ACIT CEN CIR-34, MUMBAI V. H R JOHNSON (I) LTD, MUMBAI

ITA 6996/MUM/2008

• Counselvise Citation: 699619914 RSA 2008
• Duration Of Justice: 4 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 27-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 10-12-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: CHETAN KARIA
• Keywords: Capital asset; Depreciation; Business expenditure; Opportunity of being heard; Additional evidence; Corroborative evidences; Revised return; Revenue expenditure
• Section: 143(3); 80IB; 263; 63

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $(, ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 7388 /MUM/2010 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2004-05) !./ I.T.A. NO. 6996 /MUM/2008 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2005-06) ASSTT. COMMISSIONER OF INCOME TAX- CENTRAL CIRCLE 34, R. NO. 104, FIRST FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. ( ( ( ( / VS. M/S H & R JOHNSON (INDIA) LTD., WINDSOR, 7 TH FLOOR, C.S.T. ROAD, KALINA, SANTACRUZ (WEST), MUMBAI 400 098. #. !./ PAN : AAACH3506P ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ! / APPELLANT BY : SHRI P.K. SHUKLA 01./ 2 3 ! / RESPONDENT BY : SHRI CHETAN KARIA !($ 2 / // / DATE OF HEARING : 27-06-2013 45- 2 / DATE OF PRONOUNCEMENT : 14-08-2013 '6 / O R D E R PER P.M. JAGTAP, A.M . : THESE TWO APPEALS PREFERRED BY THE REVENUE AGAINST TWO SEPARATE ORDERS PASSED BY THE LD. CIT(A) 41, MUMBAI DTD. 1 3-08-2010 FOR A.Y. 2004- 05 AND BY THE LD. CIT(A) VI, MUMBAI DATED 26-9-200 8 FOR A.Y. 2005-06 INVOLVE SOME COMMON ISSUES AND THE SAME, THEREFORE, HAVE BEEN HEARD ITA 7388/M/10 & 6996/MUM/2008 2 TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE REVEN UE FOR A.Y. 2004-05 WHICH INVOLVES A COMMON ISSUE RELATING TO THE DISAL LOWANCE OF ASSESSEES CLAIM FOR DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1962 (THE ACT) IN RESPECT OF KARAIKAL UNIT WHICH HAS BEEN DELETED BY THE LD. CIT(A). 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CERAMIC TILES AND TRAD ING IN BATH ACCESSORIES. THE RETURN OF INCOME FOR A.Y. 2004-05 WAS ORIGINALL Y FILED BY THE ASSESSEE ON 1-4-2004 DECLARING TOTAL INCOME OF RS. 30,39,56,198 /-. SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN ON 22-3-2006 DECLAR ING A TOTAL INCOME OF RS. 27,93,89,640/- AFTER CLAIMING INTER ALIA DEDUCTION U/S 80IB OF THE ACT AT A REVISED FIGURE OF RS. 4,18,04,400/-. IN THE ASSESSM ENT ORIGINALLY COMPLETED U/S 143(3) OF THE ACT VIDE AN ORDER DATED 29-12-200 6, THE TOTAL INCOME OF THE ASSESSEE WAS COMPUTED BY THE A.O. AT RS. 29,68,79,5 80/-. THE SAID ASSESSMENT WAS SET ASIDE BY THE LD. CIT VIDE AN ORD ER DATED 26-3-22009 PASSED U/S 263 OF THE ACT WITH A DIRECTION TO THE A .O. TO EXAMINE INTER ALIA THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB OF THE ACT. THE SAID DEDUCTION WAS CLAIMED BY THE ASSESSEE IN RESPECT OF PROFITS DERIVED FROM KARAIKAL UNIT WHICH WAS PURCHASED AS GOING CONCERN FROM M/S EID PARRY (INDIA) LTD. ON 2-3-2000. SINCE THE SAID UNIT WAS ESTABLISHED BY EID PARRY LTD. IN THE YEAR 1996, IT WAS CLAIMED TO BE ELIGIBL E FOR DEDUCTION U/S 80IB OF THE ACT IN THE YEAR UNDER CONSIDERATION I.E 2004-05 BEING 9 TH YEAR OF OPERATION. AS PER THE DIRECTION GIVEN BY THE LD. C IT U/S 263 OF THE ACT, THE A.O. PROCEEDED TO EXAMINE THE ELIGIBILITY OF KARAIK AL UNIT FOR DEDUCTION U/S 80IB OF THE ACT. IN THIS REGARD, HE MADE CERTAIN E NQUIRIES TO WHICH THE ASSESSEE REPLIED AS UNDER:- ITA 7388/M/10 & 6996/MUM/2008 3 (I) THE YEAR IN WHICH THE UNIT WAS ESTABLISHED. THE UNIT AT KARAIKAL STARTED THE COMMERCIAL PRODUCT ION DURING MARCH, 1996. (II) WHETHER THE UNIT WAS ELIGIBLE FOR A BENEFICIAL PROVISION OF THE INCOME- TAX ACT ULS.801B. WE DONT KNOW WHETHER THE UNIT AT KARAIKAL WAS ELIG IBLE FOR 801B DEDUCTION OR NOT. HOWEVER, NO 801B DEDUCTI ON HAS BEEN CLAIMED WITH REGARD TO KARAIKAL UNIT BY EI D PARRY (INDIA) LTD. (III) WHETHER ANY CLAIM U/S.8OLB WAS MADE BY THE UN IT PRIOR TO THE PURCHASE BY THE M/S. H & R JOHNSON (INDIA) L TD. WE CONFIRM THAT NO 801B DEDUCTION HAS BEEN CLAIMED BY US IN RESPECT OF THE KARAIKAL UNIT. (IV) PLEASE FURNISH SUPPORTING EVIDENCE TO PROVE TH AT THE UNIT HAS AVAILED THE BENEFIT OF SECTION 801B IN EARLIER. NOT APPLICABLE AS NO 801B BENEFIT WAS AVAILED PRIOR TO SALE. (V) IF THE CLAIM U/S.801B WAS NOT MADE EARLIER, THE REASONS FOR THE SAME. WE DONT KNOW WHETHER THE UNIT IS ELI GIBLE FOR 801B BENEFITS OR NOT. HENCE, NOT CLAIMED. 4. ON PERUSAL OF THE REPLY GIVEN BY THE ASSESSEE, T HE A.O. CAME TO THE CONCLUSION THAT THERE WAS NO EVIDENCE FILED BY THE ASSESSEE TO ESTABLISH THAT THE ELIGIBILITY CONDITIONS FOR CLAIMING DEDUCTION U /S 80IB OF THE ACT WERE SATISFIED BY THE KARAIKAL UNIT. HE ALSO NOTED FROM THE DUE DILIGENCE REPORT OBTAINED BY THE ASSESSEE AT THE TIME OF TAKING OVER THE KARAIKAL UNIT FROM EID PARRY (INDIA) LTD. THAT THERE WAS NO MENTION WHATSO EVER ABOUT THE SAID UNIT BEING ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE REPLY GIVEN BY EID PARRY (INDIA) LTD. VIDE LETTER DATED 14-10-2009 AGAINST T HE ENQUIRY MADE BY THE A.O., IT WAS STATED THAT THEY DID NOT KNOW WHETHER THE KARAIKAL UNIT WAS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT AND ALSO ADMITTED THAT NO DEDUCTION U/S 80IB OF THE ACT HAD BEEN CLAIMED BY THEM IN RES PECT OF THE SAID UNIT. IN ITA 7388/M/10 & 6996/MUM/2008 4 THIS REGARD, RELIANCE WAS PLACED BY THE A.O. ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF A.G.S. TIBER CHEMICAL IND USTRIES (P) LTD. VS. CIT, 233 ITR 207 WHEREIN IT WAS HELD THAT IN ORDER TO GE T THE BENEFIT FOR THE UNEXPIRED PERIOD, THE ASSESSEE MUST PROVE THAT IT I S A SUCCESSOR TO ITS PREDECESSOR WHICH WAS ENJOYING THE BENEFIT OF SPECI AL DEDUCTION. THE A.O. HELD THAT IN THE CASE OF THE ASSESSEE, IT WAS CLEAR FROM THE REPLY OF EID PARRY (INDIA) LTD. THAT IT HAD NOT AVAILED THE DEDUCTION U/S 80IB OF THE ACT AND THE ASSESSEE WAS NOT SUCCESSOR TO EID PARRY (INDIA) LTD . IN RESPECT OF CLAIM OF DEDUCTION U/S 80IB OF THE ACT. ACCORDINGLY, THE CL AIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB IN RESPECT OF KARAIKAL UNIT WAS DISALLOWED BY THE A.O. IN THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 263 OF T HE ACT VIDE AN ORDER DATED 19-11-2009. 5. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 263 OF THE ACT, APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) DISPUTING THE DISALLOWANCE OF ITS CLAIM FOR DEDUCTION U/S 80IB OF THE ACT. BEFORE THE LD. CIT(A), THE ASSESSEE FILED ADDITIONAL EVIDENCE IN S UPPORT OF ITS CLAIM FOR DEDUCTION U/S 80IB OF THE ACT WHICH WAS FORWARDED T O THE A.O. FOR HIS EXAMINATION AND COMMENTS BY THE LD. CIT(A). THE A. O. SUBMITTED THE REMAND REPORT TO THE LD. CIT(A) OFFERING HIS COMMENTS AS U NDER:- (I) THE ASSESSEE IN THE REVISED RETURN OF INCOME H AS CLAIMED DEDUCTION U/S. 8013 OF RS. 4, 18,04,4001- BEING 30% OF RS. 13,93,48,000!-. THIS CLAIM IS IN RESPECT OF KARAIKA L UNIT AT PONDICHERRY. THIS UNIT IS PURCHASED AS GOING CONCERN BY THE ASSE SSEE COMPANY FROM M/S EID PARRY LTD. ON 02.03.2000. THE SAID UNIT IS SAID TO HOVE BEEN ESTABLISHED IN 1996. THE ASSESSEE SUBMITTED THAT IS 9 TH YEAR FOR CLAIMING DEDUCTION U/S. 80I BUT THE ASSESSEE HAS MO DE CLAIM FIRST TIME FOR THIS ASSESSMENT YEAR. AS PER THE INFORMATION AV AILABLE ON RECORD, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 8018 PER TAINS TO THE KARAIKAL UNIT, WHICH HAS NOT BEEN SET UP BY THE ASS ESSEE ON ITS OWN BUT WAS PURCHASED BY THE ASSESSEE FROM EID PARRY LT D. HOWEVER, NO CONCRETE EVIDENCE AS TO HOW THE UNIT IS ELIGIBLE FO R DEDUCTION U/S. 80IB, WHETHER ANY DEDUCTION U/S 80IB HAS BEEN CLAIMED BY EID PARRY (INDIA) LTD. HAVE BEEN SUBMITTED. ITA 7388/M/10 & 6996/MUM/2008 5 FURTHER, IN RESPONSE TO LETTER ISSUED BY THIS OFFIC E, M/S. EID PARRY (INDIA) LTD. SUBMITTED THAT THE UNIT AT KARAI KAL UNIT WAS STARTED IN THE YEAR 1996 AND THEY HAVE NEVER CLAIMED DEDUCTION U/S. 8018 AS THEY DO NOT KNOWN WHETHER THE UNIT IS ELIGIBLE FOR DEDUCTION U/S. 8018. ON CONFRONTING THIS TO THE ASSESSEE, THE ASSESSEE O NLY STATED THAT AS THE STATUTORY PERIOD OF 10 YEARS IS NOT OVER, THE U NIT IS ENTITLED TO CLAIM THE DEDUCTION U/S. 8018 FOR THE REMAINING YEARS WHI CH INCLUDES YEAR UNDER REVIEW. HOWEVER, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80IB PERTAINS TO THE KARAIKAL UNIT, WHICH HAS NOT BEEN SET UP BY THE ASSESSEE ON ITS OWN BUT WAS PURCHASED BY THE ASSESSEE FROM EID PARR Y LTD VIDE MEMORANDUM OF UNDERSTANDING DATED 23. 06. 1999 FOR A TOTAL CONSIDERATION OF RS 28.51 CRORES. M/S EID PA RRY (INDIA) LTD. VIDE THEIR LETTER DATED 14.10.2009 REPLIED THAT THEY DO NOT KNOW WHETHER THEY ARE ELIGIBLE FOR DEDUCTION U/S 80IB AND NO DED UCTION/S 80IB HAS BEEN CLAIMED IN RESPECT OF KARAIKAL UNIT. EVEN AS P ER THE PROVISIONS OF SECTION 80 IB(12) OF THE ACT NO DEDUCTION U/S 80IB IS ALLOWABLE TO THE AMALGAMATED COMPANY IN THE PREVIOUS YEAR IN WHICH T HE AMALGAMATION OR DEMERGER TAKES PLACE. THERE IS NO MENTION IN THE SECTION 80IB TO ALLOW DEDUCTION WHEN THE INDUSTRIAL UNDERTAKING WAS PURCHASED BY ANOTHER COMPANY. FURTHER THE ASSESSEE HAS NOT FURNI SHED ANY EVIDENCE AS TO HOW IT HAS FULFILLED THE CONDITIONS SPECIFIED IN 80IB(2(II) READ WITH EXPLANATION 2. THE ONUS LIES WITH THE ASSESSEE TO PROVE THAT ANY D EDUCTION CALIMED BY IT IN THE RETURN OF INCOME IS AN ALLOWABLE DEDUCTIO N. AMPLE OPPORTUNITIES WERE GIVEN TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING THE PROCEEDINGS U/S 2 63 TO PROVE THAT THE CLAIM OF DEDUCTION U/S. 80IB IN RESPECT OF KARAIKAL UNIT WAS AVAILED BY PREDECESSOR. HOWEVER, THE ASSESSEE HAS FAILED TO SO . IN VIEW OF THE ABOVE, THE DEDUCTION U/S. 80IB CLAIM ED OF RS. 4,18,04,400/- WAS DISALLOWED IN THE ASSESSMENT ORDE R. (II) THE ASSESSEE HAS NOW FILED TWO CERTIFICATES ST ATING TO BE RECEIVED FROM M/S EID PARRY (INDIA) LTD., CERTIFYING THAT TH E KARAIKAL UNIT WAS ESTABLISHED BY THEM AS A NEW UNIT AND IT IS NOT FOR MED BY THE TRANSFER TO A NEW BUSINESS OF PLANT OR MACHINERY PREVIOUSLY USED FOR ANY PURPOSE AND SUCH MACHINERY OR PLANT WAS NOT AT ANY TIME PREVIOUS TO THE DATE OF THE INSTALLATION BY THE COMPANY, USED I N INDIA AND THAT KARAIKAL UNIT HAS STARTED THE COMMERCIAL PRODUCTIO N DURING MARCH, 1996. THE ASSESSEE HAS ALSO FILED COPY OF FIXED ASS ET REGISTER OF M/S EID PARRY (INDIA) LTD. IN THIS CONNECTION, IT IS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SUFFICIENT OPPORTUNITIES WERE GIVEN TO THE ASSESSEE TO FURNISH SUPPORTING EVIDENCE IN RESPECT OF CLAIM OF DEDUCTION U/S. 80IB VIDE LETTERS/NOTICES DATED 12.08.2009 AND 06.11.200 9. THE ASSESSEE, ITA 7388/M/10 & 6996/MUM/2008 6 INSTEAD OF MERELY STATING THAT IT HAS SATISFIED ALL THE CONDITIONS OF SECTION 80IB, NO DOCUMENTARY EVIDENCE AS SUCH HAS B EEN FURNISHED BY THE ASSESSEE. IT IS PERTINENT TO BROUGHT ON RECORD THAT EVEN M/S PARRY (INDIA) LTD. HAS NOT FURNISHED THE CERTIFICATES UND ER CONSIDERATION WHICH HAVE BEEN FILED BY THE ASSESSEE DURING THE AP PELLATE PROCEEDINGS, THOUGH IT HAS BEEN GIVEN OPPORTUNITY VIDE THIS OFFI CE LETTER DATED 08. 10.2009. THE ASSESSEE HAS ALSO NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT IT WAS PREVENTED BY SUFFICIENT CAUSE FRO M PRODUCING THESE DOCUMENTS DURING THE ASSESSMENT PROCEEDINGS. IN VIE W OF THESE FACTS, THE DOCUMENTS NOW FILED BY THE ASSESSEE ARE NOT LIA BLE TO BE ADMITTED. WITHOUT PREJUDICE TO THE ABOVE, THE CERTIFICATES FI LED BY THE ASSESSEE HAVE NO AUTHENTICITY AND EVIDENTIARY VALUE SINCE AS REQUIRED UNDER SEC. 8OIA(7) READ WITH SEC. 80IB(13), M/S EID PARRY (IND IA) LTD., SHOULD HAVE FURNISHED THE REPORT OF AUDIT IN THE PRESCRIBED FORM NO. 10CCB IN RESPECT OF CLAIM OF DE DUCTION U/S 80IB FOR THE INITIAL ASSESSMENT YEAR CERTIFYING THAT ALL THE CONDITIONS LAID DOWN U/S 80IB OF THE INCOME TAX ACT, 1961 HAVE BEEN FULFILLED. FILING OF AUDIT REPORT FOR THE INITIAL ASSESSMENT IS QUITE NE CESSARY IN VIEW OF THE FACT THAT M/S EID PARRY (INDIA) LTD., DURING THE CO URSE OF ASSESSMENT PROCEEDINGS VIDE THEIR LETTER DATED 14-10-2009 HAS BEEN SUBMITTED THAT THEY DO NOT KNOW WHETHER THE UNIT AT KARAIKAL WAS E LIGIBLE FOR 80IB DEDUCTION OR NOT AND NO 80IB DEDUCTION HAS BEEN CLA IMED WITH REGARD TO KARAIKAL UNIT BY EID PARRY (INDIA) LTD. (III) IT IS REITERATED THAT THE DEDUCTION CLAIMED B Y THE ASSESSEE U/S 80IB PERTAINS TO THE KARAIKAL UNIT, WHICH HAS NOT B EEN SET UP BY THE ASSESSEE ON ITS OWN BUT WAS PURCHASED BY THE ASSESS EE FROM EID PARRY LTD. THEREFORE, IT WAS FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY PREVIOUSLY USED ARID THE ASSESSEE ALSO NO T ESTABLISHED THAT THE TOTAL VALUE OF THE MACHINERY SO TRANSFERRED DOE S NOT EXCEED 20% OF THE TOTAL VALUE OF THE MACHINERY USED IN THE BUSINE SS. THUS THE ASSESSEE HAS NOT SATISFIED THE CONDITION LAID DOWN U/S 80IB(II) READ WITH EXPLANATION 2. THEREFORE, THE DEDUCTION U/S. 80IB CLAIMED BY THE ASSESSEE OF RS. 4,18,04,4001- WAS NOT ALLOWABLE TO THE ASSESSEE AND HAS RIGHTLY BEEN DISALLOWED IN THE ASSESSMENT ORDER . 6. THE REMAND REPORT SUBMITTED BY THE A.O. WAS CON FRONTED BY THE LD. CIT(A) TO THE ASSESSEE FOR ITS COMMENTS AND AFTER C ONSIDERING THE SAID COMMENTS AS WELL AS THE SUBMISSIONS EARLIER MADE BY THE ASSESSEE, THE COMMENTS MADE BY THE A.O. IN THE REMAND REPORT AND MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A)ALLOWED THE CLAIM OF THE ASSE SSEE FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF KARAIKAL UNIT FOR THE FOL LOWING REASONS GIVEN IN PARA NO. 2.9 OF HIS IMPUGNED ORDER:- ITA 7388/M/10 & 6996/MUM/2008 7 2.9 AFTER CONSIDERING OF THE FACTS AND CIRCUMSTANC ES, IT IS ESTABLISHED THAT EID PARRY INDIA LTD. WAS STARTED IN 1996. SECO NDLY, IT IS CONFIRMED THAT APPELLANT COMPANY HAS PURCHASED THIS UNIT AS A RUNNING CONCERN FROM M/S EID PARRY INDIA LTD. ON 02.03.2000. THIRDL Y IT IS TRUE THAT NEITHER THE OLD COMPANY M/S. EID PARRY INDIA NOR TH E APPELLANT COMPANY HAS CLAIMED DEDUCTION U/S 80IB IN THE EARLI ER YEARS. FOURTHLY, IT IS AGAIN TRUE THAT THIS IS THE YEAR OF THIS COMP ANY FOR CLAIMING DEDUCTION U/S. 80IB. THE CONDITIONS LAID DOWN U/S. 80IB THAT - (I) IT SHOULD NOT BE FORMED BY SPLITTING UP OR RECONSTRUCT ION IS FULFILLED BY THE APPELLANT COMPANY AND (II) IT IS NOT FORMED BY THE TRANSFER OF MACHINERY, NEW BUSINESS BECAUSE IT HAS TAKEN OVER A S A RUNNING CONCERN. THE OTHER CONDITIONS RELATING TO CLAIMING OF DEPRECIATION HAS ALSO BEEN FULFILLED BY THIS UNIT. THE ARGUMENTS OF THE ASSESSING OFFICER THAT AS PER PROVISIONS OF SECTION 80IB DEDUCTION IS LIABLE TO THE AMALGAMATED COMPANY ONLY IS NOT CORRECT INTERPRETAT ION OF THE PROVISION BECAUSE IT IS NOT MENTIONED ANYWHERE THAT THE DEDUCTION IS NOT ALLOWABLE TO THE COMPANY WHO HAS PURCHASED IT A S A RUNNING CONCERN. THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF A.G.S. TIBER C HEMICAL INDUSTRIES (P) LTD. VS. CIT AND M/S. KHORDAY INDUSTRIES (P) LT D. SUPRA ARE DISTINGUISHABLE TO THE FACTS OF THIS CASE AS, CLARI FIED BY THE APPELLANT IN HIS SUBMISSIONS STATED ABOVE. THE OTHER ARGUMENTS O F THE AO THAT THE APPELLANT HAS NOT SUBMITTED NECESSARY EVIDENCES TO PROVE THAT IT HAD FULFILLED THE CONDITIONS SPECIFIED IN SECTION 80IB( 3). THE APPELLANT HAS SUBMITTED THAT IT HAS NOT CLAIMED DEDUCTION U/S. 80 IB(3) HENCE NOT APPLICABLE. HENCE IT HAS CLAIMED DEDUCTION U/S. 80I B(4) AND THE CONDITIONS ARE FULFILLED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ALLOWING T HE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB, THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 7. THE LD. D.R., AT THE OUTSET, TOOK US THROUGH THE ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 263 OF THE ACT TO SHOW THE A DVERSE FINDINGS RECORDED BY THE A.O. WHILE DISALLOWING THE DEDUCTION U/S 80IB C LAIMED IN RESPECT OF KARAIKAL UNIT. HE SUBMITTED THAT EFFECTIVELY THE O NLY ISSUE INVOLVED IN THE PRESENT CASE IS WHETHER THE KARAIKAL UNIT TAKEN OVE R BY THE ASSESSEE FROM EID PARRY (INDIA) LTD. WAS ELIGIBLE FOR DEDUCTION U /S 80IB OF THE ACT OR NOT. IN THIS REGARD, HE INVITED OUR ATTENTION TO THE CONTEN TS OF THE REMAND REPORT SUBMITTED BY THE A.O. TO THE LD. CIT(A) AS EXTRACTE D IN THE IMPUGNED ORDER OF ITA 7388/M/10 & 6996/MUM/2008 8 THE LD. CIT(A) TO SHOW THAT THERE WAS NO DOCUMENTAR Y EVIDENCE FURNISHED BY THE ASSESSEE TO ESTABLISH THAT THE KARAIKAL UNIT IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT AS CATEGORICALLY STATED BY A.O. HE ALSO TOOK US THROUGH THE CONCLUSION PORTION OF THE LD. CIT(A)S IMPUGNED ORD ER ON THIS ISSUE AS APPEARING ON PAGE 9 OF THE SAID ORDER TO SHOW THAT THE MAIN ISSUE RELATING TO THE ELIGIBILITY OF KARAIKAL UNIT FOR DEDUCTION U/S 80IB OF THE ACT IS NOT EXAMINED ON MERIT AS THERE IS NO FINDING GIVEN BY H IM TO SHOW AS TO HOW THE ELIGIBILITY CONDITIONS FOR CLAIMING DEDUCTION U/S 8 0IB OF THE ACT WERE SATISFIED BY THE UNIT. HE CONTENDED THAT THE SAID UNIT WAS E STABLISHED BY EID PARRY (INDIA) LTD. IN THE YEAR 1996 AND THEREFORE THE SAT ISFACTION OF ELIGIBILITY CONDITION WAS REQUIRED TO BE ESTABLISHED WITH REFER ENCE TO THAT INITIAL YEAR ESPECIALLY WHEN NO DEDUCTION U/S 80IB OF THE ACT WA S CLAIMED BY EID PARRY (INDIA) LTD. IN THE INITIAL YEAR. HE CONTENDED THA T THE DECISION OF THE LD. CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/ S 80IB OF THE ACT IN RESPECT OF KARAIKAL UNIT FOR THE YEAR UNDER CONSIDERATION T HUS IS NOT WELL FOUNDED AND HIS IMPUGNED ORDER ON THIS ISSUE IS LIABLE TO BE SE T ASIDE. 8. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(A) ALLOWING THE C LAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF KARAIKA L UNIT. HE SUBMITTED THAT THE FIXED ASSET REGISTER OF EID PARRY (INDIA) LTD. WAS PRODUCED BY THE ASSESSEE TO SHOW THAT ALL THE ASSETS PURCHASED AND INSTALLED IN KARAIKAL UNIT WERE THE NEW ASSETS. HE SUBMITTED THAT NO DEDUCTION WAS CLA IMED IN RESPECT OF THE SAID UNIT U/S 80IB OF THE ACT IN THE EARLIER YEARS BECAUSE THERE WERE CONTINUING LOSSES. HE CONTENDED THAT WHATEVER ENQU IRIES MADE BY THE A.O. IN RELATION TO THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IB OF THE ACT WERE DULY REPLIED BY THE ASSESSEE FURNISHING THE RELEVANT DET AILS AND DOCUMENTS BUT STILL THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB OF THE ACT FOR WANT OF DOCUMENTARY EVIDENCE WITHOUT EVEN POINTING OUT WHAT EVIDENCE EXACTLY WAS REQUIRED BY HIM FROM THE ASSESSEE TO ESTABLISH THE CLAIM FOR DEDUCTION U/S ITA 7388/M/10 & 6996/MUM/2008 9 80IB OF THE ACT. HE SUBMITTED THAT THE ASSESSEE IS READY TO SATISFY THE A.O. AS REGARDS ITS CLAIM FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF KARAIKAL UNIT BY PRODUCING THE RELEVANT DOCUMENTARY EVIDENCE, IF REQUIRED, PROVIDED THE A.O. SPECIFICALLY POINTS OUT AS THE EVIDENCE REQUIR ED BY HIM FOR THIS PURPOSE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE KARAIKAL UNIT IN RESPECT OF WHICH THE IMPUGNED DEDUCTION U/S 80IB OF THE ACT IS CLAIMED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS S ET UP IN THE YEAR 1996 BY EID PARRY (INDIA) LTD. AND THE SAME WAS TAKEN OVER BY THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT NO DEDUCTION U/S 80IB OF THE AC T WAS CLAIMED BY EID PARRY (INDIA) LTD. IN RESPECT OF THE SAID UNIT IN T HE INITIAL YEARS AND EVEN BY THE ASSESSEE UP TO THE IMMEDIATELY PRECEDING YEAR. IT MAY BE TRUE THAT DUE TO THE CONTINUING LOSSES SUFFERED BY THE SAID UNIT IN THE EARLIER YEARS, NO DEDUCTION U/S 80IB OF THE ACT WAS CLAIMED AS STATED BY THE ASSESSEE AND THE YEAR UNDER CONSIDERATION WAS THE FIRST YEAR WHERE T HERE WAS AN OCCASION TO CLAIM SUCH DEDUCTION. HOWEVER, AS RIGHTLY CONTENDE D BY THE LD. D.R., THE ISSUE AS TO WHETHER THE SAID UNIT IS ELIGIBLE FOR D EDUCTION U/S 80IB OF THE ACT OR NOT IS REQUIRED TO BE ESTABLISHED WITH REFERENCE TO THE INITIAL YEAR AND THE ONUS ON THIS REGARD IS ON THE ASSESSEE TO ESTABLISH BY PRODUCING THE RELEVANT DOCUMENTARY EVIDENCE TO ESTABLISH THAT THE ELIGIBIL ITY CONDITIONS STIPULATED FOR CLAIMING THE DEDUCTION U/S 80IB OF THE ACT WERE DUL Y SATISFIED IN THE INITIAL YEAR. AT THE SAME TIME, IT IS ALSO REQUIRED FOR THE A.O. TO POINT OUT TO THE ASSESSEE AS TO WHAT EXACTLY IS THE DOCUMENTARY EVID ENCE REQUIRED TO ESTABLISH ITS CASE IF THE DOCUMENTARY EVIDENCE PRODUCED BY TH E ASSESSEE IS FOUND TO BE NOT SATISFACTORY BY HIM. WITH THESE OBSERVATIONS, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE T HE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME AFRESH AFT ER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. THE APPEAL OF T HE REVENUE FOR A.Y. 2004- 05 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICA L PURPOSE. ITA 7388/M/10 & 6996/MUM/2008 10 10. NOW, WE SHALL TAKE UP THE APPEAL OF THE REVENUE FOR A.Y. 2005-06 WHEREIN THE FOLLOWING GROUNDS ARE RAISED BY THE REV ENUE:- 1. ON THE ACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DIRECTING DEDUCTION U/S.801B WITHOU T CONSIDERING THE FACT THAT THE UNIT ESTABLISHED IN KARAIKAL, PONDICH ERRY DID NOT FULFILL THE CONDITION FOR ELIGIBILITY OF SUCH DEDUCTION. 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S 36(1)(VA) ON ACCOUNT OF DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF/ESTC MAD E BEYOND THE DUE DATE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING DISALLOWANCE OF INTEREST A TTRIBUTABLE TO AMOUNTING UTILIZED FOR ACQUIRING OFFICE PREMISES IG NORING THE PROVISIONS AS PER EXPLANATION TO SECTION 43(1) WHEREIN IT STIP ULATES THAT INTEREST EXPENSES INCURRED FOR ACQUISITION OF ASSET AFTER P UTTING THE SAME TO USE SHALL NOT ONLY FORM PART OF THE ACTUAL COST OF THE ASSETS. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NO. 1, THE LD. REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE ISSUE INVOLVED THEREIN RELATING TO ASSESSEES CLAIM FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF KARAIKAL UNIT IS SIMILAR TO THE ONE INVOLVED IN A.Y . 2004-05 WHICH HAS BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDE R. AS THE MATERIAL FACTS RELEVANT TO THIS ISSUE AS INVOLVED IN THE YEAR UNDE R CONSIDERATION AS WELL AS THE ARGUMENTS OF BOTH THE SIDES ARE SIMILAR, WE FOL LOW OUR CONCLUSION DRAWN IN A.Y. 2004-05 AND RESTORE THIS ISSUE RELATING TO ASSESSEES CLAIM FOR DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF KARAIKA L UNIT TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECT ION AS GIVEN IN A.Y. 2004- 05. GROUND NO. 1 OF REVENUES APPEAL IS ACCORDINGL Y TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 12. AS REGARDS GROUND NO. 2, IT IS OBSERVED THAT TH E ISSUE INVOLVED THEREIN RELATING TO THE DISALLOWANCE MADE ON ACCOUNT OF DEL AYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF/ESIC BEYOND THE DUE DA TE BUT WITHIN THE GRACE ITA 7388/M/10 & 6996/MUM/2008 11 PERIOD IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E INTER ALIA BY THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME-TAX V. SOUTH INDIA CORPORATION LTD. (2000) 242 ITR 114 (KE R.) AND THAT OF HONBLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME-TAX V. SHRI GANAPATHY MILLS COMPANY LTD. (2000) 243 ITR 879 (MA D.) WHEREIN IT WAS HELD THAT DUE DATE OF PAYMENT UNDER THE RELEVANT ACT IS INCLUSIVE OF THE GRACE PERIOD ALLOWED UNDER THE SAID ACT. RESPECTFULLY FO LLOWING THE SAID JUDICIAL PRONOUNCEMENTS, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO . 2 OF REVENUES APPEAL. 13. IN GROUND NO. 3, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE A.O. ON AC COUNT OF INTEREST ATTRIBUTABLE TO THE BORROWED FUNDS UTILIZED FOR ACQ UIRING THE OFFICE PREMISES. 14. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE WAS FOUND TO HAVE MADE PAYMENT OF RS. 13.56 CRORES FOR THE PURCHASE O F OFFICE PREMISES. THE SAID AMOUNT WAS PAID BY THE ASSESSEE FROM THE LOAN TAKEN FROM UTI BANK LTD. THE ASSESSEE, THEREFORE, WAS CALLED UPON BY T HE A.O. TO EXPLAIN AS TO WHY THE INTEREST PAID ON THE SAID LOAN TO THE EXTEN T ATTRIBUTABLE TO THE AMOUNT PAID FOR PURCHASE OF CAPITAL ASSETS SHOULD N OT BE CAPITALIZED AS PER EXPLANATION 8 TO SECTION 43 OF THE ACT. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT AS PER PROVISO TO SECTION 36(1)(III), INTEREST IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF ASSET FOR THE EXTENSION OF EXISTING BUSINESS IS NOT ALLOWABLE AS REVENUE EXPENDITURE AND SINCE THE OFFI CE PREMISES WAS ACQUIRED FOR THE PURPOSE OF EXISTING BUSINESS AND NOT FOR TH E EXTENSION OF THE EXISTING BUSINESS, THE PROVISO TO SECTION 36(1)(III) OF THE ACT WAS NOT APPLICABLE AND THE INTEREST WAS ALLOWABLE AS DEDUCTION AS PER THE MAIN PROVISIONS OF SECTION 36(1)(III) OF THE ACT. THIS EXPLANATION OF THE ASSE SSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. HE HELD THAT ALTHOUGH THE PROVISO OF S ECTION 36(1)(III) WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE, SINCE THE C ONCERNED OFFICE PREMISES HAD NOT BEEN PUT TO USE DURING THE YEAR UNDER CONSI DERATION, INTEREST ITA 7388/M/10 & 6996/MUM/2008 12 ATTRIBUTABLE TO THE SAME WAS NOT ALLOWABLE AS A REV ENUE EXPENDITURE. ACCORDINGLY, SUCH INTEREST ATTRIBUTABLE AMOUNTING T O RS. 1.39 CRORES WAS DISALLOWED BY THE A.O. AND THE SAME AMOUNT WAS CAPI TALIZED BY HIM TOWARDS THE COST OF CAPITAL ASSET. 15. BEFORE THE LD. CIT(A), IT WAS CONTENDED ON BEHA LF OF THE ASSESSEE THAT AS PER EXPLANATION 8 TO SECTION 43 OF THE ACT, WHEN TH E ASSET HAD BEEN PUT TO USE, THEN INTEREST PAYABLE AFTERWARDS COULD NOT BE CAPITALIZED. IT WAS CONTENDED THAT THE REVERSE, HOWEVER, WAS NOT TRUE A ND IT WAS NOT NECESSARY THAT IF THE SAID ASSET WAS NOT PUT TO USE, THEN INT EREST SHOULD BE CAPITALIZED. IT WAS CONTENDED THAT THE ALLOWABILITY OF INTEREST EXPENDITURE IS GOVERNED BY SECTION 36(1)(III) WHICH GIVES CLEAR CUT GUIDELINES THAT ANY AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING BUSINESS FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION OF ASSET TILL THE DATE ON WHICH SUCH ASSET FIRST PUT TO USE CANNOT BE ALLOWED AS DEDUCTION. IT WAS C ONTENDED THAT THE OFFICE PREMISES IN THE ASSESSEES CASE WAS ACQUIRED FOR TH E PURPOSE OF ITS EXISTING BUSINESS AND NOT FOR THE EXTENSION OF EXISTING BUSI NESS AND THEREFORE INTEREST PAID ON THE FUNDS BORROWED FOR ACQUISITION OF SUCH CAPITAL ASSET WAS ALLOWABLE AS DEDUCTION U/S 36(1)(III) OF THE ACT. RELIANCE W AS PLACED BY THE ASSESSEE ON THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF SIMBHAOLI SUGAR MILLS LTD. VS. ACIT (2007) 17 SOT 90 (DELHI) WHEREIN IT WAS HE LD THAT INTEREST ON BORROWED FUNDS USED FOR THE PURPOSE OF ACQUISITION OF MACHINERY FOR THE EXISTING BUSINESS HAD TO BE ALLOWED AS A REVENUE EX PENDITURE EVEN THOUGH THE SAID MACHINERY WAS NOT PUT TO USE DURING THE RELEVA NT PERIOD. THE LD. CIT(A) FOUND MERIT IN THE SUBMISSIONS MADE ON BEHALF OF TH E ASSESSEE ON THIS ISSUE AND DELETED THE DISALLOWANCE MADE BY THE A.O. ON AC COUNT OF INTEREST ATTRIBUTABLE TO THE BORROWED FUNDS UTILIZED FOR ACQ UISITION OF OFFICE PREMISES. 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY CONTENDED ON BEHALF OF THE ITA 7388/M/10 & 6996/MUM/2008 13 ASSESSEE BEFORE THE AUTHORITIES BELOW AS WELL AS BE FORE US, EXPLANATION 8 TO SECTION 43 OF THE ACT IS APPLICABLE IN A SPECIFIC S ITUATION AND NO ADVERSE INFERENCE CAN BE DRAWN RELYING ON THE SAID EXPLANAT ION BY ASSUMING A REVERSE POSITION WHERE THE SITUATION AS ENVISAGED IN THE SA ID EXPLANATION IS NOT OBTAINED SUCH AS THE CASE OF THE ASSESSEE. AS RIGH TLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ALLOWABILITY OF INTER EST EXPENDITURE AS BUSINESS EXPENDITURE IS GOVERNED BY SECTION 36(1)(VII) OF TH E ACT AND SINCE THE PROVISO THERETO IS NOT APPLICABLE IN THE CASE OF THE ASSESS EE WHO ACQUIRED THE CAPITAL ASSET OF OFFICE PREMISES FOR THE PURPOSE OF ITS EXI STING BUSINESS AND NOT FOR ANY EXTENSION OF ITS EXISTING BUSINESS, THE INTERES T PAID ON THE BORROWED FUNDS UTILIZED FOR ACQUIRING SUCH CAPITAL ASSET IS ALLOWABLE AS REVENUE EXPENDITURE AS PER THE MAIN PROVISIONS CONTAINED IN SECTION 36(1)(III) OF THE ACT. IN THIS REGARD, THE LD. CIT(A) HAS GIVEN A FIN DING ON THIS IMPUGNED ORDER THAT THE OFFICE PREMISES WAS ACQUIRED BY THE ASSESS EE FOR THE PURPOSE OF ITS EXISTING BUSINESS AND THE LD. D.R. HAS NOT REBUTTED OR CONTROVERTED THIS FINDING OF FACT RECORDED BY THE LD. CIT(A). WE, TH EREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE D ISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS UTILIZED FOR ACQUISITION OF OFFICE PREMISES FOR ITS EXISTING BUSINESS AND UPHOL DING THE SAME ON THIS ISSUE, WE DISMISS GROUND NO. 3 OF REVENUES APPEAL. 17. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y. 2 004-05 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE WHILE APPEAL OF REV ENUE FOR A.Y. 05-06 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST, 2013. . '6 2 45- 7'(8 14-08-2013 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 7'( DATED 14-08-2013. ITA 7388/M/10 & 6996/MUM/2008 14 $.)(.!./ RK , SR. PS '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. < () / THE CIT(A)- CONCERNED MUMBAI 4. < / CIT CONCERNED, MUMBAI 5. :$? 0))( , , / DR, ITAT, MUMBAI I BENCH 6. %, @ / GUARD FILE. '6(! '6(! '6(! '6(! / BY ORDER, !1: 0) //TRUE COPY// A A A A/ // /!B !B !B !B ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI