DCIT, New Delhi V. M/s International Tractors Ltd., New Delhi

ITA 5817/DEL/2010

• Counselvise Citation: 581720114 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 20-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Keywords: Additional evidence; Question of law
• Section: 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI A.N. PAHUJA ITA NO. 5817/DEL/2010 ASSTT. YR: 2005-06 DCIT, CIR. 11(1), VS. M/S INTERNATIONAL TRACTOR S LTD., CIR. 11(1), NEW DELHI. SONALIKA HOUSE 283, A.G.C.R. ENCLAVE, KARKARDOOMA, DELHI-92. PAN/GIR NO. AAACI2270H AND ITA NO. 6071/DEL/2010 ASSTT. YR: 2005-06 M/S INTERNATIONAL TRACTORS LTD., VS. DCIT, CIR. 1 1(1), SONALIKA HOUSE 283, CIR. 11(1), NEW DELHI. A.G.C.R. ENCLAVE, KARKARDOOMA, DELHI-92. (APPELLANT ) ( RESPONDENT ) REVENUE BY : SHRI R.I.S. GILL CIT (DR) ASSESSEE BY : SHRI K. SAMPATH ADV. & V. RAJAKUMAR ADV. O R D E R PER R.P. TOLANI, J.M : THESE ARE CROSS APPEALS, ONE BY THE REVENUE AND THE OTHER BY THE ASSESSEE, AGAINST CIT(A)S ORDER DATED 29-10-2010 RELATING TO A.Y. 2005-06. RESPECTIVE GROUNDS ARE AS UNDER: REVENUES APPEAL (ITA NO. 5817/DEL/10) : 1. THE ORDER OF LD. CIT(A) IS WRONG, PERVERSE, IL LEGAL AND AGAINST THE PROVISIONS OF LAW, LIABLE TO BE SET ASI DE. ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S 80I A/80IB. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7 ,54,058/- ON ACCOUNT OF DUTY DRAW BACK. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3 7,01,388/- ON ACCOUNT OF PRIOR PERIODS EXPENSES. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. ASSESSEES APPEAL (ITA NO. 6071/DEL/10) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED: I) IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSES SING OFFICER OF THE WEIGHTED DEDUCTION CLAIMED UNDER SEC TION 35(2AB) OF THE INCOME TAX ACT, 1961 ON RESEARCH AND DEVELOPMENT EXPENDITURE INCURRED DURING THE PERIOD 1 ST APRIL 04 TO 20 TH SEPTEMBER 2004; (II) IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER ERRED GROSSLY OF THE PRIOR PERIOD ITEMS TO THE TUNE OF RS. 2,10,806/-. THE ABOVE ACTIONS OF THE LEARNED CIT(APPEALS) BEIN G ARBITRARY, ERRONEOUS AND UNLAWFUL MUST BE QUASHED. 2. BRIEF FACTS ARE: ASSESSEE COMPANY, INCORPORATED IN 1995, IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF AGR ICULTURAL TRACTORS AND ITS COMPONENTS. ORIGINAL RETURN WAS FILED ON 29-10-2005 DECLARING TOTAL INCOME OF RS. 75,27,58,300/-. THEREAFTER THE RETURN WAS RE VISED ON 28-2-2007 AT ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 3 TOTAL INCOME OF RS. 69,79,75,230/-, BY CLAIMING FOL LOWING DEDUCTIONS WHICH REMAINED TO BE CONSIDERED IN ORIGINAL RETURN: (I) PRIOR PERIOD EXPENSES; (II) WEIGHTED AVERAGE DEDUCTION U/S 35(2AB) (III) CONSEQUENT REVISION OF CLAIM U/S 80-IB (FORMERLY 80 -IA). 2.1. AO FRAMED THE ASSESSMENT U/S 143(3) BY MAKING FOLLOWING DISALLOWANCES: (I) DISALLOWANCE OF WEIGHTED DEDUCTION U/S 35(2AB) (II) WITHDRAWAL OF DEDUCTION U/S 80-IB (FORMERLY 80-IA) (III) DISALLOWANCE OF EXCISE DUTY REBATE ON EXPORTS (IV) DISALLOWANCE OF PRIOR PERIOD EXPENSES. 2.2. FACTS ABOUT (I) ISSUE ARE:- CBDT CAME UP WITH A NOTIFICATION NO. 245 DATED 21-9-2004, NOTIFYING AUTOMOBILES, INCLUDING C OMPONENTS, AS ARTICLE OR THING FOR THE PURPOSES OF WEIGHTED DEDUCTION U/S 35 (2AB). THE ASSESSEE WAS ISSUED CERTIFICATE IN FORM NO. 3CM BY THE MINISTRY OF SCIENCE & TECHNOLOGY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL R ESEARCH, NEW DELHI (DSIR), ENABLING THE ASSESSEE TO CLAIM DEDUCTION U/S 35 (2AB) W.E.F. 21-9- 2004 TO 31-3-2006. ACCORDING TO AO, THE DEDUCTION W AS ALLOWABLE TO ASSESSEE IN THIS YEAR FOR THE RESTRICTED PERIOD FRO M 21-9-2004 TO 31-3-2005, AS AGAINST WHICH THE ASSESSEE HAS CLAIMED THE SAME FOR THE ENTIRE PERIOD OF 1- 4-2004 TO 31-3-2005. ON THIS BASIS, THE ASSESSEES CLAIM FOR THE PERIOD 1-4- 2004 TO 20-9-2004 WAS PARTLY DISALLOWED. 2.3. FACTS ABOUT (III) ISSUE ARE:- DISALLOWANCE OF EXCISE DUTY REBATE ON EXPORTS: AO FOUND THAT IN THE P&L A/C FILED ALONG W ITH THE RETURN OF INCOME, THE ASSESSEE OFFERED AN AMOUNT OF RS. 72,32,443/- A S EXPORT BENEFITS REBATE ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 4 ON EXCISE DUTY, WHEREAS IN THE COMPUTATION OF INCOM E ONLY A SUM OF RS. 7,54,058/- WAS REDUCED. A REMARK WAS APPENDED THAT EXPORT BENEFITS WERE TAXABLE ONLY WHEN THE ORDER IS PASSED OR CLAIM IS FILED. AO, THEREFORE, CALLED THE ASSESSEE TO EXPLAIN THE CLAIM OF UNTAXBLE EXPOR T BENEFITS. THE ASSESSEE RELIED ON ITAT JUDGMENT IN THE CASE OF INDIAN ALUMI NUM CABLES LTD. VS. IAC (1985) 13 ITD 907 (DEL.), HOLDING THAT NO AMOUN T OF DUTY DRAW BACK AND EXPORT INCENTIVE COULD BE SAID TO BE LEGALLY D UE TO THE ASSESSEE UNTIL THE CLAIM WAS ACCEPTED BY THE AUTHORITIES. AO, HOWEVER, HELD THE AMOUNT OF RS. 7,54,508/- TO BE TREATED AS INCOME ACCRUED TO THE ASSESSEE THE MOMENT IT HAD EXPORTED TRACTORS WHICH WERE EXEMPT FROM EXCISE DUT Y. CONSEQUENTLY, AS PER THE ASSESSEES MERCANTILE METHOD OF ACCOUNTING, THE BENEFIT HAD ACCRUED TO THE ASSESSEE. CONSEQUENTLY, THE AMOUNT OF RS. 7,74, 058/- WAS ADDED BACK AS INCOME OF THE ASSESSEE ON ACCOUNT OF EXCISE DUTY BE NEFIT ON EXPORT. 2.4. 80-IA/80-IB : THE AO FOUND THAT ASSESSEE HAD CLAIMED DEDUCTION U/S 80-IB (FOR THE NINTH YEAR) AT RS. 26,54,58,266/-, A SSESSEE TO EXPLAIN HOW THE CONDITIONS PRESCRIBED BY SEC. 80-IA WERE SATISFIED. IT WAS REPLIED THAT: (I) ASSESSEE WAS REGISTERED AS SSI UNIT WITH THE DEPART MENT OF INDUSTRIES AND STARTED ITS PRODUCTION IN A.Y. 1997 -98, THEREFORE THE IMPUGNED YEAR I.E. 2003-04 WAS 9 TH YEAR FOR SUCH CLAIM. (II) THOUGH THE ASSESSEE IN SUBSEQUENT YEARS HAD BECOME LARGER INDUSTRY, HOWEVER, IN VIEW OF SEC. 80-IA READ WITH DISABILITY CLAUSE (2) [NOW 80-IB(2) & (3)], THERE IS NO EXPRESS DENIA L IN CASE OF SMALL SCALE INDUSTRY WHICH IS INITIALLY HELD ELIGIB LE AND SUBSEQUENTLY BECOMES MEDIUM SCALE OR LARGE SCALE IN DUSTRY. THUS THE ELIGIBILITY INITIALLY GRANTED CANNOT BE SUBSEQU ENTLY DENIED, THOUGH THE SSI STATUS OF THE ASSESSEE DOES NOT REMA IN. ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 5 (III) TEST OF ELIGIBILITY TO SEC. 80-IB/80-IA IS TO BE DE TERMINED IN THE INITIAL ASSESSMENT YEAR AND ONCE THE INDUSTRIAL UND ERTAKING FULFILLS ALL THE PRESCRIBED CONDITIONS IN FIRST YEAR, IT BEC OMES ELIGIBLE TO CLAIM DEDUCTION FOR A TOTAL TAX HOLIDAY PERIOD OF TEN YEARS. SUBSEQUENTLY EXPANSION IN THE STATUS AND RELINQUISH MENT OF STATUS OF SMALL SCALE INDUSTRY WILL NOT DISENTITLE THE ELI GIBLE OF DEDUCTION. (IV) RELIANCE WAS PLACED ON FOLLOWING JUDGMENTS: - CIT VS. NIPPON ELECTRONICS (INDRA) PVT. LTD. 181 IT R 518 (KAR.); - M.M. PATEL & SONS (P) LTD. VS. ITO 1 ITD 82. - ITO VS. KAUSHALYA DEVI ITAT CHANDIGARH. - SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. VS. CI T 123 ITR 669 (GUJ.) - CIT VS. PANL BROS. 216 ITR 548 (BOM.) - DIT (EXEMPTION) & ANOTHER VS. APPAREL EXPORT PROMOT ION COUNCIL 244 ITR 734 (DEL.) - BAJAJ TEMPO LTD. VS. CIT 196 ITR 188. - TEXTILE MACHINERY CORPORATION LTD. VS. CIT 107 ITR 195. 2.5. IN A.Y. 1999-2000, THE CIT ISSUED NOTICE U/S 2 63 FOR WITHDRAWAL OF 80-IA DEDUCTION IN SIMILAR CIRCUMSTANCES. 263 ORDER WAS QUASHED BY THE ITAT AND M.A. FILED BY THE DEPARTMENT AGAINST ITAT ORDER WAS ALSO DISMISSED. BESIDES IN SUBSEQUENT YEARS ITAT HAS CON SISTENTLY ALLOWED THE CLAIM U/S 80IA/80-IB 2.6. AO, HOWEVER, MADE THE ABOVE DISALLOWANCES/ ADD ITIONS. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WHEREIN CIT(A) HEL D AS UNDER: ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 6 I) 80-IA/80-IB : LD. CIT(APPEALS) FOLLOWING THE EARLIER ORDERS OF THE ITAT IN THE CASE OF THE ASSESSEE FROM A.Y. 1998-99 TO 2004-05, HELD THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION BY FOLLOWING OB SERVATIONS: THE LD. ASSESSING OFFICER HAS ERRED GROSSLY AND NE GLIGENTLY BY NOT FOLLOWING THE ORDER OF THE SUPERIOR AUTHORIT Y, BEING THE HONBLE DELHI ITAT, ON THE SAME AND IDENTICAL ISSUE . AS ALREADY STATED ABOVE THE HONBLE DELHI ITAT IN THE CASE OF THE ASSESSEE COMPANY FOR ASSESSMENT YEAR 1999-2000 AND 2001-02 ON THE SAME AND IDENTICAL ISSUE I.E. ALLOWABILITY O F DEDUCTION U/S 80-IA HAS HELD THAT T HE DEDUCTION WOULD BE ALLOWAB LE TO THE ASSESSEE COMPANY SINCE IT HAS FULFILLED ALL THE CO NDITIONS IN THE INITIAL ASSESSMENT YEAR. THUS, FOLLOWING THIS JUDGM ENT THE LD. ASSESSING OFFICER SHOULD HAVE ALLOWED THE DEDUCTION TO THE ASSESSEE COMPANY U/S 80-IA. BUT THE LD. ASSESSING O FFICER ACTING ON HIS OWN OPINION DISALLOWED THE DEDUCTION TO THE ASSESSEE COMPANY BY IGNORING THE JUDGMENT OF THE HO NBLE DELHI ITAT. RELIANCE HAS BEEN PLACED BY THE APPELLA NT COMPANY IN THIS REGARD ON THE OBSERVATION OF HONBL E SUPREME COURT IN THE CASE OF UNION OF INDIA VS. KAMLAKSHI F INANCED CORPORATION LTD. (1991) 55 ELT 433 AND ALSO IN THE CASE OF BHOPAL SUGAR INDUSTRIES LTD. VS. INCOME TAX OFFICER , BHOPAL (1960) 40 ITR 618. IT HAS BEEN SUBMITTED THAT THIS HONBLE COURT AND H ONBLE ITAT DELHI HAD ALREADY DECIDED THIS MATTER IN FAVOU R OF THE ASSESSEE COMPANY FOR A.Y. 1998-99 TO 2004-05. ON A PERUSAL OF THE ABOVE SUBMISSIONS OF THE APPELL ANT AS WELL AS THE DECISION OF ITAT REFERRED TO ABOVE IN THE CA SE OF THE APPELLANT ITSELF FOR THE EARLIER YEARS, IT IS OBSER VED THAT THE CASE OF THE APPELLANT ON THE ISSUE OF ALLOWANCE U/S 80IA /80-IB IS SQUARELY COVERED IN IT/S FAVOUR. THAT FOR THE PURPO SES OF ALLOWING DEDUCTION UNDER THIS SECTION IT IS ONLY TH E INITIAL YEAR WHICH SHOULD BE CONSIDERED AND IF THE ASSESSEE FULF ILLS THE CONDITIONS IN THE INITIAL YEAR, AS LAID DOWN IN SEC TION 80-IA THEN THE DEDUCTION WOULD BE ALLOWED TO THE ASSESSEE FOR THE ENTIRE BLOCK OF PERIOD FOR WHICH SUCH DEDUCTION IS ENVISAG ED UNDER THE ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 7 SAID SECTION. THE ITAT HAS ALSO OBSERVED THAT THERE IS NOTHING IN SECTION 80-IA (NOW 80-IB) TO SHOW THAT THE CONDI TION LAID DOWN IN THESE SECTIONS SHOULD BE REVIEWED YEAR AFTE R YEAR AND DISALLOWED TO AN ASSESSEE WHO IS NO MORE SMALL SCAL E INDUSTRY AND HAS BECOME MEDIUM SCALE INDUSTRY DURING THE PR EVIOUS YEAR RELEVANT TO ASSESSMENT YEAR. IN VIEW THEREOF, RELYING ON THE ORDER OF THE ITAT (THE LAST ORDER GIVEN FOR AY 03-04) AND 04-05 ON 15-05-09 IN ITA NO . 276, 277 (DEL/08), THE GROUND OF APPEAL IS ALLOWED ON TH E FAVOUR OF THE APPELLANT. ACCORDINGLY, THE AO IS DIRECTED TO A LLOW THE DEDUCTION U/S 80-IA/ 80-IB, AS APPLICABLE IN CASE O F THE APPELLANT. (II) APROPOS THE ADDITION OF RS. 7,54,058/- ON ACCO UNT OF EXCISE DUTY REBATE ON EXPORTS, THE LD. CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE, HOLDING: I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE AP PELLANT AND THE LEGAL PROPOSITION RELIED UPON BY THE COUNSE L ON THE ISSUE AS TO THE POINT IN TIME WHEN INCOME CAN BE SAID TO HAVE ACCRUED TO ASSESSEE. IN TERMS OF THE DECISION IN THE CASE O F ED SASSON (SUPRA) IF THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INCOME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO HIM. IN FACTS OF THE APPELLANTS CASE WHILE HE DOES BECOME ELIGIBLE FOR CLAIM OF REFUND OF EXCISE DUTY CONSEQUENT TO EXPORTS BUT IN TERMS OF THE NOTIFICATION THERE ARE FORMALITIES AND PROCEDURES T O BE FULFILLED AND UPTILL THE TIME THE CONCERNED AUTHORITY DOES NOT APPROVE THE CLAIM CANNOT BE SAID THAT RIGHT TO RECEIVE THE REFUND HAS VESTED IN HIM. RELIANCE IS ALSO PLACED ON THE DECIS ION OF DELHI ITAT IN CASE OF INDIAN ALUMINUM CABLES LTD. 13 ITD 907 AND THE DECISION OF IAT IN CASE OF PEARL POLYMERS P. LT D. 16 ITD 599. IN VIEW OF THE ABOVE DISCUSSIONS THE APPEAL IS ALLOWED ON THIS ISSUE AND THE ADDITION FOR RS. 7,54,058/- MADE ON THIS ACCOUNT IS DIRECTED TO BE DELETED. (III) APROPOS PRIOR PERIOD EXPENSES, LD. CIT(APPEAL S) GAVE PART RELIEF ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 8 (I) REBATE AND DISCOUNT RS. 14,30,000/- GIVEN TO VARIOU S STOCKIEST FOR THE SALES. (II) LD. CIT(APPEALS) DISALLOWED THE EXPENDITURE ONLY TO THE EXTENT OF RS. 2,10,876/- AND ALLOWED THE RET OF THE EXPENDITU RE. 2.7. AGGRIEVED, BOTH THE REVENUE AND ASSESSEE ARE B EFORE US ON RESPECTIVE GRIEVANCES. 3. LD. DR RELIED ON THE ORDER OF AO AND CONTENDS TH AT PROVISIONS OF SEC. 80-IA PRESCRIBE THAT THE BENEFIT IS INTENDED TO BE GIVEN ONLY TO SMALL SCALE INDUSTRIES (SSI), WHICH WILL NATURALLY MEAN THAT THE INDUSTRY WHICH HAS LOST THE STATUS OF SSI WILL NOT BE ELIGIBLE FOR THE DEDU CTION IN THAT PERIOD. IT HAS BEEN ADMITTED BY ASSESSEE THAT IT IS NO MORE SSI DU RING THE YEARAND LOOKING AT THE INVESTMENT IN PLANT AND MACHINERY, THE ASSES SEE CANNOT BE HELD TO BE SSI, THEREFORE, IT IS NOT ELIGIBLE FOR DEDUCTION U/ S 80-IA. 3.1. APROPOS REMAINING GROUNDS, ORDER OF AO IS RELI ED ON. 4. LEARNED COUNSEL FOR THE ASSESSEE IN REPLY VEHEM ENTLY ARGUES THAT THE DEPARTMENT HAS BEEN AGITATING THIS ISSUE ABOUT ELIG IBILITY TO SEC. 80IA/80IBIN EVERY YEAR. ITAT SINCE 1998-99 TILL 2004-05 HAS BEE N CONSISTENTLY HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION. RELIAN CE IS PLACED ON ITAT ORDER DATED 15-5-2009, IN WHICH ASSESSEES CLAIM U/S 80-I A HAS BEEN ALLOWED FOR A.Y. 2003-04 AND 2004-05 RELYING ON EARLIER ORDERS. IT IS PLEADED THAT THE FACTS AND CIRCUMSTANCES ARE SIMILAR IN NATURE IN TH IS YEAR, THEREFORE, THE ITAT JUDGMENT IN ASSESSEES OWN CASE MAY BE FOLLOWED. ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 9 4.1. APROPOS THE ISSUE OF DUTY DRAW BACK, LD. COUNS EL CONTENDS THAT MERELY BECAUSE ASSESSEE HAS EFFECTED THE EXPORT, WILL NOT AMOUNT TO AUTOMATIC ACCRUAL OF EXPORT BENEFITS. THE INCOME CAN BE ACCRU ED TO ASSESSEE ONLY WHEN THE ASSESSEE OBTAINS A LEGAL AND ENFORCEABLE RIGHT TO CLAIM IT. LAW PROVIDES ELIGIBILITY OF CERTAIN BENEFITS ON FULFILLMENT OF C ERTAIN CONDITIONS. THE SAME CAN BE HELD TO BE ACCRUED WHEN THE SAME IS DULY ADJ UDICATED BY DUE PROCESS OF LAW. LD. CIT(APPEALS) HAS RIGHTLY RELIED ON HON BLE SUPREME COURT JUDGMENTS IN THE CASES OF POONA ELECTRIC SUPPLY CO . LTD. VS. CIT (1965) 57 ITR 521; AND E.D. SASSOON & CO. LTD. VS. CIT 26 ITR 27, FOR THE POINT OF ACCRUAL. CIT(A)S ORDER IS RELIED ON. 4.2. APROPOS THE ISSUE ABOUT PRIOR PERIOD EXPENSES , LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT LD. CIT(APPEALS) HAS CO NSIDERED ALL THE ASPECTS ABOUT NATURE OF THE PRIOR PERIOD EXPENSES ELABORATE LY. AFTER RELYING ON THE FACTS, ACCOUNTING STANDARDS, PROVISIONS OF REBATE A ND DISCOUNT, EARLIER YEARS PRACTICE FOLLOWED BY THE ASSESSEE, THE EXPENDITURE HAS BEEN ALLOWED, EXCEPTING ONLY RS. 2,10,806/- ON ACCOUNT OF MISC. E XPENDITURE, FOR WHICH THE ASSESSEE IS IN APPEAL. IT WAS CONTENDED THAT THE RE MAINING AMOUNT IS ALSO ALLOWABLE TO ASSESSEE. 4.3. COMING TO THE ISSUE IN ASSESSEES APPEAL I.E. WEIGHTED DEDUCTION U/S 35(2AB), LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE HONBLE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. CLARIS LIFE SCIENCES 326 ITR 25 1, HOLDING AS UNDER: THE PROVISIONS OF SECTION 35(2AB) NOWHERE SUGGEST OR IMPLY THAT 'RESEARCH & DEVELOPMENT' FACILITY IS TO BE APP ROVED FROM A PARTICULAR DATE AND IN OTHER WORDS, IT IS NOWHERE S UGGESTED THAT ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 10 DATE OF APPROVAL ONLY WILL BE CUT-OFF DATE FOR ELIG IBILITY OF WEIGHTED DEDUCTION ON THE EXPENSES INCURRED FROM TH AT DATE ONWARDS. A PLAIN READING OF THIS SECTION CLEARLY MA NIFESTS THAT THE ASSESSEE HAS TO DEVELOP FACILITY, WHICH PRE-SUP POSES INCURRING EXPENDITURE IN THIS BEHALF AND APPLYING T O THE PRESCRIBED AUTHORITY, WHO, AFTER FOLLOWING PROPER P ROCEDURE, WILL APPROVE THE FACILITY OR OTHERWISE, AND THE ASS ESSEE WILL BE ENTITLED TO WEIGHTED DEDUCTION OF ANY AND ALL EXPEN DITURE SO INCURRED THE TRIBUNAL HAD, THEREFORE, COME TO THE C ONCLUSION THAT ON PLAIN READING OF SECTION 35(2AB) ITSELF, TH E ASSESSEE WAS ENTITLED TO WEIGHTED DEDUCTION ON EXPENDITURE SO IN CURRED BY IT FOR DEVELOPMENT OF FACILITY, AND IT HAD ALSO CONSID ERED RULE 6(5A) AND FORM NO. 3CM AND CAME TO THE CONCLUSION T HAT A PLAIN AND HARMONIOUS READING OF RULE AND FORM CLEAR LY SUGGESTS. THAT ONCE FACILITY IS APPROVED, THE ENTIRE EXPENDIT URE SO INCURRED ON DEVELOPMENT OF 'R & 0' FACILITY HAS TO BE ALLOWED FOR WEIGHTED DEDUCTION AS PROVIDED BY SECTION 35(2AB). THE TRIBUNAL HAD ALSO CONSIDERED THE LEGISLATIVE INTENT ION BEHIND ABOVE ENACTMENT AND OBSERVED THAT TO BOOST UP R&O FACILITY IN INDIA, THE LEGISLATURE HAS PROVIDED THIS PROVISION TO ENCOURAGE THE DEVELOPMENT OF THE FACILITY BY PROVIDING DEDUCT ION OF WEIGHTED EXPENDITURE SINCE WHAT IS STATED TO BE PRO MOTED IS DEVELOPMENT OF FACILITY, INTENTION OF THE LEGISLATU RE BY MAKING ABOVE AMENDMENT IS VERY CLEAR THAT THE ENTIRE EXPEN DITURE INCURRED BY THE ASSESSEE ON DEVELOPMENT OF FACILITY , IF APPROVED, HAS TO BE ALLOWED FOR THE PURPOSE OF WEIG HTED DEDUCTION. THUS, THE REASONING GIVEN BY THE TRIBUNAL WAS TO BE ACCEPTED; THERE WAS NO SCOPE FOR ANY OTHER INTERPRETATION. SI NCE THE APPROVAL WAS GRANTED DURING THE PREVIOUS YEAR RELEV ANT TO THE ASSESSMENT YEAR IN QUESTION, THE ASSESSEE WAS ENTIT LED TO CLAIM WEIGHTED DEDUCTION IN RESPECT OF THE ENTIRE EXPENDI TURE INCURRED BY IT UNDER SECTION 35(2AB). THEREFORE, NO SUBSTANTIAL QUESTION OF LAW AROSE OUT OF THE ORDER OF THE TRIBUNAL AND, ACCORDINGLY, THE APPEAL WAS TO BE DISMISSED. ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 11 4.4. IT IS PLEADED THAT HONBLE GUJARAT HIGH COURT HAS CLEARLY LAID DOWN THAT ONCE RESEARCH & DEVELOPMENT FACILITY ARE APPRO VED THE ENTIRE EXPENDITURE INCURRED FOR ESTABLISHMENT OF R & D FAC ILITY WILL BE ALLOWABLE. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE PROCEED TO DECIDE THE ISSUES AS UNDER: 5.1. ELIGIBILITY U/S 80-IA/80-IB : THE ISSUE RAISED BY REVENUE IN RESPECT OF DEDUCTION U/S 80-IA/80-IB HAS BEEN REPEATEDLY DECID ED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN ASSESSEES OWN CASE FOR A.Y . 1998-99 TO 2004-05. IT IS CONTENDED THAT APPEAL AGAINST ITAT ORDER ON THIS ISSUE IN ASSESSEES CASE FOR A.Y. 1999-2000 BEEN ADMITTED BY THE HONBLE DEL HI HIGH COURT VIDE ITS ORDER DATED 20-12-2010 IN ITA NO. 251/2010, BY FOLL OWING OBSERVATIONS: ADMIT. FOLLOWING SUBSTANTIAL QUESTIONS OF LAW ARISE FOR CO NSIDERATION:- (I) WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS C ORRECT IN LAW IN HOLDING THAT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-IA OF THE INCOME TAX ACT, 1961, THE ASSE SSEE SHOULD BE A SMALL SCALE UNDERTAKING ON THE LAST DAT E OF THE PREVIOUS YEAR RELATING TO THE INITIAL/ FIRST ASSESS MENT YEAR AND THAT THE SAID REQUIREMENT NEED NOT BE SATISFIED IN SUBSEQUENT YEARS? (II) WHETHER ITAT WAS CORRECT IN LAW IN DELETING TH E ADDITION MADE BY THE ASSESSING OFFICER INVOKING PROVISIONS O F SECTION 40(A)(I) OF THE ACT?. FILING OF PAPER BOOK IS DISPENSED WITH. TO BE LISTE D ALONG WITH ITA NO. 497/2004 AND OTHER CONNECTED MATERS. ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 12 5.2. NO OUT COME IN THE AFORESAID APPEAL BEFORE THE HONBLE DELHI HIGH COURT HAS BEEN COMMUNICATED BY EITHER PARTIES. THER EFORE, THE ORDER OF THE ITAT ON THE ISSUE IN QUESTION STILL HOLDS GOOD. FAC TS AND CIRCUMSTANCES FOR THE ASSESSMENT YEAR IN QUESTION REMAINING THE SAME, RESPECTFULLY FOLLOWING EARLIER ORDERS OF THE ITAT , WE UPHOLD THE ORDER OF LD. CIT(APPEALS) ON THIS ISSUE ALLOWING THE DEDUCTION U/S 80-IA/80-IB. THIS GROUND IS DISMISSED. 5.3. DUTY DRAW BACK : AO HAS HELD THAT DUTY DRAW BACK BENEFITS ARE AUTOMATICALLY ACCRUED TO ASSESSEE THE MOMENT THE EXPORTS ARE EFFECTED. FROM THE FACTS EMERGING FROM RECORD, THE EXPORT BEN EFITS ARE SUBJECT TO CERTAIN PROCEDURAL REQUIREMENT AND UNLESS THERE ARE COMPLIED WITH, IT CANNOT BE HELD THAT THESE BENEFITS HAVE ACCRUED TO ASSESSE E IN TERMS OF SEC. 28. IN OUR CONSIDERED VIEW, LD. CIT(APPEALS) HAS RIGHTLY A PPLIED THE RATIO OF DECISIONS OF HONBLE SUPREME COURT IN THE CASES OF POONA ELECTRIC SUPPLY CO. LTD. (SUPRA) & E.D. SASSOON & CO. LTD. (SUPRA). WE SEE NO INFIRMITY IN THE ORDER OF LD. CIT(APPEALS), WHICH IS UPHELD. THI S GROUND OF REVENUE IS DISMISSED. 5.4. APROPOS PRIOR PERIOD EXPENSES : LD. CIT(APPEALS) HAS CONSIDERED ALL THE DISALLOWANCES MADE BY AO IN DETAIL. AO HAS DISA LLOWED THE SAME ON THE ISSUE THAT THE LIABILITY DID NOT CRYSTALLIZE. LD. C IT(APPEALS) BY ELABORATE FINDINGS HAS HELD THAT FREIGHT, OCTOROI, TESTING CH ARGES AND CARTAGE EXPENSES CRYSTALLIZED IN THE YEAR IN QUESTION. SALARY OUT OF MISC. EXPENSES AN AMOUNT OF RS. 2,10,806/- HAS BEEN DISALLOWED FOR WANT OF D ETAILS. BEFORE LD. CIT(APPEALS) NO ADDITIONAL EVIDENCE HAS BEEN FILED TO COME OVER THE DEFICIENCIES POINTED OUT. IN VIEW THEREOF, WE SEE N O INFIRMITY IN THE ORDER OF ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 13 LD. CIT(APPEALS) ON THESE ISSUES. THUS GROUND RAISE D BY THE REVENUE AS WELL AS THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 5.5. COMING TO THE REMAINING GROUND OF ASSESSEES A PPEAL I.E. ELIGIBILITY OF WEIGHTED DEDUCTION U/S 35(2AB) FOR THE PREVIOUS YEA R, RESPECTFULLY FOLLOWING THE HONBLE GUJARAT HIGH COURT JUDGMENT I N THE CASE OF CLARIS LIFE SCIENCES 326 ITR 251 (SUPRA), WE ARE OF THE VI EW THAT THE ASSESSEE IS ELIGIBLE TO DEDUCTION. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AS STATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 11-05-2012. SD/- SD/- ( A.N. PAHUJA ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11-05-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 5817 & 6071/DEL/10 M/S INTERNATIONAL TRACTORS LTD. 14