IF THE APPELLANT WAS NOT E NTITLED TO DEDUCTION U/S.80IB OF THE ACT IN THE YEAR IN WHICH THE INDUSTRIAL UNDERTAKING WAS STARTED, THE APPELLANT WILL NOT BE ELIGIBLE FOR THE DEDUCTION IN THE SUBSEQUENT YEARS, EVEN IF THE NUMB ER OF EMPLOYEES EXCEEDS THE MINIMUM NUMBER OF 10 EMPLOYEE S PRESCRIBED AS ONE OF THE CONDITIONS. IN OTHER WORD S, THE TEST OR QUALIFICATION AS TO WHETHER THE APPELLANT IS ENTITL ED TO DEDUCTION UNDER SECTIONS 80IB SHOULD BE FIXED WITH REFERENCE TO THE INITIAL YEAR OF THE NEW INDUSTRIAL UNDERTAKING AND, IN THE SUBSEQUENT YEARS, THE QUANTIFYING BASE ALONE IS CHANGED. THER E IS NOTHING IN THE LANGUAGE OF THE RELEVANT PROVISIONS OF SECTION 80IB OR 80J WHICH IMPOSE A FURTHER LIMITATION, NAMELY, THAT IF THE CONDITIONS SO LAID DOWN ARE NOT SATISFIED IN THE VERY YEAR OF COMMENCEMENT OF PRODUCTION, MANUFACTURE, ETC. THE BENEFIT OF TAX HOLIDAY WILL NOT BE AVAILABLE, EVEN IF SUCH CONDITIONS ARE SATISFIED IN THE COURSE OF ANY OF THE SUBSEQUENT YEARS, FORMING PART OF THE TA X HOLIDAY PERIOD. THIS VIEW IS SUPPORTED BY THE DECISION IN CIT VS. SEEYAN PLYWOODS 190 ITR 564 (KER) FOLLOWING DECISIONS IN S ATELLITE ENGINEERING LTD. [1978] 113 ITR 208 (GUJ) AND SUESS IN TEXTILE BEARING LTD. [1982] 135 ITR 443 (GUJ) AND DISSENTIN G FROM THE DECISION IN CIT VS. NIPPON ELECTRONICS (INDIA) PVT. LTD. [1990] 181 ITR 518 (KAR) RELIED UPON BY THE AO. TO THE SIMILA R EFFECTS ARE THE DECISIONS IN CIT VS GOPAL PLASTICS PRIVATE LIMITED 215 ITR 136 (MAD) AND CIT VS. LAXMI METAL INDUSTRIES 236 ITR 13 0( ALL.) 5.3 THE SUPREME COURT IN CIT V. VEGETABLE PRODUCTS LTD. [1973] 88 ITR 192 (AT PAGE 195) OBSERVED: IF WE FIND THAT LANGUAGE TO BE AMBIGUOUS OR CAPABL E OF MORE MEANINGS THAN ONE, THEN WE HAVE TO ADOPT THAT INTER PRETATION WHICH FAVOURS THE ASSESSEE, MORE PARTICULARLY SO BE CAUSE THE PROVISIONS RELATES TO IMPOSITION OF PENALTY. ITA 5314/MUM/2010 M/S. STRAPPING SOLUTIONS PVT. LTD. 4 EVEN IF HONBLE KARNATAKA HIGH COURT HAS TAKEN A VI EW WHICH IS AGAINST THE APPELLANT, IN VIEW OF THE FACT THAT SEV ERAL OTHER HIGH COURTS HAVE ALSO TAKEN A VIEW IN FAVOUR OF THE APPE LLANT, I ADOPT A VIEW BENEFICIAL TO THE APPELLANT FOLLOWING THE DE CISIONS OF THE APEX COURT IN CIT V. VEGETABLE PRODUCTS LTD AND CIT V. NAGA HILLS TEA CO. LTD. (SUPRA). SINCE IT IS AN ADMITTED FACT THAT THE APPELLANT HAS FULFILLED THE REQUIRED CONDITIONS PRE SCRIBED UNDER SECTION 80IB(2)(IV) IN THE ASSESSMENT YEAR IN QUEST ION, THE APPELLANT IS ENTITLED TO CLAIM RELIEF UNDER SECTION 80IB DURING THIS ASSESSMENT YEAR. THE ADDITION MADE OF ` 25,38,450/- TO THE INCOME RETURNED IS, THEREFORE, DELETED. 5. NOW, THE REVENUE IS IN APPEAL BEFORE US. WE FIN D THAT THERE ARE OTHER DECISIONS IN FAVOUR OF THE ASSESSEE, WHICH AR E REFERRED TO BY THE LD. CIT (A) IN HIS ORDER. THE LD. CIT (A) HAS FOLL OWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD. (SUPRA) AND HELD THAT IF TWO VIEWS ARE POSSIBLE THE N THE VIEW FAVOURABLE TO THE ASSESSEE IS TO BE ADOPTED. 6. AFTER GIVING OUR ANXIOUS CONSIDERATION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) AND SAM E IS CONFIRMED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0TH AUGUST 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATED: 30TH AUGUST 2011 ITA 5314/MUM/2010 M/S. STRAPPING SOLUTIONS PVT. LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)20, MUMBAI. 4) THE CIT-9, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 5314/MUM/2010 M/S. STRAPPING SOLUTIONS PVT. LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 24.08.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.08.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER