M/s. Sagar Springs Pvt. Ltd., Baroda V. The Dy.CIT, Circle-4, Baroda

ITA 70/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9778 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M J SHAH
• Keywords: Depreciation; Question of law
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I R.P. TOLANI , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SAGAR SPRINGS PVT. LTD., 4, MANISHA, PRODUCTIVITY ROAD, DODSAL SOCIETY, BARODA - 390001 PAN: AACCS5494F (APPELLANT) VS THE ACIT, RANGE - 4. BARODA (RESPONDENT) REVENUE BY : MS. SONIA KUMAR , SR. D . R. ASSESSEE BY: S H RI M.J. SHAH , A.R. DATE OF HEARING : 23 - 11 - 2 016 DATE OF PRONOUNCEMENT : 09 - 12 - 2 016 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APP EAL FOR A.Y. 2007 - 08 , AR ISES FROM ORDER OF THE CIT(A) - III, BARODA DATED 14 - 10 - 2011 IN APPEAL NO. CAB/III - 150/09 - 10 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 70 / A HD/20 12 A SSES SMENT YEAR 200 7 - 08 I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : - 1. THE C.I.T. ERRED IN UPHOL DING THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECT ION 80IB(4) OF THE I. T. ACT, 1961. 2. THE C.I.T. ERRED IN NOT APPRECIATING THE OVERALL FACTUAL AND LEGAL SUBMISSIONS MADE AT THE TIME OF APPELLATE PROCE EDINGS AND IN THE PROCESS, DISALLOWED THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 4,67,86,660/ - WAS FILED ON 31 ST OCTOBER, 2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFIC ER HAS NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB AMOUNTING TO RS. 1 , 10 , 40 , 946/ - BEING 30% OF ELIGIBLE PROFIT OF RS. 3 , 68 , 03 , 152/ - . THE ASSESSEE STATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT DEDUCTION HAD BEEN CLAIMED U/S 80IB(C)( II) BEING A SMALL SCALE INDUSTRY UNDERTAKING WHICH HAS BEGUN MANUFACTURING BETWEEN APRIL, 1995 TO 31 ST MARCH, 2002. THE ASSESSING OFFICER STATED THAT THE ASSESSEE HAD MADE INVESTMENT IN THE EXISTING PLANT & MACHINERY IN THE SAME EXISTING PREMISES IN TH E YEAR 19 9 8.AND IT HAD BEEN TREATING THE EXPANDED INFRASTRUCTURE AS A SEPARATE UNIT BUT ACTUALLY THERE WAS NOT SEPARATION BECAUSE OF COMMON SHARING OF FACILITIES IN THE PREMISES. AS A RESULT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB ON THE EXPANDED UNIT HAS BEEN DENIED BY THE ASSESSING OFFICER SINCE 1998 - 99 BY NOT TREATING THE EXPANDED UNIT AS SEPARATE UNIT. THE COMMISSIONER OF INCOME TAX(A) HAD ALSO CONFIRMED THE ACTION OF THE A SSESSING O FFICER IN ALL THOSE A SSESSMENT Y EARS. T HE TRIBUNAL HAS NOT I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 3 CON FIRMED THE ADDITION SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX(A) FOR ASSESSMENT YEAR 1998 - 99 TO 2005 - 06. THE ASSESSING OFFICER FURTHER STATED THAT THE ISSUE HAS NOT REACHED FINALITY AS FURTHER APPEAL HAS BEEN FILED BEFORE THE HON BLE GUJARAT HIGH COU RT. HE STATED THAT T HE ISSUE OF DEDUCTION IN THIS CASE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2006 - 07 WAS ALSO EXAMINED WHEREIN IT WAS FOUND THAT THE VALUE OF PLANT AND MACHINERY BEING WDB AS PER INCOME TAX A CT HAS BEEN CERTIFIED AT RS. 1, 0 0 , 00 , 893/ - I N FORM NO. 10CC B . THE ASSESSING OFFICER ALSO STATED THAT THERE WAS NO SEPARATE FIGURES OF SALES OR EXPENSES IN THE AUDITED ACCOUNTS OR THE TAX AUDIT REPORT THEREFORE THE RATIO OF SALES ALLOCATION BETWEEN THE TWO UNIT IS NOT RELIABLE. THE ASSESSING OFFICER ALSO STATED THAT AS DECIDED IN THE EARLIER YEAR THE ASSESSEE FAILED TO ESTABLISH THAT THE EXPANDED UNIT WAS DIFFERENT FROM THE EXISTING UNIT. IN VIEW OF TH ESE FACTS THE ASSESSING OFFICER HELD THAT ASSESSEE IS NOT A S SSI UNIT AND NOT ELIGIBLE FOR DEDUCTION U/S80IB OF THE ACT. 4. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX(A). THE LD. COMMISSIONER OF INCOME TAX(A) HAS SUST AINED THE ADDITION MADE BY THE ASSESSING O FFICER. THE DEC ISION OF THE LD. COMMISSIONER OF INCOME TAX(A) IS REPRODUCED AS UNDER: - 5. FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO HAS TAKEN INTO CONSIDERATION THE W.D.V. OF THE PLANT AND MACHINERY FOR DETERMINING THE INVESTMENT IN PLANT AND MACHINERY OF THE AP PELLANT IN ORDER TO ASCERTAIN AS TO WHETHER THE APPELLANT IS SMALL SCALE INDUSTRIAL UNDERTAKING OR NOT. THE SAME ACTION HAS BEEN TAKEN IN THE ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07. IT IS ALSO SEEN THAT IN I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 4 FORM NO. 10 CCB FILED BY THE APPELLANT, THE APPELL ANT IS ALSO TAKING INTO ACCOUNT THE W.D.V. OF PLANT AND MACHINERY TO SHOW THAT IT IS A SMALL SCALE INDUSTRIAL UNDERTAKING. THE ACTIONS OF BOTH A.O. AND THE APPELLANT NOT AS PER LAW. HENCE DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR WAS ASKED TO FURN ISH THE YEAR WISE ORIGINAL COST OF PLANT AND MACHINERY WHICH IS TO BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF SECTION 80 IB. THE AR HAS FURNISHED THE DETAILS AS PER WHICH THE GROSS BLOCK OF PLANT AND MACHINERY DETERMINED ON THE BASIS OF ACTUAL COST OF PLANT AND MACHINERY ARE AS FOLLOWS: NO. YEAR ENDING GROSS BLOCK OF PLANT AND MACHINERY (RS. ) 1 31.03.1998 22366980.75 2 31.03.1999 27204348.88 3 31.03.2000 28830540.88 4 31.03.2001 29027387.88 5 31.03.2002 29195022.80 6 31.03.2003 4084 6770.75 7 31.03.2004 42735730.75 8 31.03.2005 46172341.75 9 31.03.2006 46633303.75 10 31.03.2007 48304198.75 11 31.03.2008 52136515.75 5.1 FROM THE ABOVE TABLE IT IS EVIDENT THAT THE APPELLANT IS NOT A SMALL SCALE INDUSTRIAL UNDERTAK ING FOR THE PURPOSES OF DEDUCTION UNDER SECTION 80 IB(4) FROM THE ASSESSMENT YEAR 2003 - 04 ONWARDS. 5.2 IT MAY BE MENTIONED HERE THAT FROM THE ASSESSMENT YEAR 1998 - 99 TO ASSESSMENT YEAR 2005 - 06 THE CLAIM OF DEDUCTION OF THE APPELLANT U/S 80 IB WAS DISALLOW ED. IN ALL THESE ASSESSMENT YEARS, I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 5 ITAT HAS ALLOWED THE APPELLANTS CLAIM. THE DISALLOWANCE IN THESE ASSESSMENT YEARS WERE MADE ON THE BASIS THAT NO NEW AND IDENTIFIABLE UNDERTAKING DISTINCT FROM THE EXISTING INDUSTRIAL UNIT WAS SET - UP. THE HON'BLE ITAT VID E ORDER DATED 19.12.2008 HAS HELD THAT THE APPELLANT HAD INSTALLED NEW PLANT AND MACHINERY IN A SEPARATE SPACE AND THE PRODUCTION OF THE APPELLANT HAD DRASTICALLY INCREASED BECAUSE OF INSTALLATION OF NEW MACHINERY. IN VIEW OF THE ABOVE, THE ITAT HELD THAT A NEW UNIT WAS SET UP AND THE APPELLANT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. 5.3 FURTHER IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006 - 07 THE AO DISALLOWED THE DEDUCTION UNDER SECTION 80 IB ON THE GROUND THAT EVEN AFTER ALLOWIN G DEPRECIATION, THE W.D.V. OF THE PLANT AND MACHINERY WAS WORTH RS. 1.02 CRORES WHICH IS MORE THAN RS. ONE CRORES, AND THEREFORE THE UNIT WAS NOT A SSI UNIT. IN THE ASSESSMENT FOR THE CURRENT YEAR, THE A.O. HAS PLACED RELIANCE ON THE ABOVE FINDING. BUT AS ALREADY DISCUSSED, FOR DETERMINING THE INVESTMENT IN PLANT AND MACHINERY AND ACTUAL COST IS TO BE CONSIDERED AND NOT THE W.D.V. AS ALREADY DISCUSSED ABOVE, THE INVESTMENT IN PLANT AND MACHINERY AS ON 31.03.2007 IS RS. 4.83 CRORES, WHICH IS MUCH MORE THAN P ERMISSIBLE LIMIT OF RS. 3.00 CRORES. HENCE THE APPELLANT IS NOT A SMALL SCALE INDUSTRIAL UNDERTAKING AS ON 31.3.2007 AND HENCE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80 IB (4). 6. HENCE, I UPHELD THE ACTION OF THE A.O. IN DISALLOWING THE DEDUCTION U/S 80IB(4 ) TO THE APPELLANT ON THE GROUND THAT THE INVESTMENT IN PLANT AND MACHINERY AS ON 31.03.2007 WAS MORE THAN THE PERMISSIBLE LIMIT FOR BEING CONSIDERED AS A SMALL SCALE INDUSTRIAL UNDERTAKING, WITH MODIFICATIONS THAT THE ACTUAL COST OF PLANT AND MACHINERY IN PLACE OF THEIR W.D.V. ARE TO BE CONSIDERED FOR THIS PURPOSE AND FURTHER, FOR THIS PURPOSE, THE INVESTMENT LIMIT IN PLANT AND MACHINERY AS ON 31.03.2007 IS RS. 3 CRORES IN THE CASE OF THE APPELLANT. AS A RESULT, THE A.O S ACTION OF DENYING THE DEDUCTION U/ S. 80IB(4) TO THE APPELLANT IS UPHELD AND THE APPEAL IS DISMISSED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LEARNED COUNSEL STATED THAT THE HON BLE ITAT AHMEDABAD VIDE ITS ORDER DATED 19 TH DECEMBER, 2008 HAD ALLOWED THE CLAIM OF THE ASSES SEE STATING THAT THE INSPECTOR REPORTS ON WHICH THE DEPARTMENT HA D HEAVILY RELIED I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 6 CLEARLY STATES THAT THERE WERE TWO DIFFERENT WORKSHOP HAVING DIFFERENT PROCESS, DIFFERENT MACHINERY AND PRODUCTION OF DIFFERENT SPRINGS MERELY THAT THE MANAGEMENT OF BOTH THE UNITS WAS COMMON, POWER WAS SUPPLIED TO BOTH THE UNITS, THERE WERE COMMON CONNECTION WHICH WAS ENHANCED BY THE ASSESSEE FOR INSTALLING THE UNIT , WILL NOT ASSIST THE REVENUE. HE FURTHER STATED THAT THE ITAT AHMEDABAD IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 - 07 HAS DISMISSED THE GROUND OF APPEAL OF THE REVENUE STAT ING THAT THE UNITS WHICH HAVE OBTAINED PERM A NENT REGISTRATION ON THE ORDER DATED 10.12.1997 WOULD CONTINUE TO REMAINS AS SSI UNITS IN SPITE OF THE ORDER DATED 24.12.1999 REDUCIN G THE INVESTMENT LIMIT TO RS.1 CRORE . 6 . ON THE OTHER HAND, THE LD. D.R. RELIED ON THE ORDER OF LD. COMMISSIONER OF INCOME TAX(A). 7 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO PERUSED THE CERTIFICATE F R O M DISTRICT INDUSTRY CENTRE PLACED ON RECORD BY THE ASSESSEE WHEREIN IT HAS BEEN CERTIFIED THAT THE PLANT AND MACHINERY WAS NOT MORE THAN 3 CRORE DURING THE SPECIFIC PERIOD AND IT WAS FURTHER STATED THAT THEY HAVE VERIFIED THE UNIT, ITS PLANT AND INSTALLED PLANT & MAC HINERY & POWER CONSUMPTION . AS PER GOVT . OF INDIA NOTIFICATION DATED 10 TH DECEMBER, 1997 UNIT REMAINED UNDER THE DEFINITION OF SMALL SCALE INDUSTRY. THE AFORESAID FACTS HAVE NOT BEEN DISPROVED BY THE REVENUE. WE HAVE ALSO PERUSED THE ORDER OF CO - ORDINA TE BENCH OF ITAT FOR ASSESSMENT YEAR 2006 - 07 IN WHICH THE APPEAL OF THE REVENUE WAS DISMISSED ON THE I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 7 GROUND THAT AS PER CERTIFICATE ISSUED BY THE DISTRICT INDUSTRY CENTRE , THE INVESTMENT IN THE PLANT AND MACHINERY WAS NOT MORE THAN 3 CRORES. IT WAS FURTHE R STATED THAT THE LIMIT FOR INVESTMENT IN PLANT AND MACHINERY FOR THE PURPOSE OF SSI UNIT OF RS. 3 CRORES (VIDE NOTIFICATION DATED 10 - 12 - 1997) WAS REDUCED TO RS. 1 CRORE VIDE NOTIFIED DATED 29 TH DECEMBER, 1999 . L ATER ON 14 TH MARCH, 2000 A CLARIFICATION W AS ISS UED STATING THAT THOSE UNITS WH ICH HAD OBTAINED PERMANENT REGISTRA TION AS ON 10 - 12 - 1997 WOULD CONTINUE TO REMAIN AS SSI UNIT IN SPITE OF THE ORDER DATED 24 - 04 - 1997 REDUCING THE LIMIT OF RS. 1 CRORE. FURTHER, WE HAVE ALS O NOTICED THAT HON BLE HIGH COU RT OF GUJARAT VIDE ITS ORDER TAX APPEAL NO. 10 OF 2014 DATED 9 TH JANUARY, 2014 IN THE CASE OF THE ASSESSEE ON THE IDENTICAL ISSUE DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: - 4. HAVING PERUSED THE ORDERS ON RECORD, IT CLEARLY EMERG ES THAT THE ASSESSEE WAS GRANTED CERTIFICATE OF SMALL SCALE INDUSTRY REGISTRATION BY THE STATE AUTHORITIES WAY BACK IN THE YEAR 1994. THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER SECTION 80IB(4) OF THE ACT WAS DISPUTED IN THE EARLIER YEAR ALSO, AS IS BORNE OUT FROM THE DECISIONS OF THE ASSESSING OFFICER, WHO OBSERVED THAT FOLLOWING DETAILED DISCUSSION IN THE YEAR 1998 FOR THE ASSESSMENT YEAR 2005 - 06, THE CLAIM UNDER SECTION 80IB(4) OF THE ACT IS ALLOWED. THE LEARNED COUNSEL FOR THE REVENUE CANDIDLY POINTED OUT THAT SUCH ISSUE HAD REACHED HIGH COURT ONCE. THIS COURT HAD RULED IN FAVOUR OF THE ASSESSEE VIDE COMMON ORDER DATED APRIL 25, 2011 RENDERED IN TAX APPEAL NOS.2044 TO 2051 OF 2009. THIS COURT HAD DISMISSED THE REVENUE'S APPEALS. THAT BEING THE POSITION, BEN EFIT OF SECTION 80IB(4) CANNOT BE DENIED. 5. BE THAT AS IT MAY, THE TRIBUNAL IN THE PRESENT CASE, HAS NOTED THAT THOUGH THE LIMIT OF THE SMALL SCALE INDUSTRIES WAS REDUCED FROM RS.3 CRORE TO RS. 1 CRORE, BY SUBSEQUENT CLARIFICATION IT WAS PROVIDED THAT THE SMALL SCALE INDUSTRIAL UNITS WHICH HAVE OBTAINED PERMANENT REGISTRATION BEFORE DECEMBER 10, 1997 WOULD CONTINUE TO REMAIN SMALL SCALE INDUSTRIES IN RESPECT OF LIMIT OF RS. 3 CRORE AND THE UNITS I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 8 WHICH HAD SWITCHED OVER TO THE SMALL SCALE INDUSTRIE S STATUS BASED ON THE ORDER DATED DECEMBER 10, 1997 WOULD CONTINUE TO REMAIN AS SMALL SCALE INDUSTRIES DESPITE SUCH REDUCTION IN LIMIT. ADMITTEDLY, THE TRIBUNAL NOTED THAT THE ASSESSEE HAD PRODUCED THE CERTIFICATE OF DISTRICT INDUSTRY CENTRE CERTIFYING THA T THE INVESTMENT IN THE PLANT AND MACHINERY DID NOT CROSS THE LIMIT OF RS.3 CRORE. 6. UNDER THE CIRCUMSTANCES, NO INTERFERENCE IS CALLED FOR. NO QUESTION OF LAW ARISES. THE TAX APPEAL IS DISMISSED. 8 . CONSIDERING THE ABOVE STATED FACTS AND RELYING ON T HE DECISION OF HON BLE HIGH COURT OF GUJARAT AND FOLLOWING THE DECISION OF THE COORDINATE BENCH OF ITAT AHMEDABAD , WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80 IB OF THE ACT. 9 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PR ONOUNCED IN THE OPEN C OURT ON 09 - 12 - 201 6 SD/ - SD/ - ( R.P. TOLANI ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 09 /12 /2016 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , I.T.A NO. 70 /AHD/20 12 A.Y. 2007 - 08 PAGE NO SAGAR SPRINGS PVT. LTD VS. ACIT 9 / ,