ACIT, Circle-63(1), New Delhi V. Vanesa Cosmatics, New Delhi

ITA 5600/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2534 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 01-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S NEGI
• Keywords: Depreciation; Set aside
• Section: 80IB; 80IC; 80IC

Judgement Text

ACIT VS. VANESA COSMATICS./ I.T.A.NO.5600/DEL/2017/ A.Y.2013-14 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER . . /. I.T.A NO.5600/DEL/2017 / ASSESSMENT YEAR:2013-14 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 63(1), ROOM NO. 2205, E-2, BLOCK, CIVIC CENTRE, MINTO ROAD, NEW DELHI. VS. M/S VANESA COSMETICS, 116, MODEL BASTI, NEW DELHI. PAN NO. AAHFV5455B APPELLANT RESPONDENT REVENUE BY SH. S.S. NEGI, SR. DR ASSESSEE BY SH. SALIL AGARWAL, ADV. SH. SHAILESH GUPTA, ADV. SH. MADHUR AGGARWAL, ADV. DATE OF HEARING: 11 .11 .20 20 P RONOUNCEMENT ON 2 7 .11 .20 20 /O R D E R PER KULDIP SINGH, J.M. APPELLANT, ASSTT. COMMISSIONER OF INCOME TAX, NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE), BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 19.06. 2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-27, NEW DELHI FOR AY 2013-14 ON THE FOLLOWING GROUNDS: - ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN: 1. DELETING THE ADDITION OF RS. 2,81,94,648/- ON ACCOU NT OF DISALLOWANCE MADE U/S 80IC BY ALLOWING 100% DEDUCTI ON FOR 6 TH ASSESSMENT YEAR INSTEAD OF 25% AS THE ASSESSEE ITS ELF STARTED CLAIMING DEDUCTION U/S 80IC FROM INITIAL AS SESSMENT YEAR I.E. 2008-09. ACIT VS. VANESA COSMATICS./ I.T.A.NO.5600/DEL/2017/ A.Y.2013-14 PAGE 2 OF 7 2. IGNORING THE PROVISIONS OF SECTION 80IC(3)(II) WHIC H CLEARLY AND UNAMBIGUOUSLY STATE THAT UNDERTAKINGS ELIGIBLE FOR DEDUCTION U/S 80IC SHALL BE ELIGIBLE FOR 100% DEDUC TION FOR 5 ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESS MENT (AS DEFINED U/S 80IC(8)(V)) AND THEREAFTER AT THE RATE OF 25 PERCENT. 3. ALLOWING 100% DEDUCTION U/S 80IC FOR THE 6 TH ASSESSMENT YEAR WHEREAS HONBLE GUJARAT HIGH COURT IN THE CASE OF M /S ANAND FOOD AND DAIRY PRODUCTS VS. ITO 394 ITR 0531 ON THE ISSUE OF DEDUCTION U/S 80IB HAS ADJUDICATED THAT DE DUCTION WOULD BE AVAILABLE TO THE ASSESSEE AT THE RATE OF 2 5% FROM 6 TH YEAR AFTER COMPLETION OF FIVE YEARS. THE PROVISIO NS OF SECTION 80IC AND 80IVB ARE PARALLEL PROVISION IN NA TURE. 4. DELETING THE ADDITION OF RS. 1,28,692/- ON ACCOUNT OF PERSONAL USE OF THE CAR WITHOUT GIVING ANY SPECIFIC REASON. 5. DELETING THE ADDITION OF RS. 85,682/-ON ACCOUNT OF TOUR AND TRAVELLING EXPENSES AS THE ASSESSEE FAILED TO PRODU CE VOUCHERS OF EXPENSES AND SUBSTANTIATE ITS CLAIM THA T THE EXPENSE WERE INCURRED WHOLLY AND EXCLUSIVELY FOR TH E BUSINESS PURPOSE. 6. DELETING THE ADDITION OF RS. 33,917/- ON ACCOUNT OF TELEPHONE EXPENSES AS THE ASSESSEE FAILED TO PRODUC E FOR VERIFICATION THE TELEPHONE CALL REGISTER MAINTAINED FOR PARTNERS, EMPLOYEES AND PERSONAL USE CANNOT BE RULE D OUT. THE APPELLANT CRAVES THE RIGHT TO ADD OR ALTER ANY GROUND OF APPEAL. 2. BRIEFLY STATED FACTS NECESSARY FOR ADJUDICATION OF THE ISSUES AT HAND ARE : ASSESSEE BEING A PARTNERSHIP FIRM IS INTO THE BUSINESS OF MANUFACTURING OF PERFUMES, DEODORANTS, COSMETICS IT EMS AND TOILETRY GOODS UNDER THE NAME AND STYLE OF M/S VANESA COSMET ICS AT KHASRA NO. 196/186/1113, VILLAGE, JOHARAN, TRILOK PUR ROAD, TE HSIL NAHAN, DISTT. SIRMOR (KNOWN AS KALA AMB, INDUSTRIAL AREA), HIMACH AL PRADESH, DULY NOTIFIED INDUSTRIAL AREA VIDE NOTIFICATION NO. SO12 69(E) DATED 04.11.2003 FOR THE PURPOSE OF 80IC. ASSESSEE FILED A RETURN O F INCOME CLAIMING TOTAL INCOME OF RS. 38,65,418/- WHICH WAS SUBJECTED TO SC RUTINY ASSESSMENT. AO MADE ADDITION OF RS. 2,81,94,648/- WHILE MAKING DISALLOWANCE U/S 80IC OF THE ACT BY RESTRICTING THE SAME TO 25% INSTEAD O F 100% CLAIMED BY THE ASSESSEE ON THE GROUND THAT 100% DEDUCTIONS U/S 80I C IS AVAILABLE TO THE ACIT VS. VANESA COSMATICS./ I.T.A.NO.5600/DEL/2017/ A.Y.2013-14 PAGE 3 OF 7 UNITS LOCATED IN NORTH INDIAN STATES FOR THE FIRST 5 YEARS AND @ 25%/30% FOR THE NEXT 5 YEARS. AO ALSO MADE AD HOC DISALLOWANCE OF RS. 12,86,922/- I.E. @ 10% ON CAR EXPENSES, CAR INSURANCE EXPENSES, INTEREST ON CAR LOAN, CAR DEPRECIATION CLAIMED BY THE ASSESSEE AND THEREB Y FRAMED THE ASSESSMENT AT RS. 3,23,31,850/- U/S 143(3). 3. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) BY WAY OF FILING THE APPEAL WHO HAS DELETED THE ADDITION BY ALLOWING THE SAME. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBU NAL BY WAY OF FILING PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE F ACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT(A) RELIED UPON ORDER PASSED BY THE ASSESSME NT ORDER AND CONTENDED THAT THE ENTIRE ADDITION/DISALLOWANCE HAV E BEEN MADE BY THE AO ON THE BASIS OF PARTICULAR FACTS OF THE CASE. H OWEVER, ON THE OTHER HAND, LD. AR OF THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD. CIT(A) AND FURTHER RELIED UPON THE JUDGMENT PASSED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF PRINCIPAL COM MISSIONER OF INCOME- TAX, SHIMLA VS. AARHAM SOFTRONICS (SUPRA) (2019) 41 2 ITR 0623 AND ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN T HE CASE OF TIRUPATI LPG INDUSTRIES LTD. VS. DCIT (SUPRA) (2014) 151 ITD 000 1. GROUND NOS. 1, 2 & 3 : 6. UNDISPUTEDLY ASSESSEE HAS SET UP ITS BUSINESS OF MANUFACTURING OF PERFUMES, ETC. IN THE NAME AND STYLE OF M/S VANESA COSMETICS AT KALA AMB, INDL. AREA DULY NOTIFIED FOR THE PURPOSE OF 80 IC. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS STARTED COMMERCIAL PR ODUCTION IN 2007-08 AND SUCCESSFULLY CLAIMED DEDUCTION U/S 80IC FOR 5 Y EARS TILL 2012-13 AND ACIT VS. VANESA COSMATICS./ I.T.A.NO.5600/DEL/2017/ A.Y.2013-14 PAGE 4 OF 7 ALLOWED AS SUCH. IT IS ALSO NOT IN DISPUTE THAT IN THE SUBSEQUENT ASSESSMENT YEARS VIZ. 2014-15, 2015-16, 2016-17 AND 2017-18 100% DEDUCTIONS HAVE BEEN ALLOWED BY LD. CIT(A) ON THE G ROUND THAT THE ASSESSEE HAS MADE SUBSTANTIAL EXPANSION IN THE EXIS TING UNIT. IT IS ALSO NOT IN DISPUTE THAT FOR AY 2015-16, 2016-17 AND 2017-18 NO APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE APPEAL ALLOWED BY LD. CIT(A). 7. IN THE BACKDROP OF THE AFOREMENTIONED FACTS AND CIRCUMSTANCES OF THE CASE THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS AS TO WHETHER ASSESSEE IS ENTITLED FOR DEDUCTION UNDER 8 0IC @ 100% AFTER SUBSTANTIAL EXPANSION CARRIED OUT DURING FINANCIAL YEAR 2011-12. 8. WHEN IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION DURING FINANCIAL YEAR 2011-12 BY INSTALLING PLANT AND MACHINERY WORTH RS. 1,20,26,092.00 WHICH IS MORE TH AN 50% OF THE TOTAL BOOK VALUE OF RS. 2,30,48,407.00 OF THE PLANT AND M ACHINERY EXISTING ON 1 ST DAY OF THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPAN SION WAS TOOK PLACE, THE CLAIM OF THE DEDUCTION ON ACCOUNT OF SUBSTANTIA L EXPANSION U/S 80IC SUB SECTION 8 CLAUSE (IX) IS ADMISSIBLE TO THE ASSE SSEE IRRESPECTIVE OF THE CONDITIONS STIPULATED FOR NORTH INDIAN STATES AND N ORTH EASTERN INDIAN STATES AS DISCUSSED BY AO. 9. HONBLE SUPREME COURT OF INDIA IN CASE CITED AS PRINCIPAL COMMISSIONER OF INCOME-TAX, SHIMLA VS. AARHAM SOFTR ONICS (SUPRA) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY HO LDING THAT IN CASE OF SUBSTANTIAL EXPANSION CARRIED OUT AS PER CLAUSE (IX ) OF SUB SECTION 8 OF SECTION 80IC WITHIN THE AFORESAID PERIOD OF 10 YEAR S THE SAID PREVIOUS YEARS IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN WO ULD BECOME INITIAL ASSESSMENT YEAR AND AS SUCH ENTITLED FOR 100% DEDUC TIONS OF PROFITS AND GAINS. OPERATIVE PART OF THE JUDGMENT (SUPRA) IS E XTRACTED FOR READY PERUSAL AS UNDER: A).. ACIT VS. VANESA COSMATICS./ I.T.A.NO.5600/DEL/2017/ A.Y.2013-14 PAGE 5 OF 7 B) AN UNDERTAKING OR AN ENTERPRISE WHICH HAD SET U P A NEW UNIT BETWEEN 7 TH JANUARY, 2003 AND 1 ST APRIL, 2012 IN STATE OF HIMACHAL PRADESH OF THE NATURE MENTIONED IN CLAUSE (II) OF S UB-SECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO DEDUCTION @ 100 % OF THE PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADM ISSIBLE DEDUCTION WOULD BE 25% (OR 30% WHERE THE ASSESSEE IS A COMPAN Y) OF THE PROFITS AND GAINS. C) HOWEVER, IN CASE SUBSTANTIAL EXPANSION IS CARRI ED OUT AS DEFINED IN CLAUSE (IX) OF SUB-SECTION (8) OF SECTION 80-IC BY SUCH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESAID PER IOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXP ANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSESSMENT YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHALL BEEN ENTITLED TO 100% DEDUCTIONS OF THE PROFITS AND GAINS. D) SUCH DEDUCTION, HOWEVER, WOULD BE FOR A TOTAL P ERIOD OF 10 YEARS, AS PROVIDED IN SUB-SECTION (6). FOR EXAMPLE , IF THE EXPANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLETION OF FI RST FIVE YEARS, THE ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION AG AIN FOR THE NEXT FIVE YEARS. ON THE OTHER HAND, IF SUBSTANTIAL EXPA NSION IS UNDERTAKEN, SAY, IN 8 TH YEAR BY AN ASSESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION FOR THE FIRST FIVE YE ARS, DEDUCTION @ 25% OF THE PROFITS AND GAINS FOR THE NEXT TWO YEARS AND @ 100% AGAIN FROM 8 TH YEAR AS THIS YEAR BECOMES INITIAL ASSESSMENT YEAR ONCE AGAIN. HOWEVER, THIS 100% DEDUCTION WOULD BE FOR REMAINING THREE YEARS, I.E., 8 TH , 9 TH AND 10 TH ASSESSMENT YEARS. 10. IN THE LIGHT OF THE AFORESAID UNDISPUTED FACTS, WE ARE OF THE CONSIDERED VIEW THAT WHEN ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION IN THE EXISTING UNIT IMMEDIATELY ON THE COMPLETION OF FIRST FIVE YEARS I.E. IN FY 2011-12 AND DULY COMPLIED WITH THE CONDITIONS LA ID DOWN IN CLAUSE (IX) ACIT VS. VANESA COSMATICS./ I.T.A.NO.5600/DEL/2017/ A.Y.2013-14 PAGE 6 OF 7 SUB SECTION 8 OF SECTION 80-IC IT IS ENTITLED FOR D EDUCTION FOR THE YEAR UNDER ASSESSMENT @ 100%. LD. CIT(A) BY THRESHING T HE FACTS OF THIS CASE RELIED UPON ORDER PASSED BY COORDINATE BENCH OF TRI BUNAL IN TIRUPATI LPG INDUSTRIES LTD. VS. DCIT HAS RIGHTLY DELETED THE AD DITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 80-IC. SO WE FIND NO S COPE TO INTERFERE INTO THE FINDINGS RETURNED BY LD. CIT(A). HENCE GROUNDS NO. 1, 2 & 3 ARE DETERMINED AGAINST REVENUE. GROUNDS NO. 4, 5 & 6 : 11. LD. CIT(A) DELETED THE ADDITION OF RS. 1,28,692 /-, 85,682/- AND 33,917/- ON ACCOUNT OF PERSONAL USE OF CAR, ON ACCO UNT OF TOUR AND TRAVELLING EXPENSES AND ON ACCOUNT OF TELEPHONE EXP ENSES RESPECTIVELY MADE BY THE AO ON AD HOC BASIS @ 10%. 12. WE ARE OF THE CONSIDERED VIEW THAT WHEN ASSESSI NG OFFICER HAS PROCEEDED TO MAKE AD HOC DISALLOWANCE WITHOUT ASSIGNING ANY REASONS BUT ON THE BASIS OF SURMISES THE DISALLOWANCE IS NOT SU STAINABLE IN THE EYES OF LAW. WHEN UNDISPUTEDLY ASSESSEE HAS CLAIMED THE EX PENSES ON THE BASIS OF ITS AUDITED FINANCIALS WHICH HAVE NOT BEEN DISPUTED BY THE AO, THE AD HOC ADDITION ON THE BASIS OF SURMISES IS BAD IN LAW. M OREOVER, WHEN IT IS NOT CASE OF THE AO THAT THESE EXPENSES HAVE NOT BEEN MA DE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS BY THE ASSE SSEE THERE IS NO GROUND TO DISALLOW THE SAME. LD. CIT(A) HAS RIGHTLY DELET ED THE ADDITION MADE BY THE AO. WE FIND NO SCOPE TO INTERFERE IN THE FINDI NG RETURNED BY LD. CIT(A). CONSEQUENTLY GROUND NOS. 4 TO 6 RAISED BY THE REVENUE ARE DISMISSED. 13. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, PRESE NT APPEAL FILED BY THE REVENUE IS HEREBY ALLOWED. ACIT VS. VANESA COSMATICS./ I.T.A.NO.5600/DEL/2017/ A.Y.2013-14 PAGE 7 OF 7 ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2020. SD/- SD/- (ANIL CHATURVEDI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH NOVEMBER, 2020 * KAVITA ARORA, SR. P.S. COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, NEW DELHI. BY ORDER ASSISTANT REGISTRAR, ITAT: DELHI BENCHES-DELHI