DCIT 10(2)(1), MUMBAI V. JYOTHY LABORATORIES LTD, MUMBAI

ITA 7281/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0595 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 13-12-2016
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' J ' BENCH, MUMBAI BEFORE SHRI G.S. PANNU , VICE PRESIDENT AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO. 7281 /MUM/ 2016 (ASSESSMENT YEAR: 2011 - 12 ) A C I T - 10(2)(1) ROOM NO . 216 - A, 2ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. JYOTHY LABORATORIES LTD. UJALA HOUSE, RAM KRISHNA MANDIR ROAD, KONDIVITA ANDHERI (E), MUMBAI 400059 PAN AAACJ3212B APPELLANT RESPONDENT CO NO. 80 /MUM/ 201 8 (ASSESSMENT YEAR: 2011 - 12 ) M/S. JYOTHY LABORATORIES LTD. UJALA HOUSE, RAM KRISHNA MANDIR ROAD, KONDIVITA ANDHERI (E), MUMBAI 400059 VS. A C I T - 10(2)(1) ROOM NO . 216 - A, 2ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AAACJ3212B CROSS OBJECTOR APPELLANT IN APPEAL REVENUE BY: SHRI MANJUNATH SWAMY ASSESSEE BY: SHRI SOHRAB DASTUR, SHRI BOMI DARUWALA & M/S. PRIYANKA JAIN DATE OF HEARING: 06 . 09 .2018 DATE OF PRONOUNCEMENT: 30 . 11.2018 O R D E R PER G.S. PANNU , VP THE CAPTIONED APPEAL AND THE CROSS OBJECTION FOR A.Y. 2011 - 12 RELATE TO THE SAME ASSESSEE, THEREFORE, HAVE BEEN HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. WE MAY FIRST TAKE UP THE APPEAL OF THE REVENUE, WHICH IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 30.09.2016 , WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 2 1961 (HEREINAFTER 'THE ACT') DATED 31.03.2014. THE REVENUE HAS RAISED THE FOLLOWING G ROUN DS OF APPEAL: - (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S. 80IC(2) OF THE I.T. ACT WITHOUT APPRECIATION THE FACTS THAT THE PREPARATION OF UJALA SUPREME BY DILUTING THE RAW MATERIAL I.E. ACID VIOLET 49 DYE WITH WATER DOES NOT AMOUNT TO MANUFACTURER OR PRODUCE OF ANY ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE AS ENVISAGED U/S. 2(29)(BA) OF THE I.T. ACT, AND THEREBY NOT ELIGIBLE FOR DEDUCTION U /S. 80IC OF THE ACT. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB(4) OF THE I. T. ACT WITHOUT APPRECIATING THE FACTS THAT THE PREPARATION OF UJALA SUPREME BY DILUTING THE RAW MATERIAL I.E. ACID VIOLET DYE49 WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE AS ENVISAGED U/S.2(29)(BA) OF THE I.T. ACT AND THEREBY NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(5)(I) OF THE I.T. ACT. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE U/S. 14A R.W.R. 8D TO RS. 8,84,988/ - AS AGAINST RS. 34,15,155/ - BY HOLDING THAT THE DISALLOWANCE CANNOT EXCEED THE INCOME EARNED WITHOUT APPRECIATING THE FACTS THAT THE DISALLOWANCE IS MADE AS PER RULE 8D OF INCOME TAX ACT 1961 WHICH DOES NOT PROHIBITS THE A.O. TO RESTRICT THE SAME TO AMOUNT OF INCOME EARNED.' 3. SUB SEQUENTLY , THE REVENUE HAS ALSO PREFERRED AN A DDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER: - (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. NOT TO INCLUDE THE DISALLOWANCE U/S. 14A FOR THE PURPOSE OF COMPUTING TAX LIABILITY U/S. 115JB OF THE ACT RELYING ON DECISION OF JURISDICTIONAL BOMBAY HIGH COURT IN CIT V S. JSW ENERGY LTD., (2015) 60 TAXMANN.COM. 303, WHICH IS NOT SETTLED PROPOSITION AND IS PENDING BEFORE THE HON'BLE SUPREME COURT. 4. AS A PERUSAL OF THE AFORESAID G ROUNDS REVEAL , THE SUBSTANTIVE DISPUTE ARISES FROM THE ACTION OF THE ASSESSING OFFICER IN DEN YING THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IC OF THE ACT AS WELL AS UNDER SECTION 80IB OF THE ACT. IN ORDER TO APPRECIATE TH IS CONTROVERSY , THE BRIEF BACKGROUND CAN BE SUMMARISED AS FOLLOWS. THE RESPONDENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 AND IS , INTER - ALIA , ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 3 OF FABRIC WHITENERS , SOAPS, DETERGENTS, MOSQUITO REPELLENTS, SCRUBBER AND INCENSE STICK S. IT IS UNDERTAKING MANUFACTURING ACTIVITIES AT VARIOUS UNITS LOCATED IN DIFFERENT PARTS OF INDIA. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION , IT FILED THE RETURN OF INCOME ON 30.09.2011 DECLARING THE TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT A T ` 39,09,91,633/ - , WHICH , INTER - ALIA , INCLUDE D THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT OF ` 1,04,44,338/ - AND UNDER SECTION 80IC OF THE ACT OF ` 42,78,27,294/ - . THE RETURNED TAX LIABILITY WAS INDEED WORKED OUT AS PER THE BOOK PROFIT DETERMINED IN TERMS OF SECTION 115JB OF THE ACT. BE THAT AS IT MAY, FOR THE PRESENT , IT WOULD SUFFICE TO NOTE THAT THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ACT OF ` 42,78,27,294/ - IN RESPECT OF PROFIT DERIVED FROM ITS INDUSTRIAL UNDERTAKING LOCATE D AT UTTRANCHAL (HEREINAFTER REFERRED AS UTTRANCHAL UNIT ). THE ASSESSING OFFICER NOTED THAT THE UTTRANCHAL UNIT WAS DEALING IN A FINISHED PRO DUCT NAMED UJALA SUPREME. THE ASSESSING OFFICER PROCEEDED TO DENY THE DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE GROUND THAT THE ACTIVITY IN UTTRANCHAL UNIT DID NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A NECESSARY REQUIREMENT FOR THE CLAIM OF DEDUCTION. SECONDLY , THE ASSE SSING OFFICER DENIED THE CLAIM ALSO ON THE GROUND THAT THE FINISHED PRODUCT OF THE ASSESSEE WAS AN ARTICLE OF THING WHICH WAS SPECIFIED IN SCHEDULE XIII OF THE ACT AND THEREFORE NOT ELIGIBLE FOR THE CLAIM OF DEDUCTION. THUS DEDUCTION CLAIMED UNDER SECTION 80IC OF THE ACT TO THE EXTENT OF ` 42,78,27,294/ - WAS DENIED. 5. SO FAR AS DEDUCTION CLAIMED UNDER SECTION 80IB OF THE ACT OF ` 1,04,44,338/ - IS CONCERNED , THE SAME RELATE S TO TWO DIFFERENT UNITS. FIRSTLY, THE CLAIM OF ` 37,06,189/ - IN RESPECT OF UJALA DETERGENT UNIT IN KERALA (HEREINAFTER REFERRED TO AS WAYANAD UNIT ) ; AND , SECONDLY ` 67,38,149/ - IN RESPECT OF UJALA UNIT AT HIMACHAL (HEREINAFTER REFERRED TO AS HIMACHAL UNIT ). FOR THE REASONS ASCRIBED BY HIM TO DENY THE DEDUCTION UNDER SECTION 80IC OF THE ACT, THE ASSESSING OFFICER DENIED THE CLAM UNDER SECTION 80IB OF THE ACT ALSO, NAMELY , THAT THE ACTIVITY OF THE ASSESSEE D ID NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 4 6. IN THE ASSESSMENT ORDER , ELABORATE REASONS HAVE BEEN BROUGHT OUT BY THE ASSESSING OFFICER , WHICH ARE NOT BEEN PRESENTLY REFERRED TO SINCE THE APPEAL IS BEING DISPOSED OFF BY ADVERTING TO THE PRELIMINARY POINT B R OUGHT OUT BY THE LEARNED A.R. FOR THE RESPONDENT ASSESSEE. BEFORE GOI NG TO THE PRELIMINARY POINT AND TO IMPART COMPLETENESS , IT WOULD SUFFICE TO NOTE THAT WHEN THE MATTER WAS CARRIED IN APPEAL BY THE ASSESSEE BEFORE THE CIT(A), ALL THE OBJECTIONS RAISED BY THE ASSESSING OFFICER WERE ASSAILED; THE CIT(A) HAS DEALT WITH ALL T HE OBJECTIONS OF THE ASSESSING OFFICER AFTER OBTAINING A REMAND REPORT FR OM THE ASSESSING OFFICER ; AND , HE HAS ULTIMATELY FOUND THE CLAIMS OF THE ASSESSEE TO BE IN ORDER. AS THE CIT(A) ALLOWED ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IC AS WELL AS UN DER SECTION 80IB OF THE ACT, THE PRESENT APPEAL BY THE REVENUE IS BEFORE US. 7. BEFORE US THE LEARNED A.R. FOR THE RESPONDENT ASSESSEE MADE A PRELIMINARY POINT IN DEFENCE OF THE ULTIMATE CONCLUSION OF THE CIT(A), WHICH IS BASED ON THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SIMPLE FOOD PRODUCTS (P) LTD. VS. CIT (2017) 84 TAXMANN.COM 239. 8. THE POINT RAISED IS THAT WHEN THE DEDUCTIONS UNDER SECTION 80IC AS WELL AS UNDER SECTION 80IB OF THE ACT HAVE BEEN GRANTED IN THE INITIAL ASSESSMENT YEARS, THE SAME COULD NOT BE REJECTED FOR THE SUBSEQUENT ASSESSMENT YEARS UNLESS THE RELIEF ALLOWED FOR THE INITIAL YEAR WAS WITHDRAWN. IT HAS BEEN POINTED OUT BY THE LEARNED A.R. THAT THE DEDUCTIONS UNDER SECTION 80IB AND 80IC OF THE ACT ARE AL LOWABLE TO AN ASSESSEE OVER A SPECIFIED NUMBER OF CONSECUTIVE ASSESSMENT YEARS , AND IN THE INSTANT CASE , SUCH CLAIMS HAVE NOT BEEN WITHDRAWN IN THE INITIAL ASSESSMENT YEARS, THEREFORE THE ACTION OF THE ASSESSING OFFICER TO DENY THE CLAIM IN THE INSTANT ASS ESSMENT YEAR IS UNTENABLE. IN SUPPORT, R ELIANCE HAS ALSO BEEN PLACED ON THE PRINCIPLE LAID DOWN BY THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. PAUL BROTHERS (1995) 21 6 ITR 548 (BOM.) , WHICH HAS BEEN SUBSEQUENTLY REITERATED AND APPLIED BY THE HON'BLE HIGH COURT IN THE CASE OF SIMPLE FOOD PRODUCTS (P) LTD. (SUPRA). ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 5 9. THE LEARNED D.R. HAS NOT JOINED ISSUE WITH THE RESPONDENT - ASSESSEE ON FACT UAL MATRIX, BUT POINTED OUT THAT THE ASSESSING OFFICER HAS DENIED THE CLAIM IN THE INSTANT YEAR ON A JUSTIFIED BASIS. THE LEARNED D.R. HAS REITERATED THE STAND OF THE ASSESSING OFFICER ON THE MERIT OF THE CONTROVERSY, WHICH WE ARE NOT INCLINED TO GO INTO FOR THE PRESENT , AS WE DEAL WITH THE PRELIMINARY POINT BROUGHT OUT BY THE LEARNED A.R. F OR THE RESPONDENT ASSESSEE. 10. IN ORD ER TO APPRECIATE THE PRELIMINARY POINT RAISED BY THE RESPONDENT ASSESSEE, THE FOLLOWING FACTUAL POSITION IS RELEVANT. IN SO FAR AS THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IC OF THE ACT WITH RESPECT TO UTTRANCHAL UNIT IS CONCERNED , THE FIRST YEAR OF CLAIM WAS ASSESSMENT YEAR 2009 - 10 AND THE INSTANT YEAR IS THE THIRD YEAR OF CLAIM. SIMILARLY , THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RESPECT OF WAYANAD UNIT WAS MADE BY THE ASSESSEE FOR THE FIRST TIME IN ASSESSMENT YEAR 2 00 2 - 0 3 AND THE INSTANT YEAR IS THE EIGHTH YEAR OF CLAIM. IN RESPECT OF HIMACHAL UNIT, THE FIRST YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT WAS ASSESSMENT YEAR 2003 - 04, AND THUS THE INSTANT YEAR IS THE SEVENTH YEAR OF CLAIM. PERTINENTLY , THE R ELIEFS UNDER SECTION S 80IB AND 80IC OF THE ACT ARE AVAILABLE FOR TEN CONSECUTIVE YEARS STARTING FROM THE INITIAL ASSESSMENT YEAR WHEN THE RELEVANT UNDERTAKING OF THE ASSESSEE COMMENCE S MANUFACTUR E OR PRODUCTION. THEREFORE, FACTUALLY SPEAKING , THE INSTANT A SSESSMENT YEAR IS NOT THE INITIAL YEAR OF THE CLAIM , EITHER FOR SECTION 80IB OR FOR SECTION 80IC OF THE ACT. AT THE TIME OF HEARING , THE LEARNED A.R. FURNISHED A COPY OF THE ASSESSMENT YEAR PASSED UNDER SECTION 143(3) OF THE ACT FOR A.Y. 2002 - 03 DATED 2 4 .1 2.2004 , WHICH IS THE FIRST YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT WITH REGARD TO WAYANAD UNIT , WHOSE DATE OF COMMENCEMENT OF PRODUCTION/MANUFACTUR E IS 23.0 5 .2001. SIMILARLY , THE DATE OF COMMENCEMENT OF MANUFACTURE/PRODUCTION OF HIMACHAL UNIT IS 25.08.2002, AND THE INITIAL ASSESSMENT YEAR BEING 2003 - 04 FOR WHICH ALSO, A COPY OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT DATED 30.01.2006 HAS BEEN FURNISHED , WHEREIN THE RELEVANT CLAIM UNDER SECTION 80IB HAS BEEN ALLOWED. IN SO FAR AS THE CLAIM ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 6 UNDER SECTION 80IC FOR UTTRANCHAL UNIT IS CONCERNED , THE DATE OF COMMENCEMENT OF MANUFACTURE/PRODUCTION IS 06.05.2008 , AND THEREFORE THE INITIAL ASSESSMENT YEAR OF CLAIM IS ASSESSMENT YEAR 2009 - 10 . FOR ASSESSMENT YEAR 2009 - 10 ALSO, A CO PY OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT DATED 23.03.2011 HAS BEEN FURNISHED WHEREIN THE CLAIM UNDER SECTION 80IC OF THE ACT HAS BEEN ACCEPTED. IN ASSESSMENT YEAR 2010 - 11 ALSO , VIDE ORDER UNDER SECTION 143(3) OF THE ACT DATED 06.12 .2012 AFORESAID CLAIM S HA VE BEEN ACCEPTED. IT HAS ALSO BEEN POINTED OUT THAT WHEN THE TWO CLAIMS WERE DENIED IN THE INSTANT ASSESSMENT, THE CLAIMS ALLOWED IN THE RESPECTIVE INITIAL ASSESSMENT YEARS WERE NOT WITHDRAWN. IN THIS BACKGROUND , THE MOOT QUESTION IS AS TO WHETHER IN THE INSTANT YEAR , CAN THE ASSESSING OFFICER DENY THE CLAIM OF DEDUCTION UNDER SECTION 80IB AS WELL AS UNDER SECTION 80IC OF THE ACT CONSIDERING THAT THE SAID CLAIMS WERE NOT WITHDRAWN FOR RESPECTIVE INITIAL ASSESSMENT YEAR S . 11. SO FAR AS THE POINT OF CONTROVERSY BEFORE US IS CONCERNED, THE MECHANICS OF SECTION 80IB OF THE ACT ARE SIMILAR TO THAT OF SECTION 80IC OF THE ACT. FOR THE PRESENT PURPOSE, IT IS SUFFICIENT TO NOTE THAT BOTH THE DEDUCTIONS ARE ELIGIBLE FOR A PERIOD OF TEN CONSECUT IVE ASSESSMENT YEARS STARTING FROM THE INITIAL ASSESSMENT YEAR WHEN THE UNDERTAKING OF THE ASSESSEE COMMENCES MANUFACTURE/PRODUCTION. AS THE FACTUAL MATRIX OF THE PRESENT CASE SHOWS, THE INITIAL ASSESSMENT YEAR FOR THE CLAIM OF DEDUCTION UNDER SECTION 80I B OF THE ACT FOR WAYANAD UNIT AND HIMACHAL UNIT IS 31.03.20 02 AND 31.03.20 03 RESPECTIVELY, MEANING THEREBY ASSESSMENT YEARS 20 02 - 03 AND 20 03 - 04 . SIMILARLY, IN THE CONTEXT OF UTTRANCHAL UNIT, THE INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT IS ASSESSMENT YEAR 2009 - 10 AND THE YEAR OF END OF THE BENEFIT IS 31.03.2018, MEANING THEREBY ASSESSMENT YEAR 2018 - 19 . AS HAS BEEN SEEN IN THE EARLIER PART OF THIS ORDER, IN THE INITIAL ASSESSMENT YEARS, I.E. ASSESSMENT YEARS 2002 - 03, 2003 - 04 AND 2009 - 10, THE RESPECTIVE DEDUCTIONS UNDER SECTION 80IB AND/OR SECTION 80IC OF THE ACT WERE ALLOWED BY THE ASSESSING OFFICER . IT HAS ALSO BEEN BROUGHT OUT BEFORE ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 7 US, WITHOUT ANY CONTROVERSION FROM THE OTHER SIDE, THAT THE DEDUCTIONS HAVE BEEN ALLOWE D THEREAFTER TILL THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2010 - 11. IT IS ONLY IN THE INSTANT ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2011 - 12 THAT THE CLAIMS HAVE BEEN DENIED. 12. IN THE CONTEXT OF THE PRELIMINARY POINT RAISED BY THE RES PONDENT - ASSESSEE, THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SIMPLE FOOD PRODUCTS (P) LTD. (SUPRA) SQUARELY COVERS THE CONTROVERSY. IN THE SAID CASE, THE ISSUE RELATED TO CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RELATION TO AS SESSMENT YEARS 1999 - 2000 TO 2005 - 06. IN ASSESSMENT YEAR 1999 - 2000, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT FOR THE FIRST TIME EVEN WHEN IN THE INITIAL ASSESSMENT YEAR OF 1996 - 97 THE DEDUCTION UNDER SECTION 80I B OF THE ACT STOOD ALLOWED. THE POINT RAISED BY THE ASSESSEE WAS THAT THE CLAIM OF DEDUCTION IN RESPECT OF ASSESSMENT YEAR 1999 - 2000 ONWARDS COULD NOT BE REJECTED AS THE DEDUCTION GRANTED IN ASSESSMENT YEAR 1996 - 97, I.E. THE FIRST YEAR, HAD NOT BEEN WITHD RAWN. IN THIS BACKGROUND, THE FOLLOWING DISCUSSION IN THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IS RELEVANT: - (J) ACCORDING TO US, THE ENTIRE ISSUE IS NO LONGER RES - INTEGRA. THE IMPUGNED ORDER OF THE TRIBUNAL HAS, AFTER RECORDING THAT THE APPELLANT ASSESSEE RELIES UPON THE DECISION OF THIS COURT IN PAUL BROTHERS (SUPRA) HAS NOT DEALT WITH THE SAME. IT GIVES NO FINDING AS TO WHY AND IN WHAT MANNER IT WOULD NOT APPLY TO THE PRESENT FACTS. FURTHER, WE FIND THAT DISTINCTION WHICH HAS BEEN MADE IN THE IM PUGNED ORDER OF THE TRIBUNAL WITH REGARD TO DNISHAW FROZEN FOODS LTD. (SUPRA) VIZ. THAT THE ASSESSMENT IN THAT CASE HAS BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT IN INITIAL YEAR AND IT IS ONLY IN SUCH CASES THAT THE REVENUE BE BARRED FROM DENYING THE CLAIM FOR DEDUCTION IN THE SUBSEQUENT ASSESSMENT YEARS, UNLESS THE CLAIM FOR DEDUCTION HAS BEEN WITHDRAWN IN THE INITIAL YEAR WHEN DEDUCTION WAS CLAIMED AND ALLOWED UNLIKE AN ASSESSMENT WHICH IS COMPLETED UNDER SECTION 143(1) OF THE ACT. WE HAVE PERUSED TH E DECISION OF THIS COURT IN DINSHAW FROZEN FOOD LTD. NAGPUR (SUPRA) WHICH IN TURN HAS FOLLOWED THE DECISION PAUL BROTHERS (SUPRA). WE NOTE THAT THERE IS NO FINDING IN THE TWO ORDERS TO THE EFFECT THAT THE IN THE INITIAL YEAR THE CLAIM UNDER SECTION 80IA/IB OF THE ACT WAS GRANTED BY VIRTUE OF AN ORDER PASSED UNDER SECTION 143(3) OF THE ACT. NOTHING HAS BEEN BROUGHT ON RECORD TO INDICATE THAT THERE HAS BEEN SOME CHANGE IN MANUFACTURING PROCESS FROM THAT EXISTING WHEN THE CLAIM WAS ALLOWED IN THE INITIAL YEAR I.E. ASSESSMENT YEAR 1996 - 1997 AND SUBJECT ASSESSMENTS. THE INTENT/OBJECT OF THE DEDUCTION UNDER SECTION ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 8 80IA/IB OF THE ACT IS TO ENCOURAGE SETTING UP OF INDUSTRIES TO MANUFACTURE GOODS WHICH ARE NOT SPECIFIED IN THE ELEVENTH SCHEDULE TO THE ACT. (K) THE DISTINCTION SOUGHT TO BE MADE BY MR. BHATTAD, LEARNED COUNSEL FOR THE REVENUE THAT THE CLAIM FOR DEDUCTION IN PAUL BROTHERS (SUPRA) THE DEDUCTION WAS AN INVESTMENT BASED DEDUCTION, WHILE IN THE PRESENT CASE, WE ARE CONCERNED WITH THE PERFORMANCE BASE DEDU CTION. THIS IS IN - FACT, NO DISTINCTION. IN ABSENCE OF THE REVENUE BEING ABLE TO ESTABLISH THAT FOR THE SUBJECT ASSESSMENT YEARS, THE FACTS WITH REGARD TO THE PERFORMANCE WERE DIFFERENT FROM FACTS WITH REGARD TO THE PERFORMANCE IN WHICH THE CLAIM FOR DEDUC TION IN INITIAL YEAR WAS ALLOWED, THE GRANT OF DEDUCTION IN THE SUBSEQUENT SUBJECT ASSESSMENT YEAR CANNOT BE WITHHELD. THE OTHER ISSUE RAISED BY MR. BHATTAD THAT MERELY BECAUSE A CLAIM WAS ALLOWED IN AN EARLIER YEAR WOULD NOT PROHIBIT THE REVENUE FROM DISA LLOWING THE CLAIM IN SUBSEQUENT ASSESSMENT YEARS IS NO LONGER RES - INTEGRA AS THIS COURT IN PAUL BROTHERS (SUPRA) AS IT IS CATEGORICALLY HELD THAT IN ABSENCE OF DEDUCTION GRANTED IN THE INITIAL ASSESSMENT YEARS BEING WITHDRAWN, THE RELIEF FOR SUBSEQUENT ASS ESSMENT YEARS COULD NOT BE WITHHELD. THE BASIS FOR THE SAME IS FOUND IN SUB - CLAUSE (3) UNDER SECTION 80IA/IB OF THE ACT WHICH GIVES DEDUCTION FOR 10 CONSECUTIVE YEARS TO THE PROFIT AND GAINS OF AN INDUSTRIAL UNDERTAKING FROM INITIAL YEAR OF ASSESSMENT WHEN THE DEDUCTION WAS ALLOWED, SUBJECT TO THE CONDITION LAID DOWN THEREIN. IT IS NOT THE REVENUE'S CONTENTION THAT THE CONDITION IN CLAUSE (3) OF SECTION 80IB OF THE ACT HAS NOT BEEN FULFILLED. THEREFORE, ONCE DEDUCTION IS GRANTED IN THE INITIAL ASSESSMENT YE AR, THE SAME WOULD CONTINUE FOR THE PERIOD OF 10 CONSECUTIVE YEAR UNLESS THE RELIEF FOR INIT I AL YEAR IS ALSO WITHDRAWN AT THE TIME OF WITHHOLDING THE RELIEF UNDER SECTION 80IA/IB OF THE ACT. 13. THE AFORESAID DISCUSSION BY THE HON'BLE HIGH COURT CLEARLY BRINGS OUT THAT ONCE DEDUCTION IS GRANTED IN THE INITIAL ASSESSMENT YEAR, THE SAME WOULD CONTINUE FOR THE PERIOD OF TEN CONSECUTIVE YEARS UNLESS THE RELIEF FOR INITIAL ASSESSMENT YEAR IS ALSO WITHD RAWN. WE ARE CONSCIOUS OF THE FACT THAT IN COMING TO SUCH DECISION, THE HON'BLE HIGH COURT DID NOTICE THE ABSENCE OF THE REVENUE TO ESTABLISH THAT FOR THE SUBSEQUENT ASSESSMENT YEARS IN DISPUTE, THE FACTS WERE DIFFERENT FROM THE FACTS O N WHICH THE CLAIM F OR DEDUCTION IN THE INITIAL YEAR WAS ALLOWED. 14. A POINT THAT HAS BEEN RAISED IS THAT WHEN THE ASSESSMENT FOR THE INSTANT YEAR WAS FINALISED UNDER SECTION 143(3) OF THE ACT DATED 31.03.2014 , A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 21.03.2014 TO RE OPEN THE ASSESSMENT FOR ASSESSMENT YEAR 2009 - 10 IN ORDER TO WITHDRAW THE CLAIM EARLIER GRANTED UNDER SECTION 80IC OF THE ACT , ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 9 THEREFORE, IT COULD BE SAID THAT THE CLAIM IN THE INITIAL ASSESSMENT YEAR WAS DISTURBED . ON THIS ASPECT, THE LEARNED REPRESENTATI VE FOR THE RESPONDENT - ASSESSEE VEHEMENTLY POINTED OUT THAT ISSUANCE OF A NOTICE UNDER SECTION 148 OF THE ACT TO REOPEN ASSESSMENT TO WITHDRAW A CLAIM WOULD NOT MEAN WITHDRAWAL OF CLAIM IPSO FACTO . IT WAS EMPHASISED THAT AT THE TIME OF REJECTING THE CLAI M IN THE INSTANT ASSESSMENT YEAR, I.E. ON THE DATE OF PASSING OF THE ASSESSMENT ORDER, THE CLAIM UNDER SECTION 80IC OF THE ACT FOR ASSESSMENT YEAR 2009 - 10 (WHICH WAS THE INITIAL ASSESSMENT YEAR) WAS NOT WITHDRAWN AND IT REMAINED UNDISTURBED AS THE ASSESSME NT ORDER DATED 23.03.2011 FOR ASSESSMENT YEAR 2009 - 10 CONTINUED TO HOLD THE FIELD. 15. IN OUR VIEW, THE AFORESAID OBJECTION OF THE REVENUE DOES NOT COME IN THE WAY OF APPLYING THE PROPOSITION LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SIMPLE FOO D PRODUCTS (P) LTD. (SUPRA) IN THE INSTANT CASE. IN FACT, TO RECAPITULATE, THE FOLLOWING OBSERVATION OF THE HON'BLE HIGH COURT IS WORTHY OF NOTICE AND PROVIDES AN ANSWER TO THE OBJECTION RAISED BY THE REVENUE : - THEREFORE, ONCE DEDUCTION IS GRANTED IN THE INITIAL ASSESSMENT YEAR, THE SAME WOULD CONTINUE FOR THE PERIOD OF 10 CONSECUTIVE YEAR UNLESS THE RELIEF FOR INITIAL YEAR IS ALSO WITHDRAWN AT THE TIME OF WITHHOLDING THE RELIEF UNDER SECTION 80IA/IB OF THE ACT. [UNDERLINED FOR EMPHASIS BY US] 16. AS PER THE HON'BLE HIGH COURT, ONCE THE DEDUCTION IS GRANTED IN THE INITIAL ASSESSMENT YEAR, THE SAME WOULD CONTINUE FOR THE SPECIFIED PERIOD UNLESS THE RELIEF FOR INITIAL YEAR IS ALSO WITHDRAWN AT THE TIME OF WITHHOLDIN G THE RELIEF UNDER SECTION 80IA/ 80IB OF THE ACT . CLEARLY, IN THE INSTANT YEAR WHEN THE CLAIM OF DEDUCTION IS REJECTED BY THE ASSESSING OFFICER , THE RELIEF ALLOWED IN THE INITIAL ASSESSMENT YEAR H AS NOT BEEN WITHDRAWN. MERE INITIATION OF PROCEEDINGS UNDE R SECTION 148 OF THE ACT TO REOPEN THE ASSESSMENT OF THE PAST YEAR CANNOT BE UNDERSTOOD TO MEAN THAT THE CLAIM IS WITHDRAWN . THEREFORE, IN OUR VIEW, THE ASSESSING OFFICER COULD NOT HAVE REJECTED THE CLAIM FOR DEDUCTION UNDER SECTIONS 80IB AS WELL AS 80I C OF THE ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 10 ACT IN THE SUBJECT ASSESSMENT ORDER BECAUSE THE RELIEF ALLOWED IN THE INITIAL ASSESSMENT YEAR WAS NOT WITHDRAWN AT THE TIME OF SUCH REJECTION IN THE INSTANT YEAR. 17. IN THE ABOVE BACKGROUND, WE, THEREFORE, FIND MERIT IN THE PRELIMINARY POINT MADE OUT BY THE RESPONDENT - ASSESSEE AND THE APPEAL OF REVENUE ON THIS POINT DESERVES TO BE DISMISSED. THUS, IN THE FINAL ANALYSIS, WE UPHOLD THE ULTIMATE CONCLUSION OF THE CIT(A) TO ALLOW THE BENEFIT UNDER SECTIONS 80IB AND 80IC OF THE ACT TO THE ASSESSEE, ALBEIT ON A DIFFERENT GROUND. 18. THE OTHER ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT AMOUNTING TO ` 34,15,155/ - . IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD EARNED EXEMPT INCOME OF ` 8,84,898/ - REPRESENTING DIVIDEND INCOME. THE ASSESSING OFFICER APPLIED RULE 8D OF THE INCOME TAX RULES, 1962 AND COMPUTED A DISALLOWANCE OF ` 34,15,155/ - U NDER SECTION 14A OF THE ACT . BEFORE THE CIT(A), ASSESSEE ASSAILED THE DISALLOWANCE ON VARIED FACETS, BUT ONE OF THE POINTS WAS THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. THE CIT(A) CONCURRED WITH THE ASSESSEE ON T HIS ASPECT AND HELD THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT C OULD NOT EXCEED THE EXEMPT INCOME. AGAINST SUCH A DECISION, REVENUE IS IN APPEAL BEFORE US. ON THIS ASPECT, ASSESSEE HAS ALSO FILED A CROSS - OBJECTION CONTENDING THAT NO DISALLOWANCE AT ALL IS MERITED UNDER SECTION 14A OF THE ACT. 19. AT THE TIME OF HEARING, IT WAS PUT ACROSS TO THE PARTIES THAT THE PROPOSITION UPHELD BY THE CIT(A) THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT CANNOT EXCE ED THE EXEMPT INCOME IS BEING GENERALLY ACCEPTE D BY THE BENCHES OF THE TRIBUNAL. THE LEARNED REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE SUBMITTED THAT THE RESPONDENT DOES NOT WISH TO PRESS ITS CROSS - OBJECTION ONCE THE VIEW TAKEN BY THE CIT(A) IS ACCEPTED. WE FIND NO REASONS TO DISTRACT FROM THE STAND TAKEN BY THE CIT(A) ON THIS ASPECT, WHICH IS IN CONFORMITY WITH THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT, 378 ITR 33 (DEL) . ITA NO. 7281 /MUM/ 2016 M/S. JYOTHY LABORATORIES LTD. 11 20. INSOFAR AS THE ADDITIONAL GROUND RAISED BY THE REVENUE IS CONCERNED, THE SAME RELATES TO THE DIRECTION BY THE CIT(A) NOT TO INCLUDE THE DISALLOWANCE U/S. 14A FOR THE PURPOSE OF COMPUTING TAX LIABILITY U/S. 115JB OF THE ACT. THIS DECISION OF THE CIT(A) IS CONSISTENT WITH THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF VIREET INVESTMENT (P.) LTD., [2017] 82 TAXMANN.COM 415 (DELHI TRIB.) (SB). 21. AS A CONSEQUEN CE , THE REVENUE FAILS ON THIS ASPECT AND SO DOES THE ASSESSEE IN ITS CROSS - OBJECTION. 22. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS THE CROSS - OBJECTION OF THE ASSESSEE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2018 . SD/ - SD/ - ( RAVISH SOOOD ) ( G.S. PANNU ) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 30 TH NOVEMBER, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - 17 , MUMBAI 4. THE PR. CIT - 8 , MUMBAI 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.