DCIT, New Delhi V. M/s. Jakson Generators Pvt. Ltd., New Delhi

ITA 5426/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4254 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-05-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 02-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.K. HALDAR ITA NO. 5426/DEL/2010 ASSTT. YR: 2000-01 DCIT, CEN. CIR. 12, VS. M/S JAKSON GENERATORS PVT . LTD., NEW DELHI. 47, SHARDANAND MARG, DELHI. PAN/GIR NO. AAACJ0511C (APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI A.K. MONGA SR. DR RESPONDENT BY : NONE O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DATED 15-09-2010 RELATING TO A.Y. 2000-01. FOLLOWING GROUNDS ARE RAI SED: 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS NOT CO RRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF DEDUCTION CL AIMED U/S 80IA OF THE INCOME TAX ACT, 1961 INSPITE OF THE FA CT THAT THE AO HAD PROPERLY WORKED OUT THE CALCULATION OF DEDU CTION U/S 80IA. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN PASSING THE IMPUGNED ORDER, WITHOUT APPRECIATING THE FACT THAT THE DELHI OFFICE IS AN ADMINISTRATIVE OFFICE AND NOT AN INDEP ENDENT UNIT AS HAS BEEN MENTIONED BY THE AO IN HIS ASSESSMENT ORDE R. 2 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COU RSE OF HEARING OF THE APPEAL 2. NONE PUT IN APPEARANCE ON BEHALF OF THE ASSESSEE AT THE HEARING. HOWEVER, WRITTEN SUBMISSIONS AND COPY OF TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR A.Y. 2001-02 HAVE BEEN FILED. WE, THER EFORE, PROCEED TO DISPOSE OF THE APPEAL, EX PARTE, QUA THE ASSESSEE, ON MERITS AND IN THAT PROCESS WE HAVE HEARD THE LEARNED DR AND HAVE GONE THROUGH THE WRITTEN SUBMISSIONS AND OTHER RELEVANT MATERIAL AVAILABLE O N RECORD. 3. LEARNED DR AT THE OUT SET CONTENDS THAT THE ISSU E IN QUESTION CAME UP FOR CONSIDERATION BEFORE THE ITAT IN ASSESSEES OWN CASE FOR A.Y. 2001-02 WHEREIN THE ITAT DELHI BENCH D RENDERED IN ITA NO S. 3547 & 4394/DEL/2003 VIDE ORDER DATED 11-2-2007 HAS HELD T HAT THOUGH THE DELHI OFFICE WAS AN INDEPENDENT UNIT, THE LOSS FROM THIS UNIT BEING ADMINISTRATIVE OFFICE, WILL NOT BE SET OFF AGAINST THE PROFITS OF PONDICHERY UNIT U/S 80-IA BY FOLLOWING OBSERVATIONS: 3.2. WE HAVE PERUSED THE RECORDS AND CONSIDERED TH E MATTER CAREFULLY. UNDER THE PROVISIONS OF SECTION 80-IA, C ERTAIN SPECIFIED PERCENTAGE OF PROFIT DERIVED FROM CERTAIN UNDERTAKINGS IS ALLOWED AS A DEDUCTION WHILE COMPUTING THE TOTAL INCOME. THERE IS NO DISPUTE THAT THE ASSESSEE HAD AN INDUST RIAL UNDERTAKING AT PONDICHERY WHICH MANUFACTURED GENERA TOR SET AND WHICH WAS ELIGIBLE FOR DEDUCTION U/S 80-IA. THE ONLY DISPUTE IS WHETHER LOSS OF THE DELHI UNIT COULD BE SET OFF AGAINST THE PROFIT OF THE INDUSTRIAL UNIT AT PONDICHERY BEF ORE COMPUTING THE DEDUCTION U/S 80-IA. THE AO HAS SET OFF THE LOS S OF DELHI UNIT AGAINST THE PROFIT OF PONDICHERY UNIT AND AHS ALLOWED DEDUCTION ONLY ON THE NET PROFIT ON THE GROUND THAT THE DELHI OFFICE IS NOTHING BUT AN ADMINISTRATIVE OFFICE OF T HE INDUSTRIAL UNDERTAKING AT PONDICHERY. THE CASE OF THE ASSESSEE IS THAT DELHI UNIT IS A SEPARATE UNIT FOR UNDERTAKING TRADI NG ACTIVITIES IN 3 ENGINES AND IT HAS NOT TRADED IN ANY ITEMS MANUFACT URED BY THE PONDICHERY UNIT. THE DELHI UNIT IS THUS AN INDEPEND ENT UNIT AND NOT A PART OF PONDICHERY UNIT AND, THEREFORE, LOSS CANNOT BE SET OFF AGAINST PROFIT OF PONDICHERY UNIT BEFORE ALLOWI NG DEDUCTION U/S 80-IA. WE FIND SUBSTANCE IN THE CLAIM MADE BY T HE ASSESSEE. THE PROFIT & LOSS ACCOUNT AND THE DETAILS OF SALES GIVEN IN THE PAPER BOOK SHOW THAT THE DELHI UNIT HAD TRADED IN E NGINES AND NOT IN GENERATOR SETS MANUFACTURED BY THE PONDICHER Y UNIT. FURTHER, THE P&L ACCOUNT OF PONDICHERY UNIT WHICH I S ALSO AVAILABLE IN THE PAPER BOOK CLEARLY SHOWS THAT IN T HE SAID UNIT, SUBSTANTIAL EXPENDITURE UNDER THE HEAD ADMINISTRATI VE EXPENSES, HAVE BEEN CLAIMED. THESE FACTS CLEARLY SHOW THAT TH E DELHI UNIT IS NOT AN ADMINISTRATIVE UNIT OF THE INDUSTRIAL UND ERTAKING. IT IS ALSO NOTED THAT IN THE EARLIER YEARS AND IN THE SUB SEQUENT YEARS ALSO, THERE WERE LOSSES IN DELHI UNIT WHICH THE REV ENUE AUTHORITY THEMSELVES HAD NOT SET OFF AGAINST THE PROFIT GAINE D AT PONDICHERY6 UNIT. HOWEVER, IT IS ALSO NOTED FROM T HE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 WH ICH AHS BEEN PLACED ON RECORD BY THE LD. AR THAT THE ASSESS EE HAS CLAIMED ENTIRE DIRECTORS REMUNERATION AGAINST THE D ELHI OFFICE, WHICH WERE ALLOCATED TO THE PONDICHERY UNIT BY THE AO AND DEDUCTED FROM THE PROFIT OF THAT UNIT BEFORE ALLOWI NG DEDUCTION U/S 80-IA AS ALMOST ENTIRE ACTIVITIES ARE CONCENTRA TED AT THE PONDICHERY UNIT. SUCH A STAND OF THE AO IS QUITE LO GICAL. THEREFORE, THOUGH WE HOLD THAT THE DELHI OFFICE IS AN INDEPENDENT UNIT AND THAT THE LOSS FROM THAT UNIT W ILL NOT BE SET OFF AGAINST THE PROFIT OF PONDICHERY UNIT BEFORE AL LOWING DEDUCTION U/S 80-IA, WE ALSO MAKE IT CLEAR THAT DIR ECTORS REMUNERATION WILL HAVE TO BE REDUCED FROM THE PROFI T OF THE PONDICHERY UNIT IN CASE THE SAME HAS BEEN CLAIMED A GAINST THE DELHI OFFICE. WITH THESE OBSERVATIONS, WE ALLOW THE APPEAL OF THE ASSESSEE. 3.1. LEARNED DR CONCEDES THAT FACTS BEING IDENTICAL , EARLIER ORDER OF THE ITAT (SUPRA) MAY BE FOLLOWED FOR THE ASSESSMENT YEA R IN QUESTION ALSO. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. RESPECTFULLY FOLLOWIN G EARLIER ORDER OF THE 4 TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02, WE HOLD THAT THE DIRECTORS REMUNERATION CLAIMED BY THE ASSESSEE AT DELHI OFFICE AS EXPENSES BE REDUCED FROM THE PROFITS OF THE PONDICHERY UNIT. BESIDES, DELHI OFFICE BEING AN INDEPENDENT UNIT, LOSS, IF ANY, FROM DELHI OFFICE WILL NOT BE SET OFF AGAINST THE PROFITS OF PONDICHERY UNIT BEFORE ALLOW ING DEDUCTION U/S 80-IA. WE FIND THAT CIT(A) IN COMING TO ITS CONCLUSION HA S ALSO FOLLOWED THE EARLIER ORDER OF THE TRIBUNAL. IN VIEW THEREOF, WE SEE NO REASON TO TAKE A CONTRARY VIEW IN THE MATTER. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 03-05-2011. SD/- SD/- ( B.K. HALDAR ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03-05-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR