Deepa Panels, Palakkad V. ITO, Palakkad

ITA 676/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61497 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 14-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: S SRIDHAR
• Section: 80HHC; 10B

Judgement Text

1 ITA NO. 676/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.TA NO. 676/COCH/2010 (ASSESSMENT YEAR 2002-03) M/S DEEPA PANELS VS ITO, WD.II VILAYUR, PATTAMBI PALAKKAD PALAKKAD PAN : AACFD1588L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S SRIDHAR RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 18-04-2012 DATE OF PRONOUNCEMENT : 01-06-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-V, KOCHI DATED 17-08-2010 AND PERTAIN S TO ASSESSMENT YEAR 2002-03. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS EXEMP TION U/S 10B OF THE ACT. 3. SHRI S SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FIRM IS A 100% EXPORT ORIENTED UNIT. THE FIRM STARTED ITS BUSINESS IN THE YEAR 1992 AT VILAYUR, PATTAMBI IN THE STATE OF KERALA. INITIALLY THE ASS ESSEE WAS CLAIMING DEDUCTION U/ 80HHC. IN THE YEAR 1996 THE ASSESSEE EXPANDED ITS BUSINESS AND STARTED AN UNDERTAKING AT VELAPPANCHAVADI IN RENTED PREMISES. THE INVESTMENT AT VELAPPANCHAVADI UNDERTAKING WAS NEGLIGIBLE AND IT HAD NO PLANT AND MACHINERY WO RTH MENTIONING. ACCORDING TO THE 2 ITA NO. 676/COCH/2010 LD.COUNSEL, THE VELAPPANCHAVADI UNDERTAKING WAS USE D FOR WEAVING OPERATIONS. ACCORDING TO THE LD.COUNSEL, THE VELAPPANCHAVADI UN DERTAKING WAS CLOSED DOWN ON 02- 05-2001 AND A NEW UNDERTAKING WAS ESTABLISHED AT VA RADARAJAPURAM, POONAMALLEE IN CHENNAI. ACCORDING TO THE LD.COUNSEL, THE VELAPPAN CHAVADI UNDERTAKING HAD NO REQUIRED INVESTMENT FOR REGISTRATION AS 100% EXPORT ORIENTED UNIT. THEREFORE, THE ASSESSEE HAD NOT CLAIMED ANY BENEFIT U/S 10B IN RESPECT OF VELAP PANCHAVADI UNDERTAKING. THE FACT REMAINS, ACCORDING TO THE LD.COUNSEL, IS THAT THE V ELAPPANCHAVADI UNDERTAKING WAS CLOSED DOWN IN THE YEAR 2001. HOWEVER, A NEW UNDER TAKING ESTABLISHED AT VARADARAJAPURAM HAD REQUIRED INVESTMENT OF MORE THA N RS.50 LAKHS; THEREFORE, IT WAS ELIGIBLE FOR REGISTRATION AS 100% EXPORT ORIENTED U NIT. THE NEW UNDERTAKING AT VARADARAJAPURAM STARTED MANUFACTURING GOODS FOR EXP ORT DURING THE FINANCIAL YEAR 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03. AFTER OBTAINING ALL REQUIRED LICENCES UNDER THE STATUTORY PROVISIONS, THE ASSESSEE CLAIME D DEDUCTION U/S 10B FROM THE ASSESSMENT YEAR 2002-03. THE ASSESSING OFFICER ALL OWED DEDUCTIONS U/S 10B AND 80HHC. HOWEVER, HE MADE OBSERVATION THAT THE BASE YEAR FOR EXEMPTION U/S 10B IS ASSESSMENT YEAR 1997-98 AS AGAINST THE CLAIM OF THE ASSESSEE F ROM THE ASSESSMENT YEAR 2002-03. THE APPEAL FILED BY THE ASSESSEE BEFORE COMMISSIONE R OF INCOME-TAX(A) WAS ALLOWED. HOWEVER, THE COMMISSIONER OF INCOME-TAX(A) HAS NOT DISCUSSED THE YEAR OF ELIGIBILITY OF DEDUCTION IN HIS APPELLATE ORDER. THEREFORE, THE A SSESSEE FILED A RECTIFICATION APPLICATION BEFORE THE COMMISSIONER OF INCOME-TAX(A). THE RECT IFICATION APPLICATION FILED BY THE ASSESSEE BEFORE COMMISSIONER OF INCOME-TAX(A) WAS D ISMISSED. AGAINST THE ORDER OF THE RECTIFICATION U/S 154, THE ASSESSEE FILED AN APPEAL BEFORE THIS TRIBUNAL IN ITA NO.942/COCH/2008. THIS TRIBUNAL BY AN ORDER DATED 19-02-2009 SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) AND REMITTED BACK THE MATTER TO THE FILE OF THE COMMISSIONER OF INCOME-TAX(A) WITH A DIRECTION TO C ONSIDER THE SAME ON MERIT. THE TRIBUNAL HAS ALSO DIRECTED THE COMMISSIONER OF INCO ME-TAX(A) TO EXAMINE WHETHER THE ASSESEE IS ENTITLED FOR BENEFIT U/S 10B FROM THE AS SESSMENT YEAR 1997-98 ONWARDS OR FROM THE ASSESSMENT YEAR 2002-03 ONWARDS. CONSEQUE NT TO THE DIRECTION OF THIS TRIBUNAL, THE COMMISSIONER OF INCOME-TAX(A) EXAMINE D THE ISSUE AND FOUND THAT THE 3 ITA NO. 676/COCH/2010 ASSESSEE STARTED PRODUCTION IN MAY, 1996, THEREFORE , THE BENEFIT OF DEDUCTION U/ 10B WOULD START FROM ASSESSMENT YEAR 1997-98 AND NOT FR OM ASSESSMENT YEAR 2002-03. AGAINST THIS ORDER, THE ASSESSEE FILED THE APPEAL B EFORE THIS TRIBUNAL. 4. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT THE ASSESSEE FILED A DETAILED WRITTEN SUBMISSION BEFORE THE COMMISSIONER OF INCOME-TAX(A)( AND THE SAME WAS REPRODUCED AT PARAGRAPH 3 OF THE APPELLATE ORDE R PASSED BY HIM. THE ASSESSEE CLEARLY BROUGHT TO THE NOTICE OF THE COMMISSIONER O F INCOME-TAX(A) THAT THE ASSESSEE HAS TWO BUSINESS UNDERTAKINGS, ONE AT VILAYUR AND T HE OTHER AT VARADARAJPURAM, POONAMALLEE, CHENNAI. THE UNDERTAKING AT VELAPPANC HAVADI WAS CLOSED DOWN ON 02-05- 2001. THE VELAPPANCHAVADI WAS A SMALL UNDERTAKING FOR MANUAL WEAVING AND IT HAD NO REQUIRED INVESTMENT FOR THE PURPOSE OF REGISTERING AS 100% EXPORT ORIENTED UNIT. THE NEW UNDERTAKING AT VARADARAJAPURAM ITSELF WAS ESTAB LISHED DURING THE FINANCIAL YEAR 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03. THERE FORE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/ 10B FROM THE ASSESSMENT YEAR 2002-03. REFERRING TO THE PAPER BOOK, THE LD.COUNSEL SUBMITTED THAT PAGE 64 OF THE PAPER BOOK IS THE REGISTRATION CERTIFICATE UNDER CST IN RESPECT OF VELAPPANCHAVADI UNDERTAKING. THE FACTORY LICENCE FOR VELAPPANCHAVADI UNDERTAKING IS PLACED AT PAGE 66 OF THE PAPER BOOK. THE LEASE DEED FOR THE NEW UNDERTAKING AT VARADARAJAPURAM IS AVAIL ABLE AT PAGE 67 OF THE PAPER BOOK. THE LD.COUNSEL HAS ALSO SUBMITTED THAT THE SALES-TA X REGISTRATION AND TAMIL NADU GENERAL SALES-TAX ACT AND FACTORY LICENCE ISSUED BY CUSTOMS DEPARTMENT AND OTHER AUTHORITIES ARE AVAILABLE AT PAGES 70, 72 AND 74 OF THE PAPER B OOK, RESPECTIVELY. SINCE THE NEW UNDERTAKING ITSELF WAS ESTABLISHED, ACCORDING TO TH E LD.COUNSEL, IN THE YEAR 2002-03, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION ONLY FROM ASSESS MENT YEAR 2002-03 AND NOT FROM ASSESSMENT YEAR 1997-98. THE LD.COUNSEL FURTHER SU BMITTED THAT SINCE THE LOWER AUTHORITIES HAVE NOT CONSIDERED THE ESTABLISHMENT O F THE NEW UNDERTAKING AT VARADARAJAPURAM AT POONAMALLEE, CHENNAI, THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. 4 ITA NO. 676/COCH/2010 5. ON THE CONTRARY, SMT. VIJAYAPRABHA, THE LD.DR SU BMITTED THAT BEFORE THE LOWER AUTHORITIES THE ASSESSEE HAS NOT CLAIMED THAT THE N EW UNIT WAS ESTABLISHED AT VARADARAJAPURAM, POONAMALLEE. THE ASSESSING OFFICE R FOUND THAT THE UNDERTAKING WAS ESTABLISHED IN THE YEAR 1996 AND PRODUCTION WAS STA RTED IN MAY, 1996. TILL ASSESSMENT YEAR 2001-02 THE ASSESSEE DID NOT CLAIM EXEMPTION U /S 10B OF THE ACT. SINCE THE PRODUCTION WAS ACTUALLY STARTED IN THE MONTH OF 199 6, ACCORDING TO THE LD.DR, THE BASE YEAR FOR CLAIMING EXEMPTION U/S 10B IS ASSESSMENT Y EAR 1997-98 AND NOT ASSESSMENT YEAR 2002-03 AS CLAIMED BY THE ASSESSEE. THEREFORE , THE COMMISSIONER OF INCOME- TAX(A) HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESS EE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 10B OF THE ACT. UNDER SECTION 10B THE PROFIT AND GAIN DERIVED BY 100% EXPORT ORIENTED UNDERTAKING FROM EXPORT OF ARTICLE OR THING IS ELIG IBLE FOR DEDUCTION FOR 10 CONSECUTIVE YEARS BEGINNING FROM THE ASSESSMENT YEAR RELEVANT T O THE PREVIOUS YEAR IN WHICH THE UNDERTAKING STARTED MANUFACTURE OR PRODUCE ARTICLE OR THING. THEREFORE, THE BASE YEAR FOR CLAIMING DEDUCTION IS THE YEAR IN WHICH THE UND ERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLE OR THING. THE CLAIM BEFORE THE TRI BUNAL BY THE ASSESSEE IS THAT THE BUSINESS WAS STARTED IN THE YEAR 1992 AT VILAYUR. IN THE INITIAL PERIOD, THE ASSESSEE CLAIMED DEDUCTION U/S 80HHC OF THE ACT. WITH A VIEW TO EXPAND THE BUSINESS THE ASSESSEE STARTED AN UNDERTAKING AT VELAPPANCHAVADI AT CHENNAI. HOWEVER, THE REQUIRED INVESTMENT OF RS.50 LAKHS COULD NOT BE MADE ON THE UNDERTAKING AT VELAPPANCHAVADI. THEREFORE, THE VELAPPANCHAVADI UNDERTAKING WAS NOT REGISTERED AS 100% EXPORT ORIENTED UNIT. THE ASSESSEE FURTHER CLAIMED THAT V ELAPPANCHAVADI UNDERTAKING WAS CLOSED DOWN ON 02-05-2001 AND A NEW UNDERTAKING WAS SET UP AT VARADARAJAPURAM, POONAMALLEE, CHENNAI IN THE YEAR 2001. THE DEVELOP MENT COMMISSIONER GRANTED REGISTRATION AS 100% EXPORT ORIENTED UNIT STATUS BY A LETTER DATED 28-06-2001 IN RESPECT OF VARADARAJAPURAM UNDERTAKING. THE COPY OF THE LE ASE DEED IS AVAILABLE AT PAGE 67 OF THE PAPER BOOK AND SALES-TAX REGISTRATION CERTIFICA TION IS AVAILABLE AT PAGE 70 OF THE 5 ITA NO. 676/COCH/2010 PAPER BOOK WHICH SHOWS THAT THE NEW UNIT WAS ESTABL ISHED IN THE YEAR 2001. THE CUSTOMS DEPARTMENT GRANTED SANCTION BY AN ORDER DA TED 12-07-2001 IN RESPECT OF VARADARAJAPURAM UNDERTAKING. THIS MATERIAL CLEARLY SHOWS THAT THE VARADARAJAPURAM UNDERTAKING WAS ESTABLISHED IN THE MONTH OF JULY, 2 001. THIS VARADARAJAPURAM UNDERTAKING IS A NEW UNDERTAKING STARTING MANUFACTU RE IN THE ASSESSMENT YEAR 2002-03. THIS FACT WAS NOT CONSIDERED BY THE LOWER AUTHORITY . THE ASSESSEE CLAIMED DEDUCTION U/S 10B IN RESPECT OF VARADARAJAPURAM UNDERTAKING A T POONAMALLEE, CHENNAI. SINCE THE LOWER AUTHORITIES HAVE NOT CONSIDERED THE UNDERTAKI NG ESTABLISHED AT VARADARAJAPURAM, POONAMALLEE, CHENNAI FOR THE PURPOSE OF DETERMINING THE BASE YEAR, THIS TRIBUNAL IS OF THE OPINION THAT THE MATTER NEEDS TO BE RECONSIDERE D BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF LOWER AUTHORITIES ARE SE T ASIDE AND THE ENTIRE ISSUE OF CLAIM OF DEDUCTION U/S 10B IS REMITTED BACK TO THE FILE OF T HE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF THE NEW UNDERTAKING ESTABLISHED AT VARADARAJAPURAM, POONAMALLEE, CHENNAI AND THEREAFTE R DECIDE THE CLAIM OF DEDUCTION U/S 10B IN ACCORDANCE WITH LAW AFTER GIVING OPPORTU NITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 ST JUNE, 2012. (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 01 ST JUNE, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX(A) 4. THE COMMISSIONER OF INCOME-TAX 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH