ITO, New Delhi V. M/s. Supermax Laboratories, Dehradun

ITA 582/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7252 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 26-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Depreciation
• Section: 32

Judgement Text

PAGE 1 OF 5 ITA NO 582/DEL /2014 ITO V SUPERMAX LABORATORIES A Y 2008 - 09 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI KULDIP SINGH , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 582/DEL/2014 (ASSESSMENT YEAR: 2008 - 09 ) ITO, WARD - 22(4), NEW DELHI VS. SUPERMAX LABORATORIES, PLOT NO.40, PHARMA CIT Y, SELAQUI INDL . AREA, DEHRADUN (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY: SMT. ANIMA BARNWAL, SR. DR DATE OF HEARING 26/05/ 2016 DATE OF PRONOUNCEMENT 2 7 / 06 /2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1. THIS APPEAL IS PREFERRED BY REVENUE AGAINST THE ORDER OF LEARNED CIT (A) DATED 29 / 11 / 2013 RAISING FOLLOWING 2 GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS RIGHT IN ALLOWING DEDUCTION OF RS. 3 007294/ - UNDER SECTION 80IC OF THE INCOME TAX ACT 1961 EVEN THOUGH THE ASSESSEE DID NOT FULFILL THE CONDITION LAID DOWN UNDER SECTION 80 IC (4) OF THE INCOME TAX ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. C IT (A) HAS ERRED IN ALLOWING APPRECIATION OF RS. 900152 / - ON FIXED ASSETS. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF MEDICINES AND PHARMACEUTICAL PRODUCTS. IT IS HAVING A MANUFACTURING UNIT AT PLOT NO. 40 FARM CI TY DEHRADUN. THE ASSESSEE FILED RETURN OF INCOME ON 24/09/2008 SHOWING NIL INCOME. AS PER RETURN OF INCOME ASSESSEE FIRM HAS EARNED PROFIT OF RS. 2908901/ - AND CLAIM ED SAME AS DEDUCTION U/S 80 IC OF THE A CT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE CLAIM OF THE ASSESSEE WAS EXAMINED AND ASSESSEE WAS ASKED TO PRODUCE DETAILS OF ADDITION TO FIXED ASSETS ALONG WITH RELEVANT BILLS. THE A O OBSERVED THAT DURING THE YEAR ADDITION TO FIXED ASSETS WAS OF RS . 1 2389 2 53/ - AND AN AMOUNT OF RS. 4084036/ - HAS BEEN SHOWN AS TRANSFER. ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THAT THE TRANSFER IS SHOWN FROM LAND AND BUILDING AND MACHINERY H E AD IN THE PREVIOUS YEAR . H OWEVER THE LD. ASSESSING OFFICER DID N OT ACCEPT THE PAGE 2 OF 5 ITA NO 582/DEL /2014 ITO V SUPERMAX LABORATORIES A Y 2008 - 09 CONTENTION OF THE ASSESSEE BECAUSE THE ASSESSEE MAINTAINED DIFFERENT HEADS IN THE NAME OF LAND AND BUILDING AND MACHINERY HAVING CLOSING BALANCE AS ON 31 ST OF MARCH 2007 OF RS. 4 63461/ - AND RS. 3022801 / - RESPECTIVELY . F URTHER THE ADDITION SHO WN BY THE ASSESSEE DURING THE YEAR OF RS. 4739964/ - THE ASSESSEE COULD PRODUCE THE BILLS OF RS. 602486/ - ONLY . ACCORDING TO THE ASSESSING OFFICER PRIOR TO THE ASSESSMENT YEAR THE ASSESSEE WAS ALSO HAVING ANOTHER MANUFACTURING UNIT AT DELHI ACCORDING TO HIM ASSESSEE HAS TRANSFERRED OLD MACHINERIES TO THE NEW UNIT . CONSEQUENTLY THE NEW UNIT WAS STARTED AFTER SPLITTING THE OLD UNDERTAKING WHICH IS NOT PERMISSIBLE U/S 80 IC (4) OF THE ACT . FURTHER LEARNED ASSESSING OFFICER ALSO DOUBTED THE WHETHER THE SUR VEY NUMBER OF WHICH UNITS IS ESTABLISHED IS NOTIFIED FOR EXEMPTION OR NOT. IN VIEW OF THIS HE DIS ALLOWED THE CLAIM OF THE DEDUCTION OF ASSESSEE OF RS. 2908901/ - . FURTHER THE ASSESSING OFFICER DISALLOWED APPRECIATION CLAIMED BY THE ASSESSEE TO THE EXTENT OF NON PRODUCTION OF THE COMPLETE BILLS IN SUPPORT OF ADDITION TO THE FIXED ASSETS. AGAINST THE CLAIM OF THE ASSESSEE OF RS. 1560923/ - LD. AO ALLOWED THE DEPRECIATION OF RS. 660771/ - ONLY . AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. COMMISSIONER OF I NCOME T AX (A). THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE U/S 80IC OF THE A CT AND CLAIM OF THE DEPRECIATION . AGGRIEVED BY THE ORDER OF THE LEARNED CIT ( A) REVENUE IS IN A PPEAL BEFORE US AGAINST THE RELIEF GRANTED BY 1 ST APPELLATE AUTHORITY. 3. ON THE 1 ST GROUND OF APPEAL LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT LD. ASSESSING OFFICER HAS SPECIFICALLY POINTED OUT THAT THERE IS A TRANSFER OF ASSETS FROM ONE UNIT TO THE ANO THER UNIT AND THEREFORE SUBSECTION (4) OF SECTION 80IC OF THE I NCOME T AX A CT IS ATTRACTED AND THEREFORE THE DISALLOWANCE HAS RIGHTLY BEEN MADE. SHE FURTHER SUBMITTED THAT THE LD. CIT (A) THAT THE AMOUNT OF ADDITION OF THE NEW UNIT WAS SHOWN UNDER THE CAPI TAL WORK IN PROGRESS AND PLANT AND MACHINERY OF RS. 4084036 / - WAS SHOWN THEREIN AS AT 31 ST OF MARCH 2007. SHE FURTHER SUBMITTED THAT NEW PLANT AND MACHINERY THERE IS A FRESH ADDITION OF RS. 655928 / - AND DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE PRODU CED BILLS OF RS. 602486 / - ONLY . THEREFORE SHE SUBMITTED THAT EVEN BEFORE LD. CIT (A) ASSESSEE DID NOT PRODUCE THE COMPLETE BILLS. REGARDING THE AREA OF EXEMPTION S H E ALSO REFUTED THE CLAIM OF THE LD. CIT (A ). THEREFORE HER SUBMISSION WAS THAT THE CLAIM OF THE EXEMPTION OF THE APPELLANT WAS WRONGLY ALLOWED BY THE 1 ST APPELLATE AUTHORITY. ON THE 2 ND GROUND OF APPEAL REGARDING CLAIM OF DEPRECIATION S HE SUBMITTED THAT THE DEPRECIATION HAS ALSO BEEN WRONGLY ALLOWED BY THE LD. CIT (A). 4. DESPITE SERVICE OF NOTICE TO THE ASSESSEE NONE APPEARED BEFORE US. THEREFORE THE ISSUE IS DECIDED ON THE MERITS AND MATERIAL AVAILABLE ON RECORD. PAGE 3 OF 5 ITA NO 582/DEL /2014 ITO V SUPERMAX LABORATORIES A Y 2008 - 09 5. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS RAISED BEFORE US BY THE LD. DEPARTMENTAL REPRESENTATIVE AND ALSO PERUSED THE RELEVANT ORDERS OF THE LOWER AUTHORITIES. REGARDING THE CLAIM OF THE ASSESSEE UNDER SECTION 80IC OF THE ACT LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA NO 4.3 OF HIS ORDER AS UNDER: - 4.3 IN THE THIRD GROUND OF APPEAL, THE APPELLANT HAS IMPUGNED THE ACTION OF THE AO IN REJECTING ITS CLAIM OF DEDUCTION U/S. 80IC OF THE ACT. AS NARRATED EARLIER IN THE PRECEDING PARAGRAPH, THE APPELLANT HAS SUBMITTED COMPLETE SET OF BILLS OF MACHINERY WH ICH HAS BEEN PROCURED AND INSTALLED AT ITS NEW UNIT IN SELAQUI, DEHRADUN. IT IS SEEN FROM THE COPIES OF THE BILLS THAT THEY HAVE BEEN BOOKED AND INSTALLED AT 'SUPERMAX LABORATORIES, 40, SELAQUI INDUSTRIAL AREA, PHARMA CITY, DEHRADUN, UTTARANCHAL.' EVEN THE DELIVERY CHALLANS ARE IN THE NAME OF THE APPELLANT AT THE SAME ADDRESS. I HAVE ALSO GONE THROUGH THE BALANCE SHEET OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION AND ITS IMMEDIATELY PRECEDING TWO YEARS. ON A PERUSAL OF THE FIXED ASSET SCHEDULE OF THE O KHLA PLANT OF THE APPELLANT, A SUM OF RS.97,09,335.33 IS APPEARING UNDER THE HEAD 'SIDCUL, UTTARANCHAL' WHICH WAS A CONSOLIDATED FIGURE FOR CAPITAL WORK IN PROGRESS (BUILDING) FOR RS.56,25.299.31 AND PLANT AND MACHINERY FOR RS.40,84,036.02, WHICH WAS NOT P UT TO USE UPTO 31.03.2007. IN THE ASSESSMENT ORDER ITSELF, THE AO HAD MENTIONED THAT A TOTAL ADDITION OF RS.47 , 39,964 / - HAS BEEN MADE IN PLANT ARID MACHINERY DURING A.Y. 2008 - 09. OUT OF THIS, PLANT AND MACHINERY WORTH RS.40 , 84,036.02 WAS TRANSFERRED FROM 'SIDCUL, UTTARANCHAL' HEAD OF THE PRECEDING ASSESSMENT YEAR AND A FRESH ADDITION OF RS.6 , 55,928.80 WAS MADE DURING THE CURRENT ASSESSMENT YEAR. EVEN, THE AO HAS ACCEPTED THAT THE APPELLANT HAD PRODUCED BILLS FOURTH RS.6 , 02,486 / - . THE APPELLANT ALSO PROD UCED A LETTER ISSUED BY THE TEHSILDAR OF VIKAS NAGAR, DEHRADUN, CERTIFYING THAT PLOT NO. 40, PHARMA CITY, SELAQUI, DEHRADUN WAS SITUATED IN TEHSIL VIKAS NAGAR. THE APPELLANT ALSO PLACED ON RECORD COPIES OF RELEVANT NOTIFICATIONS OF THE MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, GOVERNMENT OF INDIA TO PROVE THAT IT WAS ELIGIBLE FOR DEDUCTION U/S780IC. MOREOVER, VIDE SUBMISSIONS DT. 12.08.2013, THE ID. AR SUBMITTED LOST OF EVIDENCES INCLUDING POSSESSION CERTIFICATE OF SE LAQUI PREMISES, ELECTRICITY CONNECTION CERTIFICATE, POLLUTION CLEARANCE CERTIFICATE, BANK CERTIFICATES, MANUFACTURING LICENCE, SALES TAX REGISTRATION AND COPY OF INTEREST SUBSIDY GRANTED BY SIDCUL, DEHRADUN TO NEW UNITS AND COPY OF SANCTION OF 15% CENTRAL INVESTMENT SUBSIDY OF RS.11,22,353/ - GRANTED BY DIRECTOR OF INDUSTRIES, UTTARAKHAND DT. 16.05.2008. IN THE LIGHT OF THE ABOVE DISCUSSION AND IN VIEW OF THE EVIDENCES PLACED ON RECORD, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS SET UP A NEW UNIT IN SELAQUI, DEHRADUN AND THAT THE PLANT AND MACHINERY INSTALLED THEREIN WAS NEWY IT IS ALSO CLEAR THAT THE NEW UNIT WAS NOT SET UP BY SPLITTING UP OF MACHINERY FROM THE OLD UNIT AT OKHLA, NEW DELHI. THE ASSESSING OFFICER DID NOT COMPREHEND THE ACCOUNTING E NTRIES IN PROPER PERSPECTIVE, WHEREBY THE INVESTMENT IN THE NEW UNIT WAS SHOWN IN THE BALANCE SHEET OF THE OLD UNIT SINCE, THE NEW UNIT HAD NOT BECOME OPERATIONAL. ONCE THE NEW UNIT BECAME OPERATIONAL, THE AMOUNTS WERE TRANSFERRED TO THE BALANCE SHEET OF T HE NEW UNIT BY A MERE ACCOUNTING TRANSFER ENTRY, THIS WAS COMPREHENDED AND TREATED BY THE AO AS SPLITTING UP OF THE OLD UNIT, WHICH WAS NOT THE CASE AT ALL. ONE LOOK AT THE BILLS FOR PLANT AND MACHINERY MAKES IT CLEAR THAT NEW MACHINERY HAS BEEN PROCURED A ND DIRECTLY SENT TO THE NEW UNIT. THEREFORE, THE QUESTION OF DENIAL OF DEDUCTION U/S. 80IC ON THIS GROUND BY THE AO IS PAGE 4 OF 5 ITA NO 582/DEL /2014 ITO V SUPERMAX LABORATORIES A Y 2008 - 09 JUDICIALLY UNTENABLE. THE AO IS HEREBY DIRECTED TO ALLOW THE DEDUCTION U/S. 80IC OF THE ACT AS CLAIMED BY THE APPELLANT. 6. ON PERUSAL OF T HE ORDER OF THE LD. CIT (A) IT SEEMS THAT BEFORE HIM THE APPELLANT HAS SUBMITTED THE COMPLETE SET OF BILLS OF MACHINERY ALONG WITH THE CHALLANS PURCHASED AND INSTALLED AT THE NEW UNIT . ON PERUSAL OF THE FIXED ASSET SCHEDULE OF THE ASSESSEE HE HAS NOTED T HAT THERE IS A BIFURCAT ION AVAILABLE FROM THE CONSOLIDATED FIGURE OF CAPITAL WORK IN PROGRESS BETWEEN THE PLANT AND MACHINERY AND BUILDING WHICH WAS NOT PUT TO USE UP TO 31 ST OF MARCH 2007 PERTAINING TO THE NEW UNIT. HE FURTHER NOTED THAT THAT BUILDING WAS ALSO SHOWN IN THAT PARTICULAR SCHEDULE OF RS. 56.25 LACS. IN VIEW OF THIS IT APPEARS THAT THAT THE DETAILS OF COMPLETE SET OF BILLS FOR THE PURCHASE OF MACHINERY INCLUDING W HAT WAS STATED TO BE LYING IN THE OPENING WORK IN PROGRESS AND THE DELIVERY CHALLAN WERE NOT AVAILABLE BEFORE THE LD AO . FURTHER REGARDING THE CLAIM OF THE AREA FOR WHICH EXEMPTION IS AVAILABLE THE ASSESSEE PRODUCED THE LETTER OF TEHSILDAR ALONG WITH SUB MISSION DATED 12/08/2013 AND ALSO SUBMITTED HOST OF EVIDENCES SHOWING POSSESSION CERTIFICATE, ELECTRICITY CONNECTION CERTIFICATE, POLLUTION CLEARANCE CERTIFICATE FOR THE REASON OF SHOWING THAT THE AREA IS NOTIFIED FOR EXEMPTION. ALL THESE EVIDENCES HAVE BEEN TAKEN BY THE LD. CIT (A) FOR THE PURPOSE OF ALLOWING THE CLAIM OF THE ASSESSEE. HOWEVER WE DID NOT FIND THAT THESE DETAILS WERE AVAILABLE BEFORE THE LD AO. THEREFORE IN THE INTEREST OF JUSTICE WE SET ASIDE THIS GROUND OF APPEAL TO THE FILE OF ASSESSI NG OFFICER FOR VERIFICATION AND ASCERTAINING WHETHER THERE IS ANY VIOLATION OF PROVISIONS OF SECTION 80IC (4) OF THE I NCOME T AX A CT THAT THERE IS NO SPLITTING UP OF THE EXISTING UNIT. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF HEARING BE PROVIDED TO THE A SSESSEE FOR SUBSTANTIATING ITS CLAIM. IN THE RESULT G ROUND NO. 1 OF THE APPEAL OF THE REVENUE IS ALLOWED WITH ABOVE DIRECTION. 7. ON THE 2 ND ISSUE OF GRANT OF DEPRECIATION ON THE ASSETS WE NOTICE D THAT THE PURCHASE AND USE OF THE SAME ASSETS ARE INVOLVED W HICH ARE IN CASE OF SETTING UP ON NEW UNDERTAKING. THEREFORE THE ISSUE OF DEPRECIATION IS ALSO CONNECTED TO THE PURCHASE OF THE FIXED ASSETS BY THE ASSESSEE AND LEARNED 1 ST APPELLATE AUTHORITY HAS ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT TESTING THE CO NDITIONS PRESCRIBED UNDER SECTION 32 OF THE ACT OF OWNERSHIP AND USER OF THE ASSETS. LD. 1 ST APPELLATE AUTHORITY HAS ALSO ALLOWED THE APPEAL OF THE ASSESSEE ON THIS GROUND AS HE HAS ALREADY ALLOWED THE CLAIM OF THE ASSESSEE ON EXEMPTION , ACCORDING TO US T HIS COULD NOT BE THE CORRECT REASON FOR ALLOWING THE CLAIM OF DEPRECIATION. AS THE GROUND OF EXEMPTION OF THIS APPEAL IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WE ALSO DEEM IT NECESSARY TO SET ASIDE THIS 2 ND GROUND OF THIS APPEAL ON CLAIM OF DEPR ECIATION TO THE FILE OF THE ASSESSING OFFICER. NEEDLESS TO SAY THAT THE ASSESSING AUTHORITY WILL PROVIDE ADEQUATE OPPORTUNITY OF HEARING AND OF ADDUCING THE CLAIM OF THE PAGE 5 OF 5 ITA NO 582/DEL /2014 ITO V SUPERMAX LABORATORIES A Y 2008 - 09 ASSESSEE. IN THE RESULT GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS ALLOWED WITH ABO VE DIRECTION. 8. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 / 06 /2016 . - S D / - - S D / - ( KULDIP SINGH ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 7 / 06 / 2016 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI