THE ACIT, -2(1), Bhopal V. M/s. Kilpest India Ltd., Bhopal

ITA 688/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5476 (ITAT-INDORE)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 23-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .. , .. , % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ACIT 2(1) BHOPAL, VS. M/S. KILPEST INDIA LTD. 7-C, INDUSTRIAL AREA , GOVINDPURA BHOPAL, APPELLANT RESPONDENT PAN: AABCK 3873D APPELLANT BY 23.11.2016 RESPONDENT BY 23.11.2016 DATE OF HEARING SHRI MOHD. JAVED, SR. DR DATE OF PRONOUNCEMENT SHRI S.S. DESHPANDEY CA O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, BHOPAL, [HEREINAFTER REFERRED T O AS THE CIT (A)] DATED 22.03.2016. THIS APPEAL PERTAINS TO ASSESSMENT YEAR 20 0506 AS AGAINST APPEAL DECIDED IN RESPECT OF ASSESSMENT ORDER DATED 21.03.20 13 PASSED U/S. 143(3)/147 OF INCOME TAX ACT, 1961(HEREIN AFTER REF ERRED TO AS 'THE ACT) BY THE ACIT 2(1) BHOPAL, [HEREINAFTER REFERRED TO AS THE A O]. THE AO HAS TAKEN FOLLOWING GROUNDS OF APPEAL: - WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE . . /. I.T.A. NO. 688 /IND/2016 ( ( / ASSESSMENT YEAR:2005-06 M/S. KILPEST INDIA LTD./I.T.A. NO. 688/IND/2016/AY0 5-06/BHOPAL. PAGE 2 OF 7 CASE, THE LD. CIT (A) WAS JUSTIFIED IN DELETING ADD ITION OF RS. 22, 08,829/- MADE BY THE AO DISALLOWING DEDUCTION U/S. 80IA OF INCOME T AX ACT, 1961 2. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FORMULATION A ND SALE OF PESTICIDES, INSECTICIDES AND FERTILIZERS. RETURN OF INCOME WAS FILED ON 28.10.2005 DECLARING TOTAL INCOME OF RS. NIL AND IT WAS ASSESSED AT RS. N IL AFTER ALLOWING ADJUSTMENT OF RS. 22,08,829/- (BEING 30% OF NET PROFIT OF UNIT-II) U/S. 80IA , VIDE ORDER U/S. 143(3) DATED 31.12.2007. THEREAFTER, TH E ASSESSMENT WAS REOPENED U/S. 148 OF THE ACT AFTER RECORDING REASONS AND FOLLOWING DUE PROCEDURE OF LAW. ACCORDING TO THE AO, PROVISIONS OF SECTION 80IA (7), PROVIDES THAT THE DEDUCTION UNDER SECTION 80IA ARE S UBJECT TO SUBMISSION OF AUDIT REPORT IN THE PRESCRIBED FORM NO. 10CCB ALONG WI TH RETURN OF INCOME AND BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROC EEDINGS. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT REQUIREMENT O F FILING OF AUDIT REPORT ALONG WITH RETURN IS NOT MANDATORY BUT DIRECTORY AND IF THE AUDIT REPORT WERE FILED AT ANY TIME BEFORE FRAMING OF ASSESSMENT, REQUIRE MENT UNDER SECTION 80IA (7) WOULD BE MET. HOWEVER, THIS SUBMISSION IS NO T FOUND FAVOUR, AND THE AO HELD THAT FILING OF RETURN ALONG WITH RETURN IS MANDATORY REQUIREMENT OF SECTION 80IA (7) OF THE ACT. THE AO FURTHER NOTED THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF RS. 22,80,898/- IS NOT IN ORD ER, AS THE RAW MATERIAL CONSUMED IS AT RS. 44,66,019 AND AFTER DEBITS OF OVER HEAD SALES ARE AT RS. 2,28,02,662 MADE PROPORTIONATE SALE OF UNIT-II WORKED OUT TO RS.61,24,989 AND EVEN IF REASONABLE AMOUNT IS ADDED TO THESE SALES TO COVER UP, THEN ALSO RESULTS IN LOSS IN UNIT-II, HENCE, DEDUCTION OF RS. 22,08,829/- UNDER SECTION 80IA M/S. KILPEST INDIA LTD./I.T.A. NO. 688/IND/2016/AY0 5-06/BHOPAL. PAGE 3 OF 7 OF THE ACT IS NOT AVAILABLE. IN VIEW OF THESE FACTS, THE AO DISALLOWED THE CLAIM OF DEDUCTION OF RS. 22, 08,829 UNDER SECTION 80IA O F THE ACT. 3. BEING, AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). IT WAS SUBMITTED BY THE ASSESSEE THAT IN IDENTICAL CIRCUMSTAN CES, THE LD. CIT (A) HAS ALLOWED DEDUCTION UNDER SECTION 80IA FOR A.Y. 2003- 04 AND A.Y. 2004-05 VIDE ORDER DATED 22.10.2012 AND 02.12.2013 RESPECTIVELY AND THIS ORDER WAS ALSO CONFIRMED BY THE HON`BLE TRIBUNAL VIDE ORDER DATED 19.0 6.2013 AND 21.09.2015 RESPECTIVELY. ACCORDINGLY, THE LD. CIT (A ), FOLLOWING THE ORDER OF HIS PREDECESSOR CIT (A) AND TRIBUNAL, HAS ALLOWED THE CLA IM OF DEDUCTION OF RS. 22, 08,829 MADE UNDER SECTION 80IA OF THE ACT. 4. BEING, AGGRIEVED THE REVENUE HAS FILED THIS APPEAL BE FORE THE TRIBUNAL. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED IN THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSE E, SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, ON IDEN TICAL FACTS, BY THE ORDER OF TRIBUNAL FOR A.Y. 2003-04 VIDE ORDER DATED 19.06.201 3 AND FOR A.Y. 2004-05 VIDE ORDER DATED 21.09.2015 WELL AS CIT(A) FOR RESPECTIV E YEARS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED T HE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE AO DISALLOWED T HE CLAIM OF DEDUCTION U/S 80IA OF RS.22, 08,829/-. THE ASSESSEE PREFERRED A PPEAL AND THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE RELYING UPON T HE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003 -04 AND 2004-05 WHEREIN THE ITAT HAS FOUND ASSESSEE AS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA ON UNIT-II RELATING TO MANUFACTURING OF MICRO NU TRIENT FERTILIZERS. THE RELEVANT PARA OF THE ORDER OF THE ITAT IN ITA NO. 14 /IND/2013 DATED 19.6.2013 M/S. KILPEST INDIA LTD./I.T.A. NO. 688/IND/2016/AY0 5-06/BHOPAL. PAGE 4 OF 7 AS IS REPRODUCED IN I.T.A. NO. 175/IND/2014 FOR A.Y. 2004-05 DTD. 21.09.2015 HEREUNDER :- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION , WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE OR DER OF THE LEARNED CIT (A):- 4.4 I HAVE CAREFULLY CONSIDERED THE SUBM ISSION OF THE APPELLANT AND FACTS OF THE CASE. AS EXPLAINED BY THE APPE LLANT, UNIT-II WAS SETUP FOR MANUFACTURING OF MICRONUTRIENT FERTILI ZERS DURING A.Y. 1997- 98 AND THE OLD UNIT WAS ENGAGED IN THE MANUFACTURIN G OF A DIFFERENT PRODUCT I.E. PESTICIDES AND INSECTICIDES SINCE 19743 -74. UNIT-II IS A SEPARATE AND INDEPENDENT UNIT FROM UNIT-I, BOTH ARE MA NUFACTURING DIFFERENT PRODUCTS AND CONTROLLED BY DIFFERENT LAWS. THUS, IT CANNOT BE SAID THAT UNIT-II WAS AN EXPANSION OF EXISTING UNIT- I. IT IS ALSO NOTICED THAT THE APPELLANT WAS MAINTAINING SEPARATE ACCOUNTS FOR BO TH THE UNITS, WHICH WERE DULY AUDITED. THE APPELLANT HAS FURNISHED AUDIT REPORT IN FORM NO. 10CCB DURING REASSESSMENT PROCEEDINGS AND, THEREFORE, FULFILLED THE CONDITION LAID DOWN UNDER SECTION 80I A (7). IT IS A WELL SETTLED LAW NOW THAT THE REQUIREMENT OF FILING THE A UDIT REPORT IN FORM NO. 10CCB ALONG WITH THE RETURN OF INCOME 3 IS NOT MANDATORY BUT DIRECTORY AND IF THE SAID AUDIT REPORT IS FILED DURI NG ASSESSMENT PROCEEDINGS, IS NOT MANDATORY BUT DIRECTORY AND IF T HE SAID AUDIT REPORT IS FILED DURING ASSESSMENT PROCEEDINGS, THE REQUIRE MENT OF SECTION 80IA(7) WOULD BE MET AND DEDUCTION U/S 80IA(7) CANNO T BE DENIED ON THIS ACCOUNT. THE HONBLE DELHI HIGH COURT IN CIT V S. CONTIMETERS M/S. KILPEST INDIA LTD./I.T.A. NO. 688/IND/2016/AY0 5-06/BHOPAL. PAGE 5 OF 7 ELECTRICALS PVT. LTD. (2009) 317 ITR 249 (DEL) HAD AN OCCASION TO CONSIDER THIS DECISION AND IT WAS HELD BY THE HONBLE HIGH COU RT THAT REQUIREMENT OF FILING THE AUDIT REPORT ALONGWITH THE RETURN IS NOT MANDATORY BUT DIRECTORY AND IF THE AUDIT REPORT IS FI LED AT ANY TIME BEFORE THE FRAMING THE ASSESSMENT, REQUIREMENT OF SEC TION 80IA(7) WOULD BE MET. THUS, THE APPELLANT HAD SET UP AN INDEPE NDENT UNDERTAKING UNIT-II FOR MANUFACTURING OF MICRONUTRI ENT FERTILIZER, WHICH WAS NOT AN EXPANSION OF EARLIER UNIT AND ALSO FULFIL S OTHER CONDITIONS OF SECTION 80IA(2) OF THE ACT. THEREFORE, IN VIEW OF T HE ABOVE, I AM OF THE OPINION THAT THE APPELLANT WAS ELIGIBLE FOR CLAIMING D EDUCTION U/S 80IA. HENCE, THE A.O. IS DIRECTED TO ALLOW DEDUCTION U/S 80IA OF RS. 11,10,057/-. ACCORDINGLY, THESE GROUNDS OF APPEAL AR E ALLOWED. 2.1. THE FACTS, IN BRIEF, ARE THAT, DURING THE RELE VANT PERIOD, THE ASSESSEE COMPANY WAS CARRYING ON THE BUSINESS OF FORMULATION OF PESTICIDES AND INSECTICIDES SINCE 1973-74. THE ASSESSEE SET UP A NE W UNIT IN 1997-98 TO MANUFACTURE MICRONUTRIENT FERTILIZERS AND HAD BEEN C LAIMING DEDUCTION U/S 80IA SINCE THEN WHICH WAS ALLOWED BY THE DEPARTM ENT. THE LEARNED CIT(A) PERUSED THE ASSESSMENT ORDER FRAMED U/S 143(3 ) FOR THE A.YS. 2001-02 AND 2002-03 WHEREIN THE CLAIMED DEDUCTION U /S 80IA(2) OF THE ACT WAS ALLOWED TO THE ASSESSEE. HOWEVER, VIDE ASSE SSMENT ORDER DATED 23.12.2010 THE LEARNED ASSESSING OFFICER DISA LLOWED THE CLAIMED DEDUCTION ON THE GROUND THAT THE ASSESSEE DID NOT F URNISH THE AUDIT REPORT IN FORM NO. 10CCB. THE ASSESSEE APPROACHED THE LEARNED CIT (A) WHO AFTER EXAMINING THE FACTS ALLOWED THE CLAIM , WHICH IS UNDER M/S. KILPEST INDIA LTD./I.T.A. NO. 688/IND/2016/AY0 5-06/BHOPAL. PAGE 6 OF 7 CHALLENGE BEFORE THIS TRIBUNAL. WE FIND THAT THERE IS UNCONTROVERTED FINDING IN THE IMPUGNED ORDER (PARA 4.3) THAT THE AU DIT REPORT WAS FILED AND THE REQUIREMENT OF SECTION 80IA (7) OF THE ACT H AS BEEN DULY MET WITH. UNIT-II WAS SEPARATE AND INDEPENDENT UNIT FROM THE EXISTING UNIT AND THE NEW UNIT COMMENCED ITS PRODUCTION DURING A. Y. 1997- 98. THE MANUFACTURING OF MICRONUTRIENT FERTILIZERS EVEN HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. IT IS NOT THE CASE THAT TH E UNIT IN DISPUTE IS PART OF EARLIER UNIT OR ITS EXPANSION. THERE IS AN UNCONT ROVERTED FINDING IN THE IMPUGNED ORDER THAT THE ASSESSEE WAS MAINTAINING SEPA RATE ACCOUNTS FOR BOTH THE UNITS WHICH ARE DULY AUDITED. SINCE TH E ASSESSEE HAS DULY FULFILLED THE REQUIREMENTS OF SECTION 80IA(7) OF THE ACT BY FILING THE AUDIT REPORT BEFORE FRAMING THE ASSESSMENT, WE ARE OF THE V IEW THAT THE ASSESSING OFFICER WRONGLY DISALLOWED THE CLAIM OF T HE ASSESSEE. AS PER PROVISIONS OF SECTION 80IA(7), REQUIRING FILING OF A UDIT REPORT ALONGWITH THE RETURN IS NOT MANDATORY RATHER IT IS DIRECTORY AND IF THE AUDIT REPORT IS FILED AT ANY TIME BEFORE FRAMING THE ASSESSMENT, TH E REQUIRED CONDITIONS ARE CONSIDERED TO BE FULFILLED. OUR VIEW IS FORTIFIED BY THE DECISION IN CIT VS. ACE MULTITAXES SYSTEMS (P) LTD. (2009) 317 ITR 307 (KAR.); CIT VS. MEDICAPS 5 LIMITED (2010) 323 ITR 5 54 (MP); AKS ALLOYS PVT. LTD. (2012); 18 TAXMAN.COM 25(MAD.); CIT VS. A.N. AR UNACHALAM; 75 TAXMAN 529 (MAD.). THE SUM AND SUBSTANCE OF THESE D ECISIONS IS THAT AUDIT REPORT CAN BE FILED WITH THE REVISED RETURN OR AT ANY STAGE UP TO FRAMING OF ASSESSMENT. IN VIEW OF THESE FACTS AND J UDICIAL PRONOUNCEMENTS, WE FIND NO JUSTIFICATION TO INTERFE RE WITH THE M/S. KILPEST INDIA LTD./I.T.A. NO. 688/IND/2016/AY0 5-06/BHOPAL. PAGE 7 OF 7 IMPUGNED ORDER. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION FROM DELHI HIGH COURT IN CIT VS. CONTIMETER ELECTRICALS PVT.LT D.; 317 ITR 249. IN VIEW OF THESE FACTS, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. IT IS DISMISSED. 3. SINCE THE RELIEF HAS BEEN GRANTED ON THE BASIS OF THE DECISION OF THE ITAT IN THE IMMEDIATELY PRECEDING YEAR AND FACTS RE MAIN THE SAME, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE T RIBUNAL, WE SUSTAIN THE ORDER OF THE LEARNED CIT(A) IN ALLOWING RELIEF U/S 80IA OF THE ACT TO THE ASSESSEE. 6. IN THE LIGHT OF ABOVE DECISION OF TRIBUNAL IN ASSE SSEE`S OWN CASE FOR A.Y. 2003- 04 AND 2004-05 WHEREIN ON SAME SET OF FACTS, DEDUCTI ON UNDER SECTION 80IA OF THE ACT WAS ALLOWED TO THE ASSESSEE. THEREFORE, RES PECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE SUSTAIN THE ORDER OF THE L EARNED CIT(A) IN ALLOWING RELIEF U/S 80IA OF THE ACT TO THE ASSESSEE. ACCORDIN GLY, THE APPEAL OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. 8. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.11.20 16. SD/- SD/- (D.T.GARASIA) JUDICIAL MEMBER (O.P.MEENA) ACCOUNTANT MEMBER DATED : NOVEMBER 23 , 2016.OPM