The ITO, Ward-3 Mehsana, Mehsana V. Vimal Oil & Foods Ltd., Mehsana.

ITA 719/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9169 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-08-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 08-03-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Keywords: Depreciation; Non passing of speaking order; Set aside
• Section: 80IB; 80IA; 251; 80HH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 20.08.09 DRAFTED ON:2.09.09 ITA NO.719/AHD/2004 ASSESSMENT YEAR : 2000-01 A.C.I.T., MEHSANA CIRCLE, MEHSANA. VS. VIMAL OIL & FOOD PVT. LTD. 31, G.I.D.C. HIGHWAY, MEHSANA. PAN/GIR NO. : (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI GOVIND SINGHAL SR. D.R. RESPONDENT BY: SHRI RAJEEV RANJAN A.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-XXI, MEHSANA, DATED 11.12.2003. 2. GROUND NO.1 OF THE APPEAL IS DIRECTED AGAINST TH E DELETING THE ADDITION OF RS.3,84,441/-ON ACCOUNT OF BROKERAGE EX PENSES PERTAINING TO EARLIER YEARS. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF EDIBLE OI L AND DE OILED CAKES. FOR THE RELEVANT PREVIOUS YEAR THE ASSESSEE DEBITED BROKERAGE AND DALALI TO THE EXTENT OF RS.26,14,911/- ON SALES AND OF RS. 25,88,230/- ON PURCHASES. THE LEARNED ASSESSING OFFICER OBSERVED THAT THIS INCLUDED BROKERAGE OF RS.3,60,891/-, WHICH PERTAINED TO EARL IER YEARS ON ACCOUNT VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 2 - OF PURCHASES AND RS.23,550/- ON ACCOUNT OF SALES. T HE CONTENTION OF THE ASSESSEE THAT THE EXPENSES HAD NOT BEEN PROVIDED IN THE RELEVANT YEARS WAS NOT ACCEPTED BY THE LEARNED ASSESSING OFFICER. ACCORDING TO THE LEARNED ASSESSING OFFICER, THE ASSESSEE WAS FOLLOWI NG MERCANTILE SYSTEM OF ACCOUNTING AND THE BROKERAGE PERTAINED TO EARLIE R YEARS. HE THEREFORE, DISALLOWED THE AMOUNT OF RS.3,84,441/- ( 360891+23550) ON THIS ACCOUNT. 4. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) THE ASSESSEE SUBMITTED THAT IN THE LIN E OF BUSINESS OF THE ASSESSEE, THE GOODS ARE PURCHASED/SOLD THROUGH THE AGENTS. THESE ARE FIRST CHECKED BY THE CONCERNED PARTIES WHO VERIFY T HE CREDENTIALS OF THE GOODS. IT IS STATED THAT ONLY AFTER THE GOODS ARE A PPROVED BY THE PARTY, THE CONCERNED PARTY INFORMED THE BROKER AND THE BRO KER RAISE THE BILL ONLY AFTER THE TRANSACTION IS CONFIRMED BY BOTH THE PARTIES. IN RESPECT OF THE BROKERAGE OF RS.3,84,441/-, IT IS SUBMITTED THA T THOUGH THIS BROKERAGE WAS IN RESPECT OF SALE/PURCHASE MADE BY T HE ASSESSEE IN EARLIER YEARS, THE BILLS WERE RAISED BY THE BROKER AFTER APPROVAL OF THE PARTIES ONLY DURING THE PRECIOUS YEAR RELEVANT TO A SSESSMENT YEAR UNDER CONSIDERATION. HE PRODUCED COPIES OF THE BILLS RAIS ED BY THE BROKERS IN THIS REGARD. THE LD. COUNSEL THEREFORE, CONTENDED T HAT THE LIABILITY TO PAY BROKERAGE CRYSTALLISED DURING THE RELEVANT PREVIOUS YEAR ONLY WHEN THE BROKERS RAISED NECESSARY BILL. ACCORDINGLY, IT WAS SUBMITTED THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING THE ASSESSEE HAD RIGHTLY PROVIDED IN THE BOOKS OF ACCOUNTS ON TH E BASIS OF THE BILLS RECEIVED FROM THE RESPECTIVE BROKERS. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. A GAJA PATI NAIDU 53 ITR VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 3 - 114, THE ASSESSEE SUBMITTED THAT THE RIGHT TO RECEI VE ANY AMOUNT AROSE IN THE PRESENT ACCOUNTING YEAR, THE SAME COULD BE I NCLUDED ONLY IN THE PRESENT AMOUNTING YEAR AND THAT IT DOES NOT BE RELA TE BACK TO AN EARLIER YEAR ON THE GROUND THAT THE SAID INCOME AROSE OUT O F AN EARLY TRANSACTION. IT WAS THEREFORE, CONTENDED THAT THE D ISALLOWANCE OF RS.3,84,441/- SHOULD BE DELETED. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT THOUGH BROKERAGE IN QUESTION IS IN RESPECT OF PURCHASE AND SALE MADE BY THE ASSESSEE IN EARLIER YEAR, THE UNDISPUTED POSITION I S THAT THE BILLS FOR THE SAME WAS RAISED BY THE RESPECTIVE BROKERS DURING TH E PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION ONLY. THEREFORE, THE LIABILITY CRYSTALLISED DURING THE PRESENT PREVI OUS YEAR AND THAT UNDER MERCANTILE SYSTEM OF ACCOUNTING THE AMOUNT WAS TO B E ACCOUNTED FOR IN THE PRESENT PREVIOUS YEAR ONLY. HENCE, HE DELETED T HE DISALLOWANCE OF RS. 3,84,441/- MADE BY THE LEARNED ASSESSING OFFICE R. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WHE REAS THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS DEBITED BROKERAGE EXPENSES OF RS.3,84,431/- ON PURCHASE AND SALE ENTERED INTO IN EARLIER YEARS. THE VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 4 - LEARNED ASSESSING OFFICER DISALLOWED THE SAME AS PR IOR PERIOD EXPENSES. ACCORDING TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THOUGH THE EXPENSES RELATE TO THE PURCHASE AND SALE TRANSA CTIONS OF EARLIER YEAR BUT THE BILLS OF BROKERAGE CHARGES WERE RAISED BY T HE PARTIES DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THIS, ACCORDI NG TO THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), EVEN IN MERCAN TILE SYSTEM FOLLOWED BY THE ASSESSEE, THE EXPENDITURE IN QUESTI ON IS ALLOWABLE AS RELEVANT EXPENDITURE IS CRYSTALLISED DURING THE YEA R UNDER APPEAL. IN OUR CONSIDERED VIEW, IT IS NOT IN DISPUTE THAT BROKERAG E CHARGE UNDER DISPUTE WERE PAID IN RESPECT OF PURCHASE AND SALE MADE DURI NG THE EARLIER YEAR. WE FIND THAT THE ASSESSEE COULD NOT BRING ON RECORD ANY MATERIAL TO SHOW THAT THERE WAS ANY DISPUTE REGARDING EITHER QU ANTUM OR PAYABILITY OF THE BROKERAGE IN THE EARLIER YEAR. NO REASON CO ULD BE CITED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE T HAT WHILE PROVISION FOR BROKERAGE PAYABLE COULD NOT BE MADE BY THE ASSE SSEE IN THE YEAR IN WHICH RELEVANT PURCHASE AND SALE TRANSACTION TOOK P LACE. MERELY, NON RECEIPT OF BILL CANNOT BE A GROUND FOR NOT MAKING P ROVISION AT LEAST ON ESTIMATE BASIS WHEN THE ASSESSEE ACTUALLY AVAILED T HE SERVICES AND WAS AWARE THAT FOR THE SERVICES AVAILED DURING THE PERI OD HE WAS LIABLE TO PAY. WE FIND THAT LEARNED COMMISSIONER OF INCOME TA X(APPEALS) HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT LIABILIT Y FOR PAYMENT OF BROKERAGE UNDER CONSIDERATION WAS ACTUALLY CRYSTALL ISED DURING THE YEAR UNDER APPEAL. MERELY, RAISING OF BILL DOES NOT SIG NIFY THE PERIOD IN WHICH THE LIABILITY AROSE OR CRYSTALLISED. IN VIEW OF THE ABOVE, IN OUR CONSIDERED OPINION, THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.3,84,4 41/-. WE THEREFORE, SET VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 5 - ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) AND RESTORE THAT OF THE LEARNED ASSESSING OFFICER I N RESPECT OF THE ABOVE GROUND. THUS, THIS GROUND OF THE APPEAL IS ALLOWED. 8. THE GROUND NO.2 OF THE APPEAL, RELATES TO DELETI NG THE DISALLOWANCES OF RS.1,87,439/- OUT OF CAR, TELEPHON E EXPENSES ETC. 9. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER OBSERVED THAT PERSONAL USE OF THE TELEPHONES AND VE HICLES COULD NOT BE RULED OUT AS NO LOG BOOKS ETC. WERE MAINTAINED. HE FURTHER OBSERVED THAT THERE WAS ALWAYS SOME PERSONAL EXPENSES IN THE OFFICE EXPENSES AND THAT THERE HAS BEEN SUCH DISALLOWANCE IN EARLIE R YEARS OUT OF THE SAME. THE LEARNED ASSESSING OFFICER THEREFORE, DISA LLOWED RS.60,000/- RS.60,928/-, RS.16,511/- AND 50,000/- OUT OF TELEPH ONE EXPENSES, VEHICLE EXPENSES, DEPRECIATION ON CAR AND OFFICE EXPENSES R ESPECTIVELY. 10. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), THE ASSESSEE CONTENDED THAT THE TELEP HONE EXPENSES HAD BEEN CLAIMED BY THE ASSESSEE IN RESPECT OF THE TELE PHONES INSTALLED AT THE BUSINESS PREMISES OF THE ASSESSEE ONLY. IT WAS FURTHER SUBMITTED THAT THE VEHICLES WERE USED FOR THE BUSINESS PURPOSES OF THE ASSESSEE COMPANY AND THAT NO PERSONAL USE BY THE DIRECTORS WAS INVOLVED. WITH REGARD TO THE DISALLOWANCE OUT OF OFFICE EXPENSES, IT WAS CONTENDED THAT THESE INCLUDE EXPENSES LIKE ELECTRICITY, CONVEYANCE , GARDEN EXPENSES AND THAT OFFICE EXPENSES OF THE FACTORY ITSELF WERE ONL Y RS.1,34,194/-. THE LD. COUNSEL SUBMITTED THAT THE LEARNED ASSESSING OFFICE R HAD ERRED IN STATING THAT BILLS AND VOUCHERS WERE NOT PRODUCED A ND THAT DURING THE VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 6 - ASSESSMENT PROCEEDINGS WHEN ALL THE BOOKS, BILLS AN D VOUCHERS WERE PRODUCED BEFORE HIM. IT WAS SUBMITTED THAT THE DISA LLOWANCE MADE ON ESTIMATION WITHOUT ANY SPECIFIC REASONS AND WITHOUT POINTING OUT ANY SPECIFIC ITEM OF EXPENDITURE WHICH WAS NOT INCURRED FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE THAT DISALLOWANCE WAS NOT JUSTIFIED. FOR DISALLOWANCE OUT OF THE EXPENSES HE PLACED RELIANCE UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT I.E. HONBLE HIGH COU RT IN THE CASE OF SAYAJI IRON AND ENGG. COMPANY LTD. VS. CIT 253 ITR 749. TH E LD. COUNSEL, THEREFORE, CONTENDED THAT THE ADDITION MADE BY DISA LLOWING THESE EXPENSES SHOULD BE DELETED. 11. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT IN CASE OF A LIMITED COMPANY, NO DISALLOWANCE CAN BE MADE ON ACC OUNT OF PERSONAL EXPENSES OF THE DIRECTORS RELYING ON THE DECISION O F THE JURISDICTIONAL HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJAI I RON AND ENGINEERING COMPANY LTD. (SUPRA) AND DELETED THE DISALLOWANCE O F RS.1,87,439/-. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED ASSESSING OFFICER WHEREAS THE LEARNED A UTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE, THE TELEPHONE EXPENSES, VEHICLE EXPEN SES AND OFFICE EXPENSES CLAIMED BY THE ASSESSEE COMPANY WERE PARTL Y DISALLOWED BY VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 7 - THE LEARNED ASSESSING OFFICER ON ACCOUNT OF PERSONA L USE OF THE DIRECTORS. THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) DELETED THE SAME FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND ENGG. COMPANY LTD. VS. CIT 253 ITR 749. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONCEDE D THAT THE ISSUES ARE COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN FAVOUR OF THE ASSESSEE. WE THEREFORE, DISMISS THIS GROUND OF APPEAL OF REVENUE. 14. GROUND NO.3 OF THE APPEAL RELATES TO THE DIRECT ION TO THE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IB OF THE I.T.ACT. 15. THE BRIEF FACTS OF THE CASE ARE THAT IN THE COM PUTATION OF INCOME THE ASSESSEE CLAIMED DEDUCTION OF RS.17,34,748/- BE ING 30% OF THE INCOME OF RS.57,82,495/-, UNDER THE PROVISIONS OF S ECTION 80IA OF THE I.T.ACT 1961. IT WAS CLAIMED BEFORE THE LEARNED ASS ESSING OFFICER THAT THE ASSESSEE WAS AN INDUSTRIAL UNDERTAKING INVOLVED IN MANUFACTURING OF REFINED OIL FROM RAW OIL. IT WAS HAVING A SOLVENT E XTRUSION PLANT FROM WHICH DE-OILED CAKES WERE ALSO MANUFACTURED. OIL MI LL IN WHICH RAW OIL WAS EXTRACTED FROM THE SEEDS WAS ALSO OWNED BY THE ASSESSEE. AS THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING ACTIVITY, IT HAD CLAIMED DEDUCTION UNDER SECTION 80I OF THE I.T.ACT. THE LEA RNED ASSESSING OFFICER OBSERVED THAT WHEREAS IN THE RETURN OF INCOME THE A SSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA, IN ITS SUBMISSIONS DA TED 19.03.2002, THE CLAIM WAS MADE UNDER SECTION 80I OF THE I.T.ACT. ON QUERY BY THE LEARNED ASSESSING OFFICER, IT WAS CLARIFIED THAT TH E ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER SECTION 80I. HOWEVER, BECAUSE T HE ASSESSEE STARTED MANUFACTURING ACTIVITY IN FINANCIAL YEAR 93-94 AND THEREFORE, THE VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 8 - DEDUCTION, IF ANY, COULD BE CLAIMED BY THE ASSESS EE UNDER SECTION 80IA APPLICABLE TO THE ASSESSEE WHICH STARTED MANUFACTUR ING ACTIVITY FROM 1.4.1991 TO 31.03.1995. IN THE LETTER DATED 17.06.2 002 FILED BEFORE THE LEARNED ASSESSING OFFICER, THE ASSESSEE AGAIN SUBMI TTED THAT ITS CLAIM FOR DEDUCTION SHOULD BE CONSIDERED UNDER SECTION 80 IA OF THE I.T.ACT. AS PER THE LEARNED ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS THE ASSESSEE RATHER MADE CLAIM OF DEDUCTIONS UNDER SECT ION 80IB ALSO AT ONE TIME. THE LEARNED ASSESSING OFFICER THEREFORE, OBSE RVED THAT THE ASSESSEE CHANGED ITS STAND FOR FOUR TIMES. ACCORDIN G TO THE ASSESSING OFFICER THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 80I BECAUSE IT WAS NOT ALLOWABLE TO THE ASSESSEE WHO ST ARTED THE MANUFACTURING ACTIVITY AFTER 31.03.1991. AS FAR AS CLAIM OF DEDUCTION UNDER SECTION 80IA IS CONCERNED, THE LEARNED ASSESS ING OFFICER NOTED THAT THE ASSESSEE HAD ITSELF WITHDRAWN THE CLAIM AN D THAT THEREFORE, THERE WAS NO QUESTION OF ALLOWANCE. AS THE PROVISIO NS OF SECTION 80IB ARE APPLICABLE WITH EFFECT FROM ASSESSMENT YEAR 2000-01 , THE LEARNED ASSESSING OFFICER FURTHER NOTED THAT DEDUCTION UNDE R THE PROVISIONS OF THIS SECTION ALSO WAS NOT ALLOWABLE TO THE ASSESSEE . DURING THE RELEVANT PERIOD, THE ASSESSEE WAS RUNNING TWO UNITS. ONE OF THEM WAS ENGAGED IN THE PROCESSING OF EDIBLE OILS AND IN THE OTHER UNIT THE ASSESSEE HAD EARNED JOB CHARGES FROM CONVERSION OF SKIMMED MILK TO SKIMMED MILK POWDER. AS PER THE LEARNED ASSESSING OFFICER AS THE ASSESSEE NEVER SUBMITTED THE BREAKUP OF PROFIT FOR WHICH THE DEDUC TION WAS CLAIMED, THE CLAIM OF THE ASSESSEE WAS NOT THEREFORE, ALLOWA BLE EVEN FROM THIS ANGLE. THE LEARNED ASSESSING OFFICER FURTHER OBSERV ED THAT IF AT ALL ASSESSEES CLAIM WAS TO BE CONSIDERED IT HAD TO BE WITH REFERENCE TO VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 9 - PROFITS AND GAINS OF THE ELIGIBLE INDUSTRIAL UNDERT AKING I.E. THE ONE ENGAGED IN THE PROCESSING OF EDIBLE OILS. ON PG.14 & 15 OF THE ASSESSMENT ORDER, THE LEARNED ASSESSING OFFICER WOR KED OUT THE NET PROFIT EARNED BY THE ASSESSEE FROM THE POWDER PLANT BY ALLOWING THE PROPORTIONATE EXPENSES. HE WORKED OUT SUCH NET INCO ME FROM JOB CHARGES FOR CONVERSION OF SKIMMED MILK AT RS.1,05,6 9,098/- OUT OF THE TOTAL JOB CHARGES RECEIVED BY THE ASSESSEE AT RS.1, 48,26,492/-. THE LEARNED ASSESSING OFFICER OBSERVED THAT THIS PROFIT WAS IN NO WAY CONNECTED WITH THE INCOME DERIVED FROM THE ELIGIBLE INDUSTRIAL ACTIVITY OF EDIBLE OIL PROCESSING. ACCORDING TO THE LEARNED ASS ESSING OFFICER, THIS WAS THEREFORE, REQUIRED TO BE EXCLUDED FOR THE PURP OSES OF COMPUTING INCOME FOR DEDUCTION UNDER SECTION 80IA ETC. AS THE INCOME FROM POWDER PLANT WORKED OUT BY THE LEARNED ASSESSING OF FICER AT RS.1,05,69,093/- WAS MORE THAN THE TOTAL INCOME SHO WN BY THE ASSESSEE, THE LEARNED ASSESSING OFFICER CONCLUDED T HAT THE ASSESSEE HAD NOT DERIVED ANY INCOME FROM THE INDUSTRIAL ACTIVITY OF EDIBLE OIL PROCESSING ON WHICH DEDUCTION UNDER ANY OF THE SECT IONS COULD BE ALLOWED. IN VIEW OF THE ABOVE DISCUSSION, THE LEARN ED ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION OF RS.17,74,748/- MADE BY THE ASSESSEE UNDER THE PROVISIONS OF THIS SECTION. 14. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), THE ASSESSEE CONTENDED THAT THE ASSES SEE WAS RUNNING MANUFACTURING UNITS DURING THE RELEVANT PREVIOUS YE AR. THE ASSESSEE STARTED MANUFACTURING IN THE FINANCIAL YEAR 1993-94 AND IT FULFILLED ALL THE CONDITIONS NECESSARY FOR AN INDUSTRIAL UNDERTAK ING FOR DEDUCTION UNDER SECTION 80I IN THE INITIAL YEAR AND LATER CON VERTED INTO 80IA AND VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 10 - THEN 80IB. THE ASSESSEE EXPLAINED THAT TO BE ELIGIB LE FOR DEDUCTION UNDER THE PROVISIONS OF THIS SECTION, THE INDUSTRIAL UNDE RTAKING SHOULD NOT BE FORMED BY SPLITTING UP AND BY RECONSTRUCTION OF A B USINESS ALREADY IN EXISTENCE, IT SHOULD BE MANUFACTURING AND PRODUCING ARTICLES AND THAT IT SHOULD HAVE EMPLOYED 10 OR MORE PERSONS DURING THE YEAR. ACCORDING TO THE ASSESSEE, ALL THE ABOVE BASIC CONDITIONS WERE F ULFILLED BY THE ASSESSEE COMPANY AND THAT THEREFORE, THE LEARNED AS SESSING OFFICER WAS NOT JUSTIFIED IN DENYING THE CLAIM OF DEDUCTION. TH E ASSESSEE SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAD NOT ASKED TH E ASSESSEE DURING ASSESSMENT PROCEEDINGS TO GIVE BREAK UP OF PROFIT E TC. IT WAS THEREFORE, SUBMITTED THAT THE LEARNED ASSESSING OFFICER WAS NO T JUSTIFIED IN OBSERVING THAT THE ASSESSEE HAD NOT GIVEN THE BREAK OF PROFIT. IT IS FURTHER CONTENDED THAT FIRSTLY THE DEDUCTION ON THE POWDER PLANT, WHICH ITSELF WAS A MANUFACTURING UNIT AND ELIGIBLE FOR DE DUCTION UNDER SECTION 80IB, WAS ALLOWABLE AND THAT FURTHER THE LEARNED AS SESSING OFFICER HAS TAKEN PROFIT FROM THE POWDER PLANT AT 71.28% OF THE TOTAL RECEIPTS WHICH WAS UNREALISTIC WHEN THE REAL INCOME WAS IN THE RAN GE OF 5 TO 6% OF RECEIPTS ONLY. HE CLARIFIED THAT THE ASSESSEE HAD A LREADY EXCLUDED THE OTHER INCOME NOT ELIGIBLE FOR SUCH DEDUCTION FROM I TS INCOME FOR COMPUTING THE CLAIM FOR DEDUCTION AS ABOVE. THE ASS ESSEE REFERRED TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CHOKSHI METALS LTD. 107 ITR 63 WHICH WAS LATER CONFIRMED BY HONBL E SUPREME COURT IN THE CASE REPORTED AT 161 ITR 159 AND SUBMITTED THAT THE CLAIM OF DEDUCTION UNDER CHAPTER VIA SHOULD BE ALLOWED EVEN IF NOT CLAIMED BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT IT HAS BE EN HELD IN THESE DECISIONS THAT IT WAS INCUMBENT OF THE LEARNED ASSE SSING OFFICER TO VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 11 - FOLLOW THE CIRCULARS AND DRAW THE ATTENTIONS OF THE ASSESSEE CONCERN TO ALL THE RELIEF AND REFUNDS TO WHICH AN ASSESSEE SEE MED TO BE ENTITLED FROM THE FACTS OF THE CASE EVEN THOUGH THAT ASSESSE E MIGHT HAVE OMITTED TO CLAIM THE RELIEF /REFUND. IT WAS FURTHER EXPLAIN ED THAT IN THE DECISION OF CIT VS. ASPINWELL AND COMPANY, 251 ITR 323 THE H ONBLE SUPREME COURT HAS HELD THAT IF THE CHANGES MADE IN THE ARTI CLE RESULTED IN NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO MANUF ACTURING ACTIVITY. ACCORDING TO THE ASSESSEE, IT IS FURTHER HELD BY TH E COURT THAT IF THE NET PRODUCT WAS ABSOLUTELY DIFFERENT AND SEPARATE FROM INPUT AND HAS A DIFFERENT IDENTITY DISTINCT FROM RAW MATERIAL FROM WHICH IT WAS MANUFACTURED, THE PROCESS HAD TO BE TAKEN AS MANUFA CTURING PROCESS. IT WAS THEREFORE, SUBMITTED THAT THE ASSESSEE WAS ELIG IBLE FOR DEDUCTION FOR THE MILK POWDER PLANT ALSO. THE ASSESSEE ALSO P LACED RELIANCE ON THE DECISION OF CIT VS. KRISHNA PURVARIZING 163 CTR 151 A.P. HIGH COURT IN WHICH IT HAS BEEN HELD THAT UNIT WISE AND PRODUCT W ISE PROFIT SHOULD NOT BE SEEN FOR ALLOWING THE DEDUCTION AS MANUFACTURING ACTIVITIES. THE LD. COUNSEL CONTENDED THAT IN THE LIGHT OF THE DECISION OF JURISDICTIONAL HIGH COURT DISCUSSED ABOVE THE CLAIM OF THE ASSESSEE OF RUNNING AN INDUSTRIAL UNDERTAKING SHOULD BE ACCEPTED AND IT SHOULD BE ALL OWED DEDUCTION AS CLAIMED. 17. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSE E, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT L EARNED ASSESSING OFFICER DENIED DEDUCTION TO THE ASSESSEE ON THE GRO UND THAT THE ASSESSEE HAD CHANGED ITS STAND WITH RESPECT TO UNDE R THE PROVISIONS OF WHICH SECTION THE DEDUCTION WAS CLAIMED. THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT THIS CANNOT BE A VALID AND JUSTIFIED VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 12 - GROUND FOR DISALLOWING THE DEDUCTION. IT IS SETTLE D POSITION OF LAW IN VIEW OF DIFFERENT HIGH COURTS INCLUDING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CHOKSHI METAL LTD. (SUPRA) THA T ASSESSEE SHOULD BE ALLOWED RELIEF AND DEDUCTION TO WHICH THEY ARE ACTU ALLY ENTITLED FROM THE FACTS OF THE CASE, EVEN THOUGH THEY MIGHT HAVE OMIT TED TO CLAIM SUCH RELIEF/REFUND. FURTHER, IN THE CASE OF SUBHASHCHAND RA SARVESHKUMAR VS. ITAT 132 ITR 160, THE HONBLE COURT HELD THAT EVEN IF ASSESSEE HAS NOT CLAIMED DEDUCTION UNDER SECTION 80J AND UNDER SECTI ON 80HH IN THE RETURN OR DURING ASSESSMENT, THE ITO MAY GIVE BENEF IT OR DEDUCTION IF THE NECESSARY PARTICULARS WERE ON RECORD. IN VIEW O F THE ABOVE POSITION, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), HE LD THAT THE ASSESSEE OFFICER WAS NOT JUSTIFIED IN DENYING DEDUC TION TO THE ASSESSEE. 18. FURTHER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE DID NOT GIVE THE BREAK U P OF THE PROFIT AND THAT THEREFORE, IT WAS NOT ENTITLED TO THE DEDUCTIO N. HOWEVER, AS POINTED OUT BY THE ASSESSEE, FIRST OF ALL THE LEARNED ASSES SING OFFICER HAD NOT ASKED SPECIFICALLY TO THE ASSESSEE TO GIVE SUCH BRE AKUP. SECONDLY IN VIEW OF THE RATIO OF DECISION OF HONBLE A.P. HIGH COURT IN THE CASE OF KRISHNA PULVARIZING 163 CTR 151 (SUPRA) RELIED UPON BY THE LD. COUNSEL, THIS COULD NOT BE VIEWED AS A DISQUALIFICATION FOR ALLOW ING THE DEDUCTION FOR MANUFACTURING ACTIVITIES. EVEN OTHERWISE AS WOULD B E DISCUSSED SUBSEQUENTLY, BOTH THE UNITS OF THE ASSESSEE I.E. T HE FIRST ONE ENGAGED IN THE MANUFACTURING OF EDIBLE OILS AND SECOND IN THE MANUFACTURING OF POWDER MILK FROM THE SKIMMED MILK ARE, ENGAGED IN T HE MANUFACTURING ACTIVITIES ONLY. THEREFORE, THERE WAS NO NEED TO HA VE THE BREAK UP OF PROFITS OF THE TWO UNITS TO COMPUTE THE ELIGIBLE PR OFITS FOR THE PURPOSE OF VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 13 - DEDUCTION OF INCOME FROM MANUFACTURING ACTIVITIES. FURTHER, THROUGH THE LEARNED ASSESSING OFFICER HAS CONSIDERED ONLY THE U NIT ENGAGED IN THE MANUFACTURING OF EDIBLE OIL TO BE ENGAGED IN THE MA NUFACTURING ACTIVITIES AND HAS NOT SO CONSIDERED THE UNIT ENGAGED IN THE M ANUFACTURING OF MILK POWDER FROM SKIMMED MILK, HE HAS NOT CLEARLY GIVEN THE REASONS FOR HIS SO DOING. MAKING OF POWDER MILK FROM SKIMMED MILK I S CLEARLY A MANUFACTURING ACTIVITY AS THE NET PRODUCT IS ABSOLU TELY DIFFERENT AND SEPARATE FROM INPUT AND HAS AN IDENTITY DISTINCT FR OM RAW MATERIALS I.E. SKIMMED MILK FROM WHICH IT WAS MANUFACTURED. IN VIE W OF THE RATION OF THE DECISIONS OF VARIOUS COURTS IN THIS REGARD INCL UDING THAT OF HONBLE SUPREME COURT IN THE CASE OF ASPINWELL AND COMPNAY 251 ITR 323 (SC) RELIED UPON BY THE LD. COUNSEL, THE ACTIVITY OF PRO DUCING MILK POWDER AS ABOVE IS NOTHING BUT MANUFACTURING ACTIVITY WHEREIN COMMERCIALLY DIFFERENT ARTICLE I.E. MILK POWDER IS PRODUCED FROM THE ORIGINAL ARTICLE I.E. SKIMMED MILK. THEREFORE, THOUGH THE LEARNED ASSESSI NG OFFICER HAS HELD THE INCOME EARNED BY THE ASSESSEE FROM THE MILK POW DER PLANT TO BE NOT ELIGIBLE FOR DEDUCTION WITHOUT ASSIGNING ANY REASON S WHATSOEVER, THE APPROACH DOES NOT APPEAR TO BE JUSTIFIED. IT HAS TO BE HELD ACCORDINGLY THAT THE ASSESSEE WAS CARRYING ON MANUFACTURING ACT IVITIES BOTH IN THE EDIBLE OIL UNIT AND IN THE MILK POWDER PLANT. FURTH ER AS THE ASSESSEE FULFILLED ALL THE NECESSARY CONDITIONS, AS SUBMITTE D BY THE LD. COUNSEL AND AS DISCUSSED IN THE PRECEDING PARAS AND WHICH I S SOMEHOW NOT DISPUTED BY THE LEARNED ASSESSING OFFICER, THE ASSE SSEE SHOULD HAVE BEEN ALLOWED DEDUCTION UNDER SECTION 80IB OF THE I. T. ACT, 1961. IN VIEW OF THE ABOVE DISCUSSIONS, THE LEARNED ASSESSING OFF ICER IS DIRECTED TO ALLOW THE ASSESSEE DEDUCTION UNDER SECTION 80IB OF THE I.T. ACT VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 14 - CONSIDERING THE INCOME FROM BOTH THE UNITS AS ABOVE TO BE ELIGIBLE FOR DEDUCTION UNDER THE PROVISIONS OF THIS SECTION. THI S GROUND OF APPEAL IS THEREFORE, TAKEN TO BE ALLOWED. 19. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED ASSESSING OFFICER WHEREAS THE LEARNED A UTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE, THE CLAIM OF DEDUCTION UNDER SECTION 80IB, OF ASSESSEE OF RS.17,34,748/- WAS DISALLOWED BY THE LEARNED ASSESS ING OFFICER MERELY ON THE GORUND THAT THE CONVERSION OF SKIMMED MILK I NTO SKIMMED MILK POWDER DOES NOT AMOUNT TO MANUFACTURE AND PROFIT OF ASSESSEE DERIVED FROM CONVERSION OF SKIMMED MILK INTO SKIMMED MILK P OWDER WAS MORE THAN THE TOTAL INCOME OF THE ASSESSEE I.E. IN OTHER WORDS, THERE WAS NO PROFIT ON PRODUCTION OF EDIBLE OIL. LEARNED COMMISS IONER OF INCOME TAX(APPEALS) HELD THAT THE LEARNED ASSESSING OFFICE R HAS GIVEN NO REASON FOR COMING TO THE CONCLUSION THAT CONVERSION OF SKI MMED MILK INTO SKIMMED MILK POWDER IS NOT MANUFACTURING. THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) FURTHER OPINED THAT SKIMMED MILK AND SKIMMED MILK POWDER ARE DIFFERENT PRODUCTS AND THEREFORE, C ONVERSION TANTAMOUNT TO MANUFACTURE. HE THEREFORE, DIRECTED T HE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IB OF THE ACT TO THE ASSESSEE. WE FIND THAT LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) WAS FULLY JUSTIFIED IN HOLDING THAT WHEN THE FULL F ACTS OF THE CASE WERE VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 15 - BEFORE THE LEARNED ASSESSING OFFICER AND DEDUCTION WERE CLAIMED BY THE ASSESSEE, IT IS THE DUTY OF THE LEARNED ASSESSING O FFICER TO ALLOW DEDUCTION UNDER THE CORRECT SECTION EVEN THOUGH THE ASSESSEE UNDER MISTAKE MENTIONED SOME WRONG SECTION. FURTHER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS JUSTIFIED I N HOLDING THAT NON SUBMISSION OF BREAK UP OF PROFIT CANNOT BE A GROUND FOR DISALLOWING THE DEDUCTION WHICH IS OTHERWISE ALLOWABLE TO THE ASSES SEE. THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THA T THE LEARNED ASSESSING OFFICER HAS GIVEN NO REASON FOR CONCLUDIN G THE CONVERSION OF SKIMMED MILK INTO SKIMMED MILK POWDER DOES NOT AMO UNT TO MANUFACTURE COULD NOT BE CONTROVERTED BY THE LEARNE D DEPARTMENTAL REPRESENTATIVE. IN OUR CONSIDERED OPINION, THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS) WAS JUSTIFIED IN HOLDING THAT S UCH NON SPEAKING ORDER IS NOT SUSTAINABLE. HOWEVER, WE FIND THAT LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) HAS HELD THAT CONVERSION OF SKIMMED MILK INTO SKIMMED MILK POWDER TANTAMOUNT TO MANUFACTURE FOR T HE REASON THAT BOTH ARE COMMERCIALLY DIFFERENT PRODUCTS. IN OUR CO NSIDERED VIEW, THE LEARNED ASSESSING OFFICER HAS NOT GIVEN ANY REASON WHY HE CONSIDERED THAT CONVERSION OF SKIMMED MILK INTO SKIMMED MILK P OWDER WAS NOT MANUFACTURE. THE LEARNED ASSESSING OFFICER HAS NOT RECORDED ANY FINDING TO THE EFFECT WHETHER SKIMMED MILK AND SKIM MED MILK POWDER ARE COMMERCIALLY TWO DIFFERENT PRODUCTS OR NOT. IT APPEARS THAT SKIMMED MILK POWDER CAN AGAIN BE CONVERTED INTO SKIMMED MIL K BY MERELY ADDING WATER INTO IT. IF THAT BE SO, THEN THE SKIMM ED MILK AND SKIMMED MILK POWDER ARE SAME PRODUCT. MERELY, HAVING TWO DI FFERENT FORMS I.E. ONE IN LIQUID FORM AND IN OTHER IN POWDER FORM. IN VIEW OF THE ABOVE, IN VIMAL OIL & FOOD PVT. LTD. ITA NO. 719/AHD/2004 ASST . YEAR : 2000-01 - 16 - OUR CONSIDERED OPINION, IT SHALL BE IN THE INTEREST OF THE JUSTICE TO RESTORE THIS ISSUE BACK TO THE FILE OF THE LEARNED ASSESSIN G OFFICER FOR CONSIDERATION OF THE MATTER IN DETAIL AFTER VERIFIC ATION OF ALL RELEVANT FACTS. THEREFORE, THE ORDERS OF THE LOWER AUTHORITI ES ON THIS ISSUES ARE SET ASIDE AND THE MATTER IS REMITTED BACK TO THE FILE O F THE LEARNED ASSESSING OFFICER WITH THE DIRECTION TO REFRAME THE ASSESSMEN T ON THIS ISSUE BY PASSING A SPEAKING ORDER AFTER TAKING INTO CONSIDER ATION ALL THE RELEVANT FACTS AND OBSERVATIONS MADE HEREINABOVE IN THIS ORD ER. NEEDLESS TO MENTION THAT LEARNED ASSESSING OFFICER SHALL ALLOW SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE RE-ADJUDICATING T HE ISSUE AS PER LAW. THUS, THIS GROUND OF APPEAL OF REVENUE IS ALLOWED F OR STATISTICAL PURPOSES. 21. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED IN THE MANNER INDICATED ABOVE. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 04.09.2009. SD/- SD/- ( T.K. SHARMA ) ( N.S. SAINI ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD; DATED 04/09/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD.CIT(A)-XXI, MEHSAN A 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD