VIMAL GUPTA, Jaipur V. ITO, Jaipur

ITA 732/JPR/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5603 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 14-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Depreciation
• Section: 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAI NI) ITA NO. 732/JP/2010 ASSESSMENT YEAR : 2006-07 PAN: ACCPG 2293 B SHRI VIMAL GUPTA VS. THE ITO B-14, ANANDPURI WARD- 5 (2) M.D. ROAD, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL SHARMA DEPARTMENT BY: SHRI D.C. SHARMA DATE OF HEARING: 20-01-2014 DATE OF PRONOUNCEMENT: 22-01-2014 ORDER PER HARI OM MARATHA, JM:- THIS APPEAL OF THE ASSESSEE IS PERTAINING TO ASSE SSMENT YEAR 2006-07 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-II I, JAIPUR DATED 05-03-2010 WHEREIN THE ASSESSEE HAS RAISED SOLITARY GROUND AS UNDER:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 26,60,040/- TOWARDS DISALLOWANCE OF DEDUCTION U/S 8 0-IB OF I.T. ACT, 1961. 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF OIL AND TRANSFORME RS ETC. FOR ASSESSMENT 2 YEAR 2006-07, THE ASSESSEE HAS FILED HER RETURN OF INCOME ON 2-01-2007 DECLARING A TOTAL INCOME OF RS. 3,59,743/-. THE AO HAS NOTICED THAT THE ASSESSEE IS THE PROP. OF TWO CONCERNS NAMELY M/S. T RANSFORMERS, SITUATED IN JAIPUR IN WHICH MANUFACTURING AND DISTRIBUTION OF T RANSFORMERS IS CARRIED OUT AND M/S. INDO CHEM INDUSTRIES, SITUATED IN DEMAN, I N WHICH BLENDING OF LUBRICANTS AND TRANSFORMERS OIL IS DONE. THE ASSES SEE HAS SHOWN A NET PROFIT OF RS.26,60,040/- AND HAS CLAIMED DEDUCTION U/S 80IB OF THE ACT, BEING THE 100% AMOUNT OF NET PROFIT. BUT THE AO HAS NOT ALLOWED THIS CLAIM OF DEDUCTION BECAUSE OF THE FOLLOWING REASONS. (I) THE ASSESSEE HAD NOT FILED THE RETURN OF INCO ME FOR THIS YEAR (A.Y. 2006-07) BY THE DUE DATE PRESCRIBED U/S 139(1) OF THE I.T. ACT I.E. 31-10-2006 (APPLICABLE IN THE APPLICANTS CASE), WHICH WAS A PRE-CONDITION TO CLA IM BENEFIT U/S 80IB OF THE I.T. ACT (THE RETURN OF INC OME HAS BEEN FILED ON 2-01-2007). (II) THE ASSESSEE HAS NOT FILED THE NECESSARY AUDIT REPORT IN FORM NO. 10CCB FOR CLAIMING BENEFIT U/S 8 0IB WITH THE RETURN OF INCOME FILED ON 2-01-2007 OR WIT H THE TAX AUDIT REPORT FILED ON 31-10-2006, AND THE SAME HAD BEEN FILED ON 12-12-2008 ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (III) THE ASSESSEE HAD NOT EMPLOYED THE MINIMUM NUMBER OF WORKERS, IN THE MANUFACTURING PROCESS CAR RIED ON BY IT, AS PRESCRIBED U/S 80IB OF THE I.T. ACT. ACCORDINGLY, THE AO ISSUED A SHOW CAUSE NOTICE TO T HE ASSESSEE ON 5-12- 2008 PROPOSING TO DISALLOW THE CLAIMED DEDUCTION U/ S 80IB OF THE ACT. THE ASSESSEE RESPONDED THROUGH LETTER DATED 12-12-2008 BUT THE AO WAS NOT 3 CONVINCED THAT DUE TO FINANCIAL PROBLEMS SHE COULD NOT DEPOSIT TAX ON TIME AND ALSO COULD NOT FILE THE RETURN OF INCOME U/S 13 9(1) OF THE ACT WHICH FELL ON 31-10-2006. THE AO ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT SHE HAD FILED HER RETURN ON OR BEFORE THE FINANCIAL YEA R AND BEFORE FINALIZATION OF THE ASSESSMENT. IN THIS YEAR, THE ASSESSEE HAS PLAC ED RELIANCE ON VARIOUS DECISIONS. THE AO HAS MENTIONED THAT W.E.F. ASSESSM ENT YEAR 2006-07, IT IS MANDATORY TO FILE THE RETURN OF INCOME BY DUE DATE AS PRESCRIBED U/S 139(1) OF THE ACT FOR CLAIMING BENEFIT OF SECTION 80IB OF THE ACT. THE DUE DATE WAS 31-10-2006. ACCORDINGLY, THE AO FOUND THAT THIS CON DITION FOR ALLOWANCE OF 80IB DEDUCTION WAS LACKING. REGARDING NECESSARY AUD IT REPORT IN FORM NO. 10CCB WHICH IS ALSO REQUISITE FOR CLAIMING BENEFIT U/S 80IB OF THE ACT WAS NOT FILED WITH THE RETURN OF INCOME AND THAT WAS AL SO THE REASON FOR DENIAL OF DEDUCTION. HE ALSO FOUND ANOTHER CONDITION OF EMPLO YING 10 EMPLOYEES IN CASE OF POWER DRIVER UNIT AS ONLY 08 EMPLOYEES WERE FOUND EMPLOYED, ACCORDINGLY, HE DISALLOWED ENTIRE CLAIM AND ADDED T HIS AMOUNT TO HER TOTAL INCOME. 2.2 AGAINST, THIS, THE ASSESSEE PREFERRED AN APPEAL AND THE LD. CIT(A) HAS ALSO FOLLOWED SUIT AND THE ASSESSEE IS FURTHER AGG RIEVED AND HAS RAISED FOLLOWING GROUND. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 4 26,60,040/- TOWARDS DISALLOWANCE OF DEDUCTION U/S 8 0-IB OF I.T. ACT, 1961. 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED ENTIRE RECORD. WE HAVE GONE THROUGH THE RELEVANT PROVISION S OF SECTION 80IB OF THE ACT AS WELL AS PRECEDENTS THEREON. UNDER SECTION 80 IB, AN ELIGIBLE ASSESSEE IS ENTITLED TO DEDUCTION IN RESPECT OF PROFITS AND GAIN FROM INDUSTRIAL UNDERTAKING OTHER THAN INFRASTRUCTURE DEVELOPMENT U NDERTAKING. UNDER THIS SECTION, ELIGIBLE BUSINESS IS ALLOWED DEDUCTION SUB JECT TO FULFILLING SPECIFIC CONDITIONS LAID DOWN IN SUB-SECTION 2 OF SECTION 80 IB WHICH READS AS UNDER:- (2) THIS SECTION APPLIES TO ANY INDUSTRIAL UNDERT AKING WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONS TRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN INDUSTRIAL UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-E STABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION ; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE ; (III) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR TH ING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHE DULE, OR OPERATES ONE OR MORE COLD STORAGE PLANT OR PLANTS, IN ANY PART OF I NDIA: PROVIDED THAT THE CONDITION IN THIS CLAUSE SHALL, I N RELATION TO A SMALL SCALE INDUSTRIAL UNDERTAKING OR AN INDUSTRIAL UNDERTAKING REFERRED TO IN SUB- SECTION (4) SHALL APPLY AS IF THE WORDS NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDULE HAD BEEN OMITTED. EXPLANATION 1.--FOR THE PURPOSES OF CLAUSE (II), AN Y MACHINERY OR PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OTHER TH AN THE ASSESSEE SHALL 5 NOT BE REGARDED AS MACHINERY OR PLANT PREVIOUSLY US ED FOR ANY PURPOSE, IF THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY : (A) SUCH MACHINERY OR PLANT WAS NOT, AT ANY TIME PR EVIOUS TO THE DATE OF THE INSTALLATION BY THE ASSESSEE, USED IN INDIA ; (B) SUCH MACHINERY OR PLANT IS IMPORTED INTO INDIA FROM ANY COUNTRY OUTSIDE INDIA ; AND (C) NO DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESP ECT OF SUCH MACHINERY OR PLANT HAS BEEN ALLOWED OR IS ALLOWABLE UNDER THE PROVISIONS OF THIS ACT IN COMPUTING THE TOTAL INCOME OF ANY PERSON FOR ANY PERIOD PRIOR TO THE DATE OF THE INSTALLATION OF THE MACHINERY OR PLANT BY THE ASSESSEE. EXPLANATION 2.--WHERE IN THE CASE OF AN INDUSTRIAL UNDERTAKING, ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TOTAL VALUE O F THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER C ENT. OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-SECTION, THE CONDITION SPEC IFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH ; (IV) IN A CASE WHERE THE INDUSTRIAL UNDERTAKING MAN UFACTURES OR PRODUCES ARTICLES OR THINGS, THE UNDERTAKING EMPLOYS TEN OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF PO WER, OR EMPLOYS TWENTY OR MORE WORKERS IN A MANUFACTURING PROCESS C ARRIED ON WITHOUT THE AID OF POWER. ACCORDING TO THE ASSESSEE, SHE IS ENTITLED TO THIS DEDUCTION AS SHE CARRIES ON ELIGIBLE BUSINESS AS REFERRED TO SUB-SECTION 1 OF S ECTION 80IB OF THE ACT. THERE IS NO DISPUTE REGARDING THIS FACT BETWEEN THE PARTIES. IN THIS CASE, THE CONDITION NO. (I), (II) AND (III) ARE NOT, ADMITTED LY, ATTRACTED. IN SO FAR AS, THE QUESTION OF CLAIMING THIS DEDUCTION BY FILING THE R ETURN OF INCOME WITHIN TIME IS CONCERNED, WE HAVE FOUND THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 2-01-2007 WITHIN THE TIME ALLOWED U/S 139(4) OF THE ACT. IN SO FAR AS THIS DEDUCTION IS CONCERNED, THIS RETURN HAS TO BE TREAT ED AS THE RETURN FILED WITHIN THE TIME. IN THIS REGARD, FOLLOWING DECISIONS ARE R ELEVANT. 6 (A) CIT VS. KULLU VALLEY TRANSPORT CO. (P) LTD., 77 IT R 518 (SC) (B) CIT VS. BVR GLUCOSE PRODUCTS LTD., 250 ITR 512 (AP) (C) TELSTER ADVERTISING (P) LTD. VS. CIT, 16 ITR 610 (D) PRESIDENCY MEDICAL CENTRE (P) LTD. VS. CIT, 108 ITR 838(CAL.) (E) CIT VS. NAGINIMARA VENEER & SAW MILLS (P) LTD. 216 ITR 237 (GAU) 2.4 REGARDING FILING OF AUDIT REPORT IN FORM NO. 10 CCB IS CONCERNED, IT WAS OBTAINED, UNDISPUTEDLY, ON 01-08-2006. HOWEVER, UNDENIABLY, IT WAS FILED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS ONLY. WE ARE IN AGREEMENT WITH LD. AR'S SUBMISSIONS THAT FILING OF THIS REPORT IS NOT MANDATORY BUT IS ONLY DIRECTORY. THE PURPOSE OF FIL ING THIS REPORT IS TO SCRUTINIZE THE SAME BY THE AO. WHEN THIS REPORT WAS DULY AVAILABLE BEFORE THE AO DURING ASSESSMENT PROCEEDINGS, NO ADVERSE IN FERENCE CAN BE DRAWN TO DENY THIS ELIGIBLE DEDUCTION TO THE ASSESSEE. IN THIS REGARD, FOLLOWING DECISIONS RELIED UPON BY THE LD. AR ARE RELEVANT. (A) CIT VS. TREHAN ENTERPRISES, 108 TAXMAN 189 (J&K) (B) CIT VS. PANAMA CHEMICALS WORKS, 245 ITR 684 (M.P.) (C) AMBER SALES MANUFACTURING CORPORATION VS. ITO 19 TT J 177 (CHD.) (D) MAHALAXMI RICE FACTORY VS. ITO 5 ITD 238 (CHD.) (E) GUJARAT OIL AND ALLIED INDUSTRIES VS. ITO, 2 ITD 45 4 (AHD.) 2.5 REGARDING THIRD CONDITION WHICH IS CONTAINED IN SUB-CLAUSE (1)(B) OF SECTION 80IB (2) OF THE ACT. REGARDING NUMBER OF E MPLOYEES TO BE EMPLOYED DURING THE YEAR ARE CONCERNED, WE ARE AGAI N IN AGREEMENT WITH THE ASSESSEE THAT THIS CONDITION IS ALSO FULFILLED. THE ASSESSEE HAS BEEN CARRYING ON MANUFACTURING PROCESS THROUGH BLENDING MACHINE A ND FILTER PRESS 7 MACHINE WHICH ARE OPERATED BY POWER INPUT. THEREFOR E, AS PER SUB-CLAUSE (1)(B) IS REQUIRED TO EMPLOY 10 OR MORE WORKERS IN THE MANUFACTURING PROCESS CARRIED BY IT . IT IS FOUND THAT DURING THE YEAR THAT ASSESSEE HAD EMPLOYED 10 OR MORE WORKERS DIRECTLY OR INDIRECTLY IN THE MANUFACTURING PROCESS BARRING THE MONTHS OF JUNE AND AUG. 2005 AN D FEB. 2006. ON THE WHOLE, THIS CONDITION IS ALSO TREATED AS FULFILLED. ON THIS SMALL FAULT OR PEDANTIC REASON, THE ELIGIBLE DEDUCTION CANNOT BE DENIED TO THE ASSESSEE. ACCORDINGLY, WE ALLOW THIS SOLE GROUND OF APPEAL OF THE ASSESSEE AND ORDER TO DELETE THE ENTIRE ADDITION. HENCE, THE SOLE GROU ND OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-01-2014 . SD/- SD/- (.N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMEBR JAIPUR DATED: 22 ND JAN 2014 *MISHRA COPY FORWARDED TO:- BY ORDER 1. SHRI VIMAL GUPTA, JAIPUR 2. THE ITO , WARD- 5 (2), JAIPUR 3. THE LD. CIT(A) 4. THE LD. CIT 5. THE DR 6. THE GUARD FILE (IT NO.732/JP/10) A.R., ITAT, J AIPUR 8 9 10