HINDUSTHAN FEEDS MANUFACTURING,CO, Satara V. Addl CIT, Satara Range, Satara

ITA 66/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8510 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-02-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS M S VERMA
• Keywords: Revision of order; Question of law
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NOS.65 TO 69/PN/2012 (A. YS. : 2004-05 TO 2008-09) HINDUSTHAN FEEDS MANUFACTURING COMPANY, L-4, ADDITIONAL MIDC, SATARA 415 004. PAN : AABFH6485P . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. . RESPONDENT ITA NO.105/PN/2013 (ASSESSMENT YEAR : 2009-10) HINDUSTHAN FEEDS MANUFACTURING COMPANY, L-4, ADDITIONAL MIDC, SATARA 415 004. PAN : AABFH6485P . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. . RESPONDENT ASSESSEE BY : MR. FARROKH IRANI DEPARTMENT BY : MRS. M. S. VERMA DATE OF HEARING : 25-08-2014 DATE OF PRONOUNCEMENT : 30-09-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED SIX APPEALS PERTAINING TO ASSESSMENT YEARS 2004-05 TO 2009-10 RELATE TO THE SAME ASSESSEE AND SINCE THEY INVOLVE CERTAIN COMMON ISSUES THE APPEALS HAVE BEEN CLUBBED AND HEARD TOGE THER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. 2. ITA NOS.65 TO 68/PN/2012 ARE APPEALS FOR ASSESSM ENT YEARS 2004-05 TO 2007-08, WHICH ARE DIRECTED AGAINST A CONSOLIDAT ED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATE D 25.01.2011 WHICH, IN TURN, HAS ARISEN FROM RESPECTIVE ASSESSMENT ORDERS DATED 28.12.2006, ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 15.11.2007, 15.12.2008 & 18.12.2009 PASSED BY THE A SSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.69/PN/2012 FOR ASSESSMENT YEAR 2008-09 IS DIRECTED AGAINST AN ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 31.10.2011 WHI CH, IN TURN, HAS ARISEN FROM AN ASSESSMENT ORDER DATED 20.12.2010 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT. ITA NO.105/PN/2013 FOR ASSE SSMENT YEAR 2009-10 IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-III, PUNE DATED 19.11.2012 WHICH, IN TURN, HAS ARISEN FR OM AN ASSESSMENT ORDER DATED 20.12.2011 PASSED BY THE ASSESSING OFFICER U/ S 143(3) OF THE ACT. 3. ONE OF THE ISSUE, WHICH IS COMMON IN ALL THE APP EALS, EMANATES FROM THE ACTION OF THE INCOME-TAX AUTHORITIES IN DENYING ASSESSEES CLAIM FOR DEDUCTION U/S 80IB OF THE ACT. AT THE TIME OF HEAR ING, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCE S AS WELL AS THE BASIS ON WHICH THE INCOME-TAX AUTHORITIES HAVE DENIED ASSESS EES CLAIM FOR DEDUCTION U/S 80IB OF THE ACT ARE SIMILAR FOR ALL THE ASSESSM ENT YEARS. THEREFORE, ITA NO.65/PN/2012 RELATING TO ASSESSMENT YEAR 2004-05 I S TAKEN AS THE LEAD CASE. 4. THE APPELLANT BEFORE US IS A PARTNERSHIP FIRM, W HICH IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF MANUFACTURE OF CATTLE FE ED. FOR THE ASSESSMENT YEAR 2004-05, ASSESSEE CLAIMED A DEDUCTION U/S 80IB OF THE ACT AMOUNTING TO RS.38,93,923/- WITH RESPECT TO THE PROFITS DERIVED FROM ITS INDUSTRIAL UNDERTAKING MANUFACTURING CATTLE FEED WHICH HAS BEE N STYLED AS UNIT NO.III. IN THIS CONTEXT, BRIEF BACKGROUND IS THAT INITIALLY ASSESSEE HAD SET-UP TWO UNITS VIZ. UNIT-I AT W-32, ADDITIONAL MIDC, SATARA AND UN IT-II AT L-4, ADDITIONAL MIDC, SATARA. THE UNIT NO.III, I.E. THE UNIT UNDER CONSIDERATION, WAS SITUATED AT L-4 & L-6, ADDITIONAL MIDC, SATARA. UNIT NO.III WAS SETUP IN THE PREVIOUS YEAR ENDING ON 31.03.2002 CORRESPONDING TO THE ASSE SSMENT YEAR 2002-03. ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 IN-FACT, THE TRIAL PRODUCTION IN UNIT-III HAD COMME NCED ON 10.02.2002 AND UNIT WAS STATED TO BE COMMERCIALLY OPERATIONAL FROM 06.0 3.2002. 5. IN ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICE R HAS DENIED THE CLAIM OF THE ASSESSEE ON THE GROUNDS THAT (I) THE A CTIVITY BEING CARRIED OUT IN UNIT NO.III DOES NOT AMOUNT TO MANUFACTURE; AND, (I I) UNIT NO.III WAS NOT A NEW, INDEPENDENT INDUSTRIAL UNDERTAKING BUT IT WAS FORME D BY RECONSTRUCTION OF ITS BUSINESS ALREADY IN EXISTENCE. BOTH THE AFORESAID OBJECTIONS RAISED BY THE ASSESSING OFFICER HAVE BEEN AFFIRMED BY THE CIT(A). 6. IT HAS BEEN STATED BEFORE US THAT SIMILAR OBJECT IONS WERE RAISED IN ASSESSMENT YEAR 2003-04 BY THE COMMISSIONER OF INCO ME TAX-III, PUNE (IN SHORT THE COMMISSIONER) WHILE INVOKING THE REVISI ONARY JURISDICTION U/S 263 OF THE ACT BECAUSE IN THE ASSESSMENT ORDER PASSED BY T HE ASSESSING OFFICER U/S 143(3) OF THE ACT FOR ASSESSMENT YEAR 2003-04 DATED 30.01.2006 THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB OF THE ACT IN R ELATION TO UNIT NO.III WAS ALLOWED. THE LEARNED COUNSEL CONTENDED THAT THE AF ORESAID ORDER OF THE COMMISSIONER WAS QUASHED BY THE PUNE BENCH OF THE T RIBUNAL VIDE ITS ORDER DATED 30.06.2009 IN ITA NO.569/PN/2008, A COPY OF W HICH HAS BEEN PLACED ON RECORD. THE HONBLE HIGH COURT, ON AN APPEAL FI LED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL, UPHELD THE ACTION OF THE TRIBUNAL AND WHILE DOING SO, THE HONBLE HIGH COURT OBSERVED THAT THE ACTIVITY U NDERTAKEN BY THE ASSESSEE AMOUNTED TO MANUFACTURE; AND FURTHER, THAT UNIT NO. III WAS NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREAD Y IN EXISTENCE. IN THIS BACKGROUND, IT IS CONTENDED THAT THE IMPUGNED OBJEC TIONS NO LONGER SURVIVE EVEN FOR THE CAPTIONED YEARS. EVEN OTHERWISE, IT W AS POINTED OUT THAT THE AFORESAID OBJECTIONS ARE RELEVANT FOR THE INITIAL Y EAR OF THE CLAIM WHICH IN THE INSTANT CASE IS ASSESSMENT YEAR 2002-03 AND IN THE INITIAL YEAR, THERE ARE NO ADVERSE FINDINGS BY THE ASSESSING OFFICER ON SUCH I SSUES. ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 7. WE HAVE EXAMINED THE AFORESAID PRELIMINARILY PLE A SETUP BY THE ASSESSEE. ADMITTEDLY, THE ACTIVITY BEING UNDERTAKE N BY THE ASSESSEE IN UNIT NO.III IS PRODUCTION OF CATTLE FEED. IN ASSESSMENT YEAR 2002-03, WHICH WAS THE INITIAL YEAR FOR UNIT NO.III, THE ASSESSING OFFICER IN AN ORDER PASSED U/S 143(3) OF THE ACT DATED 15.02.2005 HAS NOTED THAT UNIT NO. III STARTED COMMERCIAL PRODUCTION FROM 06.03.2002. IN THE BODY OF THE ASS ESSMENT ORDER, A COPY OF WHICH HAS BEEN PLACED ON RECORD, THE ASSESSING OFFI CER HAS REFERRED TO THE NOTES ATTACHED WITH THE RETURN OF INCOME REGARDING THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT AND IT IS ENUMERATED THAT UNIT NO.I II STARTED COMMERCIAL PRODUCTION ON 06.03.2002; THAT IT WAS THE FIRST YEA R OF CLAIM BUT IN THE ABSENCE OF ANY PROFITS THE QUESTION OF DEDUCTION U/S 80IB O F THE ACT DID NOT ARISE. THE ASSESSING OFFICER HAS FURTHER NOTED THAT IT IS A SM ALL SCALE INDUSTRIAL UNDERTAKING AS CERTIFIED BY THE DIC, SATARA. IT HA S ALSO BEEN NOTED THAT UNIT NO.III IS CARRYING ON THE ACTIVITY OF THE CATTLE FE ED MANUFACTURING. FURTHER, IN THE SUBSEQUENT ASSESSMENT YEAR 2003-04 ALSO, THE AS SESSING OFFICER IN AN ASSESSMENT FINALIZED U/S 143(3) OF THE ACT DATED 30 .01.2006 EXAMINED THE MANUFACTURING PROCESS CARRIED OUT BY THE ASSESSEE. THE ASSESSMENT ORDER CONTAINS A DISCUSSION WITH REGARD TO THE THREE UNIT S OWNED BY THE ASSESSEE AND WITH RESPECT TO THE UNIT-II, IT HAS BEEN NOTED THAT IT WAS CLOSED ON 05.03.2002. THE ASSESSMENT ORDER RECORDS THAT THE CLAIM FOR DEDUCTION U/S 80IB OF THE ACT HAS BEEN VERIFIED, AND ACCORDINGLY, THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT IN RELATION TO UNIT-III WAS ALLOWED . SUBSEQUENTLY, THE COMMISSIONER PASSED AN ORDER U/S 263 OF THE ACT SET TING-ASIDE THE ASSESSMENT ORDER OF THE ASSESSING OFFICER DATED 30. 01.2006 (SUPRA) AND DIRECTED THE ASSESSING OFFICER TO DECIDE THE ISSUE REGARDING THE ASSESSEES ELIGIBILITY FOR THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT AFRESH. THE SAID ORDER OF THE COMMISSIONER HAS SINCE BEEN QUASHED BY THE T RIBUNAL VIDE ITS ORDER DATED 30.06.2009 (SUPRA). THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE HIGH COURT ASSAILING THE ORDER OF THE T RIBUNAL DATED 30.06.2009 ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 (SUPRA) AND THE HONBLE HIGH COURT VIDE ITS ORDER I N INCOME TAX APPEAL NO.1041 OF 2010 DATED 11.10.2011 HELD AS UNDER :- 2. THE ASSESSMENT YEAR INVOLVED HEREIN IS AY 200 3-04. 3. THE ASSESSEE IS ENGAGED IN THE PRODUCTION OF CAT TLE FEED. IN THE ASSESSMENT YEAR IN QUESTION, THE ASSESSEE CLAIMED D EDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961 ('THE ACT' FOR SHO RT) IN RESPECT OF UNIT I AND II AND ALSO IN RESPECT OF NEWLY ESTABLISHED UNIT III S ITUATE AT BLOCK NO. L-4 AND L- 6. THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE A SSESSEE IN RESPECT OF THE UNIT NO. III SITUATE AT BLOCK NO. L-4 AND L-6 BY RE CORDING A FINDING THAT THE ASSESSEE HAS FURNISHED NECESSARY UNIT-WISE DETAILS FOR THE PURPOSE OF AVAILING DEDUCTION UNDER SECTION 80IB OF THE ACT. 4. THE CIT WAS OF THE OPINION THAT THE ASSESSING OF FICER HAS NOT CONSIDERED THE ISSUE AS TO WHETHER THE UNIT NO. III WAS FORMED BY SPLITTING AND RECONSTRUCTING OF THE EXISTING UNITS AND THAT THE A SSESSING OFFICER HAS NOT CONSIDERED THE ISSUE AS TO WHETHER THE ACTIVITY CAR RIED OUT BY THE ASSESSEE IN THE THIRD UNIT CONSTITUTES MANUFACTURING ACTIVITY O R NOT. ACCORDINGLY, THE CIT INVOKED JURISDICTION UNDER SECTION 263 OF THE ACT A ND DIRECTED THE ASSESSING OFFICER TO PASS FRESH ASSESSMENT ORDER AFTER TAKING INTO CONSIDERATION THE AFORESAID ISSUES. 5. ON APPEAL FILED BY THE ASSESSEE, THE ITAT BY THE IMPUGNED ORDER DATED 30/6/2009 SET ASIDE ORDER PASSED BY THE CIT U NDER SECTION 263 OF THE INCOME TAX ACT. CHALLENGING THE AFORESAID ORDER, TH E REVENUE HAS FILED THE PRESENT APPEAL. 6. PERUSAL OF THE ORDER PASSED BY THE ITAT, PARTICU LARLY PARA 4 THEREOF SHOWS THAT THE ITAT HAS HELD ON THE BASIS OF THE MA TERIAL ON RECORD THAT THE UNIT NO. III SITUATE AT BLOCK NO. L-4 AND L-6 WAS A N INDEPENDENT UNIT NEWLY ESTABLISHED, HAVING PRODUCTION CAPACITY THREE TIMES MORE I.E. 150 TONNES THAN THE EXISTING UNITS. MOREOVER, IN THIS APPEAL, THE A SSESSEE HAS ALSO FILED AN AFFIDAVIT STATING ON OATH THAT THE ASSESSEE HAS PUR CHASED VARIOUS NEW MACHINERIES FOR THE NEWLY ESTABLISHED UNIT NO. III WHEREIN PRODUCTION OF CATTLE FEED ACTIVITY WAS CARRIED OUT. THE ASSESSEE HAS ALS O GIVEN A LIST OF THE MACHINERIES PURCHASED BY IT. THEREFORE, THE DECISIO N OF THE ITAT THAT THE UNIT NO. III WAS NOT FORMED BY SPLITTING OR RECONSTRUCTI ON OF THE EXISTING UNITS CANNOT BE FAULTED. 7. THE TRIBUNAL HAS FURTHER RECORDED THAT THE ACTIV ITY CARRIED OUT BY THE ASSESSEE IN UNIT NO. III IS ALSO CARRIED OUT IN THE OTHER TWO UNITS, WHEREIN IT HAS BEEN HELD THAT THE PRODUCTION OF CATTLE FEED AMOUNT S TO MANUFACTURE AND THE REVENUE HAS ACCEPTED THAT DECISION IN THE CASE OF O THER TWO UNITS. 8. IN THESE CIRCUMSTANCES, IN OUR OPINION, THE DECI SION OF THE ITAT IS BASED ON FINDING OF FACT AND NO QUESTION OF LAW ARI SES OUT OF THE SAID ORDER. THE APPEAL IS ACCORDINGLY DISMISSED WITH NO ORDER A S TO COSTS. 8. A PERUSAL OF THE AFORESAID JUDGEMENT OF THE HON BLE HIGH COURT REFLECTS THAT IT HAS OPINED ON BOTH THE INSTANT OBJECTIONS R AISED BY THE ASSESSING OFFICER TO DENY THE CLAIM OF THE ASSESSEE FOR DEDUC TION U/S 80IB OF THE ACT IN RELATION TO PROFITS OF UNIT NO.III FOR THE CAPTIONE D ASSESSMENT YEARS. FIRSTLY, THE HONBLE HIGH COURT NOTED THE OBJECTION OF THE COMMI SSIONER THAT THE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 ASSESSING OFFICER HAD FAILED TO EXAMINE AS TO WHETH ER OR NOT UNIT NO.III WAS FORMED BY SPLITTING UP OR RECONSTRUCTION OF THE EXI STING UNITS; AND, SECONDLY, THAT THE ASSESSING OFFICER FAILED TO CONSIDER AS TO WHETHER OR NOT THE ACTIVITY CARRIED OUT BY THE ASSESSEE IN UNIT NO.III CONSTITU TES MANUFACTURING ACTIVITY. THE HONBLE HIGH COURT HAS UPHELD THE DECISION OF T HE TRIBUNAL TO THE EFFECT THAT UNIT NO.III WAS NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF THE EXISTING UNITS. THE HONBLE HIGH COURT NOT ONLY CONSIDERED THE MATERIAL CONSIDERED BY THE TRIBUNAL BUT HAS ALSO REFERRED TO AN AFFIDAVIT ON OATH FILED BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT STATING THAT ASSESSEE HAS PURCHASED VARIOUS NEW MACHINERIES FOR THE NEWLY ESTABLISHED UNIT NO.I II WHEREIN ACTIVITY OF CATTLE FEED PRODUCTION WAS CARRIED OUT. 9. IN VIEW OF THE AFORESAID JUDGEMENT OF THE HONBL E HIGH COURT, WE FIND NO REASON TO UPHOLD THE STAND OF THE REVENUE IN THE CAPTIONED PROCEEDINGS TO THE EFFECT THAT UNIT NO.III DOES NOT COMPLY WITH TH E CONDITION PLACED IN CLAUSE (I) OF SUB-SECTION (2) OF SECTION 80IB OF THE ACT T O THE EFFECT THAT UNIT NO.III WAS FORMED BY SPLITTING OR RECONSTRUCTION OF THE EXISTI NG UNITS. SECONDLY, THE HONBLE HIGH COURT HAS AFFIRMED THAT THE ACTIVITY C ARRIED OUT BY THE ASSESSEE IN UNIT NO.III IS SIMILAR TO THE ACTIVITY CARRIED OUT IN THE OTHER TWO UNITS, WHEREIN REVENUE HAS ACCEPTED THAT THE PRODUCTION OF CATTLE FEED AMOUNTS TO MANUFACTURE. THE AFORESAID AUTHORITATIVE PRONOUNCE MENT OF THE HONBLE HIGH COURT IN THE ASSESSEES OWN CASE, IN OUR VIEW, CLEA RLY BELIES THE STAND OF THE REVENUE IN THE CAPTIONED APPEALS TO THE EFFECT THAT THE ACTIVITY OF PRODUCTION OF CATTLE FEED DOES NOT AMOUNT TO MANUFACTURE SO AS TO QUALIFY FOR DEDUCTION U/S 80IB OF THE ACT. 10. BEFORE US, IT HAS BEEN VEHEMENTLY ARGUED BY THE LEARNED CIT-DR THAT THE ORDER OF THE TRIBUNAL DATED 30.06.2009 (SUPRA) DEALING WITH ASSESSEES APPEAL AGAINST THE ORDER PASSED BY THE COMMISSIONER U/S 263 OF THE ACT FOR ASSESSMENT YEAR 2003-04 WAS ON A TECHNICAL ISSUE RE GARDING VALIDITY OF THE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 EXERCISE OF JURISDICTION BY INVOKING SECTION 263 OF THE ACT AND THAT THE ORDER OF THE TRIBUNAL DID NOT ADJUDICATE ON MERITS OF THE CL AIM OF DEDUCTION U/S 80IB OF THE ACT. THE LEARNED CIT-DR HAS POINTED OUT THAT W HILE DEALING WITH ASSESSEES APPEAL AGAINST THE ORDER OF COMMISSIONER , THE TRIBUNAL OBSERVED THAT IT WAS NOT COMMENTING ON MERITS OF THE CLAIM P ERTAINING TO THE ELIGIBILITY OF DEDUCTION U/S 80IB OF THE ACT. THEREFORE, ACCORDIN G TO HER, THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF THE ASSESS EE DATED 11.10.2011 (SUPRA) HAS TO BE UNDERSTOOD IN THE SAID LIGHT. AC CORDING TO HER, THE ORDER OF THE HONBLE HIGH COURT CANNOT BE UNDERSTOOD TO REFL ECT ANY PRONOUNCEMENT ON THE MERITS OF THE ISSUES RAISED BY THE REVENUE QUA THE ENTITLEMENT OF ASSESSEE FOR THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. 11. WE HAVE CAREFULLY CONSIDERED THE AFORESAID PLEA SETUP BY THE LEARNED CIT-DR, AND ALSO A SIMILAR STAND OF THE CIT(A) IN T HE IMPUGNED ORDER. IN OUR CONSIDERED OPINION, HAVING REGARD TO THE DISCUSSION CONTAINED IN THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, WHICH WE HAVE REPRODUCED IN THE EARLIER PART OF THIS ORDER, IT IS QUITE CLEA R THAT A DEFINITE OPINION HAS BEEN EXPRESSED ON THE OBJECTIONS RAISED BY THE REVENUE T O DENY THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT, AND THEY ARE ALSO SI MILAR TO THE OBJECTIONS BEING RAISED BY THE REVENUE IN THE PRESENT APPEALS. THE HONBLE BOMBAY HIGH COURT HAS CONSIDERED THE LEGAL AS WELL AS THE RELEV ANT FACT-SITUATION AND ULTIMATELY THE DECISION OF THE TRIBUNAL QUASHING TH E ORDER OF THE COMMISSIONER HAS BEEN UPHELD. THE PLEA OF THE LEARNED CIT-DR, I N OUR VIEW, IS QUITE MISPLACED HAVING REGARD TO THE EXPLICIT DECISION OF THE HONBLE HIGH COURT IN THE ASSESSEES OWN CASE VIDE ORDER DATED 11.10.2011 (SUPRA). THUS, THE AFORESAID OBJECTIONS RAISED BY THE REVENUE ARE DISM ISSED. 12. ANOTHER ISSUE WHICH HAS BEEN RAISED IN ORDER TO DENY THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT IS TO THE EFFECT THAT UNIT NO.III, IN RESPECT OF WHICH THE DEDUCTION U/S 80IB OF THE ACT HAS BEEN CLAIMED, DOES NOT COMPLY WITH THE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 CONDITION PRESCRIBED IN CLAUSE (II) OF SECTION 80IB (3) OF THE ACT. AS PER THE REVENUE, IN TERMS OF SECTION 80IB(3)(II) OF THE ACT , IN ORDER TO BE ELIGIBLE FOR DEDUCTION, THE UNIT MUST BE A SMALL SCALE INDUSTRIA L UNDERTAKING AS CONTEMPLATED U/S 80IB(14)(G) OF THE ACT. SECTION 8 0IB(14)(G) OF THE ACT PROVIDES THAT FOR THE PURPOSES OF THIS SECTION, SM ALL SCALE INDUSTRIAL UNDERTAKING (IN SHORT SSI) MEANS AN INDUSTRIAL UNDERTAKING WHICH IS ON THE LAST DAY OF THE PREVIOUS YEAR, REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING U/S 11B OF THE INDUSTRIES (DEVELOPMENT AND REGULATI ON) ACT, 1951 (IN SHORT IDR ACT). NOTABLY, IT HAS BEEN POINTED OUT THAT IN TERMS OF NOTIFICATION SO- 857(E) DATED 10.12.1999 ISSUED BY THE MINISTRY OF I NDUSTRY IN EXERCISE OF THE POWERS CONFERRED U/S 11B(1) OF THE IDR ACT, THE TOT AL INVESTMENT IN PLANT AND MACHINERY SHOULD NOT EXCEED RUPEES ONE CRORE AS ON THE LAST DAY OF THE PREVIOUS YEAR IN THE CASE OF A SMALL SCALE INDUSTRI AL UNDERTAKING. AS PER THE REVENUE, THE TOTAL VALUE OF THE INVESTMENT IN PLANT AND MACHINERY AS ON 31.03.2004 EXCEEDS RUPEES ONE CRORE AND THEREFORE U NIT NO.III NO LONGER REMAINS A SSI UNIT AND THEREFORE THE DEDUCTION U/S 80IB OF THE ACT OUGHT TO BE DISALLOWED. IT IS NOT DISPUTED THAT IN SO FAR AS T HE INITIAL YEAR OF SETTING-UP OF THE UNIT IS CONCERNED, I.E. ASSESSMENT YEAR 2002-03 , THE INVESTMENT IN THE PLANT AND MACHINERY WAS BELOW RUPEES ONE CRORE AND THUS IT WAS ENTITLED TO THE DEDUCTION, AS IT WAS A SSI UNIT. 13. BEFORE US, THE LEARNED CIT-DR HAS ALSO SUBMITTE D THAT IN THE CASE OF SAMRUDDHI INDUSTRIES LTD. VS. JCIT VIDE ITA NO.1002 /PN/2009 DATED 31.03.2011, IT HAS BEEN HELD BY THE PUNE BENCH THAT AN ASSESSEE SHOULD BE A SMALL SCALE INDUSTRIAL UNDERTAKING AS ON THE LAST D AY OF THE PREVIOUS YEAR IN EACH YEAR OF CLAIM, EVEN IF DEDUCTION HAS BEEN ALLO WED IN THE INITIAL ASSESSMENT YEAR. IN THE PRESENT CASE, IN ASSESSMEN T YEAR 2002-03 WHEN UNIT NO.III BEGAN PRODUCTION IT WAS A SMALL SCALE INDUST RIAL UNDERTAKING BUT IN THE INSTANT ASSESSMENT YEAR I.E. 2004-05 ASSESSEE DOES NOT QUALIFY TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING ON ACCOUNT OF THE INCR EASE IN THE VALUE OF ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 INVESTMENT IN PLANT AND MACHINERY BEYOND THE PRESCR IBED LIMIT AND THEREFORE THE DEDUCTION HAS BEEN JUSTIFIABLY DENIED BY THE IN COME-TAX AUTHORITIES. 14. THE FIRST AND FOREMOST PLEA RAISED BY THE ASSES SEE IS THAT THE CLAIM U/S 80IB OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSI DERATION CANNOT BE DENIED UNLESS ASSESSEE HAS BEEN HELD TO BE INELIGIBLE FOR SUCH RELIEF IN THE INITIAL ASSESSMENT YEAR. ACCORDING TO THE LEARNED COUNSEL, UNLESS ASSESSEE IS HELD INELIGIBLE FOR SECTION 80IB BENEFITS IN THE INITIAL ASSESSMENT YEAR, ASSESSEES ELIGIBILITY FOR SUCH DEDUCTION CANNOT BE RE-VISITED OR RE-EXAMINED OR DENIED IN A SUBSEQUENT ASSESSMENT YEAR. IN SUPPORT, RELIANCE H AS BEEN PLACED ON THE FOLLOWING JUDGEMENTS :- (I) CIT VS. WESTERN OUTDOOR INTERACTIVE P. LTD., 34 9 ITR 309 (BOM); (II) CIT VS. PAUL BROTHERS, 216 ITR 548 (BOM); (III) DIRECT INFORMATION PVT. LTD. VS. ITO, 349 ITR 150 (BOM); AND, (IV) SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V S. CIT, 123 ITR 669 (GUJ). 15. FURTHER, IT HAS BEEN SUBMITTED THAT THERE WAS NO JUSTIFICATION TO EXAMINE WHETHER OR NOT UNIT-III OF THE ASSESSEE WAS A SMALL SCALE INDUSTRIAL UNDERTAKING BECAUSE SUCH A CONDITION WAS PRESCRIBED IN SECTION 80IB(2)(III) OF THE ACT, WHICH APPLIES TO AN ASSESSEE ENGAGED IN TH E MANUFACTURE OF AN ARTICLE LISTED IN THE ELEVENTH SCHEDULE AND THE ASS ESSEE WAS NOT ENGAGED IN ANY SUCH ACTIVITY. IN THE ALTERNATIVE, IT HAS BEEN SUBMITTED THAT IN ANY EVENT UNIT-III OF THE ASSESSEE QUALIFIES TO BE A SMALL SC ALE INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF THE IDR ACT, BECAUSE THE VALU E OF INVESTMENT IN PLANT AND MACHINERY HAS TO BE COMPUTED AS PER THE MEANING ASCRIBED TO THE EXPRESSION PLANT AND MACHINERY UNDER THE IDR ACT, AND IF THE VALUE IS SO COMPUTED IT IS BELOW THE PRESCRIBED LIMITS. ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ON THIS ASPECT. IN THIS CONTEXT, THE CIT(A) HAS HELD THAT IN VIEW OF T HE PROVISIONS OF CLAUSE (II) OF SECTION 80IB(3) OF THE ACT, THE UNIT MUST BE A SMAL L SCALE INDUSTRIAL UNDERTAKING AS CONTEMPLATED U/S 80IB(14)(G) OF THE ACT. SECTIO N 80IB(3) READS AS UNDER :- (3) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDU STRIAL UNDERTAKING SHALL BE TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE T HE ASSESSEE IS A COMPANY), OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRI AL UNDERTAKING FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECU TIVE ASSESSMENT YEARS WHERE THE ASSESSEE IS A CO-OPERATIVE SOCIETY) BEGIN NING WITH THE INITIAL ASSESSMENT YEAR SUBJECT TO THE FULFILLMENT OF THE F OLLOWING CONDITIONS, NAMELY: (I) IT BEGINS TO MANUFACTURE OR PRODUCE, ARTICLES O R THINGS OR TO OPERATE SUCH PLANT OR PLANTS AT ANY TIME DURING THE PERIOD BEGINNING FROM THE 1ST DAY OF APRIL, 1991 AND ENDING ON THE 31ST DAY O F MARCH, 1995 OR SUCH FURTHER PERIOD AS THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY WITH REFERENCE TO ANY PARTICULAR UNDERTAKING; (II) WHERE IT IS AN INDUSTRIAL UNDERTAKING BEING A SMALL SCALE INDUSTRIAL UNDERTAKING, IT BEGINS TO MANUFACTURE OR PRODUCE AR TICLES OR THINGS OR TO OPERATE ITS COLD STORAGE PLANT [NOT SPECIFIED IN SU B-SECTION (4) OR SUB- SECTION (5)] AT ANY TIME DURING THE PERIOD BEGINNIN G ON THE 1ST DAY OF APRIL, 1995 AND ENDING ON THE 31ST DAY OF MARCH, [2 002]. 17. UNIT NO.III OF THE ASSESSEE COMMENCED PRODUCTIO N IN MARCH, 2002 AND IT WAS CERTIFIED AS A SMALL SCALE INDUSTRIAL UNIT B Y DIC, SATARA. NOW, IN TERMS OF CLAUSE (II) OF SECTION 80IB(3) OF THE ACT REFERRED ABOVE, THE SMALL SCALE INDUSTRIAL UNDERTAKING MUST BEGIN TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPERATE ITS COLD STORAGE PLANT AT ANY TIME DU RING THE PERIOD BEGINNING FROM 01.04.1995 AND ENDING ON 31.03.2002 IN ORDER T O BE ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. ON THE STRENGTH OF CLAUSE (II) OF SECTION 80IB(3) OF THE ACT, IT IS CLAIMED BY THE REVENUE TH AT SINCE UNIT NO.III OF THE ASSESSEE WAS A SMALL SCALE INDUSTRIAL UNDERTAKING I N THE INITIAL ASSESSMENT YEAR OF 2002-03, IT SHOULD CONTINUE TO BE A SMALL S CALE INDUSTRIAL UNDERTAKING FOR THE ENTIRE PERIOD OF TEN CONSECUTIVE YEARS FOR WHICH THE DEDUCTION U/S 80IB OF THE ACT IS TO BE CLAIMED. IN OTHER WORDS, AS PE R THE REVENUE, WHEN ONCE THE BENEFIT OF SECTION 80IB OF THE ACT IS GRANTED I N THE INITIAL YEAR AS A SMALL SCALE INDUSTRIAL UNDERTAKING, THE UNDERTAKING SHALL BE ENTITLED TO THE BENEFIT FOR ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 THE SUBSEQUENT YEARS ONLY IF IT CONTINUES TO BE A S MALL SCALE INDUSTRIAL UNDERTAKING IN THE MANNER PRESCRIBED IN SECTION 80I B(14)(G) OF THE ACT. NOTABLY, SECTION 80IB(14)(G) PROVIDES THAT FOR THE PURPOSES OF SECTION 80IB OF THE ACT, A SMALL SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUSTRIAL UNDERTAKING WHICH IS, AS ON THE LAST DAY OF THE PREVIOUS YEAR, REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING U/S 11B OF THE INDUSTRIES (D EVELOPMENT AND REGULATION) ACT, 1951. IT IS FURTHER PROVIDED IN TERMS OF A NO TIFICATION DATED 10.12.1999 (SUPRA) ISSUED BY THE MINISTRY OF INDUSTRY IN EXERC ISE OF THE POWERS CONFERRED U/S 11B(1) OF THE IDR ACT, THAT THE TOTAL INVESTMEN T IN PLANT AND MACHINERY SHOULD NOT EXCEED RUPEES ONE CRORE AS ON THE LAST D AY OF THE PREVIOUS YEAR IN THE CASE OF SMALL SCALE INDUSTRIAL UNDERTAKINGS. T HERE IS NO DISPUTE THAT IN THE INITIAL ASSESSMENT YEAR I.E. 2002-03 WHEN UNIT NO.I II BEGAN PRODUCTION THE VALUE OF INVESTMENT IN PLANT AND MACHINERY WAS BELO W RUPEES ONE CRORE AND IT QUALIFIED TO BE A SMALL SCALE INDUSTRIAL UNDERTA KING. THE MOOT POINT IS WHETHER THE BENEFIT OF TEN YEARS COMMENCING FROM TH E INITIAL YEAR SHALL BE AVAILABLE ON A CONTINUOUS BASIS IF AFTER THE INITIA L ASSESSMENT YEAR THE SMALL SCALE INDUSTRIAL UNDERTAKING GROWS AND THE TOTAL VA LUE OF INVESTMENT IN PLANT AND MACHINERY EXCEEDS RUPEES ONE CRORE. 18. A PERUSAL OF SUB-SECTION (3) OF SECTION 80IB OF THE ACT REVEALS THAT IT GOVERNS THE QUANTUM AND THE PERIOD FOR WHICH THE DE DUCTION U/S 80IB OF THE ACT IS ALLOWABLE TO AN INDUSTRIAL UNDERTAKING. THE AMOUNT OF DEDUCTION IS TWENTY-FIVE PERCENT OR THIRTY PERCENT, WHERE THE AS SESSEE IS A COMPANY. THE DEDUCTION IS AVAILABLE FOR A PERIOD OF TEN CONSECUT IVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR WHEN THE INDUSTRIAL UNDERTAKING BEGAN ITS PRODUCTION. HOWEVER, TWO CONDITIONS HAV E BEEN PRESCRIBED THEREIN BY WAY OF CLAUSES (I) AND (II). CLAUSE (II) IS REL EVANT FOR OUR PURPOSE, AND IT PROVIDES THAT IF THE INDUSTRIAL UNDERTAKING IS A SM ALL SCALE INDUSTRIAL UNDERTAKING, IT SHOULD BEGIN TO MANUFACTURE OR PROD UCE ARTICLES OR THINGS AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL, 1995 AND ENDING ON ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 31 ST MARCH, 2002. THUS, WHERE THE CLAIM IS BY A SMALL SCALE INDUSTRIAL UNDERTAKING, IT HAS TO BEGIN MANUFACTURING OR PRODU CTION OF ARTICLE OR THING DURING THE PRESCRIBED PERIOD. THE STAND OF THE ASS ESSEE IS THAT THERE IS NO INDICATION THAT THE INDUSTRIAL UNDERTAKING HAS TO B E A SMALL SCALE INDUSTRIAL UNDERTAKING FOR ALL THE TEN YEARS. THE STAND OF TH E REVENUE IS TO THE CONTRARY, AND IN SUPPORT RELIANCE HAS BEEN PLACED ON THE DECI SION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SAMRUDDHI INDUSTRIES LT D. (SUPRA) TO SAY THAT THE INDUSTRIAL UNDERTAKING OUGHT TO BE A SMALL SCALE IN DUSTRIAL UNDERTAKING NOT ONLY IN THE INITIAL YEAR BUT ALSO IN EACH OF THE SUBSEQU ENT YEARS IN ORDER TO BE ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. 19. WE HAVE CONSIDERED THE PLEA SET-UP BY THE REVEN UE BASED ON THE DECISION OF SAMRUDDHI INDUSTRIES LTD. (SUPRA). IN THE CASE OF SAMRUDDHI INDUSTRIES LTD. (SUPRA), THE ISSUE WAS ON ACCOUNT O F APPLICATION OF SECTION 80IB(2)(III) OF THE ACT. IN SUB-SECTION (2) OF SEC TION 80IB OF THE ACT, FOUR CONDITIONS HAVE BEEN PRESCRIBED IN TERMS OF CLAUSES (I) TO (IV) THEREOF, WHICH AN INDUSTRIAL UNDERTAKING MUST FULFILL IN ORDER TO BE ELIGIBLE FOR THE DEDUCTION U/S 80IB OF THE ACT. CLAUSE (III) OF SECTION 80IB(2) O F THE ACT, WHICH WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF SAMRUDDHI INDUSTRIES LTD. (SUPRA), PROHIBITS DEDUCTION U/S 80IB OF THE ACT TO AN INDUS TRIAL UNDERTAKING WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING SPECI FIED IN THE ELEVENTH SCHEDULE. HOWEVER, IN TERMS OF THE PROVISO TO CLAU SE (III) OF SECTION 80IB(2) OF THE ACT, THE SAID PROHIBITION IS RELAXED IN THE CAS E OF AN INDUSTRIAL UNDERTAKING WHICH IS A SMALL SCALE INDUSTRIAL UNDERTAKING. IN OTHER WORDS, A SMALL SCALE INDUSTRIAL UNDERTAKING MANUFACTURING OR PRODUCING A N ARTICLE OR THING SPECIFIED IN THE ELEVENTH SCHEDULE IS ALSO ELIGIBLE TO CLAIM DEDUCTION U/S 80IB OF THE ACT. IN THE CASE OF SAMRUDDHI INDUSTRIES LTD. (SUPRA), T HE DENIAL OF DEDUCTION BY THE REVENUE WAS ON ACCOUNT OF APPLICATION OF CLAUSE (II I) OF SECTION 80IB(2) OF THE ACT BECAUSE ASSESSEE WAS STATED TO BE MANUFACTURING AN ARTICLE OR THING SPECIFIED IN THE ELEVENTH SCHEDULE, AND, THE INDUST RIAL UNDERTAKING HAD LOST THE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 STATUS OF A SMALL SCALE INDUSTRIAL UNDERTAKING AFTE R THE INITIAL ASSESSMENT YEAR. IN THIS BACKGROUND, THE TRIBUNAL INTERPRETED CLAUSE (III) OF SUB-SECTION (2) OF SECTION 80IB OF THE ACT TO MEAN THAT THE INDUSTRIAL UNDERTAKING WOULD BE INELIGIBLE FOR DEDUCTION U/S 80IB IN THE SUBSEQUENT YEARS WHEN IT LOST THE STATUS OF SMALL SCALE INDUSTRIAL UNDERTAKING BECAUSE IT WA S MANUFACTURING AN ARTICLE SPECIFIED IN THE ELEVENTH SCHEDULE. IN OTHER WORDS , BECAUSE OF THE CONDITION PRESCRIBED IN CLAUSE (III) OF SECTION 80IB(2) READ WITH THE PROVISO THEREOF, IN ORDER TO CLAIM DEDUCTION U/S 80IB, AN INDUSTRIAL UN DERTAKING OUGHT TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING IN THE YEAR OF CLAIM O F DEDUCTION, BE IT BE THE INITIAL YEAR OR ANY OF THE SUBSEQUENT ASSESSMENT YEARS, SO LONG AS IT MANUFACTURED ANY ARTICLE OR THING SPECIFIED IN THE ELEVENTH SCHE DULE. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT UNIT NO.III OF THE ASSESSE E IS NOT ENGAGED IN MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING SPECIFIED IN THE ELEVENTH SCHEDULE, AND IT IS FOR THIS REASON NEITHER THE ASS ESSING OFFICER AND NOR THE CIT(A) HAVE REFERRED TO SECTION 80IB(2)(III) OF THE ACT IN ORDER TO DENY THE CLAIM OF THE ASSESSEE. THUS, THE FACT-SITUATION IN THE C ASE OF SAMRUDDHI INDUSTRIES LTD. (SUPRA) WAS QUITE DIFFERENT. THE PROPOSITION IN THE CASE OF SAMRUDDHI INDUSTRIES LTD. (SUPRA) HAS BEEN RENDERED IN THE CO NTEXT OF SECTION 80IB(2)(III) OF THE ACT INVOKED BY THE REVENUE WHEREAS IN THE PR ESENT CASE THE REVENUE HAS INVOKED SECTION 80IB(3)(II) OF THE ACT IN ORDER TO DENY THE CLAIM OF THE ASSESSEE. SECTION 80IB(2)(III) OF THE ACT HAS NO A PPLICATION IN THE PRESENT CASE AS ASSESSEE IS NOT MANUFACTURING ANY ARTICLE O R THING SPECIFIED IN THE ELEVENTH SCHEDULE. 20. IN-FACT, THE AFORESAID STAND OF THE REVENUE IS SIGNIFICANT ONLY IF IT IS TO BE HELD THAT UNIT NO.III OF THE ASSESSEE DOES NOT QUAL IFY TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING AS ON THE LAST DAY OF THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2004-05. IN THIS CONTEXT, THE PLEA SETUP BY THE ASSESSEE IS THAT THE UNIT QUALIFIES TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING AS THE VALUE OF INVESTMENT IN PLANT AND MACHINERY DOES NOT ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 EXCEED THE PRESCRIBED LIMIT OF RUPEES ONE CRORE AS ON THE LAST DAY OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. A REFERENCE HAS BEEN MADE TO NOTIFICATION DATED 10.12 .1999 (SUPRA) ISSUED BY THE MINISTRY OF INDUSTRY IN TERMS OF SECTION 11B(1) OF THE IDR ACT. IN PARTICULAR, OUR REFERENCE WAS INVITED TO NOTE 2(B) OF THE NOTI FICATION, WHICH PROVIDES THAT FOR CALCULATING THE VALUE OF PLANT AND MACHINERY, I TEMS (I) TO (XI) ENUMERATED THEREIN ARE LIABLE TO BE EXCLUDED. ITEM NO.(X) IS RELEVANT FOR OUR PURPOSE, WHICH READS AS UNDER :- (X) COST OF SUCH STORAGE TANKS WHICH STORE RAW MAT ERIALS, FINISHED PRODUCTS ONLY AND ARE NOT LINKED WITH THE MANUFACTU RING PROCESS. 21. ON THE BASIS OF THE AFORESAID, IT IS SOUGHT TO BE POINTED OUT THAT THE VALUES OF MOLASSES STORAGE TANK OF RS.11,93,977/- A ND VEHICLES OF RS.20,77,359/- ARE LIABLE TO BE EXCLUDED IN ORDER T O COMPUTE THE VALUE OF INVESTMENT IN PLANT AND MACHINERY AS THE SAME DO NO T CONSTITUTE EITHER PLANT OR MACHINERY WHICH IS LINKED TO THE MANUFACTURING P ROCESS OF THE ASSESSEE. 22. IN THIS CONTEXT, THE CLAIM OF THE ASSESSEE IS T HAT THE VALUE OF INVESTMENT IN PLANT AND MACHINERY CALCULATED AS PER THE NORMS OF IDR ACT IS RS.89,77,418/-, DETAILED AS UNDER :- 1. GROSS VALUE OF FIXED ASSETS AS ON 31/03/2004 3,52,37,852 2. LESS I) OTHER ITEMS OF FIXED ASSETS OTHER THAN PLANT & 2,34,24,577 MACHINERY II) ITEMS OF FIXED ASSETS NOT USED IN WEIGH 4,20,314 BRIDGE MANUFACTURING PROCESS 2,38,44,891 BALANCE MACHINERY 1,13,92,961 3. ADD : MACHINERY TRANSFERRED (DIFF IN S.L.M. TO 3,25,470 W.D.V. METHOD. GROSS VALUE OF PLANT & MACHINERY 1,17,18,4 31 4. LESS : EXCLUSIONS (AS PER SEC.3 OF INDUSTRIES D & R 27,41,013 ACT VALUE OF PLANT & MACHINERY AS PER DEFINITION I N 89,77,418 INDUSTRIES ACT 1951 AS ON 31/03/2004 23. THE CIT(A) DID NOT AGREE WITH THE ASSESSEE, AS ACCORDING TO HIM, THE VALUE OF (I) MOLASSES STORAGE TANK AMOUNTING TO RS. 11,93,977/-; AND, (II) VEHICLES AMOUNTING TO RS.20,77,359/- WAS LIABLE TO BE INCLUDED IN THE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 CALCULATION OF VALUE OF PLANT AND MACHINERY AND IF IT WAS SO INCLUDED, THE TOTAL VALUE OF PLANT AND MACHINERY AS ON 31.03.2004 WOULD BE RS.1,22,48,754/-, WHICH THE EXCEEDED THE PRESCRIBED LIMIT OF RUPEES ONE CRORE AND THUS UNIT NO.III OF THE ASSESSEE WAS NOT A SMALL SCALE INDUST RIAL UNDERTAKING. THE AFORESAID STAND OF THE CIT(A) HAS BEEN REITERATED B Y THE LEARNED CIT-DR BEFORE US. 24. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN TERMS OF THE NOTIFICATION DATED 10.12.1999 (SUPRA) ISSUED BY THE CENTRAL GOVERNMENT, CERTAIN FACTORS HAVE BEEN SPECIFIED ON THE BASIS OF WHICH AN INDUSTRIAL UNDERTAKING SHALL BE REGARDED AS A SMALL SCALE INDU STRIAL UNDERTAKING. IT WOULD SUFFICE FOR THE PRESENT TO OBSERVE THAT IN TERMS OF THE SAID NOTIFICATION, A SMALL SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUSTRIAL UN DERTAKING IN WHICH THE INVESTMENT IN FIXED ASSETS IN PLANT AND MACHINERY, WHETHER HELD ON OWNERSHIP TERMS OR ON LEASE OR ON HIRE-PURCHASE, DOES NOT EXC EED RUPEES ONE CRORE. NOTE- 2(A) THEREOF PROVIDES THAT FOR THE PURPOSES O F CALCULATING THE VALUE OF PLANT AND MACHINERY THE ORIGINAL PRICE THEREOF SHAL L BE TAKEN INTO ACCOUNT. NOTE NO.2(B) LISTS OUT CERTAIN ITEMS WHOSE COST IS LIABLE TO BE EXCLUDED FOR CALCULATING THE VALUE OF PLANT AND MACHINERY. ONE OF THE ITEMS SPECIFIED FOR EXCLUSION IS BY WAY OF ITEM (X), WHICH WE HAVE REPR ODUCED IN AN EARLIER PARA. AS PER THE APPELLANT, THE VALUE OF MOLASSES STORAGE TANK WHICH HAS BEEN INCLUDED BY THE CIT(A) TO CALCULATE THE VALUE OF PL ANT AND MACHINERY, IS NOT LINKED WITH THE MANUFACTURING PROCESS AND THEREFORE THE SAME IS NOT LIABLE TO BE INCLUDED. A PERUSAL OF ITEM (X) REPRODUCED ABOV E WOULD SHOW THAT THE COST OF SUCH STORAGE TANKS WHICH ARE FUNCTIONALLY USED T O STORAGE RAW MATERIAL OR FINISHED PRODUCTS ARE LIABLE TO BE EXCLUDED SO LONG AS THEY ARE NOT LINKED WITH THE MANUFACTURING PROCESS. THE PLEA SETUP BY THE A SSESSEE IS THAT THE MOLASSES STORAGE TANK COSTING RS.11,93,977/- IS NOT LINKED WITH THE MANUFACTURING PROCESS BUT IS USED ONLY FOR STORAGE OF RAW MATERIAL AFTER IT IS RECEIVED. THE FOLLOWING FACTUAL POSITION HAS BEEN ASSERTED TO SAY THAT THE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 MOLASSES STORAGE TANK IS NEITHER LINKED TO AND NOR IS AN INTEGRAL PART OF THE MANUFACTURING PROCESS :- ON ARRIVAL OF THE TANKERS, MOLASSES IS FIRST UNLOA DED INTO AN UNDERGROUND RCC TANK AND SUBSEQUENTLY TRANSFERRED I NTO THE MOLASSES STORAGE TANK. FOR THE PROCESS OF MANUFACTURE OF CATTLEFEED, THE M OLASSES IS TRANSFERRED EVERY DAY, FROM THE MOLASSES STORAGE TA NK INTO A DOSAGE TANK (ALSO TERMED AS A 'DAY TANK'). THEREAFTER, A SPECIF IC QUANTITY OF MOLASSES IS DRAWN FROM THE DOSAGE TANK AND SPRAYED INTO THE MIXER USING AUTO TIMER. THE ABOVE PROCESS IS ILLUSTRATED GRAPHICALLY OVERLE AF: TANKER RCC TANK MOLASSES STORAGE TANK DOSAGE TANK (DAY TANK) SPRAYED INTO MIXER USING AUTO TIMER THE ABOVE SHOWS THAT ONLY THE DAY TANK, ALONE, CAN IF AT ALL, BE REGARDED AS LINKED WITH, AND AS INTEGRAL PART OF, T HE MANUFACTURING PROCESS, SO AS TO BE INCLUDIBLE IN THE VALUE OF PLA NT AND MACHINERY, IN ORDER TO DETERMINE THE SSI CEILING. THEREFORE, THE MOLASSES STORAGE TANK CANNOT BE REGA RDED AS LINKED WITH THE MANUFACTURING PROCESS. FURTHER, THE MOLASSES STORAGE TANK, WHICH THE CIT(A ) HAS INCLUDED IN COMPUTING THE TOTAL VALUE OF THE APPELLANT'S PLA NT & MACHINERY: (A) IS SITUATED, PHYSICALLY, OUTSIDE THE APPELLANT' S ACTUAL PRODUCTION FACILITY; (B) HAS A CAPACITY OF OVER 738 MTS WHEREAS THE APPE LLANT'S DAILY CONSUMPTION OF MOLASSES IS ONLY ABOUT 8 MTS. THUS, THE MOLASSES STORAGE TANK STORES MATERIAL EQUIVALEN T TO ABOUT THREE MONTHS CONSUMPTION. THIS MAKES IT CLEAR THAT THE APPELLANT'S MOLASSES STORAGE TANK IS IN SUBSTAN CE A STORAGE RESERVOIR AND CANNOT BE REGARDED AS AN INTE GRAL PART OF THE MANUFACTURING PROCESS. AS SUCH, THE APPELLAN T'S MOLASSES STORAGE TANK WOULD QUALIFY FOR EXCLUSION, UNDER CLAUSE (X), IN CALCULATING THE VALUE OF THE APPELLA NT'S PLANT & MACHINERY. (C) THE MANUFACTURING PROCESS IS DEFINED AS ONE, WH ERE, AS RESULT OF UNDERGOING A PROCESS, A DISTINCT COMMERCI AL COMMODITY DIFFERENT FROM THE RAW MATERIAL COMES INT O EXISTENCE. IN SHORT, THE MANUFACTURING PROCESS STARTS FROM THE POINT OF INPUT OF RAW MATERIAL AND PASSES THROUGH VARIOUS STAGES AND RESULTS INTO A FINISHED PRODUCT. THE APPELLANT SUBMITS THAT IN ITS CASE, THE INPUT O F RAW MATERIALS EG. CORN, JOWAR, OIL CAKES, ETC. AT NO TIME PASS TH ROUGH THE MOLASSES STORAGE TANK, ON ITS WAY TO BECOMING THE FINISHED P RODUCT OF CATTLEFEED. ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 THE CIT (A) IS, THEREFORE, WRONG IN INCLUDING SUCH TANK IN DETERMINING WHETHER THE RS.1 CRORE LIMIT IS BREACHED. 25. HAVING REGARD TO THE AFORESAID FACTUAL ASSERTIO NS, TO WHICH THERE IS NO NEGATION FROM THE SIDE OF THE REVENUE, IT HAS TO BE HELD THAT THE MOLASSES STORAGE TANK IN QUESTION IS TO BE FUNCTIONALLY UNDE RSTOOD AS A STORAGE TANK NOT LINKED WITH THE MANUFACTURING PROCESS OF THE ASSESS EE. THUS, THE VALUE OF MOLASSES STORAGE TANK AMOUNTING TO RS.11,93,977/- I S LIABLE TO THE EXCLUDED FROM THE VALUE OF PLANT AND MACHINERY IN TERMS OF T HE NOTIFICATION DATED 10.12.1999 (SUPRA). 26. THE OTHER ASPECT IS THE INCLUSION OF THE COST O F VEHICLES. IN OUR CONSIDERED OPINION, THE STAND OF THE REVENUE ON THI S ASPECT IS QUITE FALLACIOUS AS THE EMPHASIS OF THE NOTIFICATION DATED 10.12.199 9 (SUPRA) IS TO INCLUDE INVESTMENT IN FIXED ASSETS IN PLANT AND MACHINERY . OSTENSIBLY, VEHICLES IN QUESTION, NAMELY, EICHER CANTER, TWO WHEELERS AND C ARS DO NOT FIT INTO THE EXPRESSION FIXED ASSETS IN PLANT AND MACHINERY, A S UNDERSTOOD PER NOTIFICATION DATED 10.12.1999 (SUPRA). THEREFORE, IN OUR VIEW, THE VALUE OF THE VEHICLES AMOUNTING TO RS.20,77,359/- IS ALSO LIABLE TO BE EXCLUDED IN ORDER TO COMPUTE THE VALUE OF PLANT AND MACHINERY FOR THE PU RPOSE OF EVALUATING THE SMALL SCALE INDUSTRIAL UNDERTAKING STATUS OF ASSESS EES UNIT NO.III. THE STAND OF THE CIT(A) BASED ON THE DECISION OF THE MUMBAI B ENCH OF THE TRIBUNAL IN THE CASE OF KOOVERJI DEVSHI & CO. (P) LTD., 38 ITD 99 (MUM) IS NOT JUSTIFIED BECAUSE THE MUMBAI BENCH WAS CONSIDERING THE DEFINI TION OF PLANT AS PROVIDED U/S 43(3) OF THE ACT WHEREIN VEHICLES HA VE BEEN ARTIFICIALLY INCLUDED IN THE DEFINITION OF PLANT. SO HOWEVER, FOR THE PURPOSES OF ASCERTAINING THE INVESTMENT IN THE PLANT AND MACHINERY FOR THE PURPO SES OF THE IDR ACT, THE SAME HAS TO BE IN CONSONANCE WITH THE IDR ACT, WHER EIN THE REQUIREMENT IS TO ADOPT INVESTMENT MADE IN FIXED ASSETS IN PLANT AND MACHINERY ALONE. THEREFORE, ON THIS ASPECT, WE UPHOLD THE PLEA OF TH E ASSESSEE THAT FACTUALLY SPEAKING, AS ON 31 ST MARCH, 2004 UNIT NO.III CONTINUES TO BE A SMALL SC ALE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 INDUSTRIAL UNDERTAKING. FOR THE SAID REASON ALSO, IN OUR VIEW, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB OF THE ACT CANNOT B E REJECTED. 27. IN THE RESULT, THE ORDER OF THE CIT(A) IS SET-A SIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSES SEE FOR DEDUCTION U/S 80IB OF THE ACT IN RELATION TO THE ASSESSMENT YEAR 2004-05. 28. IN SO FAR AS THE OTHER CAPTIONED ASSESSMENT YEA RS ARE CONCERNED THE FACTS AND CIRCUMSTANCES OF THE CLAIM OF DEDUCTION U /S 80IB OF THE ACT IS SIMILAR TO THAT CONSIDERED BY US FOR THE ASSESSMENT YEAR 20 04-05. THEREFORE OUR DECISION ON THIS ISSUE IN THE CONTEXT OF ASSESSMENT YEAR 2004-05 RENDERED IN EARLIER PARAGRAPHS SHALL APPLY MUTATIS-MUTANDIS TO OTHER APPEALS ALSO. 29. NOW, WE MAY TAKE UP THE OTHER ISSUES IN THE ASS ESSMENT YEAR 2004-05, WHICH ARE RELATING TO A DISALLOWANCE OF RS.2,86,916 /- IN TERMS OF SECTION 40A(2)(B) OF THE ACT AND AN AD-HOC DISALLOWANCE OF RS.25,000/- OUT OF TELEPHONE EXPENSES. 30. IN RELATION TO THE DISALLOWANCE OF RS.2,86,916/ - U/S 40A(2)(A) OF THE ACT, THE SAME RELATES TO THE DISCOUNT GIVEN ON SALES MAD E TO BARAMATI CATTLE FEED PVT. LTD.. THE ASSESSING OFFICER NOTED THAT ASSESS EE FIRM SOLD ITS PRODUCT TO M/S BARAMATI CATTLE FEEDS PVT. LTD., A CONCERN SPEC IFIED U/S 40A(2)(B) OF THE ACT AT LOWER RATES AS COMPARED TO SALE OF THE SAME PRODUCT TO OTHER PARTIES. THE ASSESSING OFFICER HAS TABULATED THE RELEVANT DE TAILS AND INSTANCES OF THE SALE OF PRODUCTS TO DIFFERENT PARTIES IN PARA 7 OF THE ASSESSMENT ORDER. ON BEING SHOW-CAUSED, ASSESSEE POINTED OUT THAT BARAMA TI CATTLE FEEDS PVT. LTD. WAS TO BEAR THE COST OF TRANSPORTATION CHARGES IN B RINGING THE MATERIAL FROM BARAMATI TO PUNE AND THEREFORE IT WAS FINDING THE P URCHASE OF MATERIAL UNVIABLE AND THEREFORE ASSESSEE OFFERED CERTAIN DIS COUNTS. WITH REGARD TO THE SALES MADE TO OTHER PARTIES AT HIGHER RATES, IT WAS EXPLAINED THAT THE SAID ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 PARTIES WERE ALLOWED A CREDIT PERIOD OF 30 DAYS AND THEY WERE BUYING RELATIVELY SMALLER QUANTITIES AS COMPARED TO BARAMATI CATTLE F EED PVT. LTD.. IT WAS ALSO POINTED OUT THAT SALES WERE MADE TO BARAMATI CATTLE FEED PVT. LTD. ON IMMEDIATE PAYMENT TERMS. FOR ALL THE ABOVE REASONS , SALES MADE TO BARAMATI CATTLE FEED PVT. LTD. AT DISCOUNTED RATES IN COMPAR ISON TO SALES MADE TO OTHER PARTIES WAS SOUGHT TO BE JUSTIFIED. THE ASSESSING OFFICER CONCLUDED THAT UNDUE DISCOUNT HAS BEEN ALLOWED BY THE ASSESSEE TO A CONCERN WHICH IS SPECIFIED U/S 40A(2)(B) OF THE ACT THEREFORE SUCH E XCESS EXPENDITURE, QUANTIFIED BY HIM AT RS.2,86,916/-, WAS DISALLOWED IN TERMS OF SECTION 40A(2)(A) OF THE ACT. THE CIT(A) HAS ALSO AFFIRMED THE ORDER OF THE ASSESSING OFFICER. 31. BEFORE US, THE PLEA OF THE LEARNED COUNSEL IS T HAT TRADE DISCOUNT ALLOWED TO A SISTER CONCERN IS NOT TO BE UNDERSTOOD AS AN EXPENDITURE WITHIN THE MEANING OF SECTION 40A(2)(A) OF THE ACT AND IN THIS CONTEXT, RELIANCE HAS BEEN PLACED ON THE JUDGEMENT OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF UNITED EXPORTS VS. CIT, (2011) 330 ITR 549 (DELHI). 32. ON THE OTHER HAND, THE LEARNED CIT-DR APPEARING FOR THE REVENUE HAS DEFENDED THE ORDERS OF THE AUTHORITIES BELOW BY ADO PTING THE REASONING WHICH WE HAVE ALREADY REFERRED TO EARLIER PARAS AND IS NO T BEING REPEATED FOR THE SAKE OF BREVITY. 33. HAVING CONSIDERED RIVAL SUBMISSIONS, WE FIND SE CTION 40A(2)(A) OF THE ACT HAS BEEN APPLIED IN THE PRESENT CASE WITH RESPE CT TO A TRADE DISCOUNT ALLOWED TO THE SISTER CONCERN. THE HONBLE DELHI H IGH COURT IN THE CASE OF UNITED EXPORTS (SUPRA) HAS HELD THAT TRADE DISCOUNT IS NOT AN EXPENDITURE WHICH IS LIABLE FOR CONSIDERATION WITHIN THE MEANIN G OF SECTION 40A(2)(A) OF THE ACT. FOLLOWING THE AFORESAID JUDGEMENT, AND IN THE ABSENCE OF ANY CONTRARY DECISION RELIED UPON BY THE REVENUE, WE SET-ASIDE T HE ORDER OF THE CIT(A) AND ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.2,86,916/-. THUS, ON THIS GROUND ASSESSEE SUCCEEDS. 34. THE ONLY OTHER GROUND IN THE ASSESSMENT YEAR 20 04-05 IS AN AD-HOC DISALLOWANCE OF RS.25,000/- MADE OUT TELEPHONE EXPE NSES. IN THE ABSENCE OF ANY CREDIBLE ARGUMENTS, THE SAID DECISION OF THE CI T(A) IS HEREBY AFFIRMED. THUS, ON THIS GROUND ASSESSEE FAILS. 35. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSES SMENT YEAR 2004-05 IS PARTLY ALLOWED. 36. THE ONLY OTHER ISSUE WHICH REMAINS IS FOR ASSES SMENT YEAR 2007-08, WHEREIN ASSESSEE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN SUSTAINING AN ADDITION OF RS.4,25,802/- U/S 40A(2)(A) OF THE ACT. IN THIS CONTEXT, THE RELEVANT FACTS ARE AS FOLLOWS. IT WAS NOTICED THAT ASSESSEE HAD SHOWN A TURNOVER OF RS.2,73,05,832/- TOWARDS TRADING OF FINISHED GOODS, IN RESPECT OF WHICH A LOSS OF RS.4,25,862/- WAS SHOWN. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ENTIRE STOCK OF FINISHED GOODS WAS PURCHASED FR OM BARAMATI CATTLE FEEDS PVT. LTD., WHICH IS A SISTER CONCERN OF THE APPELLA NT. ON BEING ASKED TO EXPLAIN THE REASONS FOR THE LOSS, IT WAS CONTENDED THAT THE RE WAS ADDITIONAL REQUIREMENT FROM CUSTOMERS WHICH ASSESSEE COULD NOT FULFILL AND TO MAINTAIN THE QUALITY AND STANDARD OF THE PRODUCT WHICH THE C USTOMERS ALWAYS INSISTED THE ASSESSEE WAS FORCED TO PROCURE THE FINISHED PRO DUCTS FROM BARAMATI CATTLE FEED LTD., WHICH WAS PRODUCING THE SAME QUALITY GOO DS AS WAS BEING PRODUCED BY THE APPELLANT. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION PUT-FORTH BY THE ASSESSEE. IT WAS OBSERVED BY HIM THAT MAJORITY OF THE PURCHASE FROM THE SISTER CONCERN PE RTAINED TO TWO PRODUCTS, NAMELY, RAJAT PELLET 70 KG AND SUVARNA PELLET 70 KG . ON PERUSAL OF THE STOCK REGISTER FOR THE RELEVANT ITEMS AS ON THE DATES OF PURCHASE OF THE SAID ITEM, THE ASSESSING OFFICER NOTICED THAT THERE WAS SUFFICIENT STOCK AVAILABLE WITH THE ITA NOS.65 TO 69/PN/2012 ITA NO.105/PN/2013 ASSESSEE. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE COULD NOT SATISFACTORY EXPLAIN THE TRANSACTIONS WHICH ARE COV ERED BY THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT. ACCORDINGLY, LOSS CL AIMED TO THE EXTENT OF RS.4,25,862/- ON ACCOUNT OF TRADING ACTIVITY WAS DI SALLOWED. THE CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE. 37. HAVING CONSIDERED THE RIVAL STANDS, WE FIND THA T THE CIT(A) MADE NO MISTAKE IN HOLDING THAT THE EXPENDITURE INCURRED BY THE APPELLANT ON THE PURCHASES FROM ITS SISTER CONCERN IS EXCESSIVE OR U NREASONABLE HAVING REGARD TO THE MARKET VALUE OF THE GOODS, OR THE LEGITIMATE NEEDS OF THE BUSINESS FOR WHICH THE PAYMENT IS MADE AND THE PURCHASES IN QUES TION ARE CLEARLY HIT BY THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT. TH E ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND THE ASSESSEE FAILS ON THIS ASPE CT. 38. RESULTANTLY, WHEREAS THE APPEALS OF THE ASSESSE E FOR ASSESSMENT YEARS 2004-05 AND 2007-08 ARE PARTLY ALLOWED, THOSE FOR A SSESSMENT YEARS 2005-06, 2006-07, 2008-09 AND 2009-10 ARE ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 30 TH SEPTEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE