ACIT, New Delhi V. M/s. Intec Corporation, New Delhi

ITA 5788/DEL/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6960 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A.K. SAROHA
• Assessee Lawyers: S V. LAKSHMI KUMARAN; S. SEETHAVARAN
• Keywords: Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5788/DEL./2011 (ASSESSMENT YEAR : 2008-09) ACIT, CIRCLE 23 (1), VS. M/S. INTEC CORPORATION, NEW DELHI. 108 A, MADANGIR, NEW DELHI. (PAN : AAAFI1856J) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI V. LAKSHMI KUMARAN, S. S EETHAVARAN, R. RAMA CHANDRAN & BHARAT BERIWAL, ADVOCATES REVENUE BY : SHRI A.K. SAROHA, CIT DR DATE OF HEARING : 22.12.2016 DATE OF ORDER : 16.01.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, ASSISTANT COMMISSION OF INCOME-TAX, CIRCLE 23 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE I MPUGNED ORDER DATED 05.10.2011, PASSED BY THE COMMISSIONER OF INC OME-TAX (APPEALS)-XXIII, NEW DELHI UNDER SECTION 143(3) OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSM ENT YEAR 2008-09 ON THE GROUND THAT :- ITA NO.5788/DEL./2011 2 ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.3,13,09,690/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 80-IC IN RESPECT OF ITS NEW UNIT . 2. BRIEFLY STATED FACTS OF THIS CASE ARE : THE RETU RN OF INCOME FILED BY THE ASSESSEE DECLARING INCOME OF RS.1,62,8 2,400/- QUA ASSESSMENT YEAR 2008-09 WAS SUBJECTED TO SCRUTINY A ND SHRI RAJIV MEHRA, CA AND SHRI BHARAT, AR ATTENDED THE PROCEEDI NGS AND BROUGHT ON RECORD THE NECESSARY DETAILS. ASSESSEE CLAIMED DEDUCTION OF RS.3,13,09,690/- FROM ITS GROSS TOTAL INCOME UNDER SECTION 80-IC OF THE INCOME-TAX ACT, 1961 (FOR SHOR T THE ACT) BEING THE PROFIT FROM A NEW INDUSTRIAL UNIT AT SELA QUI IN UTTARAKHAND CLAIMED TO HAVE COMMENCED THE MANUFACTU RING AND PRODUCTION DURING THE YEAR UNDER ASSESSMENT. ASSES SEE IS INTO THE MANUFACTURING OF ROOF MOUNTED AIR-CONDITIONING UNIT S FOR INDIAN RAILWAYS. THE ENTIRE MANUFACTURING OF ASSESSEE WAS DONE UPTO AY 2007-08 FROM ITS INDUSTRIAL UNIT AT KALA AMB, HIMAC HAL PRADESH AND DURING THE YEAR UNDER ASSESSMENT, THE MANUFACTU RING PROCESS HAS BEEN SPLIT BETWEEN THE UNIT AT KALA AMB AND SOM E PART TO BE DONE AT ITS NEWLY SET UP UNIT AT SELAQUI, UTTARAKHA ND. ASSESSEE CLAIMED THAT THE SEMI-FINISHED GOODS ARE NOW SENT T O KALA AMB FACTORY FOR FINAL ASSEMBLY AND TESTING. AO NOTICED FROM THE BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE DURING ASSESS MENT ITA NO.5788/DEL./2011 3 PROCEEDINGS THAT TOOLS AND EQUIPMENTS OF RS.1,59,24 1/- WERE TRANSFERRED FROM KALA AMB UNIT TO UNIT AT SELAQUI. ASSESSEE CLAIMED TO HAVE PURCHASED ONE 3 TON CAP WIRE ROPE HOIST ON 23.04.2007 AND ONE OF THE TWO MAP 1305 HYDRAULIC PALLETS PURCHASED ON 04.04.2007 WERE SUBSEQUENTLY TRANSFERR ED TO NEW UNIT ON 07.07.2007 AND IN ADDITION TO THAT, OLD TOOLS AN D EQUIPMENTS VALUED AT RS18,000/- WERE ALSO TRANSFERRED TO THE N EW UNIT. HOWEVER, AO BEING NOT SATISFIED OBSERVED THAT SINCE THE VALUE OF THE AFORESAID MACHINERY, WHICH CANNOT BE HELD AS NE W AND PREVIOUSLY USED FOR ANY PURPOSE, IS MORE THAN 20% O F THE VALUE OF THE PLANT AND MACHINERY USED IN THE NEW UNIT, THE A SSESSEE HAS FAILED TO SATISFY THE CONDITIONS LAID DOWN U/S 80-I C (4)(II) OF THE ACT. AO ULTIMATELY CAME TO THE CONCLUSION THAT NEW PLANT AT SELAQUI IS NOT AN ELIGIBLE INDUSTRIAL UNIT FOR EXEM PTION U/S 80-IC AS NO REAL MANUFACTURING ACTIVITIES ARE BEING CARRIED ON AT SELAQUI AND IT IS BEING USED AS A CONDUIT AND TRANSIT ONLY TO T AKE ADVANTAGE OF THE DEDUCTIONS AVAILABLE U/S 80-IC OF THE ACT AND T HEREBY DISALLOWED THE DEDUCTION OF RS.3,13,09,690/- CLAIME D U/S 80-IC AND MADE AN ADDITION THEREOF TO THE TOTAL INCOME OF THE ASSESSEE AT RS.4,75,92,090/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS ALLOWED THE APPEAL. FEEL ING AGGRIEVED, ITA NO.5788/DEL./2011 4 THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER CONTENDED INTER ALIA THAT THE SELAQUI UNIT OF THE A SSESSEE HAS NEVER STARTED PRODUCTION TO BE ELIGIBLE FOR CLAIMING DEDU CTION U/S 80-IC; THAT THE PURPORTED ACTIVITIES CARRIED OUT BY THE AS SESSEE DO NOT AMOUNT TO MANUFACTURING; THAT THE ASSESSEE HAS VIOL ATED THE PROVISIONS CONTAINED U/S 80-IC (3)(III); THAT THE U NIT IS EXPANSION OF OLD MANUFACTURING BUSINESS OWNED BY THE ASSESSEE WH ICH AMOUNTS TO SUBSTANTIAL EXPANSION; THAT CIT (A) RELIED UPON THE FRESH PIECE OF EVIDENCE BY NOT COMPLYING WITH THE PROVISIONS CONTA INED UNDER RULE 46A. 6. HOWEVER, IN ORDER TO REBUT THE CONTENTIONS RAISE D BY THE LD. DR, THE LD. AR FOR THE RESPONDENT (HEREINAFTER REFE RRED TO AS THE ASSESSEE) CONTENDED INTER ALIA THAT THE LD. DR HAS SET UP ENTIRELY A NEW CASE THAT THERE WAS NO MANUFACTURING ACTIVITY I N THE SELAQUI UNIT; THAT THE VENDOR OF THE PROPERTY IN QUESTION O N WHICH UNIT WAS SET UP WAS OWNER OF THE BUILT-UP PROPERTY OF THE LE ASEHOLD LAND ITA NO.5788/DEL./2011 5 UNDERNEATH THE SAME; THAT THE ASSESSEE HAS SET UP A NEW INDUSTRIAL UNIT AT SELAQUI WHICH WAS FORMED BY SPLITTING UP OF AN EXISTING BUSINESS; THAT ASSESSEE IS INTO ASSEMBLING OF VARIO US PURCHASED COMPONENTS INTO RMPU AIR-CONDITIONERS WHICH DOES NO T REQUIRE HIGH END MACHINERY FOR MANUFACTURING; THAT RMPU AIR - CONDITIONERS AT SELAQUI WERE SENT TO KALA AMB UNIT JUST FOR GAS FILLING AND TESTING WHICH CANNOT BE CALLED SEMI-FIN ISHED GOODS; THAT THERE WAS NO TRANSFER OF PREVIOUSLY USED MACHINERY IN EXCESS OF 20%; THAT THE ASSESSEE APPLIED FOR AND OBTAINED VAT REGISTRATION VIDE REGISTRATION NO.05006854433 AND THE ASSESSEE H AS ALSO OBTAINED REGISTRATION OF THE NEW UNIT AT SELAQUI UN DER CENTRAL SALES-TAX ACT ON 21.12.2006; THAT THE ASSESSEE HAS USED PLANT AND MACHINERY WORTH RS.3,50,563/- AT THE NEW UNIT AT SE LAQUI AT THE END OF 31.03.2008; THAT NEW WIRE ROPE HOIST PURCHASED F OR SELAQUI WAS RECEIVED AT KALA AMB UNIT ON 03.05.2007 AND DUE TO INCLEMENT WEATHER, THE ASSESSEE WAS FORCED TO TAKE THE SAME I NSIDE WHICH WAS NEVER USED AT KALA AMB UNIT EITHER DURING THE PERIO D 03.05.2007 TO 23.05.2007 OR THEREAFTER UNTIL IT WAS TRANSFERRED T O SELAQUI UNIT ON 07.06.2007; THAT AREA BASED EXEMPTION U/S 80-IC SHO ULD BE GIVEN LIBERAL INTERPRETATION; THAT ACTIVITIES CARRIED OUT BY THE ASSESSEE AMOUNTED TO MANUFACTURING; THAT THE RESPONDENT PROC URES VARIOUS COMPONENTS OF RMPU LIKE CHASSIS, COMPRESSOR, ELECTR IC MOTOR, ITA NO.5788/DEL./2011 6 COPPER PIPE MOUNTING PLATE ,SHEET METAL BOX AND OTH ER INPUTS FROM VARIOUS SUPPLIERS. 7. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES, ARGUMENTS ADDRESSED BY THE LD. REPRESENTATIVES OF T HE PARTIES TO THE APPEAL AND CASE LAWS RELIED UPON, THE FIRST QUESTIO N ARISES FOR DETERMINATION IN THIS CASE IS : AS TO WHETHER THE ASSESSEE HAS STARTED MANUFACTURING ACTIVITIES DURING THE YEAR UNDER ASSESSMENT AT SELAQUI UNIT TO BE ELIGIBLE FOR CLAIM ING EXEMPTION U/S 80-IC? 8. AO TO PROVE THAT NO MANUFACTURING ACTIVITIES HAV E BEEN CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER A SSESSMENT BASED HIS FINDINGS ON THE FOLLOWING FOUR POINTS :- (I) THAT THE ASSESSEE DID NOT HAVE ANY BUILDING AT SELA QUI UNIT FOR CARRYING OUT MANUFACTURING ACTIVITIES DURI NG THE YEAR UNDER ASSESSMENT; (II) THAT THE ASSESSEE HAS TRANSFERRED ITS USED MACHINER Y IN EXCESS OF 20% FROM KALA AMB UNIT TO SELAQUI UNIT, THUS FAILED TO SATISFY THE PROVISIONS CONTAINED U/S 80- IC (4)(I), AGAINST WHICH THE EXEMPTION U/S 80-IC HA S BEEN CLAIMED; (III) THAT NO EXPENDITURE ARE DEBITED TO P&L ACCOUNT UNDE R THE HEAD SALARY TO PROVE THE MANUFACTURING ACTIVITIES; AND (IV) THAT THE SELAQUI UNIT HAS BEEN ESTABLISHED BY SPLIT TING UP THE EXISTING UNIT. ITA NO.5788/DEL./2011 7 9. UNDISPUTEDLY, THE ASSESSEE HAS PURCHASED THE PRO PERTY WHEREUPON SELAQUI UNIT HAS BEEN ESTABLISHED BY VIRT UE OF THE AGREEMENT TO SELL DATED 15.11.2006, AVAILABLE AT PA GES 125 & 126 OF THE PAPER BOOK-2 FILED BY THE REVENUE. THE LD. AR FOR THE ASSESSEE WHILE REFERRING TO PARA 3 OF THE AGREEMENT TO SELL CONTENDED THAT ASSESSEE HAS PURCHASED PLOT/BUILT U P PROPERTY NO. F-89, SELAQUI INDUSTRIAL AREA, DEHRADUN MEASURING 1 519.00 SQ.MTRS. WITH LEASEHOLD RIGHTS AND WHEN THE ASSESS EE WAS OWNER OF THE BUILT UP PROPERTY AND LEASEHOLD LAND UNDERNEATH THE SAME, THERE WAS NO NEED TO CONSTRUCT THE BUILDING. 10. HOWEVER, BARE SCRUTINY OF AGREEMENT TO SELL (SU PRA), THE LEASE DEED DATED 16.12.2006 REGISTERED ON 19.12.200 6 ENTERED INTO BETWEEN UP ESTATE DEVELOPMENT CORPORATION LTD. AND THE ASSESSEE, AVAILABLE AT PAGES 138 TO 144 OF THE PAPE R BOOK-2, AND SITE PLAN ANNEXED WITH THE LEASE DEED, AVAILABLE AT PAGE 137 OF THE PAPER BOOK-2, LEAD TO THE IRRESISTIBLE CONCLUSION T HAT THE ASSESSEE HAS PURCHASED VACANT PLOT NO.F-89, SELAQUI INDUSTRI AL AREA, DEHRADUN AND NOMENCLATURE IN PARA 3 OF THE AGREEMEN T TO SELL THAT VENDOR IS OWNER OF THE PLOT/BUILT UP PROPERTY IS GIVEN IN ROUTINE. HAD THE ASSESSEE BOUGHT BUILDING CONSTRUCTED ON THE PLOT NO.F-89, ITS SITE PLAN WOULD HAVE ANNEXED WITH THE AGREEMENT TO SELL AS WELL AS LEASE DEED. ITA NO.5788/DEL./2011 8 11. FURTHERMORE, BARE PERUSAL OF SCHEDULE D TO THE BALANCE SHEET FOR THE PERIOD 31.03.2008 SHOWS THAT THE TOTAL ADDI TION OF RS.32,67,070/- HAS BEEN MADE UNDER HEAD LAND AND NO ADDITION IS ATTRIBUTED TO THE BUILDING. LIKEWISE, THERE IS NO ADDITION UNDER THE HEAD BUILDING AS PER ANNEXURE-3 TO THE FORM NO.3C D AND THE ENTIRE AMOUNT OF RS.32,67,070/- IS ATTRIBUTED TO TH E LAND. 12. WHEN WE FURTHER EXAMINE THE CONTENTIONS RAISED BY LD. AR FOR THE ASSESSEE THAT THE ASSESSEE HAS PURCHASED LA ND/BUILT UP PROPERTY IN THE LIGHT OF THE SCHEDULE D TO THE BALA NCE SHEET AS ON 31.03.2008 WHEREIN CAPITAL WIP BUILDING IS SHOWN AT RS.35,23,345/-, THE ARGUMENT ADDRESSED BY THE LD. A R THAT THERE WAS NO OCCASION FOR REPAIR AND MAINTENANCE LOST ITS GROUND. THE CONTENTION OF THE LD. AR THAT THE REVENUE IS NOT EN TITLED TO SET UP A NEW CASE BY RAISING ARGUMENT THAT, WHEN THE BUILDING OF THE NEW UNIT WAS NOT IN EXISTENCE THE QUESTION OF CARRYING MANUFACTURING ACTIVITIES THEREIN DOES NOT ARISES , IS NOT TENABLE FOR THE REASON THAT WHEN ILLEGALITY OF THE ORDER IS UNDER CHALLENGE BEF ORE THE TRIBUNAL IT BEING A FACT FINDING FORUM IS EMPOWERED TO GO IN TO ANY ARGUMENT ADDRESSED BY THE PARTIES, THOUGH NOT ADDRESSED BEFO RE THE CIT (A), TO ACHIEVE THE ENDS OF JUSTICE. SO, WE ARE OF THE CONSIDERED VIEW THAT THERE WAS NO BUILDING WITH ASSESSEE AT SELAQUI UNIT DURING THE PERIOD UNDER ASSESSMENT TO CARRY OUT THE MANUFACTUR ING ACTIVITIES. ITA NO.5788/DEL./2011 9 13. THE SECOND QUESTION FOR DETERMINATION IN THIS C ASE IS :- AS TO WHETHER THE ASSESSEE HAS TRANSFERRED ITS USE D MACHINERY IN EXCESS OF 20% FROM KALA AMB UNIT TO SELAQUI UNIT AGAINST WHICH THE EXEMPTION U/S 80-IC HAS BEEN CLAIMED, THUS FAILED TO SATISFY THE PROVISIONS CONTAINED U/S 80-IC (4)(I) AND THE NEXT QUESTION, I.E. THIRD QUESTION, FOR DETERMINATION IN THIS CASE IS :- NO EXPENDITURE ARE DEBITED TO P&L ACCOUNT UNDER TH E HEAD SALARY TO PROVE THE MANUFACTURING ACTIVITIES . 14. UNDISPUTEDLY, THE TOTAL VALUE OF PLANT AND MAC HINERY AVAILABLE AT NEW UNIT AT SELAQUI AS ON 31.03.2008 W AS WORTH RS.3,50,353/-. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE TOOK DELIVERY OF A 3 TON CAP WIRE ROPE HOIST MACHINE W ORTH RS.1,27,233/- AT ITS KALA AMB UNIT ON 03.05.2007 A ND STATED TO HAVE TRANSFERRED TO ITS SELAQUI UNIT ON 07.06.2007 DUE TO NON- AVAILABILITY OF FORM-XVI UNDER RULE 26 (3) OF UTTA RAKHAND UNIT RULES, 2005. IT IS ALSO NOT IN DISPUTE THAT ASSESS EE HAS RECEIVED TWO HYDRAULIC PALLET AT KALA AMB ON 05.05.2007 AND THE TOTAL MACHINERY TRANSFERRED FROM KALA AMB TO SELAQUI UNIT WAS UNDISPUTEDLY WORTH RS.1,59,241/-. 15. ON THE BASIS OF AFORESAID UNDISPUTED FACTS, TH E AO CAME TO THE CONCLUSION THAT SINCE THE AFORESAID MACHINERY, WHICH IS MORE THAN 20% OF THE PLANT AND MACHINERY USED IN THE NEW UNIT IS OLD ITA NO.5788/DEL./2011 10 ONE, THE ASSESSEE HAS FAILED TO SATISFY THE PROVISI ONS CONTAINED UNDER SECTION 80-IC (4)(II) OF THE ACT. 16. HOWEVER, ON THE OTHER HAND, LD. CIT (A) BY PLAC ING RELIANCE ON THE AFFIDAVIT FILED BY SHRI R.S. SIDHU, PARTNER OF THE ASSESSEE COMPANY UPSET THE FINDINGS RETURNED BY THE AO AND B ELIEVED THAT THE ASSESSEE HAS STORED THE AFORESAID MACHINERY AT ITS KALA AMB UNIT AND NEVER USED THE SAME BEFORE ITS INSTALLATIO N AT SELAQUI UNIT. 17. WE ARE UNABLE TO AGREE WITH THE LD. CIT (A) WHO HAS TAKEN THE AFFIDAVIT FILED BY SHRI R.S. SIDHU AS A GOSPEL TRUTH EVEN WITHOUT INSISTING UPON ANY EVIDENCE TO SUPPORT HIS FINDINGS . FIRST OF ALL, THE AFFIDAVIT OF SHRI R.S. SIDHU RELIED UPON BY THE LD. CIT (A) IS UNDATED. SECONDLY, THE CIT (A) HAS PROCEEDED IN HA STE IN ENTERTAINING THE UNDATED AFFIDAVIT IN THE EVIDENCE IN VIOLATION OF RULE 46A OF THE INCOME-TAX RULES, 1962 (FOR SHORT THE RULES) TO BELIEVE THE AVERMENT MADE BY THE ASSESSEE IN THE AF FIDAVIT AS A GOSPEL TRUTH. THIRDLY, THERE WAS NO MENTION OF TEL EPHONE NUMBER, TELE-FAX AND INTERNET FACILITY AT THE SELAQUI UNIT BECAUSE IN THE PURCHASE ORDER DATED 05.07.2007 TELEPHONE NUMBER OF KALA AMB UNIT IS GIVEN AND TELE-FAX NUMBER OF HEAD OFFICE, D ELHI OF THE ASSESSEE HAS BEEN GIVEN. FOURTHLY, DOCUMENTS FOR T RANSPORTING THE MACHINERY PURCHASED FROM GRIP ENGINEERS PVT. LTD., BALLABHGARH AND ABB, FARIDABAD ARE NOT TALLYING WITH THE MATERI AL RECEIPT DATED ITA NO.5788/DEL./2011 11 03.05.2007 REGARDING TRANSPORTATION OF 21 ELECTRICA L MOTORS THROUGH TRUCK NO.DL1M1252 WHEREAS 21 ELECTRICAL MOTORS WERE ALLEGED TO HAVE BEEN TRANSPORTED BY ABB THROUGH TRUCK NO.HR35J 5393 ON 28.04.2007. ALL THESE FACTS GO TO PROVE THAT THE S ELAQUI UNIT WAS JUST A DROP BOX ADDRESS AND NO MANUFACTURING ACTIVI TIES ARE BEING CARRIED OUT IN THE SAME. 18. ASSESSEE STATED TO HAVE PURCHASED THE MACHINERY FROM M/S. GRIP ENGINEERS PVT. LTD., BALLABHGARH AND ABB, FARI DABAD ON 23.04.2007 AND 28.04.2007 RESPECTIVELY BUT STATED T O HAVE STORED THE SAME AT KALA AMB UNIT FOR WANT OF NON-AVAILABIL ITY OF THE TRANSIT FORM TO BE ISSUED BY UTTARAKHAND GOVERNMENT . WHEN ASSESSEE ALLEGED TO HAVE STARTED MANUFACTURING AT S ELAQUI UNIT IN THE MONTH OF JUNE 2007, IT IS DIFFICULT TO BELIEVE AS TO WHY THE ORDER WAS PLACED 5 MONTHS IN ADVANCE WITHOUT GETTING THE NECESSARY TRANSIT FORM ISSUED, WHICH TO OUR MIND, DOES NOT RE QUIRE ANY EXTENSIVE EXERCISE, PARTICULARLY WHEN THE GOVERNMEN T IS PROVIDING EXEMPTION TO THE NEW UNIT U/S 80-IC, IT CANNOT TAKE FIVE MONTHS TO ISSUE TRANSIT FORM. 19. MOREOVER, WHEN THIS FACT IS EXAMINED IN THE LIG HT OF THE FACT THAT NO TRAVELLING ALLOWANCE HAS BEEN DEBITED BY TH E ASSESSEE TO THE P&L ACCOUNT DURING THE YEAR UNDER ASSESSMENT, IT IS DIFFICULT TO BELIEVE THAT ANY MANUFACTURING ACTIVITIES HAVE BEEN CARRIED OUT AT ITA NO.5788/DEL./2011 12 THE SELAQUI UNIT. BECAUSE EARNING THE TURNOVER OF RS.11.11 CRORES WITH PROFIT OF RS.3.13 CRORES FROM THE ASSEMBLING / MANUFACTURING UNIT IS HUMANLY NOT FEASIBLE WITHOUT SUPERVISION OF SENIOR / JUNIOR FUNCTIONARIES OF THE ASSESSEE EITHER FROM KALA AMB UNIT OR FROM HEAD OFFICE, DELHI NOR ANY SKILLED WORKER HAS EVER VISITED THE SELAQUI UNIT OR PROVED TO BE ENGAGED. SO, ALL THES E FACTS STRENGTHEN THE FINDINGS RETURNED BY THE AO WHICH HAVE BEEN OVE RTURNED BY THE CIT (A) ON THE BASIS OF WHIMS AND FANCIES. SINCE T HE ASSESSEE HAS TRANSFERRED TOOLS AND MACHINERY MORE THAN 20% OF TH E TOTAL MACHINERY EMPLOYED AT SELAQUI UNIT FROM KALA AMB UN IT IT IS VIOLATION OF SECTION 80-IC(4)(II) OF THE ACT. 20. THE FACTUM OF TRANSFER OF MACHINERY BY GRIP ENG INEERS PVT. LTD., BALLABHGARH AND ABB, FARIDABAD TO THE KALA AM B UNIT OF THE ASSESSEE ON 23.04.2007 AND 28.04.2007 RESPECTIVELY WITH WHICH THE ASSESSEE HAS ALLEGED TO HAVE STARTED MANUFACTURING IN THE MONTH OF JUNE 2007 IS NOT TO BE SEEN IN ISOLATION, RATHER IT IS TO BE SEEN IN THE LIGHT OF THE CONNECTED FACTS AND CIRCUMSTANCES THAT THE ASSESSEE HAS DEBITED ONLY AMOUNT OF RS.1,35,388/- UNDER THE HEAD WAGES, BONUS, PF, ESI, ETC., WITH WHICH AT THE MOST ONLY ONE WORK ER CAN BE HIRED AND NO EXPENDITURE HAS BEEN DEBITED TO P&L ACCOUNT ON ACCOUNT OF TRAVELLING EXPENSES NOR ANY TELEPHONE, TELE-FAX AND INTERNET FACILITY IS PROVED TO HAVE BEEN ESTABLISHED AT SELAQUI UNIT. SO, WE ARE OF ITA NO.5788/DEL./2011 13 THE CONSIDERED VIEW THAT NEW PLANT AND MACHINERY, E VEN IF ASSUMED TO BE TRANSFERRED BY THE ASSESSEE FROM KALA AMB UNI T TO SELAQUI UNIT, IT WAS NEVER PUT TO USE TO CARRY OUT THE MANU FACTURING ACTIVITIES TO QUALIFY FOR EXEMPTION U/S 80-IC. 21. FURTHERMORE, WHEN WE EXAMINE THE FACTUM OF NON- AVAILABILITY OF THE MACHINERY AT SELAQUI UNIT IN TH E LIGHT OF THE FACT THAT NO MANPOWER WAS ENGAGED BY THE ASSESSEE TO CAR RY OUT THE MANUFACTURING ACTIVITIES AT SELAQUI UNIT, THE ENTIR E ASSESSEES CASE TO CLAIM EXEMPTION U/S 80-IC GOES FLAT. PERUSAL OF THE P&L ACCOUNT STATEMENT, AVAILABLE AT PAGE 147 OF THE SUP PLEMENTARY PAPER BOOK, SHOWS THAT THE EXPENDITURE OF RS.1,35,3 88/- HAS BEEN DEBITED TO THE P&L ACCOUNT UNDER THE HEAD WAGES, BO NUS, GRATUITY AND OTHER BENEFITS WHICH COMES TO ROUGHLY RS.50,000 /- PER MONTH OF WAGES, PF, GRATUITY, ETC. ANNEXURE 4 ANNEXED WI TH THE TAX AUDITORS REPORT, AVAILABLE AT PAGE 54 OF THE PAPER BOOK, SHOWS THE MONTHLY CONTRIBUTION OF RS.2,000/- WHICH LEADS TO T HE IRRESISTIBLE CONCLUSION THAT ONLY ONE WORKER WAS HIRED FOR THE S ELAQUI UNIT DURING THE ENTIRE PERIOD UNDER ASSESSMENT. 22. THE CONTENTION OF THE LD. AR FOR THE ASSESSEE T HAT SINCE THE ASSESSEE IS CARRYING OUT THE FUNCTION OF ASSEMBLY O F RMPU WITH THE PARTS PROCURED FORM DIFFERENT MANUFACTURERS LIK E CHASSIS, COMPRESSORS, ELECTRIC MOTORS, COPPER WIRE, MOUNTING PLATE SHEET ITA NO.5788/DEL./2011 14 METAL BOX, ETC. BY ENGAGING REQUISITE NUMBER OF EMP LOYEES AND THEY WERE PAID AT THE RATES PREVAILING IN THE STATE OF UTTARAKHAND, WHOSE WAGES CANNOT BE COMPARED WITH THE WAGES OF EM PLOYEES AT DELHI, IS NOT TENABLE BECAUSE APART FROM THE COMPOS ITE EXPENSES OF RS.1,53,588/-, NO OTHER EXPENDITURE ON ACCOUNT OF W AGES/SALARY HAVE BEEN DEBITED TO THE P&L ACCOUNT. 23. NO DOUBT, ASSEMBLING ACTIVITIES HAVE BEEN HELD TO BE MANUFACTURING BY THE HONBLE SUPREME COURT AND ITAT , DELHI BENCH IN THE JUDGMENTS CITED AS M/S. NARNE TULAMAN MANUFACTURERS PVT. LTD., HYDERABAD VS. COLLECTOR OF CENTRAL EXCISE, HYDERABAD (1989) 1 SCC 172, TRIVENI ENGI NEERING & INDUSTRIES LTD. & ANR. VS. COMMISSIONER OF CENTRAL EXCISE & ANR. (2000) 7 SCC 29, BPL INDIA LTD. VS. COMMISSI ONER OF CENTRAL EXCISE, COCHIN (2002) 5 SCC 167, XEROX MO DICORP LTD. VS. COMMISSIONER OF CENTRAL EXCISE 2001 (130 ) EL T 219 (TRI.DEL.) AND (V) MAJESTIC AUTO LTD. VS. COMMISSIO NER OF CENTRAL EXCISE 2001 (130) ELT 551 (TRI. DEL.) BUT THESE JUDGMENTS ARE OF NO SUPPORT TO THE CASE OF THE ASSESSEE BECAUSE T HERE IS NOT AN IOTA OF MATERIAL ON RECORD IF SIMPLE ASSEMBLING WORK OF RMPU HAS BEEN CARRIED OUT BY THE ASSESSEE AT ITS SELAQUI UNI T. BECAUSE A SINGLE WORKER CANNOT CREATE / MANUFACTURE A NEW AND DIFFERENT ARTICLE I.E. RMPU AIR-CONDITIONERS EVEN BY WAY OF A SSEMBLING THE ITA NO.5788/DEL./2011 15 NUMEROUS COMPONENTS PROCURED BY THE ASSESSEE FROM D IFFERENT SUPPLIERS WITHIN A PERIOD OF 10 MONTHS TO ACHIEVE T HE TURNOVER OF RS.11.11 CRORES AND PROFIT OF RS.3.13 CRORES. 24. FURTHERMORE, WHEN THE FACTUM OF NON-AVAILABILIT Y OF THE PLANT AND MACHINERY AT SELAQUI UNIT DURING THE YEAR UNDER ASSESSMENT IS EXAMINED IN THE LIGHT OF THE WRITTEN SUBMISSIONS MADE BY THE ASSESSEE BEFORE LD. CIT (A), AVAILABLE AT PAGES 1 TO 56 OF THE PAPER BOOK HAVING COVERING LETTER DATED 23.0 2.2012, RELEVANT PAGES 39 & 40, THE ASSESSEE HAS ADDED TOOLS AND MAC HINERY TO THE TUNE OF RS.29,70,370/- DURING THE FYS 2008-09 AND 2 009-10 TO THE EXISTING TOOLS AND MACHINERY WORTH RS.3,50,563/-, I T AGAIN LEADS TO THE IRRESISTIBLE CONCLUSION THAT NO MANUFACTURING A CTIVITIES MUCH LESS ASSEMBLING ACTIVITIES WERE BEING CARRIED OUT A T SELAQUI UNIT DURING THE YEAR UNDER ASSESSMENT, OTHERWISE IF THE PLANT AND MACHINERY WORTH RS.3,50,563/- WAS ENOUGH FOR THE AS SESSEE TO ACHIEVE TREMENDOUS GROSS TURNOVER OF RS.11.11 CRORE S WITH PROFIT OF RS.3.13 CRORES, THEN THE ASSESSEE HAS NO NEED TO MAKE SUBSTANTIVE ADDITION OF TOOLS AND MACHINERY WORTH R S.29,70,370/-. 25. FOR ARGUMENTS SAKE, EVEN IF IT IS ASSUMED THAT THE NEW PLANT AND MACHINERY HAS BEEN MADE AVAILABLE BY THE ASSESS EE AT ITS SELAQUI UNIT BY TRANSPORTING THE SAME FROM ITS KALA AMB UNIT, AS CONTENDED BY LD. AR FOR THE ASSESSEE, IT IS NOT HUM ANLY POSSIBLE ITA NO.5788/DEL./2011 16 THAT MASSIVE MANUFACTURING ACTIVITIES EARNING GROSS TURNOVER OF RS.11.11 CRORES WITH PROFIT OF RS.3.13 CRORES IN A PERIOD OF 10 MONTHS, HAS BEEN CARRIED OUT BY JUST A ONE MAN ARMY . 26. THE LAST QUESTION ARISES FOR DETERMINATION IN T HE CASE IS :- AS TO WHETHER SELAQUI UNIT HAS BEEN ESTABLISHED BY SPLITTING UP THE EXISTING UNIT? 27. IT IS THE CASE OF THE REVENUE THAT THE SELAQUI UNIT CAME INTO EXISTENCE BY WAY OF SPLITTING THE EXISTING UNIT AT KALA AMB IN VIOLATION OF PROVISIONS OF SECTION 80-IC (3)(III). THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE EXEMPTION U/S 80-IC WIL L BE AVAILABLE TO ALL UNDERTAKING WHICH EXPAND OR AUGMENT THE PROD UCTION IN A DIFFERENT AND SEPARATE LOCATION WITHOUT USE OF THE PREVIOUSLY USED MACHINES OR USE OF PREVIOUSLY USED MACHINES NOT EXC EEDING 20% AS PER CLAUSE (I) AND (II) OF SECTION 80-IC OF THE ACT. FOR THE SAKE OF REPETITION, IT IS REITERATED THAT THE CASE OF TH E ASSESSEE DOES NOT FALL UNDER THE HEAD EXPANSION OF THE EARLIER EXISTI NG UNIT. BECAUSE, AS DISCUSSED IN THE PRECEDING PARA NO.22, WHEN NO P LANT AND MACHINERY WAS AVAILABLE IN THE SELAQUI UNIT NOR WOR K FORCE WAS THERE TO CARRY OUT THE MANUFACTURING ACTIVITIES, TH E QUESTION OF EXPANSION OR AUGMENT THE PRODUCTION IN A DIFFERENT AND SEPARATE LOCATION DOES NOT ARISE. EVEN OTHERWISE, ASSESSEE HAS TRANSFERRED THE USED PLANT AND MACHINERY FROM ITS KALA AMB UNIT TO SELAQUI ITA NO.5788/DEL./2011 17 UNIT EXCEEDING 20% WHICH BARS THE ASSESSEE FROM TAK ING BENEFIT OF SECTION 80-IC. PLETHORA OF DOCUMENTS BROUGHT ON RE CORD BY THE ASSESSEE EVEN OTHERWISE GOES TO PROVE THAT ASSESSEE S CASE FALLS U/S 80-IC(2)(B) UNDER WHICH THE ASSESSEE HAS NOT CLAIME D ANY DEDUCTION AS THE ASSESSEE IS NOT MANUFACTURING ANY ARTICLE LISTED UNDER SCHEDULE 14. RATHER IT IS A CASE OF SPLITT ING UP/ RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE F OR WHICH THE ASSESSEE IS NOT ELIGIBLE DUE TO VIOLATION OF SECTIO N 80-IC (4)(II) OF THE ACT I.E. THE USE OF PREVIOUSLY USED PLANT AND M ACHINERY BEYOND 20%. 28. NO DOUBT, UNDISPUTEDLY THE ASSESSEE WAS NOT HAV ING FACILITY OF GAS FILLING AND TESTING OF RMPU AIR-CONDITIONERS AT SELAQUI UNIT FOR WHICH THE ASSESSEE STATED TO HAVE SENT THE ASSE MBLY UNIT TO KALA AMB UNIT BUT PRIOR TO THAT THE ASSESSEE HAS TO BRIN G ON RECORD THE SUBSTANTIAL EVIDENCE TO PROVE THE FACT THAT THE RMP U AIR- CONDITIONERS AGAINST WHICH THE ASSESSEE HAS EARNED TURNOVER OF RS.11.11 CRORES WERE ASSEMBLED AT SELAQUI UNIT, WHI CH THE ASSESSEE HAS MISERABLY FAILED AS DISCUSSED IN THE PRECEDING PARA. 29. THE LD. AR FOR THE ASSESSEE FURTHER CONTENDED T HAT LIBERAL INTERPRETATION IS REQUIRED TO BE GIVEN TO SECTION 8 0-IC AND RELIED UPON THE JUDGMENT CITED AS STATE OF JHARKHAND & ORS. VS. TATA CUMMINS LTD. & ANR. (2006) 4 SCC 57 . NO DOUBT THE HONBLE ITA NO.5788/DEL./2011 18 APEX COURT IN THE CASE OF STATE OF JHARKHAND VS. TATA CUMMINS LTD. (SUPRA) HELD THAT THE EXEMPTION NOTIFICATION HAS T O BE GIVEN LIBERAL INTERPRETATION KEEPING IN MIND THE OBJECTS ENVISAGED BY THE INDUSTRIAL POLICY AND NOT IN STRICT SENSE AS THE CA SE OF EXEMPTION FROM LIABILITY UNDER THE TAXING STATUTE. BUT WE AR E OF THE CONSIDERED VIEW THAT THE JUDGMENT IN STATE OF JHARKHAND VS. TATA CUMMINS LTD. (SUPRA) IS AGAIN OF NO SUPPORT TO THE ASSESSEE BECAUSE WHEN UNIT ITSELF HAS NOT BEEN ESTABLISHED A T SELAQUI UNIT RATHER THE PRODUCT PURPORTED TO BE PRODUCED AT SELA QUI UNIT WERE ACTUALLY PRODUCED BY KALA AMB UNIT AS DISCUSSED IN THE PRECEDING PARAS AS THE ASSESSEE IS UNDISPUTEDLY PRODUCING SAM E PRODUCT FOR INDIAN RAILWAY AT ITS KALA AMB UNIT AND THE MANAGEM ENT OF SELAQUI UNIT AS WELL AS KALA AMB UNIT ARE THE SAME. 30. THE LD. DR FOR THE REVENUE CONTENDED THAT THE P ERUSAL OF THE SALES-TAX RETURN FILED BY THE ASSESSEE WITH UTTARAK HAND SALES-TAX AUTHORITIES GOES TO PROVE THAT NEITHER ANY PURCHASE S INCLUDING CAPITAL GOODS HAVE BEEN MADE NOR ANY CONSIGNMENT HA S BEEN RECEIVED FROM OUTSIDE UTTARAKHAND WHICH SHOWS THAT SELAQUI UNIT HAS NEVER COME IN OPERATION. HOWEVER, LD. AR FOR T HE ASSESSEE CONTENDED THAT SINCE THE BENEFIT OF VAT INPUT IS NO T AVAILABLE TO THE ASSESSEE, IT IS NOT MANDATORY TO MENTION PURCHA SES IN THE SALES- TAX RETURN AND THIS CONTENTION OF THE ASSESSEE HAS BEEN ACCEPTED BY ITA NO.5788/DEL./2011 19 THE AO AND NOW THE LD. DR IS NOT EMPOWERED TO RACK UP THIS ISSUE AFRESH. HOWEVER, WE ARE UNABLE TO AGREE WITH THE C ONTENTIONS RAISED BY THE LD. AR FOR THE ASSESSEE FOR TWO REASO NS : (I) THAT FOR THE COMPLETENESS OF RECORD AND BOOKS OF ACCOUNT EAC H AND EVERY FACTS HAS TO BE BROUGHT ON RECORD BY THE ASSESSEE, WHICH WOULD HAVE STRENGTHENED THE CASE OF THE ASSESSEE TO PROVE THE HUGE PURPORTED TURNOVER OF RS.11.11 CRORES FROM ITS SELA QUI UNIT TO ACHIEVE THE CAUSE OF JUSTICE; (II) THAT ANY ISSUE C AN BE RAISED BEFORE A FACT FINDING AUTHORITY PARTICULARLY TO PROVE THE PERVERSITY OF FACTS ON RECORD. 31. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.3,13,09,690/- MADE BY THE AO ON ACCOUNT OF DISAL LOWANCE MADE U/S 80-IC OF THE ACT. CONSEQUENTLY, APPEAL FILED B Y THE REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF JANUARY, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBE R DATED THE 16 TH DAY OF JANUARY, 2017 TS ITA NO.5788/DEL./2011 20 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.