ACIT CIR 25(3), MUMBAI V. ABHINAV ELECTRICAL INDUSTRIES, MUMBAI

ITA 5682/MUM/2012

• Counselvise Citation: 568219914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SINGH
• Section: 80IB

Judgement Text

, , ,, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH. . .. . . .. . , ,, , / !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RAJENDR A, ACCOUNTANT MEMBER /. ITA NO.5682/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR-2009-10 ACIT CIR 25(3) 308 C-11 BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI- 400051 VS ABHINAV ELECTRICAL INDUSTRIES 101, NARMAN TOWER, B WING, 1 ST FLOOR, S.V. ROAD, KANDIVALI (W) MUMBAI-400067 PAN: AAHFA8603N ( &' / APPELLANT) ( ()&' / RESPONDENT) $*+ $*+ $*+ $*+ , , , , ' '' ' / APPELLANT BY : SHRI K.SINGH ! - , ' / REVENUE BY : NONE $ $ $ $ - -- - +. +. +. +. / DATE OF HEARING : 04-11-2013 /0% - +. / DATE OF PRONOUNCEMENT : 08-11-2013 $ $ $ $ , 1961 - -- - 254 )1( ' '' ' +1+ +1+ +1+ +1+ '2 '2 '2 '2 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM: CHALLENGING THE ORDER DATED 05.06.2012 OF CIT(A)-35 ,MUMBAI,ASSESSING OFFICER (AO) HAS FILED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN GIVING RELIEF ON THE ISSUE OF DISALLOWANCE OF RS. 21,50,795/- MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF DEDUCTION CLAIMED UNDER SECTION 80IB(4) OF THE I.T. ACT, 1961 WITHOUT APPRECIATING THE FACT THE 2 ND UNIT IS FOR ALL PRACTICAL PURPOSE A NEW INDUSTRIAL UNDERTAKING. 2.THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND. 2 .ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF MANUF ACTURING OF PLASTIC CUPS,FILED ITS RETURN OF INCOME ON 24.9.2009 DECLARING TOTAL INCOME AT RS. 1 .68 CRORES.ASSESSMENT WAS FINALISED U/S.143 (3)OF THE TAX ACT BY THE AO ON 29.12.2011 DETERMINI NG THE TOTAL INCOME AT RS. 1.90 CRORES. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT AS SESSEE HAD CLAIMED DEDUCTION OF RS.55.62 LACS U/S.80IB(4) OF THE ACT FOR THE 9 TH CONSECUTIVE YEAR IN RESPECT OF ITS ELIGIBLE INDUST RIAL UNDERTAK -ING THAT HAD COMMENCED PRODUCTION ON 01.04.2000.AO FOUND THAT ASSESSEE HAD SHOWN SALES FROM TWO UNITS I.E. UNIT-I(13.49 CRORES) AND UNIT-II (RS . 8.50 CRORES).HE DIRECTED THE ASSESSEE TO GIVE DETAILS OF DATE OF COMMENCEMENT OF MANUFACTURING OR PRODUCTION FOR THE UNIT-I AND UNIT- II AND COPIES OF LETTERS OF GOVERNMENT AUTHORITIES ALLOWIN G SETTING UP OF BOTH THE UNITS.HE ASKED THE ASSESSEE AS TO WHY THE CLAIM OF DEDUCTION U/S 80IB SHOULD NOT BE RESTRICTED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO HELD THAT IN THE CA SE OF THE ASSESSEE ONLY ONE OF THE TWO UNITS HAD STARTED PRODUCTION IN THE PERIOD 01.04.1993-31.03.2 004,THAT DEDUCTION WAS ALLOWABLE IN RESPECT OF THAT UNIT ONLY.FINALLY, HE DENIED THE DEDUCTION U/S 80IB(4) OF THE ACT IN RESPECT OF UNIT-II. 2 ITA NO.5682/MUM/2012 ABHINAV ELECTRICAL INDUSTRIES . 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R,HE HELD THAT AS PER THE PROVISIONS OF SECTION 80IB(4) OF THE ACT, THE AMOUNT OF DEDUCTION IN CASE OF AN INDUSTRIAL UNDERTAKING HAD TO BE 100% FOR THE 5 AYS.BEGINNING WITH THE INITIAL AY. AND TH EREAFTER 20%OR 30% OF THE PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING,THAT THE PROVISIONS OF THE SAID SECTION PROVIDED FOR THE BENEFIT OF THE ALLOWANCE TO AN INDUSTRIAL UNDERTAKING AND NOT TO T HE PLANT OR SET OF MACHINERY INSTALLED ON OR BEFORE 31.03.2004,THAT THERE WAS NO RESTRICTION UND ER THE SAID SECTION TO CONFINE THE DEDUCTION TO THE PROFITS DERIVED FROM THE SAID MACHINERIES INSTA LLED ON OR BEFORE 31.03.2004, THAT THE PROVISIONS OF SECTION 80IB WERE FOR PROMOTION OF INDUSTRIAL GR OWTH IN BACKWARD STATES, THAT THE EXPANSION OF INDUSTRIAL UNDERTAKING BY INSTALLATION OF NEW MACHI NERY REPLACEMENT OF WORN OUT MACHINERY WAS ALLOWABLE AT POINT OF TIME,THAT SUCH ACTIVITIES WER E PART AND PARCEL OF THE INDUSTRIAL ACTIVITIES OF A N UNDERTAKING,THAT AO ERRED IN COMPARING WDV AS ON 01 .04.2007 WITH THE COST OF NEW MACHINERY PROCURED AND INSTALLED IN THE FINANCIAL YEAR 2007-0 8 INSTEAD OF MAKING SUCH COMPARISON BETWEEN THE ORIGINAL COST OF THE OLD MACHINERY WITH THE COS T OF NEW MACHINERY,THAT AO MISLED HIMSELF INTO THINKING AS IF A NEW SET OF MACHINERY WAS EQUIVALEN T TO THE PURCHASE OF OLD MACHINERY,THAT THE AO HAD ERRED INTO NOT TAKING INTO CONSIDERATION THE FA CT THAT UNIT-I & II WAS ESTABLISHED FOR INTERNAL CONTROL AND MANAGEMENT OF THE UNDERTAKING,THAT SOME PART OF OLD MACHINERY WAS ALSO INSTALLED ALONG WITH THE NEW MACHINERIES AT THE SO-CALLED UNI T II,THAT FOR THE ALLEGED NEW UNIT ADDITIONAL SPACE WAS PROVIDED BY THE DEPARTMENT OF INDUSTRY NE AR THE EXISTING UNIT, THAT DISALLOWANCE WAS MADE BY THE AO ON THE BASIS OF A HYPOTHETICAL EXAMP LE,THAT ORDER OF THE AO WAS BASED ON ASSUMP -TIONS, RESUMPTIONS, SURMISES AND CONJECTURES, THAT THE DISALLOWANCE WAS NOT BASED ON ANY DATA OR FACTS OR FIGURES.FINALLY,HE HELD THAT DISALLOWANCE MADE BY THE AO U/S 80IB(4) OF THE ACT WAS NOT TENABLE. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) RELIED U PON THE ORDER OF THE AO. WE HAVE CONSIDERED HIS SUBMISSIONS AND HAVE PERUSED THE ORD ERS OF THE AO AND FAA.WE FIND THAT IN THE CASE UNDER CONSIDERATION DISALLOWANCE WAS MADE BY T HE AO ON THE GROUND THAT ONLY UNIT WAS ELIGIBLE FOR THE DEDUCTION AND THAT UNIT II STARTED PRODUCTION AFTER DUE DATE.IN OUR OPINION DEDUCTION U/S.80IB(4) IS ALLOWABLE FOR INDUSTRIAL U NDERTAKING-IT HAS NO CONNECTION WITH INSTALLATION OF MACHINERY OR PLANT. ASSESSEE WAS MANUFACTURING T HE SAME PRODUCT FROM THE SPACE ALLOTTED TO IT BY THE GOVERNMENT AGENCIES.FOR SAKE OF CONVENIENCE IT HAS TERMED THE WORKING PLACES AS UNIT I AND UNIT II,BUT SUCH BIFURCATION WAS FOR INTERNAL C ONTROL AND MANAGEMENT.EXPANSION OF MANUFACTURING ACTIVITIES BY AN INDUSTRIAL UNDERTAKI NG CANNOT BE BASIS FOR DENYING OF DEDUCTION TO THE ASSESSEE.WHILE DISALLOWING THE CLAIM MADE BY TH E ASSESSEE,AO HAS NOT MENTIONED AS HOW HE ARRIVED AT THE CONCLUSION THAT ASSESSEE HAD ESTABLI SHED A NEW UNIT.WE ARE AWARE THAT THE SECTION 80IB(4) WAS INTRODUCED WITH AN AIM TO GIVE ENCOURAG EMENT TO THE ASSESSEES TO ESTABLISH INDUSTRIES IN THE BACKWARD AREAS.IT IS A PART OF BENEFICIAL LE GISLATION AND HAS TO BE INTERPRETED IN LIBERAL MANNER.FAA HAS RIGHTLY HELD THAT THE ASSESSEE-COMPA NY WAS ENTITLED TO CLAIM DEDUCTION.THEREFORE,CONFIRMING HIS ORDER GROUND NO. 1 IS DECIDED AGAINST THE AO. AS A RESULT,APPEAL FILE D BY THE AO STANDS DISMISSED. * +3 $*+ VF/KDKJH VF/KDKJH VF/KDKJH VF/KDKJH 4 5 - 1 $ !6 - !+ 78 . ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH NOVEMBER,2013 . '2 - /0% ' 9 :$ 8 UOECJ UOECJ UOECJ UOECJ , 2013 0 - 1 ; SD/- SD/- ( . < < < < . . B.R.MITTAL) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER 3 ITA NO.5682/MUM/2012 ABHINAV ELECTRICAL INDUSTRIES . / MUMBAI, :$ /DATE: 8 TH NOVEMBER,2013 SK '2 '2 '2 '2 - -- - (+ (+(+ (+= = = = >'=%+ >'=%+ >'=%+ >'=%+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / ? @ , 4. THE CONCERNED CIT / ? @ 5. DR A BENCH, ITAT, MUMBAI / =A1 (+$ , ,, , , . . . 6. GUARD FILE/ 1 B )=+ )=+ )=+ )=+ (+ (+(+ (+ //TRUE COPY// '2$ / BY ORDER, C / 7 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI