ACIT, Ludhiana V. M/s Mrs. Bector Foods Specialities Pvt. Ltd, Ludhiana

ITA 715/CHANDI/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68394 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 28-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Rule of consistency; Capital receipt
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES ACHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 715/CHD/2011 ASSESSMENT YEAR:2006-07 THE ASSTT.COMMISSIONER OF INCOME TAX, VS M/S MRS.BECTOR FOODS CIRCLE III, LUDHIANA. SPECIALITIES PV T. LTD., G.T.ROAD, (WEST), JALANDHAR BYE PASS, LUDHIANA. PAN : AABCM- 9495K & C.O. 62/CHD/2011 IN ITA NO. 715/CHD/2011 M/S MRS.BECTOR FOODS VS THE D CIT, C-III, SPECIALITIES PVT. LTD., LUDHIANA. G.T.ROAD, (WEST), JALANDHAR BYE PASS, LUDHIANA. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI N.K.SAINI RESPONDENT BY : SHRI SUBHASH AGGARWAL & SHRI ASHISH AGGARWAL DATE OF HEARING : 11.07.2013 DATE OF PRONOUNCEMENT : 02.08.2013 ORDER PER SUSHMA CHOWLA, JM THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF CIT(APPEALS)-II, LUDHIANA, DATED 27.04.2011 RELATIN G TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961 AND THE CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE AGAINST THE APPEAL FILED BY THE REVENUE. 2 2. BOTH THE APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTIONS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 3. THE REVENUE HAS RAISED UNDER MENTIONED GROUNDS O F APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN ALLOWING DEDUCTION U/S 80IB BY HOLDING THE ASSESSEE UNIT TO BE SMALL SCALE INDUSTRIAL UNIT BY SIMPLY RELYING ON TH E SUBMISSIONS OF THE ASSESSEE AND BY NOT GIVING ANY I NDEPENDENT FINDINGS. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEDUCTION U/S 80IB BY HOLDING THE ASSESSEE UNIT TO BE SMALL SCALE INDUSTRIAL UNIT AND BY NOT GIVING ANY F INDING AS TO WHY SOME MACHINERIES HAVE BEEN EXCLUDED FROM THE TOTAL PLANT AND MACHINERY FOR MAKING IT ELIGIBLE FOR A SMALL SCALE INDUSTRY. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN ALLOWING DEDUCTION U/S 80IB BY HOLDING THE ASSESSEE UNIT TO BE SMALL SCALE INDUSTRIAL UNIT AND BY NOT GIVING ANY FINDING THAT WHETHER THE VALUE OF MACHINERY IS TO BE CONSIDERED AS ON THE LAST DAY OF THE PREVIOUS YE AR OR IN THE YEAR IN WHICH THE ASSESSEE WAS REGISTERED AS A SMALL SCALE INDUSTRY ALTHOUGH IT IS CLEARLY PROVIDED IN CLAUSE (G) OF SU B SECTION 14 OF SECTION 80IB THAT THE VALUE OF PLANT AND MACHINERY HAS TO BE CONSIDERED ON THE LAST DAY OF THE PREVIOUS YEAR. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING AO TO TREAT THE GRANT-IN-AID RECEIVED BY THE ASSESSEE AS CAPITAL RECEIPT WHEN THE ASSESSEE HAD NEITHER CREDITED THIS AMOUNT TO CA PITAL ASSETS ACCOUNT NOR SHOWN IN P&L A/C AND THIS GRANT IN AID HAS NOT BEEN APPROPRIATED TO ANY CAPITAL ASSET AND HENCE, SHOULD HAVE BEEN TREATED AS REVENUE RECEIPT. 6. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED O FF. 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN THE CROSS OBJECTIONS : 1. THAT THE LEARNED CIT (A) - II, LUDHIANA, HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,04,000/- OUT O F FOREIGN TRAVELING EXPENSES OF DIRECTOR IGNORING THE FACT TH AT THE SAID EXPENDITURE WAS INCURRED FOR THE PURPOSES OF BUSINE SS AND DID NOT CALL FOR ANY DISALLOWANCE. 3 2. THAT THE LEARNED CIT (A) - II, LUDHIANA, HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 5,70,833/- OUT O F RS. 6.85 LAKHS BY WRONGLY UPHOLDING THE APPLICABILITY OF PRO VISIONS OF SECTION 35AB OF THE INCOME TAX ACT, 1961, IGNORING THE FACT THAT THE SAID EXPENDITURE WAS ALLOWABLE AND THE PRO VISIONS OF SECTION 35AB WERE NOT APPLICABLE. 3. THAT THE LEARNED CIT (A) - II, LUDHIANA, HAS E RRED IN CONFIRMING THE DISALLOWANCE OF RS. 9,51,133/-ON ACC OUNT OF INTEREST PAID TO BANKS ON LOANS RAISED FOR THE PURC HASE OF PROPERTY FOR BUSINESS PURPOSES. 4. THAT IN ANY CASE THE ABOVE DISALLOWANCES ARE A GAINST THE LAW AND FACTS OF THE CASE AND IGNORING THE SUBMISSIONS MADE BY THE APPELLANT. 5. TAKING UP THE APPEAL OF THE REVENUE, THE ISSUE R AISED BY THE REVENUE VIDE THE GROUNDS OF APPEAL NO. 1, 2 TO 4 AR E IN RELATION TO THE GROUND OF DEDUCTION UNDER SECTION 80IB OF THE ACT B Y HOLDING THE ASSESSEE TO BE A SMALL SCALE INDUSTRIAL UNIT. ANOT HER LINKED ISSUE RAISED IN THE PRESENT APPEAL BY THE REVENUE IS IN R ELATION TO THE GRANT IN AID RECEIVED BY THE ASSESSEE TREATED AS CAPITAL REC EIPT BY THE CIT(APPEALS). 6. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE MANUFACTURING OF SAUCES AND SYRUPS. THE ASSESSEE H AD CLAIMED DEDUCTION UNDER SECTION 80IB(2)(III) OF THE ACT ON ACCOUNT OF A SMALL SCALE INDUSTRY. THE CLAIM OF THE ASSESSEE WAS THAT IT HAD COMMENCED ITS OPERATION SINCE SEPTEMBER, 1996 AND THIS WAS TH E 10 TH YEAR OF CLAIM OF THE SAID DEDUCTION UNDER SECTION 80IB OF THE ACT . THE ASSESSING OFFICER, HOWEVER WAS OF THE VIEW THAT THE PROVISION S OF SECTION 80IB OF THE ACT WERE NOT APPLICABLE AS THE COST OF MACHI NERY HAD INCREASED MORE THAN RS.3 CRORES AND CONSEQUENTLY, THE BENEFIT OF DEDUCTION UNDER SECTION 80IB OF THE ACT WAS NOT AVAILABLE TO THE ASSESSEE AS SMALL SCALE INDUSTRY. THE NEXT ISSUE RAISED BY THE ASSESSING OFFICER WAS THAT THE ASSESSEE DOES NOT FULFIL ALL THE CONDI TIONS OF SECTION 80IB(2)(III) OF THE ACT WHICH PROVIDES THAT THE IN DUSTRIAL UNDERTAKING 4 SHOULD FULFIL ALL THE CONDITIONS INCLUDING THAT IT MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICL E OR THING IN THE LAST IN THE ELEVENTH SCHEDULE. THE ELEVENTH SCHEDULE AT SR.NO. 6 MENTIONS CONFECTIONARY AND CHOCOLATES. THE LIST OF THE PR ODUCTS BEING MANUFACTURED SHOWS THAT THE ASSESSEE IS MANUFACTURI NG CHOCOLATES. 7. THE ASSESSING OFFICER VIDE PARA 5.3 HELD AS UNDE R : 5.3 IN THESE FACTS AND CIRCUMSTANCES THE COST OF PLANT AND MACHINERY AS PER INCOME TAX ACT, 1961 AN D AS PER THE ABOVE STATED ORDERS OF GOVERNMENT OF INDIA CANNOT INCREASE FOR MORE THAN RS. 3 CRORES. SINCE THE VALU E OF THE PLANT & MACHINERY DURING THE YEAR HAS INCREASED FRO M RS. 3 CRORES. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80IB DURING THIS YEAR. THIS INELIGIBILITY OF TH E ASSESSEE IS IN ADDITION TO THE VIOLATION OF MANUFACTURING OF TH E PRODUCTS PROHIBITED IN SCHEDULE XI OF INCOME TAX ACT, 1961 D ISCUSSED ABOVE. 8. THE ASSESSING OFFICER FURTHER, IN RESPECT OF GRANT-IN-AID RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT OF INDIA ON ACC OUNT OF EXPANSION OF EXISTING UNIT, VIDE PARA 6 HELD AS UNDER : 6. THE ASSESSEE HAS RECEIVED GRANT-IN-AID AMOUNTING TO RS.16.40 LACS FROM MINISTRY OF FOOD PROCESSING INDU STRIES, GOVERNMENT OF INDIA ON ACCOUNT OF EXPANSION OF EXISTING FRUITS AN D VEGETABLE PROCESSING UNIT VIDE LETTER NO. 4-124/2003-F&VP DATED 28 TH APRIL, 2005. THE ASSESSEE HAS NEITHER CREDITED THIS AMOUNT IN THE CAPITAL ASS ETS ACCOUNT AND HAS NOR SHOWN IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE HA S RECEIVED ONLY 50% OF THE GRANT-IN-AID AMOUNT I.E. SANCTIONED AMOUNT IS RS. 32,81,000/-. THE ASSESSEE HAS NOT RECEIVED THE BALANCE AMOUNT SO FAR AS SUBMITTED DURING DISCUSSIONS IN ASSESSMENT PROCEEDI NGS. THE ASSESSEE CANNOT CLAIM THIS GRANT-IN-AID AS A RECEIPT NOT LIA BLE FOR TAXATION. THEREFORE, AN AMOUNT OF RS. 16,40,000/- RECEIVED DURING THE YE ARNS GRANT-IN-AID IS CONSIDERED AS REVENUE RECEIPT AND ADDED AS INCOME O F THE ASSESSEE. HOWEVER, THE DEDUCTION U/S 80IB WILL NOT BE ALLOWED ON THE SAME SINCE IT DOES NOT ARISE OUT OF THE INDUSTRIAL ACTIVITY. THE GRANT -IN-AID RECEIPT DOES NOT INVOLVE THE OPERATIONS OF THE INDUSTRIAL ACTIVITY BUT IS GIVEN FOR THE INDUSTRIAL OPERATIONS. THE RECEIPT IS NOT FROM INDUSTRIAL UND ERTAKING BUT FOR THE INDUSTRIAL UNDERTAKING. 9. THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESS EE HOLDING IT TO BE A SMALL SCALE UNDERTAKING. THE CIT(APPEALS) FURTHER OBSERVED THAT THE TOTAL VALUE OF PLANT & MACHINERY SHOWN BY THE ASSESSEE IN ITS LIST OF FIXED ASSETS WAS NOT TO BE CONSIDERED AS UT ILIZED FROM 5 MANUFACTURING ACTIVITIES IN VIEW OF THE CIRCULAR NO . SO 857E DATED 10.12.1997, POINT (B) NOTE NO. 2 OF THE SAID CIRCUL AR AND EXCLUDED THE VALUE OF CERTAIN MACHINERY AND COMPUTED THE NET VAL UE OF PLANT & MACHINERY TO BE CONSIDERED FOR BEING ELIGIBLE FOR S SI UNIT AT RS.2.27 CRORES. THE DETAILS ARE TABULATED UNDER PARA 8.2 A T PAGES 7 & 8 OF THE APPELLATE ORDER. SINCE THE ASSESSEE WAS HELD TO BE SMALL SCALE UNDERTAKING HOLDING SSI CERTIFICATE ISSUED BY DIRE CTOR OF INDUSTRIES, PUNJAB, THE ASSESSEE WAS HELD TO BE ELIGIBLE FOR DE DUCTION UNDER SECTION 80IB OF THE ACT. THE CIT(APPEALS) IN RESPE CT OF THE ADDITION OF RS.16.40 LACS RECEIVED BY THE ASSESSEE AS GRANT- IN-AID, BEING HELD AS REVENUE RECEIPTS BY THE ASSESSING OFFICER, VIDE PAR A 9 OF THE APPELLATE ORDER ALLOWED THE CLAIM OF THE ASSESSEE . 10. THE REVENUE IS IN APPEAL AGAINST THE DELETION O F THE ABOVESAID ADDITIONS BY THE CIT(APPEALS). 11. THE LD. DR FOR THE REVENUE REFERRED TO THE OBSE RVATIONS OF THE ASSESSING OFFICER AT PAGE 4 IN RESPECT OF THE GRANT OF DEDUCTION UNDER SECTION 80IB OF THE ACT AND POINTED OUT THAT THE AS SESSEE WAS NOT A SMALL SCALE INDUSTRIAL UNIT IN VIEW OF THE TOTAL VA LUE OF PLANT & MACHINERY OWNED BY THE ASSESSEE. THE LD. DR FOR TH E REVENUE FURTHER POINTED OUT THAT ON THE START WHEN THE UNIT WAS SET -UP, TOTAL INVESTMENT IN THE PLANT & MACHINERY WAS LESS THAN THE PRESCRIB ED LIMIT OF RS.1 CRORE BUT IN THE YEAR UNDER APPEAL, THE TOTAL INVES TMENT EXCEEDED RS.3 CRORES AND AS SUCH THE UNIT WAS NOT AN SSI UNIT. I T WAS FURTHER POINTED OUT BY THE LD. DR FOR THE REVENUE THAT IN ORDER TO AVAIL THE DEDUCTION UNDER SECTION 80IB(2)(III) OF THE ACT, THERE IS A P ROHIBITION IN RELATION TO THE ITEMS MANUFACTURED AS LISTED IN ELEVENTH SCH EDULE AND SINCE THE ASSESSEE WAS MANUFACTURING ONE OF THE BANNED ITEMS, THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IB OF THE ACT UNDER THE SAID 6 SUB-SECTION. THE LD. DR FOR THE REVENUE FURTHER PO INTED OUT THAT THERE WAS NO BASIS IN THE ORDER OF CIT(APPEALS) IN EXCLUD ING CERTAIN ITEMS OF PLANT & MACHINERY FROM THE TOTAL LIST OF PLANT & MACHINERY AND TO HOLD THAT THE TOTAL INVESTMENT IN THE PLANT & MACHI NERY WAS LESS THAN RS.3 CRORES. 12. THE LD. AR FOR THE ASSESSEE FILED WRITTEN SUBMI SSIONS AND POINTED OUT THAT THE TOTAL INVESTMENT IN THE PLANT & MACHINERY WAS LESS THAN RS.3 CRORES, MAKING IT ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. IT WAS FURTHER POINTED OU T BY THE LD. AR FOR THE ASSESSEE THAT AS PER THE INSTRUCTIONS OF DEPART MENT OF INDUSTRIAL POLICY & PROMOTION DATED 10.12.1997, AS PER NOTE-2, ITEM-B, CERTAIN ITEMS OF PLANT & MACHINERY HAD TO BE EXCLUDED AND O NCE THE SAID ITEMS ARE EXCLUDED FROM THE LIST OF PLANT & MACHINERY INS TALLED BY THE ASSESSEE, THE TOTAL INVESTMENT WAS LESS THAN RS.3 C RORES AND AS SUCH THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION U NDER SECTION 80IB OF THE ACT, BEING SSI UNIT. IT WAS FURTHER POINTED OU T BY THE LD. AR FOR THE ASSESSEE THAT THE PROVISIONS OF ELEVENTH SCHEDU LE WERE NOT APPLICABLE WHERE UNIT IS AN SSI UNIT. 13. THE NEXT PLEA OF THE LD. AR FOR THE ASSESSEE WA S THAT THIS WAS THE TENTH YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT AND THE AUTHORITY GRANTING SSI CERTIFICATION HAD NOT WI THDRAWN THE CERTIFICATE GRANTED TO THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE REPLIES FILED BOTH BEFORE ASSESSING OFFICER AND CIT (APPEALS), UNDER WHICH THE ABOVESAID LIST OF PLANT & MACHINERY OF TH E ASSESSEE AND THE ITEMS TO BE EXCLUDED FROM THE SAID LIST WERE FILED AND THE ISSUE WAS EXPLAINED AT LENGTH, WHICH WAS NOT CONSIDERED BY AS SESSING OFFICER. 7 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF SAUC ES AND SYRUPS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE ESTABLISHED A SSI UNIT. THE ASSESSEE HAS FILED ON RECORD THE COPY OF SSI REGISTRATION CERTIFICATE AT PAGES 1 TO 9 OF THE PAPER BOOK IN WH ICH THE DETAILS OF PLANT & MACHINERY AND THEIR COSTS HAVE BEEN LISTED. DURING THE YEAR UNDER CONSIDERATION, THE TOTAL VALUE OF THE PLANT & MACHINERY AS ON CLOSE OF THE YEAR WAS RS.3,85,44,090/- AS PER THE L IST OF PLANT & MACHINERY TABULATED AT PAGE 3 OF THE ASSESSMENT ORD ER. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT OBSERVED TH AT AT THE START OF THE PRODUCTION IN SEPTEMBER,1996, THE LIMIT FOR SSI WAS RS.1 CRORE AND THE TOTAL COST OF PLANT & MACHINERY ESTABLISHED BY THE ASSESSEE IN THE INITIAL YEARS OF PRODUCTION WAS LESS THAN RS.1 CROR E AND AS SUCH THE DEDUCTION CLAIMED UNDER SECTION 80IB OF THE ACT WAS CLAIMED AND ALLOWED TO THE ASSESSEE. THE SAID LIMIT WAS INCREA SED TO RS.3 CRORES VIDE S.O. 857(E) DATED 10.12.1997. ANOTHER CIRCULA R WAS ISSUED BY THE GOVERNMENT OF INDIA VIDE S.O. 1288(E) DATED 24. 12.1999, UNDER WHICH THE SAID LIMIT OF INVESTMENT IN THE PLANT & M ACHINERY WAS REDUCED FROM RS. 3 CRORES TO RS.1 CRORE. HOWEVER, THERE WAS A CLARIFICATION VIDE LETTER NO. 4(1)/2000-SSI BD. DAT ED 14.3.2000 ISSUED BY ADDITIONAL DEVELOPMENT COMMISSIONER TO THE EFFEC T THAT UNITS THAT HAD OBTAINED PERMANENT REGISTRATION ON THE ORDER DA TED 10.12.1997 OR SWITCHED-OVER TO SSI STATUS BASED ON THE SAID ORDER , WOULD CONTINUE TO REMAIN AS SSI UNIT. IN VIEW OF THE ABOVE CLARIFICA TION, AND THE FACT THAT THE ASSESSEE HAD RECEIVED PERMANENT REGISTRATI ON, THE VALUE OF PLANT & MACHINERY IN THE HANDS OF THE ASSESSEE WAS TO BE TAKEN AT RS.3 CRORES FOR DETERMINING WHETHER THE ASSESSEE WAS SSI UNIT OR NOT. 8 15. THE PERUSAL OF THE NOTIFICATION ISSUED BY THE M INISTRY OF INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMO TION DATED 10.12.1997 I.E. S.O.857(E) ALSO PROVIDE UNDER NOTE- 2 THE LIST OF ITEMS OF SUCH PLANT & MACHINERY WHICH SHALL BE EXCLUDED W HILE COMPUTING THE VALUE OF PLANT & MACHINERY FOR THE PURPOSE OF D ETERMINING THE STATUS OF SSI UNIT. NOTE-2 POINT NOS. (A) & (B) PR OVIDE AS UNDER : NOTE-2 A. IN CALCULATING THE VALUE OF PLANT AND MACHINERY FOR THE PURPOSES OF PARAGRAPHS (1) AND (2) OF THIS NOTIFICATION, THE ORIGINAL PRICE THEREOF, IRRESPECTIVE OF WHETHER THE PLANT AND MACHINERY ARE NEW OR SECOND HAND, SHALL BE TAKEN INTO ACCOUNT. B. IN CALCULATING THE VALUE OF PLANT A ND MACHINERY, THE FOLLOWING SHALL BE EXCLUDED, NAMELY:- I. THE COST OF EQUIPMENTS SUCH AS TOOLS, JIGS, D IES, MOULDS AND SPARE PARTS FOR MAINTENANCE AND THE COST OF CONSUMABLE STORES; II. THE COST OF INSTALLATION OF PLANT AND MACHINERY; III. THE COST OF RESEARCH AND DEVELOPMENT EQUIPMENT AND POLLUTION CONTROL EQUIPMENT; IV. THE COST OF GENERATION SETS AND EXT RA TRANSFORMER INSTALLED BY THE UNDERTAKING AS PER THE REGULATIONS OF THE STATE ELECTRICITY BOARD; V. THE BANK CHARGES AND SERVICE CHARGES PAID TO THE NATIONAL SMALL INDUSTRIES CORPORATION OR THE STATE SMALL INDUSTRIES CORPORATI ON; VI. THE COST INVOLVED IN PROCUREMENT OR INSTALLATION OF CABLES, WIRING, BUS BARS, ELECTRICAL CONTROL PANELS (NOT THOSE MOUNTED ON IND IVIDUAL MACHINES), OIL CIRCUIT BREAKERS OR MINIATURE CIRCUIT BREAKERS WHIC H ARE NECESSARILY TO BE USED FOR PROVIDING ELECTRICAL POWER TO THE PLANT AN D MACHINERY OR FOR SAFETY MEASURES; VII. THE COST OF GAS PRODUCER PLANTS; VIII. TRANSPORTATION CHARGES (EXCLUDING OF SALES-TAX AND EXCISE) FOR INDIGENOUS MACHINERY FROM THE PLACE OF MANUFACTURING TO THE SI TE OF THE FACTORY; IX) CHARGES PAID FOR TECHNICAL KNOW-HOW FOR ERECTION OF PLANT & MACHINERY; X) COST OF SUCH STORAGE TANKS WHICH ST ORE RAW MATERIALS, FINISHED PRODUCTS ONLY AND ARE NOT LINKED WITH THE MANUFACTURING PROCESS; AND XI) COST OF FIRE FIGHTING EQUIPMENTS. 16. THE ASSESSEE DURING THE COURSE OF ASSESSMENT AN D APPELLATE PROCEEDINGS AND EVEN IN THE PROCEEDINGS BEFORE US H AS PROVIDED THE 9 LIST OF TOTAL PLANT & MACHINERY AND ALSO THE LIST O F PLANT & MACHINERY TO BE EXCLUDED AS PER ORDER NO. SO-857(E) DATED 10. 12.1997 I.E. POINT-B NOTE NO.-2. THE RELEVANT DETAILS WERE PROVI DED IN A TABULATED FORM UNDER WHICH OUT OF THE TOTAL VALUE OF PLANT & MACHINERY AT RS. 3,85,44,090/-, THE VALUE OF THE PLANT & MACHINERY T O BE EXCLUDED AS PER NOTIFICATION TOTALLED TO RS. 1,58,33,134/-. T HE BALANCE PLANT & MACHINERY TO BE CONSIDERED TOTALLED TO RS. 2,27,10 ,956/-. THE LIST OF PLANT & MACHINERY IS ATTACHED WITH THIS ORDER. 17. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE NOTIFICATION ISSUED BY THE MINISTRY OF INDUSTRY FOR RECOGNIZING THE UNITS AS SSI UNIT, WE ARE IN CONFOR MITY WITH THE OBSERVATIONS OF THE CIT(APPEALS) THAT THE ASSESSEE HAVING INVESTED RS. 2.27 CRORES IN THE ELIGIBLE PLANT & MACHINERY, WHICH WAS LESS THAN THE PRESCRIBED LIMIT OF RS. 3 CRORE, FALLS UNDER TH E CATEGORY OF SMALL SCALE INDUSTRIAL UNDERTAKING. FURTHER THE ASSESSEE IS HOLDING VALID SSI REGISTRATION CERTIFICATE ISSUED BY THE DIRECTOR ATE OF INDUSTRIES, PUNJAB, WHICH HAS NOT BEEN WITHDRAWN TILL DATE. 18. SECTION 80IB(1) OF THE ACT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES ANY PROFIT & GAINS DERIVED FROM ANY ELIGIBLE BUSINESS, AS DEFINED UNDER THE ACT, SHALL BE ALLOWED DEDUCTION FROM SUCH PROFIT & GAINS, OF AN AMOUNT EQUAL TO SUC H PERCENTAGE AND FOR SUCH NUMBER OF YEARS, AS MAY BE SPECIFIED IN TH E SECTION, WHILE COMPUTING TOTAL INCOME OF THE ASSESSEE. THE SUB-SE CTION (2) TO SECTION 80IB OF THE ACT LAYS DOWN THE CONDITIONS WHICH HAVE TO BE FULFILLED BY THE INDUSTRIAL UNDERTAKING IN ORDER TO AVAIL THE SA ID DEDUCTION. ONCE SUCH CONDITION IS PROVIDED UNDER SUB-CLAUSE (III) T O SECTION 80IB(2) OF THE ACT WHEREIN IT IS PROVIDED THAT THE UNIT SHOULD NOT BE ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THI NG, NOT BEING ANY 10 ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVE NTH SCHEDULE. HOWEVER, THE PROVISO UNDER THE SAID SUB-CLAUSE LAYS DOWN THAT THE CONDITIONS IN THE CLAUSE WOULD NOT OPERATE IN RELAT ION TO A SMALL SCALE INDUSTRIAL UNDERTAKING OR AN UNDERTAKING REFERRED T O IN SUB-SECTION (4). THUS, THERE IS NO BAR IN MANUFACTURING OR PRO DUCTION OF ANY ARTICLE OR THING WHICH ARE LISTED IN THE ELEVENTH S CHEDULE BY SSI UNIT. IN OTHER WORDS, SMALL SCALE UNDERTAKING CAN MANUFA CTURE OR PRODUCE ANY ARTICLE OR THING, AS IT DEEMS FIT AND THERE IS NO BAR OF NOT PRODUCING THE ARTICLE OR THING LISTED IN THE ELEVEN TH SCHEDULE TO THE ACT, WHERE THE UNIT ESTABLISHED BY THE ASSESSEE IS A SMALL SCALE UNIT. AS REFERRED TO BY US IN PARAS HEREIN ABOVE, THE SMA LL SCALE UNITS ARE REFERRED TO AS SUCH UNITS, WHICH HAVE BEEN INSTALLE D WITH THE VALUE OF PLANT & MACHINERY BEING LESS THAN RS. 3 CRORES. IN THE FACTS OF THE PRESENT CASE, THE TOTAL INVESTMENT IN THE PLANT & M ACHINERY WAS RS. 2.27 CRORES WHICH IS LESS THAN RS. 3 CRORES AND AS SUCH THE ASSESSEE IS AN SSI UNIT WHICH IN-TURN IS ELIGIBLE FOR THE CLAIM OF DEDUCTION IN VIEW OF FULFILLMENT OF THE CONDITIONS LAID DOWN IN THE P ROVISO TO SECTION 80IB(2)(III) OF THE ACT. 19. THE UNIT OF THE ASSESSEE WAS ESTABLISHED AS AN SSI UNIT AND CONSEQUENTLY THE ASSESSEE CLAIMED DEDUCTION UNDER S ECTION 80IB OF THE ACT FROM ASSESSMENT YEAR 2001-02 WHICH WAS THE FIFT H YEAR OF PRODUCTION. THE SAID DEDUCTION UNDER SECTION 80IB OF THE ACT HAS BEEN ALLOWED TO THE ASSESSEE FROM YEAR TO YEAR. IN THE ASSESSMENT PROCEEDINGS RELATING TO ASSESSMENT YEAR 2004-05, TH E SAID CLAIM WAS ALLOWED TO THE ASSESSEE VIDE ORDER PASSED UNDER SEC TION 143(3) OF THE ACT DATED 15.12.2006. THE FACTS OF THE INSTANT ASS ESSMENT YEAR ARE IDENTICAL TO THE FACTS IN THE PRECEDING YEAR AND FO LLOWING THE PRINCIPLE OF CONSISTENCY, WE HOLD THAT THE ASSESSEE IS ENTITL ED TO THE CLAIM OF 11 DEDUCTION UNDER SECTION 80IB OF THE ACT IN THE CAPT IONED ASSESSMENT YEAR, BEING THE TENTH YEAR OF MANUFACTURING ACTIVIT Y CARRIED ON BY THE ASSESSEE 20. IN VIEW OF THE TOTALITY OF THE ABOVESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE CONFIRM THE ORDER OF THE CIT(APPEAL S) IN ALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT TO THE ASSESSEE. THE GROUNDS OF APPEAL NO. 1, 2 & 4 RAISED BY THE REVENU E ARE, THUS DISMISSED. 21. THE NEXT ISSUE RAISED BY THE REVENUE IS IN RESP ECT OF THE GRANT- IN-AID RECEIVED BY THE ASSESSEE BEING CAPITAL OR RE VENUE IN NATURE. THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE OBSE RVING AS UNDER : 9. THE NEXT GROUND NO.5 IN RESPECT OF ADDITION OF RS. 16.40 LACS RECEIVED BY THE APPELLANT AS GRANT IN AID AS REVENU E RECEIPT. THE AMOUNT OF RS. 16.40 LACS HAS : : BEEN-/RECEIVED BY THE APPELLANT AS A GRANT FROM MINISTRY OF FOOD PROCESSING INDUSTRIES, NEW DELHI V IDE SANCTION LETTER DATED 28.04.2005 (ENCLOSED AS ANNEXURE 'A' W ITH THIS APPELLATE ORDER) FOR MEETING THE COST OF PLANT AND MACHINERY. AS PER EXPLANATION 10 TO SECTION 43(1) ANY SUBSIDY OR GRAN T IS NOT BE INCLUDED IN COST OF PLANT OF MACHINERY. THEREFORE THE GRANT REC EIVED BY THE APPELLANT IS CAPITAL IN NATURE AND HAS TO BE REDUCE D FROM THE VALUE OF PLANT AND MACHINERY. IN VIEW OF ABOVE I DO NOT AGRE E TO THE ACTION OF THE A.O IN TREATING THE ENTIRE RECEIPT AS REVENUE RECEI PT. THE ASSESSING OFFICER IS DIRECTED TO REDUCE THE GRANT OF RS. 16.4 0 LACS FROM THE TOTAL COST OF PLANT & MACHINERY AND ACCORDINGLY REDUCE THE AMO UNT OF DEPRECIATION ON THE SAME. THIS GROUND OF THE APPELLANT IS PARTLY ALLOWED. 22. THE LD. DR FOR THE REVENUE HAS FAILED TO CONTRO VERT THE FINDINGS OF THE CIT(APPEALS) THAT THE AMOUNT OF RS. 16.40 LA CS RECEIVED BY THE ASSESSEE WAS AGAINST THE COST OF PLANT & MACHINERY. IN VIEW OF THE SANCTION LETTER DATED 28.04.2005, WHICH IS ENCLOSED AS ANNEXURE-A TO THE APPELLATE ORDER UNDER WHICH IT IS CLEARLY PROVI DED THAT THE SAID GRANT IS BEING GRANTED TO THE ASSESSEE FOR EXPANSION OF EXISTING FRUITS AND VEGETABLES PROCESSING UNIT AT THENG ROAD, PHILL AUR (PUNJAB), WE FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE REVENUE . IN VIEW 12 OF THE ABOVESAID, WE UPHOLD THE ORDER OF CIT(APPEAL S) IN DELETING THE ADDITION OF RS. 16.40 LACS AS THE SAID RECEIPT WAS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. 23. NOW COMING TO THE CROSS OBJECTIONS FILED BY THE ASSESSEE. THE LD. AR FOR THE ASSESSEE HAS NOT PRESSED THE GRO UND NO. 2 & 3 RAISED IN THE CROSS OBJECTIONS AND HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 24. THE ONLY ISSUE RAISED IN THE C.O. IS AGAINST TH E DISALLOWANCE OF RS. 2,04,000/- OUT OF FOREIGN TRAVELING EXPENSES OF DIRECTORS. 25. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE DIRECTOR OF THE ASSESSEE COMPANY HAD VISITED CANADA AND U.S.A. DURI NG THE YEAR UNDER CONSIDERATION AND THE SAID EXPENDITURE OF RS. 2,04, 000/- WAS DISALLOWED AS NO BUSINESS WAS RECEIVED FROM THE SAI D COUNTRIES. THE CLAIM OF THE ASSESSEE WAS THAT IT HAD RECEIVED THE ORDERS IN THE SUCCEEDING YEARS. IN ANY CASE, THE EXPENDITURE WAS CLAIMED TO BE FOR THE PURPOSE OF BUSINESS AND HENCE BUSINESS EXPENDIT URE. THE ASSESSEE HAS PLACED ON RECORD THE DETAILS OF TRAVELING EXPEN SES ALONGWITH COPIES OF BILLS AT PAGES 3 TO 17 OF THE PAPER BOOK AND HAS ALSO FURNISHED DETAILS OF EXPORT DURING THE FINANCIAL YEAR 2007-08 TO U.S.A. AT PAGES 23 TO 27 OF THE PAPER BOOK. 26. IN THE TOTALITY OF THE ABOVESAID FACTS AND CIRC UMSTANCES, WHERE THE VISIT OF THE DIRECTOR OF THE ASSESSEE COMPANY H AD RESULTED IN THE EXPORT OF ITEMS MANUFACTURED BY THE ASSESSEE TO U.S .A., EVEN IN THE SUCCEEDING YEARS, DOES NOT MERIT THE DISALLOWANCE O F THE FOREIGN TRAVELING EXPENSES DURING THE YEAR UNDER CONSIDERAT ION. IT IS AN ADMITTED FACTS THAT THE SAID EXPENDITURE HAS BEEN I NCURRED BY THE ASSESSEE ON THE VISIT OF ITS DIRECTOR TO U.S.A. AND CANADA. WE DIRECT 13 THE ASSESSING OFFICER TO ALLOW THE SAID EXPENDITURE IN THE HANDS OF THE ASSESSEE. GROUND NO.1 RAISED IN THE C.O. IS THUS, ALLOWED. 27. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF AUG., 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 2 ND , AUG. 2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH