Mcleod Russel India Ltd, Kolkata V. DCIT, Circle-4(1), Kolkata, Kolkata

ITA 682/KOL/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1482 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOULEN HANGSHING
• Assessee Lawyers: D S DAMLE
• Keywords: Depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 682/KOL/201 7 ASSESSMENT YEAR : 2012-1 3 MCLEOD RUSSEL INDIA LTD. -VS.- D. C.I.T., CIRCLE-4 (1), KOLKATA KOLKATA [PAN : AAACE 6918 J] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI D.S.D AMLE, AR FOR THE RESPONDENT : SHRI GOULEN HANGSHIN G, CIT(DR) DATE OF HEARING : 25.07.2017. DATE OF PRONOUNCEMENT : 28.07.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 24.03.2017 OF C.I.T., KOLKATA-2, KOLKATA PASSED U/S 263 OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) RELATING TO A.Y.2012-13. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF GROWING AND MANUFACTURING OF TEA. FOR A.Y.2012-13 THE ASSESSEE FILED RETURN O F INCOME ON 25.11.2012 DISCLOSING TOTAL INCOME OF RS.37,83,29,120/-. THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IE OF THE ACT. UNDER SECTION 80IE OF THE ACT, WHERE THE TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING TO WHICH SECTION 80IE OF THE ACT APPLIES FROM ANY BUSINESS REFERRED TO IN SUB-SECTIO N (2), THE ASSESSEE SHALL BE ALLOWED DEDUCTION OF 100% OF PROFITS AND GAINS FROM SUCH BU SINESS FOR 10 CONSECUTIVE ASSESSMENT YEARS COMMENCING FROM THE INITIAL ASSESS MENT YEAR. THE BUSINESS REFERRED TO SUB-SECTION (2) ALSO REFERS TO AN UNDERTAKING OF NORTH-EASTERN STATES WHICH MANUFACTURES OR PRODUCES ELIGIBLE ARTICLE OR THING OR UNDERTAKES SUBSTANTIAL EXPANSION TO MANUFACTURE OR PRODUCE ANY ELIGIBLE ARTICLE OR T HING. THE ASSESSEE MADE THE CLAIM FOR 2 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 2 DEDUCTION U/S 80IE OF THE ACT IN RESPECT OF VARIOUS UNDERTAKINGS OF THE ASSESSEE CARRYING OUT SUBSTANTIAL EXPANSION TO MANUFACTURE O R PRODUCE ARTICLE OR A THING. SUBSTANTIAL EXPANSION HAS BEEN DEFINED IN SUB-SECTI ON 80IE(7)(III) OF THE ACT WHICH MEANS INCREASE IN THE INVESTMENT IN THE PLANT AND M ACHINERY BY AT LEAST 25% OF THE BOOK VALUE OF THE PLANT AND MACHINERY AS ON THE FIR ST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. 3. THE ASSESSEE HAD VARIOUS TEA ESTATES IN THE NO RTH EASTERN STATES AND EACH TEA ESTATE HAD TO BE REGARDED AS AN UNDERTAKING FOR THE PURP OSE OF CLAIMING DEDUCTION U/S 80IE OF THE ACT. 4. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IE OF THE ACT IN RESPECT OF CARRYING OUT SUBSTANTIAL EXPANSION IN 28 TEA GARDENS IN THE PREV IOUS YEAR RELEVANT TO A.Y.2010-11. THE AO ALLOWED DEDUCTION U/S 80IE OF THE ACT IN RES PECT OF 24 TEA GARDENS (UNDERTAKINGS) AND DISALLOWED IN RESPECT OF FOUR UN DERTAKINGS. THE CIT(A) ON APPEAL BY THE ASSESSEE ALLOWED THE DEDUCTION IN RESPECT OF THE REMAINING FOUR UNDERTAKINGS ALSO. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) AND THE ISSUE IS PENDING BEFORE THE TRIBUNAL FOR A.Y.2010-11. 5. IN THE PREVIOUS YEAR RELEVANT TO A.Y.2011-12, THE ASSESSEE CLAIMED DEDUCTION IN RESPECT OF 36 TEA GARDENS (UNDERTAKINGS) I.E. 8 TEA GARDENS (UNDERTAKINGS) OVER AND ABOVE 28 TEA GARDENS FOR WHICH DEDUCTION WAS CLAIME D FOR A.Y.2010-11. THE AO DISALLOWED CLAIM FOR DEDUCTION IN RESPECT OF EIGHT UNDERTAKINGS INCLUDING FOUR DISALLOWED IN A.Y.2010-11. 6. AS FAR AS A.Y.12-13 IS CONCERNED, THE ASSESSE E CLAIMED DEDUCTION IN RESPECT OF 42 TEA GARDENS (UNDERTAKINGS) AND THE AO DISALLOWED TH E CLAIM IN RESPECT OF 11 UNDERTAKINGS INCLUDING 8 DISALLOWED IN A.Y.2011-12. THEREFORE OUT OF THE 6 3 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 3 UNDERTAKINGS FOR WHICH A NEW CLAIM FOR DEDUCTION WA S MADE IN AY 2012-13, DEDUCTION WAS ALLOWED FOR 3 UNDERTAKINGS AND DISALLOWED FOR T HE REMAINING 3 UNDERTAKINGS. 7. IT IS WORTHWHILE TO MENTION THAT SO FAR AS DE DUCTION U/S 80IE OF THE ACT IS CONCERNED THE CONDITION FOR ALLOWING DEDUCTION U/S 80IE OF THE ACT HAS TO BE DECIDED IN THE INITIAL ASSESSMENT YEAR. THEREFORE AS FAR AS A. Y.2012-13 IS CONCERNED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IE OF THE ACT WAS MADE ONLY IN RESPECT OF SIX TEA GARDENS (UNDERTAKINGS) OUT OF WHICH THE AO ALLOWED THE CLAIM IN RESPECT OF THREE TEA GARDENS (UNDERTAKINGS) AND DISALLOWED THE CLAIM IN RESPECT OF THREE UNDERTAKING TEA GARDENS. THEREFORE AS FAR AS A.Y.2012-13 IS CONCERN ED THE SUBJECT MATTER OF DEDUCTION U/S 80IE OF THE ACT THAT COULD BE INVESTIGATED BY T HE AO WAS ONLY SIX NEW UNDERTAKINGS (TEA GARDENS) FOR WHICH A FRESH CLAIM OF DEDUCTION WAS MADE BY THE ASSESSEE. WITH THIS BACKGROUND WE SHALL NOW SEE AS TO HOW CIT PROCEEDED TO INVOKE HIS POWERS U/S 263 OF THE ACT. 8. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT ORDER DATED 03.03.2015 FOR A.Y.2012-13, THE AO WITHOUT MAKING A DISTINCTION BE TWEEN THE UNDERTAKINGS FOR WHICH DEDUCTION WAS DISALLOWED IN A.Y.2010-11 AND 2011-12 AND AFTER OBSERVING THAT IN RESPECT OF 11 UNDERTAKINGS, THE ASSESSEE WAS NOT EN TITLED TO DEDUCTION U/S 80IE OF THE ACT FOR THE REASON THAT SUBSTANTIAL EXPANSION HAD B EEN CARRIED OUT BY THE ASSESSEE OVER A PERIOD OF TWO OR THREE YEARS AND NOT IN ONE SINGL E YEAR WHICH WAS THE REQUIREMENT FOR CLAIMING DEDUCTION ON ACCOUNT OF SUBSTANTIAL EXPANS ION U/S 80IE OF THE ACT. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF AO :- 4. DEDUCTION U/S 80IE : IN RESPONSE TO THE QUERIES RAISED FROM TIME TO TIME WITH RESPECT TO THE DEDUCTION U/S 80LE OF THE INCOME TAX ACT, 1961 THE A/R OF THE ASSESSEE FILED VARIOUS SUBMISSIONS AND DETAILS TO CLAIM DEDUCTION U/S 80LE FOR 42 TEA ESTATES. ON A VERIFICATION OF THE SUBMISSION, IT WAS FOUND THAT T HE ASSESSEE COMPANY HAD UNDERTAKEN SUBSTANTIAL EXPANSION IN VARIOUS TEA EST ATES SINCE 1 ST APRIL, 2007, ON THE 4 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 4 BASIS OF WHICH IT CLAIMS DEDUCTION UNDER SECTION 80 LE IN ITS RETURN OF INCOME IN RESPECT OF THE ABOVE 42 TEA ESTATES. THE SAID CLAIM S WERE MADE CONSIDERING EACH TEA ESTATE AS SEPARATE UNDERTAKING FOR THE PURPOSE OF D EDUCTION UNDER SECTION 80LE OF THE ACT. AS PER THE SUBMISSION, RELEVANT DOCUMENTS FILED AND PRODUCED BEFORE ME, IT IS EVIDENT THAT THE ASSESSEE HAS COMPLETED ITS SUBSTAN TIAL EXPANSION SPREAD OVER 2-3 YEARS PERIOD AND HAS REFLECTED SUCH EXPANSION WORK THROUGH CERTAIN ADDITIONS AS CAPITAL WORK IN PROGRESS AND SIMULTANEOUSLY, IT HAS CLAIMED DEPRECIATION ON CERTAIN ADDITIONS AS AND WHEN PUT TO USE. AS REQUISITIONED , THE ASSESSEE PROVIDED A STATEMENT OF ADDITIONS AND % AGE OF COMPLETION AFTE R EXCLUDING ADDITION ON WHICH DEPRECIATION HAS ALREADY BEEN CLAIMED U/S 80IE. LOO KING INTO THE DETAILS, IT WAS FOUND THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DE DUCTION U/S 80IE FOR THE FOLLOWING ELEVEN TEA ESTATES : NAME OF THE ESTATE AMOUNT CLAIMED (RS.) AMOUNT CONSIDERED FOR DISALLOWANCE IN CURRENT YEAR (RS.) PANEERY 1,04,53,251 1,04,53,251 MIJCAJAN 1,42,43,980 1,42,43,980 MONABARRIE 4,59,07,343 4,59,07,343 MORAN 62,35,274 62,35,274 PHILLOBARI 1,37,25,419 1,37,25,419 RAJMAI 1,75,59,137 1,75,59,137 NYAGOGRA 2,56,32,686 2,56,32,686 DEHING 3,86,79,348 3,86,79,348 DIROK 4,90,10,177 4,90,10,177 BARDUBI 1,40,90,663 1,40,90,663 HARICHURAH 80,30,773 80,30,773 TOTAL 24,35,68,051 24,35,68,051 HENCE, OUT OF TOTAL DEDUCTION OF RS.79,53,97,988/- CLAIMED U/S 80IE BY THE ASSESSEE, AN AMOUNT OF RS.24,35,68,051/- IS DISALLO WED U/S 80IE. PENALTY PROCEEDINGS U/S 271(1)(C) IS INITIATED FOR THE ABOVE DISALLOWANCE. 9. THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF T HE ACT WAS OF THE VIEW THAT THE ACTION OF THE AO IN ALLOWING DEDUCTION U/S 80IE OF THE ACT AS DONE IN THE ORDER OF ASSESSMENT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE FOR THE FOLLOWING REASONS :- 5 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 5 3. AS PER PROVISIONS OF SECTION 801E, 100% DEDUCT ION IS AVAILABLE TO ELIGIBLE UNDERTAKING WHICH HAS, DURING THE PERIOD BEGINNING ON THE 1' DAY OF APRIL, 2007 AND ENDING BEFORE THE 1' DAY OF APRIL 2017, BEGUN O R BEGINS, IN ANY OF THE NORTH EASTERN STATES I) MFG. OF PRODUCED ANY ELIGIBLE ARTICLE OR THING II) UNDERTAKE SUBSTANTIAL EXPANSION TO MFG. OR PROD UCED ANY ELIGIBLE ARTICLES OR THING III) TO CARRY ANY ELIGIBLE BUSINESS. 4. SUBSTANTIAL EXPANSION HAS BEEN DEFINED U/S.80 IE(7) AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST.2 5% OF THE BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DESCRIPTION IN ANY YEA R), AS ON THE 1 ST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. 5. IN THE INSTANT CASE, YOU CLAIMED DEDUCTION OF RS .24,35,68,051/- IN RESPECT OF 11 TEA ESTATES WAS DISALLOWED BY THE A.O. HOLDING THEM INELIGIBILITY FOR DEDUCTION U/S.80IE. THE AO STATED THAT YOU HAVE COMPLETED ITS SUBSTANTIAL EXPANSION SPREAD OVER TWO TO THREE YEARS PERIOD AND AFTER LOOKING IN TO THE DETAIL OF STATEMENT OF ADDITIONS TO CAPITAL WORK IN PROGRESS AND PERCENTAG E OF COMPLETION, THIS UNITS WERE INELIGIBLE FOR DEDUCTION U/S.80IE. 6. IT IS ALSO OBSERVED THAT IN 11 MORE UNITS DEDUCT ION U/S.80IE WAS CLAIMED, BUT SUBSTANTIAL EXPANSION WAS NOT COMPLETED IN ONE YEAR . 7. THEREFORE, DEDUCTION OF RS. 23,41,59,547/- U/S.8 0IE AS COMPLETED ABOVE WAS TO BE DISALLOWED WHICH WAS NOT DONE. THIS RESULTED IN UNDERASSESSMENT OF INCOME OF RS.23,41,59,547/- AND CONSEQUENT UNDER CHARGE OF TA X OF RS. 7,59,73,065/- (@ 30% + 5% + 3%) INCLUDING INTEREST. 8. IT MAY BE MENTIONED HERE THAT THE AO DISALLOWED THE DEDUCTION U/S.80IE IN THE CASE OF ANOTHER COMPANY, M/S. JOYSREE TEA INDUSTRIE S LTD., FOR A.Y. 2012-L3 & 09- 10, ASSESSED IN SAME CHARGE I.E. CIRCLE-4(1) KOLKA TA ON GROUND THAT HE COULD NOT COMPLETE THE SUBSTANTIAL EXPANSION IN ONE YEAR. THE SAID DISALLOWANCE WAS CONFIRMED BY THE CIT(A}-IV, KOLKATA IN RESPECT OF 2 009-10 IN APPEAL ORDER DTD 5.12.20L3, IN APPEAL NO. 209/CIT(A)-IV/2011-12. 10. THE CIT ISSUED A SHOW CAUSE NOTICE ON 30.11. 2016 AS MENTIONED IN THE EARLIER PARAGRAPH. THE ASSESSEE VIDE ITS REPLY DATED 21.12. 2016 HIGHLIGHTED AS TO HOW THE AO HAS EXAMINED AND ALLOWED THE CLAIM OF DEDUCTION TO THE ASSESSEE U/S 80IE OF THE ACT TO THE EXTENT BENEFICIAL TO THE ASSESSEE. THE ASSESSE E POINTED OUT THAT EACH OF THE 31 6 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 6 GARDENS IN RESPECT OF WHICH DEDUCTION U/S 80LE WAS ALLOWED, HAD INDIVIDUALLY COMPLIED WITH REQUIREMENTS OF SEC 80LE OF THE ACT. EACH OF T HE 31 TEA GARDENS IN RESPECT OF WHICH DEDUCTION WAS ALLOWED HAD ACHIEVED NORMS OF ATTAINI NG 'SUBSTANTIAL EXPANSION' AS PROVIDED FOR IN SEC 80IE OF THE ACT AND THAT DETAIL S WERE FULL, COGENT AND SUFFICIENT MATERIAL AND EVIDENCE TO PROVE THAT THE ASSESSEE HA D ACHIEVED SUBSTANTIAL EXPANSION AT EACH OF THE 31 GARDENS WAS FILED BEFORE THE AO. ON VERIFICATION OF THE MATERIAL, EVIDENCES AND AUDIT REPORTS THE AO HAD ALLOWED THE DEDUCTION U/S 80LE ON BEING SATISFIED THAT THE PRESCRIBED CONDITIONS WERE FULFI LLED BY EACH OF THE 31 GARDENS. THE ASSESSEE ALSO ARGUED THAT PROCEEDINGS U/S 263 HAVE BEEN INITIATED UPON INTERPRETING PROVISIONS OF SEC 80IE OF THE ACT AS REQUIRING 'SUB STANTIAL EXPANSION' OF AN UNDERTAKING CONTEMPLATED IN SEC 80IE SHOULD BE ACHIEVED BY AN A SSESSEE IN ANYONE SINGLE FINANCIAL YEAR AND THE DEDUCTION WILL NOT BE PERMISSIBLE IF S UBSTANTIAL EXPANSION OF AN UNDERTAKING SPREADS OVER MORE THAN ONE FINANCIAL YE AR. THE ASSESSEE SUBMITTED THAT THE LANGUAGE EMPLOYED BY THE LEGISLATURE WHILE ENACTING SEC 80IE NOWHERE PROVIDED OR REQUIRED THAT AN ASSESSEE SHOULD ACHIEVE SUBSTANTIA L EXPANSION OF AN INDUSTRIAL UNDERTAKING IN ANYONE FINANCIAL YEAR. IT WAS ARGUED THAT RULES OF INTERPRETATION OF STATUTE REQUIRES THAT WHILE INTERPRETING BENEFICIAL PROVISI ONS OF THE ACT AN AUTHORITY SHOULD NOT READ INTO PROVISIONS ANY RESTRICTIONS OR DISABILITY WHICH THE LEGISLATURE HAS NOT SPECIFICALLY PROVIDED FOR IN THE STATUE. THE ONLY R EQUIREMENT TO BE SATISFIED BY THE INDUSTRIAL UNDERTAKING FOR CLAIMING THE DEDUCTION U /S 80LE IS THAT SUBSTANTIAL EXPANSION MUST BE ATTAINED IN GIVEN PREVIOUS YEAR. ONCE THE S UBSTANTIAL EXPANSION IS ACHIEVED BY AN UNDERTAKING IN A PREVIOUS YEAR WHICH ENDS ANY TI ME UPTO 31.03.2017 THEN PROFITS OF SUCH UNDERTAKING BECOME ELIGIBLE FOR DEDUCTION FOR A PERIOD OF 10 CONSECUTIVE FINANCIAL YEARS; COMMENCING FROM THE YEAR IN WHICH THE SUBSTA NTIAL EXPANSION IS ACHIEVED. THE PROVISIONS OF SEC 80IE AS THEY STAND IN STATUE NO WHERE PROVIDE THAT IN ORDER TO QUALIFY FOR DEDUCTION U/S 80IE OF THE ACT, THE SUBSTANTIAL EXPANSION OF THE UNDERTAKING MUST BE ACHIEVED IN ANYONE FINANCIAL YEAR. 7 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 7 11. THE ASSESSEE FURTHER SUBMITTED THAT THE CIT(A) -2, KOLKATA WHILE DECIDING THE ASSESSEE'S APPEALS FOR THE AYS 2010-11 & 2011-12 HA D SPECIFICALLY DEALT WITH THE IDENTICAL OBJECTIONS OF THE AO. IN THE ASSESSMENT O RDERS FOR AYS 2010-11 & 2011-12 THE AO HAD DISALLOWED THE ASSESSEE'S DEDUCTION U/S 80IE IN RESPECT OF SOME OF ITS TEA GARDENS ON THE PLEA THAT THE ASSESSEE DID NOT ACHIE VE SUBSTANTIAL EXPANSION IN ONE FINANCIAL YEAR. THE CIT(A) AFTER EXAMINING THE FACT UAL MATRIX GOVERNING THE SUBSTANTIAL EXPANSION' CARRIED OUT BY THE ASSESSEE CAME TO CONC LUSION THAT THE ASSESSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION IN AN ORGANIZED MA NNER, AND THIS WAS CARRIED OUT OVER A PERIOD OF TIME WHICH IN SOME CASES SPREAD OVER MO RE THAN ONE FINANCIAL YEAR. THE CIT(A) FOUND THAT CONSEQUENT ON COMPLETION OF SUBST ANTIAL EXPANSION, THE ASSESSEE NOT ONLY INCREASED THE GROSS BLOCK OF PLANT & MACHINERY AT EACH TEA GARDEN MORE THAN 25% BUT IN QUANTITATIVE TERMS ALSO EACH TEA GARDEN ACHI EVED SUBSTANTIAL INCREASE IN THE TEA PRODUCED, THE CIT(A) ACCORDINGLY UP HELD THE ASSESS EE'S CLAIM FOR DEDUCTION U/S 80IE OF THE ACT. 12. IT WAS ARGUED THAT YOUR HONOUR WILL THUS APPRE CIATE THAT ON THE ISSUE OF INTERPRETATION OF SEC 80IE CONCEIVABLY MORE THAN ON E LEGAL VIEW IS POSSIBLE VIZ., THE VIEW EXPRESSED BY THE CIT IN THE SHOW CAUSE NOTICE U/S.263 OF THE ACT BASED ON CIT(A)S ORDER IN THE CASE OF M/S.JAYASHREE TEA COM PANY AND THE OTHER THE ONE EXPRESSED BY THE CIT(A)-2 KOLKATA IN ASSESSEES CAS E FOR THE AYS 2010-11 & 2011-12. IT WAS ARGUED THAT U/S 263 OF THE ACT THE ORDER OF THE AO CAN BE CONSIDERED TO BE ERRONEOUS IF THE VIEW ADOPTED BY THE AO IS FOUND TO BE A POSSIBLE VIEW. HOWEVER WHERE ON ANY ISSUE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE OF THE POSSIBLE VIEW THEN THE ORDER OF THE ASSESSMENT CANNOT BE CONSIDERED TO BE ERRONEOUS FOR THE PURPOSES OF SEC 263 OF THE ACT. 13. THE CIT(A) HOWEVER WAS NOT SATISFIED WITH TH E AFORESAID EXPLANATION AND CAME TO THE CONCLUSION THAT THE SUBSTANTIAL EXPANSION WAS N OT ACHIEVED IN ONE YEAR AND THE FOLLOWING WERE HIS OBSERVATIONS :- 8 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 8 HOWEVER, REGARDING DEDUCTION OF RS.23,41,59,547/- U/S 80IE, THE REPLY OF ASSESSEE IS NOT SATISFACTORY. THE SUBSTANTIAL EXPANSION WAS NOT COMPLETED IN ONE YEAR AND THEREFORE, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCT ION IN RESPECT OF CERTAIN UNITS, I, THEREFORE, HOLD THAT ASSESSMENT ORDER OF A.O. IS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IN THIS RESPECT. THE ASSESSMENT IS THEREFORE SET ASIDE U/S 263 AND A.O. IS DIRECTED TO ALLOW DEDUCTION U/S 80IE CORREC TLY. THE IMPUGNED ORDER U/S 143(3) 03.03.2015 IS ACCORDINGLY, SET ASIDE AND ASSESSMENT SHOULD BE DONE AS PER ABOVE DIRECTIONS. 14. AGGRIEVED BY THE ORDER OF CIT THE ASSESSEE HA S PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE FIRST ASPECT WHICH WAS HIGHLIGHTE D BY THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE CIT IN COMING TO THE CONCLUSION THAT D EDUCTION OF RS.23,41,59,547/- U/S 80IE OF THE ACT OUGHT TO HAVE BEEN DISALLOWED BUT H AS NOT SPECIFIED THE UNDERTAKINGS IN WHICH THE SUBSTANTIAL EXPANSION HAD NOT BEEN COMPLE TED BY THE ASSESSEE IN THE MANNER REQUIRED U/S 80IE OF THE ACT. ACCORDING TO HIM THE REFORE THE IMPUGNED ORDER U/S 263 OF THE ACT DESERVES TO BE QUASHED. HIS NEXT SUBMISSIO N WAS THAT IN RESPECT OF UNDERTAKINGS FOR WHICH DEDUCTION U/S 80IE OF THE ACT HAD ALREADY BEEN ALLOWED FOR A.Y.2010-11 AND 2011-12 WHILE COMPLETING THE ASSESSMENT FOR A.Y.201 2-13, THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT CANNOT DIRECT THE AO TO D O WHAT WAS BEYOND THE SCOPE OF THE AOS POWERS WHILE COMPLETING ASSESSMENT FOR A..Y.20 12-13 BECAUSE THE QUESTION WHETHER AN UNDERTAKING HAS ACHIEVED SUBSTANTIAL UND ERTAKING OR NOT CAN BE INVESTIGATED AND DECIDED ONLY IN THE FIRST YEAR IN WHICH THE CLA IM IS MADE AND IF THE CLAIM IS ACCEPTED IN THE FIRST YEAR THEN THE DEDUCTION HAS TO BE ALLO WED IN THE FOLLOWING 10 YEARS. THE THIRD SUBMISSION BY THE LD. COUNSEL FOR THE ASSESSEE WAS THAT ONLY IN RESPECT OF THREE UNDERTAKINGS OUT OF SIX UNDERTAKINGS FOR WHICH THE ASSESSEE MADE A FRESH CLAIM FOR DEDUCTION U/S 80IE OF THE ACT IN A.Y.2012-13, COULD THE AO MAKE AN INVESTIGATION ABOUT THE ELIGIBILITY OF THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IE OF THE ACT. IN RESPECT OF THESE SIX NEW UNDERTAKINGS THE ASSESSEE HAS DULY FILED FORM NO.10CCB GIVING ALL THE DETAILS OF PLANT AND MACHINERY WHICH RESULTED IN SUBSTANTIAL EXPANSION. HE BROUGHT TO OUR NOTICE THAT IN PARAGRAPH 4 OF THE OR DER OF ASSESSMENT U/S 143(3) OF THE ACT, IN WHICH THESE FACTS HAVE BEEN DULY RECORDED B Y THE AO. IT WAS HIS SUBMISSION THAT 9 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 9 IN THE ABSENCE OF A CLEAR FINDING AS TO WHICH OF TH E UNDERTAKINGS U/S 80IE OF THE ACT ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE CIT WAS NOT ENTITLED TO INVOKE THE PROVISION U/S 263 OF THE ACT. 15. FOR THE PROPOSITION THAT IT WAS ONLY IN THE FI NANCIAL YEAR OF SUBSTANTIAL EXPANSION THAT AO COULD MAKE AN INVESTIGATION OF THE CLAIMS R EGARDING SUBSTANTIAL EXPANSION, THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- 1. ACIT VS DELHI PRESS PATRA PRAKASHAN 355 ITR 14 (DEL HI) 2. SAURASHTRA CEMENT & CHEMICAL VS CIT 123 ITR 669 (GU J) 3. CIT VS KARAM CHAND THAPAR & BROS. 216 ITR 548 (BOM) 16. THE LAST SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE DECISION WHICH THE AO/CIT(A) RENDERED ON DEDUCTION U/S 80IE OF THE ACT IN THE CASE OF JAYSHREE TEA INDUSTRIES LTD WAS CONTRARY TO THE VIEW TAKEN BY CI T(A)-IV, KOLKATA IN ASSESSEES OWN CASE FOR A.Y.2010-11 AND 2011-12 WHEREIN A VIEW WAS EXPRESSED THAT THE SUBSTANTIAL EXPANSION CAN BE SPREAD OVER BEYOND ONE FINANCIAL Y EAR. IT WAS SUBMITTED BY HIM THAT THE VIEW EXPRESSED BY THE AO/CIT(A) IN THE CASE OF JAISHREE TEA INDUSTRIES LTD AND THAT BY CIT(A)-IV, KOLKATA IN ASSESSEES OWN CASE WHICH VIEW ARE CONTRARY TO EACH OTHER ALSO SHOWS THAT THE ISSUE RAISED BY CIT IN THE PROC EEDINGS U/S 263 OF THE ACT WAS A DEBATABLE ISSUE ON WHICH TWO VIEWS ARE POSSIBLE. TH E LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS CIT 243 ITR 83 (SC) WHEREIN IT WAS HELD THAT WHERE THERE ARE TWO POSSIBLE VIEWS ON AN ISSUE AND THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS, JURISDICTION U/S 263 OF THE ACT CANNOT BE INVOKED. THE LD. DR RELIED ON THE ORDER OF CIT. 17. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS. IT IS CLEAR FROM A PERUSAL OF THE ORDER OF AO DATED 03.03.2015 PASSED U/S 143(3) OF THE ACT THAT THE AO DULY TOOK COGNIZANCE OF THE FACT THAT DEDUCT ION U/S 80IE OF THE ACT WAS CLAIMED 10 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 10 BY THE ASSESSEE IN RESPECT OF 42 UNDERTAKINGS (TEA ESTATES). HE HAS ALSO TAKEN NOTE OF THE FACT THAT SUBSTANTIAL EXPANSION WAS SPREAD OVER THE PERIOD BEYOND THE FINANCIAL YEAR. HE HAS HOWEVER NOT ALLOWED DEDUCTION U/S 80IE OF THE A CT IN RESPECT OF 11 UNDERTAKINGS (TEA ESTATES). AS FAR AS A.Y.2012-13 IS CONCERNED O UT OF 11 UNDERTAKINGS FOR WHICH DEDUCTION U/S 80IE OF THE ACT WAS DENIED ONLY THREE UNDERTAKINGS WERE FRESH CLAIM MADE BY THE ASSESSEE FOR DEDUCTION U/S 80IE OF THE ACT IN A.Y.2012-13. IN RESPECT OF THE REMAINING EIGHT UNDERTAKINGS, THE CLAIM WAS ALR EADY REJECTED IN A.Y.2010-11 AND 2011-12. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FO R THE ASSESSEE THE QUESTION WHETHER THERE WAS SUBSTANTIAL EXPANSION OR NOT HAD TO BE DE CIDED ONLY IN THE INITIAL YEAR IN WHICH SUBSTANTIAL EXPANSION IS CARRIED OUT. IN RESPECT OF 8 UNDERTAKINGS THIS QUESTION OF SUBSTANTIAL EXPANSION WAS ALREADY DECIDED AGAINST T HE ASSESSEE IN A.Y. 2010-11 AND 2011-12 BY THE AO. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, ONLY SIX UNDERTAKINGS FOR WHICH A FRESH CLAIM FOR DEDUCTION U/S 80IE OF THE ACT CAN BE THE SUBJECT MATTER OF INVESTIGATION IN A.Y.2012-13. 18. IT IS ALSO NOTICED THAT THE CIT IN THE IMPUG NED ORDER HAS EXPRESSED THE VIEW THAT DEDUCTION ALLOWED BY THE AO U/S 80IE OF THE ACT WAS INCORRECT BUT HAS ALSO SPELT OUT AS TO WHICH OF THE 42 UNDERTAKINGS FAILED TO COMPLY WI TH THE CONDITIONS FOR ACHIEVING SUBSTANTIAL EXPANSION REQUIRED U/S 80IE OF THE ACT. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE CIT IN THE ORDER U/S 263 OF THE ACT HAS TO BE SPELT OUT AS TO HOW ORDER OF THE AO WAS ERRONEOUS AND WE AGREE WITH THE SUBMISSIONS OF THE ASSESSEE THAT IN THE IMPUGNED ORDER OF CIT IT HAS NOT BEEN S PELT OUT AS TO HOW AND WHICH OF THE UNDERTAKINGS ARE NOT ELIGIBLE FOR DEDUCTION U/S 80I E OF THE ACT. BESIDES THE ABOVE, IT IS ALSO SEEN THAT THE MAIN BASIS ON WHICH CIT PASSED T HE ORDER U/S 263 OF THE ACT WAS THE DECISION TAKEN BY THE AO/CIT(A) IN THE CASE OF JAIS HREE TEA INDUSTRIES LTD IN WHICH HE CONCLUDED THAT THE SUBSTANTIAL EXPANSION SHOULD HAV E TAKEN PLACE IN ONE YEAR (FINANCIAL YEAR/PREVIOUS YEAR). HOWEVER, WE FIND THAT THERE IS A CONTRARY VIEW EXPRESSED IN ASSESSEES OWN CASE BY CIT(A) KOL-II IN A.Y.2010-11 AND 2011-12 WHICH IS TO THE EFFECT THAT THE SUBSTANTIAL EXPANSION COULD TAKE PL ACE EVEN BEYOND A PERIOD OF ONE 11 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 11 FINANCIAL YEAR. IT THEREFORE APPEARS THAT THE ISSUE WAS A DEBATABLE ISSUE AND TWO VIEWS ARE POSSIBLE ON AN ISSUE. THE CIT CANNOT INVOKE THE JURISDICTION U/S 263 OF THE ACT JUST BECAUSE HE DOES NOT AGREE WITH THE VIEW OF THE AO U NLESS THE VIEW OF THE AO IS SHOWN TO BE ERRONEOUS. WE ARE THEREFORE OF THE VIEW THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE THE JURISDICTION U/S 263 OF THE ACT WAS NOT PROPERLY EXERCISED BY CIT. THE CONDITION PRECEDENT FOR EXERCISING JURISDICTION U/S .263 OF THE ACT HAS NOT BEEN SATISFIED. WE THEREFORE QUASH THE IMPUGNED ORDER U/S 263 OF TH E ACT AND ALLOW THE APPEAL OF THE ASSESSEE. 19. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRON OUNCED IN THE COURT ON 28.07.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDE VAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28.07.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. MCLEOD RUSSEL INDIA LTD., 4, MANGOE LANE, S URENDRA MOHAN GHOSH SARANI, KOLKATA-700001. 2. D.C.I.T., CIRCLE-4(1), KOLKATA 3. PR.C.I.T.-2, KOLKATA. 4. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT KOLKATA BENCHE S 12 ITA NO.682/KOL/2017 M/S. MCLEOD RUSSEL INDIA LIMITED A.YR.2012-13 12