INSOTHERM GLASS SYSTEMS, MUMBAI V. JT CIT 15(1), MUMBAI

ITA 7991/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62257 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 09-04-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: ANANT N PAI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI VIVEK V ARMA, J.M. ITA NO. : 7991/MUM/2011 ASSESSMENT YEAR : 2008-09 INSOTHERM GLASS SYSTEMS B-17, SHREYAS INDUSTRIAL ESTATE; OFF WESTERN EXPRESS HIGHWAY; NEXT TO JAYCOACH, GOREGAON (E) MUMBAI-400 063. PAN NO: AAAFI 2361 N JT. COMMISSIONER OF INCOME TAX -15(1) MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI ANANT N. PAI RESPONDENT BY : SHRI PARTHASARATHI NAIK DATE OF HEARING : 9.4.2012 DATE OF PRONOUNCEMENT : 25.4.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 4.10.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2008-09. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING CLAIM OF DEDU CTION UNDER SECTION 80IB(4). 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO WAS ENGAGE D IN THE BUSINESS OF PROCESSING/MANUFACTURING DOUBLE GLAZED INSULA TING GLASS, HAD CLAIMED DEDUCTION OF RS.24,63,566/- UNDER SECTION 80IB(4) IN ASSESSMENT YEAR 2007-08. THE AO HOWEVER NOTED THAT IN THE FORM ITA NO. 7991/M/11 A.Y.08-09 2 NO.10CCB ATTACHED TO RETURN OF INCOME COMMENCEMENT OF I NDUSTRIAL UNDERTAKING WAS MENTIONED AS 5.11.1995. THE DEDUCTION UNDER SECTION 80IB(4) WHICH WAS AVAILABLE FOR 10 YEARS HAD TH EREFORE, EXPIRED IN 2005-06. THE AO, THEREFORE, ASKED THE ASSESSE E TO EXPLAIN AS TO WHY CLAIM SHOULD NOT BE DISALLOWED. ASSESSEE SUBMITTED THAT THE AUDITORS HAD WRONGLY MENTIONED DATE OF COMMENCEMENT OF UNIT NO.2 IN RESPECT OF WHICH DEDUCTION HAD BEEN CLAIMED, AS THE DA TE OF COMMENCEMENT OF UNIT-I WHICH WAS 5.11.1995 AUDITORS VID E LETTER DATED 22.11.2010 HAD CORRECTED THE MISTAKE AND MENTION ED THAT THE DATE OF COMMENCEMENT IN RESPECT OF UNIT NO.2 WAS 1.9.199 8. THE ASSESSEE HAD FURTHER EXPLAINED THAT THE NEW UNIT WHICH H AD COMMENCED PRODUCTION IN ASSESSMENT YEAR 1999-00 WAS LOCATED AT THE SAME PREMISES AT WHICH THE OLD UNIT WAS LOCATED. IT WAS F URTHER SUBMITTED THAT THE ASSESSEE WAS MANUFACTURING NEW PRODUCT I N UNIT NO.2 FOR WHICH TECHNOLOGY AND MACHINERY USED WERE TOT ALLY DIFFERENT AND THERE WAS DIFFERENCE IN THE RAW MATERIAL USED. THE MANUFACTURING PROCESS WAS ALSO DIFFERENT. THE NEW UNIT WAS THEREFORE, QUITE DIFFERENT FROM THE OLD UNIT AND IT WAS NOT RECONSTRUCTION OF THE OLD UNIT. ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREM E COURT IN THE CASE OF TEXTILE MANUFACTURING CORPORATION (107 IT R 195) AND ON THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE O F CIT V. GAEKWAR FOAM AND RUBBER CO. LTD. (135 ITR 662). 2.1 THE AO HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISE D. IT WAS OBSERVED BY HIM THAT THE BASIC BUSINESS OF THE ASSESSEE WAS T O MANUFACTURE MULTI VALVE INSULATED GLASS WITH AIR GAP. THE ASSESSEE CONTINUED TO DO THE SAME BUSINESS WITH NO SEPARATE IDENTI TY. IT WAS ALSO OBSERVED BY HIM THAT THE UNIT-2 WAS SITUATED AT TH E SAME PREMISES AND WAS USING THE SAME POWER AND ELECTRICAL INFR ASTRUCTURE. THE AO ALSO NOTED THAT THERE WAS NO SEPARATE CENTRAL EX CISE ITA NO. 7991/M/11 A.Y.08-09 3 REGISTRATION GRANTED IN RESPECT OF THE NEW UNIT WHICH WAS FUNCTIONING ON THE BASIS OF OLD REGISTRATION DATED 15.9.1993. THE FACTORY LICENCE ISSUED WAS ALSO OLD DATED 7.2.1996. THERE WAS ALSO NO SA LES TAX EXEMPTION CERTIFICATE. THE OLD EXEMPTION CERTIFICATE DA TED 23.6.1995 HAD EXEMPTED DOUBLE GLAZED INSULATING GLASS WINDOW UNI T AND SWIGLE SCALE SPACES AND ALUMINIUM SPACES FROM SALES TAX. THE AO THER EFORE HELD THAT THE NEW UNIT WAS NOTHING BUT RECONSTRUCTION O F OLD UNIT AND, THEREFORE, NOT ENTITLEMENT FOR DEDUCTION UNDER SECTION 80IB(4). 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED B EFORE CIT(A) THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURIN G OF DOUBLE GLAZED INSULATING GLASS IN THE UNIT -1. IN THE F.Y. 19 98-99, THE ASSESSEE SET UP UNIT NO.2 FOR MANUFACTURE OF NEW RANGE OF INSULATION OF DOUBLE GLAZED INSULATING GLASS USING ALUMINIUM SPACES WHICH WAS NEW PRODUCT WHICH WAS CHEAPER AND HAD LARGE APPLICATIONS IN DIFFERENT INDUSTRIES. THE NEW UNIT WAS SET UP AT THE PREMISES OF THE OLD UNIT AND THEREFORE, UNIT-1 HAD TO BE DISMANTLED AND ONLY LESS THAN 25% OF THE MACHINERY OF OLD UNIT WAS UTILIZED IN THE NEW UNI T. THE AUDITORS HAD WRONGLY MENTIONED DATE OF COMMENCEMENT OF NEW UNI T AS DATE OF PRODUCTION OF OLD UNIT WHICH HAD SUBSEQUENTLY BEEN COR RECTED. THE MACHINERY USED AND THE TECHNOLOGY AND MANUFACTURING PR OCESS EMPLOYED IN THE NEW UNIT WAS TOTALLY DIFFERENT FROM THE OLD UNIT. THERE WAS ALSO DIFFERENCE IN RAW MATERIAL USED AS WELL A S THE PRODUCTION PROCESS. THE ASSESSEE ALSO SUBMITTED THAT NO SEPARA TE PERMISSION WAS REQUIRED FOR EXTRA POWER FROM THE POWER AUTHORITIES, AS SANCTIONED POWER WAS ENOUGH FOR THE NEW UNIT. THERE WAS ALSO NO NEW REGISTRATION REQUIRED UNDER EXCISE AND SALES TAX LAW S AS PRODUCT CODES FOR BOTH UNITS WERE SAME. THE ASSESSEE ARGUED THAT TH E NEW UNIT WAS A DISTINCT UNIT, INDEPENDENT OF THE OLD UNIT WHICH HAD BEEN DISMANTLED. THE IDENTITY OF THE OLD UNIT WAS LOST AND , THEREFORE, IT WAS ITA NO. 7991/M/11 A.Y.08-09 4 NOT A CASE OF RECONSTRUCTION OF THE EXISTING BUSINESS. THE A SSESSEE POINTED OUT THAT THE JUDGMENT OF HON'BLE SUPREME COU RT IN CASE OF TEXTILE MANUFACTURING VS. CIT (SUPRA), AND THE JUDGME NT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. GAEKWAR FOAM AN D RUBBER CO. LTD. (SUPRA), SUPPORTED THE CASE OF THE ASSESSEE THAT I T WAS NOT A CASE OF RECONSTRUCTION. CIT(A) HOWEVER, OBSERVED THAT TH E ASSESSEE HAD BEEN ASKED TO PROVIDE COPIES OF ACCOUNT FOR THE ASSESSME NT YEAR 1999-00 TO SHOW THAT THE OLD UNIT HAD BEEN SHUT DOWN AND NEW UNIT HAD BEEN COMMISSIONED IN ASSESSMENT YEAR 1999-00. BUT THE ASSESSEE COULD NOT SHOW THAT THE OLD UNIT WAS CLOSED DOWN I N ASSESSMENT YEAR 1999-00. CIT(A) ALSO OBSERVED THAT ONLY O N THE BASIS OF DIFFERENCE IN PRODUCT, RAW MATERIAL, MANUFACTURING PROCESS AND MACHINERY USED, IT COULD NOT BE SAID THAT THE ASSESSEE HAD COMMISSIONED A NEW UNIT. ASSESSEE HAD ALSO GIVEN NO INFORMA TION TO THE EXCISE DEPARTMENT REGARDING CLOSING DOWN OF THE OLD UNIT. HE DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT THE NEW PRODUCT COULD BE MANUFACTURED UNDER THE SAME LICENCE. CIT(A) THEREFORE, DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT UNIT NO.2 WAS AN INDEPENDE NT NEW UNIT SET UP AFTER CLOSING DOWN OF THE OLD UNIT. HE HELD THA T NEW UNIT WAS NOTHING BUT EXTENSION /RECONSTRUCTION OF THE EARLIER UN IT. HE, THEREFORE, CONFIRMED THE DISALLOWANCE OF DEDUCTION MADE BY AO AGG RIEVED BY WHICH ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT THE NEW UNIT HAD BEEN SET UP AFTER DISMANTLING THE OLD UNIT OF WHICH LESS THAN 25% O F THE MACHINERY HAD BEEN USED IN THE NEW UNIT. THE PRODUCT MANUFACTUR ED AS WELL AS RAW MATERIAL USED WAS DIFFERENT AND THERE WAS DIFFEREN CE IN MANUFACTURING PROCESS AND TECHNOLOGY USED. IT WAS POINTE D OUT THAT RAW MATERIAL OF OLD UNIT COULD NOT BE USED IN THE NE W UNIT. THOUGH THE ITA NO. 7991/M/11 A.Y.08-09 5 FUNCTION OF THE NEW PRODUCT WAS SAME, ITS QUALITY WAS DI FFERENT AND HAD DIFFERENT APPLICATIONS IN THE INDUSTRY. THE DETAI LS OF THE DIFFERENCE IN THE PRODUCTS, PROCESS AND RAW MATERIAL ETC. HAD BEEN G IVEN BEFORE AO WHICH ARE PLACED AT PAGE 63 TO 66 OF THE PAPER BOO K. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD MADE DETAILED SUBMISSION BEFORE CIT(A) WHO HAD REMANDED THE MATTER TO THE AO AND CO PY OF THE REMAND REPORT WAS AVAILABLE AT PAGE 119 TO 121 OF THE PAPER BOOK . THE AO WAS NOT CORRECT IN STATING IN THE REMAND REPORT THAT THE ASSESSEE HAD FAILED TO PROVE DIFFERENCE IN PRODUCT, THE RAW MATERIAL CONSUMPTION, MACHINERY USED, THE MANUFACTURING PROCESS AND TECHNOLOGY, THOUGH SUCH DETAILS HAD BEEN GIVEN WHICH ARE AVAILABLE AT PAGE 63-66 OF THE PAPER BOOK WHICH HAD NOT BEEN CONSID ERED. IT WAS ALSO POINTED OUT THAT CIT(A) HAD ALSO NOT EXAMINED TH E CASE PROPERLY AND CONFIRMED THE ORDER OF AO ON SUPERFICIAL GROUNDS. THE FINDING OF AUTHORITIES BELOW THAT THE NEW UNIT WAS THE SAME AS THE OLD UNIT WAS OBVIOUSLY WRONG AS OLD UNIT HAD BEEN DISMANTLED AND EX CEPT THE TRANSFER OF WASHING MACHINE OF OLD UNIT THE PLANT AND MACHINERY WAS NEW WITH TOTALLY DIFFERENT MANUFACTURING PROCESS AND T ECHNOLOGY. THE CASE OF THE ASSESSEE WAS COVERED BY SEVERAL JUDICIAL PRONOUN CEMENTS OF HON'BLE SUPREME COURT AND HIGH COURTS CITED BEFORE T HE AUTHORITIES BELOW WHICH HAD BEEN BRUSHED ASIDE WITHOUT ANY PROPER REASON. IT WAS ACCORDINGLY REQUESTED THAT THE ORDER OF CIT(A) SHOUL D BE SET ASIDE AND CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. 4.1 THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND ARGUED THAT THE UNIT NO.2 COULD NOT BE CONSIDERED A TOTALLY NEW AND INDEPENDENT UNIT AS IT WA S FUNCTIONING FROM THE SAME PREMISES WITH THE SAME POWER CONNECTION, SAL ES TAX AND EXCISE REGISTRATION. IT WAS ACCORDINGLY URGED THAT TH E CONCLUSION DRAWN BY THE AUTHORITIES BELOW SHOULD BE UPHELD. ITA NO. 7991/M/11 A.Y.08-09 6 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABI LITY OF DEDUCTION UNDER SECTION 80IB(4) IN RESPECT OF UNIT-2 CLAIMED TO BE COMMISSIONED BY THE ASSESSEE IN ASSESSMENT YEAR 1999-2000. THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING OF DOUBLE GLAZED INSULATIN G GLASS WHICH WAS BEING MANUFACTURED EARLIER IN UNIT-1 WHICH HAD COM MENCED PRODUCTION ON 5.11.1995. THE ASSESSEE SUBMITTED BEFORE AO THAT IT HAS SET UP THE NEW UNIT-2 IN ASSESSMENT YEAR 1999-2000 F OR MANUFACTURE OF NEW RANGE OF DOUBLE GLAZED INSULATING GLASS WHICH WAS AS A NEW PRODUCT FOR WHICH NEW TECHNOLOGY AND NEW MANUF ACTURING PROCESS HAD BEEN EMPLOYED. THE PLANT AND MACHINERY WAS A LSO NEW EXCEPT THE WASHING MACHINE OF THE OLD UNIT WHICH HAD BE EN USED. THUS PLANT AND MACHINERY EMPLOYED IN THE NEW UNIT WAS LESS THAN 20% OF THE OLD UNIT. THE RAW MATERIAL USED WAS ALSO DIFFEREN T. IT WAS ALSO POINTED OUT THAT THE DATE OF COMMENCEMENT OF NEW UNIT WAS WRONGLY MENTIONED BY THE AUDITORS AS 5.11.1995 WHICH HAD BEEN SUBSEQUENTLY CORRECTED BY THEM VIDE LETTER DATED 22.11.2010 CLEARLY MENTIONING THE DATE OF COMMENCEMENT OF NEW UNIT AS 1.9.1998. THE CLAIM OF THE ASSESSEE HAS HOWEVER, NOT BEEN ACCEPTED BY THE AUTHORITIES BELOW WHO HAVE HELD THAT THE NEW UNIT WAS NOTHING BUT RECON STRUCTION OF THE OLD UNIT. THE AO IN THE REMAND REPORT GIVEN TO CIT (A) MENTIONED THAT THE ASSESSEE HAD FAILED TO PROVE THE DIFFERENCE IN PRODU CT, RAW MATERIAL CONSUMPTION, THE MACHINERY USED AS WELL AS THE U SE OF TECHNOLOGY. CIT(A) HAS HELD THAT EVEN IF THERE WAS D IFFERENCE IN PRODUCT, RAW MATERIAL USED, MANUFACTURING PROCESS EMPLOYE D AND THE MACHINERY USED, THE UNIT COULD NOT BE CONSIDERED AS NEW A S THERE WAS NO SEPARATE LICENCE FOR MANUFACTURING THE PRODUCT. FURT HER, THE PLACE OF NEW UNIT WAS THE SAME AS THE OLD UNIT AND IT WAS USI NG THE SAME ITA NO. 7991/M/11 A.Y.08-09 7 POWER SANCTIONED IN RESPECT OF OLD UNIT. CIT(A) ALSO OB SERVED THAT THE ASSESSEE COULD NOT PRODUCE THE COPY OF ACCOUNTS FOR THE ASSESSMEN T YEAR 1999-2000 TO SHOW THAT THE OLD UNIT HAD BEEN CLO SED DOWN AND INDEPENDENT NEW UNIT HAD BEEN SET UP. HE HAS HELD THA T THE NEW UNIT WAS NOTHING BUT EXTENSION/RECONSTRUCTION OF OLD UNIT. 5.1 WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPECTS OF TH E MATTER. WHETHER THE ASSESSEE HAD SET UP A NEW AND INDEPENDENT U NIT CAN NOT BE DECIDED ON THE BASIS OF THE FACT THAT NO SEPARATE LICE NCE HAD BEEN ISSUED OR NO SEPARATE POWER CONNECTION HAD BEEN TAKEN OR SALES TAX REGISTRATION WAS THE SAME. THESE MAY BE RELEVANT FACTORS IN CONSIDERING WHETHER IT WAS A CASE OF NEW UNIT-1 BUT ARE NOT CONCLUSIVE. THERE IS NO FINDING THAT SEPARATE EXCISE LICENSE OR SALES TAX EXEMPTION WAS REQUIRED. EVEN IF THESE WERE REQUIRED, MERELY BE CAUSE THERE WAS VIOLATION OF PROVISIONS OF OTHER ACT COULD NOT BE GROUN D TO HOLD THAT THE UNIT WAS NOT NEW. WHETHER THE UNIT WAS NEW AND INDEPE NDENT UNIT AND NOT EXTENSION/RECONSTRUCTION OF THE EXISTING UNIT, HAS TO BE EXAMINED INDEPENDENTLY AFTER OBTAINING ALL NECESSARY MATERIAL. IN THIS CASE, ASSESSEE HAS CLAIMED THAT OLD UNIT HAD BEEN CLOSED DOWN AND LESS THAN 20% OF THE MACHINERY OF OLD UNIT HAS BEEN UTILIZED I N THE NEW UNIT. THERE IS NO CLEAR FINDING ON THIS ASPECT BY THE AUTHORI TIES BELOW. CIT(A) HAS OBSERVED THAT THE ASSESSEE COULD NOT GIVE DETAI LS FOR ASSESSMENT YEAR 1999-2000 TO ESTABLISH THE FACTUM OF CLO SURE. IN OUR VIEW THIS IS A VERY IMPORTANT ASPECT WHICH IS REQUIRED TO BE EXAMINED AFTER OBTAINING DETAILS FROM THE ASSESSEE. THERE IS NO MA TERIAL TO SHOW THAT THE ASSESSEE HAD REFUSED TO FIVE DETAILS. WE, ALSO NOTE THAT AO IN THE REMAND REPORT MENTIONED THAT THE ASSESSEE COULD NOT PROVE THE DIFFERENCE IN THE NEW PRODUCT, IN THE RAW MATERIAL CON SUMED AND IN THE MACHINERY AND TECHNOLOGY USED IN THE MANUFACTURING PROCE SS. THE ASSESSEE HAD GIVEN VARIOUS DETAILS POINTING OUT THE DIFFE RENCES IN THE ITA NO. 7991/M/11 A.Y.08-09 8 TWO UNITS WHICH HAVE BEEN PLACED AT PAGE 63 TO 66 OF T HE PAPER BOOK WHICH HAVE NOT BEEN EXAMINED. CIT(A) HAS ALSO NOT GIVE N A CLEAR FINDING ON THIS ASPECT. HE HAS ONLY MENTIONED THAT EVE N IF THE CLAIM WAS CORRECT THE UNIT COULD NOT BE CONSIDERED A NEW ONE BA SED ON THESE FACTORS. THESE IN OUR VIEW ARE IMPORTANT FACTORS WHICH A LONG WITH FACTUM OF CLOSURE OF THE OLD UNIT WOULD BE USEFUL IN D ECIDING THE ISSUE. IN OUR VIEW THE ISSUE HAS NOT BEEN EXAMINED PROPERLY. A CLEAR FINDING IS REQUIRED TO BE GIVEN AFTER OBTAINING NECESSARY DETAI LS AS TO WHETHER OLD UNIT HAD BEEN CLOSED DOWN AND WHETHER ONLY 20% OF THE MACHINERY OF THE OLD UNIT HAD BEEN USED IN THE NEW U NIT. THEREAFTER AFTER CONSIDERING THE VARIOUS DIFFERENCES POINTED OUT BY THE ASSESSEE IN RELATION TO PRODUCT, RAW MATERIAL, MANUFACTURING PROCE SSS AND TECHNOLOGY USED, A FINDING HAS TO BE GIVEN WHETHER IT WAS A CASE OF NEW AND INDEPENDENT UNIT OR RECONSTRUCTION OF THE EXIS TING UNIT IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS CITED BY THE ASSESSEE . WE, THEREFORE SET ASIDE THE ORDER OF CIT(A) AND RESTORE TH E MATTER BACK TO HIM FOR PASSING A FRESH ORDER AFTER RECORDING NECESSARY F INDINGS MENTIONED ABOVE AND AFTER ALLOWING OPPORTUNITY OF H EARING TO THE ASSESSEE. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.4.2012. SD/- SD/- ( VIVEK VARMA) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 25.4.2012. JV. ITA NO. 7991/M/11 A.Y.08-09 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.