M/s Vishwa Electricals P. Ltd, Chandigarh V. ITO, Chandigarh

ITA 821/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63888 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 19-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 821/CHD/2011 ASSESSMENT YEAR: 2007-08 M/S VISHWA ELECTRICALS P.LTD., V ITO, WARD 1(2), 35, INDUSTRIAL AREA, PH-II, CHANDIGARH. CHANDIGARH. PAN: AAACV-4714H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. JINDAL RESPONDENT : SHRI N.K.SAINI DATE OF HEARING : 23.07.2012 DATE OF PRONOUNCEMENT : 29.08.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 17.06.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN NOT CONSIDERING THE ARGUMENTS THAT RULE 18BBB (4) REQUIRES ONLY PERMISS ION TO CARRY ON THE ELIGIBLE BUSINESS AND THE PROVISIONAL REGISTR ATION WHICH IS FOR A PERIOD OF FIVE EARS IS A VALID PERMISSION TO CARRY ON THE BUSINESS AND HENCE THE APPELLANT HAS FULFILLED ALL THE REQUIREME NTS OF SECTION 80IC OF THE ACT MAKING THE UNIT ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION. 2. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN HOLDING THAT THE COMMERCIAL PRODUCTION MAY HAVE STARTED ON THE BASIS OF PROVISIONAL 2 REGISTRATION BUT THAT BY ITSELF WILL NOT MAKE THE U NIT ELIGIBLE FOR DEDUCTION U/S. 80IC OF THE ACT. 3. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN ALL OWING THE DEDUCTION U/S. 80-IC OF THE ACT W. E. F. 7.3.2007 I.E. DATE OF COMMERCIAL PRODUCTION TAKEN BY DEPUTY DIRECTOR OF INDUSTRIES W HILE GRANTING PERMANENT REGISTRATION TO THE UNIT IGNORING THE FACT THAT THE COMMERCIAL PRODUCTION ACTUALLY STARTED ON 2 5.5.2006. 4. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITI ON, DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. 3. THE APPELLANT CONTENDS THAT COMMERCIAL PRODUCTIO N STARTED ON 25.5.2006, WHEREAS CIT(A) CONCLUDED THAT COMMERCIAL PRODUCTION COMMENCED W.E.F. 07.03.2007. ACCORDINGLY, THE DEDUCTION U/S 80IC WAS ALLOWED. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' REFERRED TO VARIOUS DOCUMENTS AND CERTIFICATES, AS CONTAINED IN THE PAPER BOOK TO PROVE THAT THE ACTUAL DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION WAS 25.5.2006 AND NOT THE DATE, AS ADOPTED BY THE CIT(A), I.E.7.3.200 7. LD. 'AR' ALSO REFERRED TO RULE 18BBB(4) OF THE INCOME TAX RU LES, 1962, AND CONTENDED THAT RECORDS OF THE APPELLANT SHOWS T HAT PRODUCTION COMMENCED FROM 25.5.2006. LD. 'AR' STATE D THAT MACHINERY WAS PURCHASED AFTER THE SO CALLED DATE OF COMMENCEMENT AS PLEADED BY LD. 'AR' FOR THE ASSESSE E. 5. LD. 'DR', ON THE OTHER HAND, REFERRED TO RELEVAN T PAGES OF THE PAPER BOOK AND CONTENDED THAT COMMERCIAL PRODUC TION STARTED AS PER THE CERTIFICATE ISSUED BY THE DY. DI RECTOR (INDUSTRIES) ON 25.6.2009, WHEREIN THE DATE OF COMM ENCEMENT 3 OF COMMERCIAL PRODUCTION OF THE UNIT IS CLEARLY STA TED AS 07.03.2007. THE ASSESSEE WAS SPECIFICALLY ASKED BY THE BENCH, AS TO WHETHER THE DATE OF COMMENCEMENT, AS P LEADED BY HIM, WAS INTIMATED TO ANY OF THE GOVERNMENT AGEN CIES, HE REPLIED IN NEGATIVE. 6. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORD, INCLUDING PAPER B OOK FILED BY THE ASSESSEE. THE BRIEF FACTS OF THE CASE, AS C ULLED OUT FROM THE RELEVANT RECORDS ARE THAT THE ASSESSEE COM PANY CLAIMED DEDUCTION U/S 80IC OF THE ACT. THE ASSESSE E WAS REQUIRED TO FILE A COPY OF THE AGREEMENT, APPROVED OR PERMISSION FROM INDUSTRIES DEPARTMENT OF THE CONCER NED STATE TO CARRY ON ELIGIBLE BUSINESS, UNDER PROVISIONS OF RULE 18BBB OF THE INCOME TAX RULES, 1962, FOR THE PURPOSE OF A VAILING DEDUCTION U/S 80IC OF THE ACT. THE APPELLANT FILED A COPY OF LETTER NO. IND-BD/SWCA/EM-II/VISHWA ELECTRICALS (P) LTD.- 1132 DATED 25.06.2009, ISSUED BY THE DIRECTOR OF IN DUSTRIES, DISTT. SOLAN, WHEREIN THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION HAS BEEN SPECIFIED AS 07.03.2 007. THE ASSESSEE WAS ASKED TO CLARIFY THE SITUATION REG ARDING ACTUAL DATE OF COMMENCEMENT PRODUCTION BY THE UNIT, IN THE LIGHT OF SUCH CERTIFICATE, ISSUED BY THE COMPETENT AUTHORITY. THE APPELLANT SUBMITTED THAT UNIT CAME INTO COMMERC IAL PRODUCTION ON 25.05.2006 AND THE APPLICATION FOR PR OVISIONAL REGISTRATION WAS APPLIED FOR AND OBTAINED ON 07.03. 2007. THE AO, WAS NOT SATISFIED WITH THE EXPLANATION FILED BY THE ASSESSEE AND HELD THAT AS PER RULE 18BBB(4), THE FO RM OF AUDIT REPORT FOR CLAIMING DEDUCTION U/S 80IC, IS TO BE 4 ACCOMPANIED BY A COPY OF THE AGREEMENT/APPROVAL/PERMISSION, SIGNED OR ISSUED BY THE CENTRAL GOVERNMENT OR STATE GOVERNMENT FOR CARRYING ON ELIGIBLE BUSINESS AND THIS DOCUMENT WAS NOT ATTACHE D WITH THE AUDIT REPORT. CONSEQUENTLY, AO DISALLOWED THE ENTIRE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IC OF THE A CT. BEFORE THE CIT(A), IT WAS SUBMITTED THAT PRODUCTION COMMENCED ON 25.5.2006 AND THE DATE OF COMMENCEMENT HAS BEEN MENTIONED AS 07.03.2007 BY THE DY. DIRECTOR OF INDUSTRIES, AS THE POWER WAS RELEASED IN THE NAME O F THE APPELLANT ON THIS DATE. IN THE OPINION OF THE LD. 'AR', REQUIREMENT OF RULE 18BBB IS THAT PERMISSION FROM T HE STATE GOVERNMENT TO CARRY ON THE ACTIVITIES SHOULD BE OBT AINED AND NO FORMAT HAS BEEN PROVIDED FOR SUCH PERMISSION. T HERE WAS ONLY SINGLE REQUIREMENT OF OBTAINING APPROVAL FROM THE STATE GOVT. WHICH WAS GIVEN ON 16.2.2006. IT HAS BEEN SU BMITTED THAT WHEN THE DATE OF PERMANENT REGISTRATION I.E. 0 7.03.2007, FALLS WITHIN THE YEAR UNDER CONSIDERATION, DEDUCTIO N U/S 80IC COULD NOT BE DENIED TO THE ASSESSEE APPELLANT. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF AHMEDABAD TRIBUN AL IN THE CASE OF PRIYA PRINTEK 1 ITR (TRIB) 302 AND OF ITAT HYDERABAD IN THE CASE OF MEENAKSHI INFRASTRUCTURE P.LTD. 52 D TR (HYD.TRIB0 396. LD. CIT(A), ON APPRECIATION OF THE SUBMISSIONS FILED BY THE ASSESSEE AND THE CASE LAWS CITED BEFORE HIM, RECORDED HIS FINDINGS AS UNDER : 2.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. CO UNSEL FOR THE APPELLANT AND HAVE GONE THROUGH THE DOCUMENTS FILED WITH THE SUBMISSION. FOR THE SAKE OF READY REFERENCE, THE PR OVISIONS OF RULE 18BBB(4) ARE REPRODUCED BELOW: - 5 * IN ANY OTHER CASE, THE FORM SHALL BE ACCOMPANIED BY A COPY OF THE AGREEMENT, APPROVAL OR PERMISSION, AS THE CASE MAY BE, TO CARRY ON THE ACTIVITY SIGNED OR ISSUED BY THE CENTRAL GOVERNMENT OR THE STATE GOVERNMENT OR THE LOCAL AUTHORITY FOR CARRYING ON T HE ELIGIBLE BUSINESS.' 2.3.1 IN THE CASE OF THE APPELLANT, THE COPY OF PER MISSION TO CARRY ON THE BUSINESS ACTIVITIES WAS NOT ATTACHED WITH THE AUDIT REPORT AND SO THE AUDIT REPORT FOR CLAIMING DEDUCTION U/S 80IC WAS IN COMPLETE. THE PERMISSION IN THE CASE OF THE APPELLANT HAS BEEN GR ANTED VIDE LETTER DATED 25.06.2009 (SUPRA), WHICH READS AS UNDER:- 'ON THE SUBJECT MENTIONED ABOVE, IT IS INTIMATED TH AT ENTERPRENEUR'S MEMORANDUM PART-II BEARING NO. 02/009/1/2/70380 DAT ED 30.05.2009 HAS BEEN ALLOCATED TO YOUR UNIT UNDER THE MICRO/SMA LL/MEDIUM SCALE ENTERPRISE FOR THE MANUFACTURING/PROCESSING ASSEMBL ING/SERVICING OF FOLLOWING ITEMS:- 1. POLYER/COMPOUNDS 2. POWER CABLE JOINTS KITS & ACCESSORIES 3. HEAT SHRINKABLE COMPONENTS. DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION OF TH E UNIT I.E. 07.03.2007 HAS BEEN TAKEN ON RECORD. ORIGINAL COPY OF ENTREPRENEUR S MEMORANDUM-H IS ENCLOSED HEREWITH. THIS CERTIFICATE IS BEING ISSUED SUBJECT TO THE CON DITIONS THAT THE UNIT WILL ENSURE 70% EMPLOYMENT TO BONAFIDE HIMACHALIS OR AS FIXED BY THE GOVT. FROM TIME TO TIME, FAILURE OF WHICH AT ANY TIME SUBSEQUE NTLY WOULD RESULT INTO DEREGISTRATION OF THE UNIT, DISCONNECTION OF POWER AND RECOVERY OF ALL FISCAL INCENTIVES IF ANY AVAILED BY THE UNIT AGAINST THIS CERTIFICATE.' 2.3.2 IN THE ABOVE LETTER, THE DATE OF COMMENCEMENT OF PRODUCTION HAS BEEN MENTIONED AS 07.03.2007. THE APPELLANT HAS TRIED TO EXPLAIN AS TO WHY THIS DATE HAS BEEN TAKEN AS 07.03.2007, BUT THAT IS OF N O HELP TO THE APPELLANT. IN FACT, IN THE COPY OF ENTREPRENEUR MEMORANDUM PART- II, THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION/ACTIVITY H AS BEEN MENTIONED AS 07.03.2007 AFTER STRIKING THE DATE OF 25.05.2006 BY A LINE. THUS, IT CANNOT BE CALLED AN INADVERTENT MIST AKE ALSO. IN FACT, AFTER ASSESSMENT OF THIS ASSESSMENT YEAR HAD BEEN COMPLETED, THE APPELLANT HAD PROBABLY CONTACTED THE AUTHORITIES FOR CHANGE OF DATE OF PRODUCTION AND WAS ABLE TO PE RSUADE DY. DIRECTOR OF INDUSTRIES, BADDI TO WRITE A LETTER TO THE COMMISSIONER, INDUSTRIES IN THIS REGARD. THIS LE TTER WAS WRITTEN BY DY. DIRECTOR OF INDUSTRIES ON 02.02.2010 BUT IT APPEARS THAT THE AUTHORITIES HAVE NOT AGREED TO CHA NGE THE DATE OF PRODUCTION. THE PROVISIONS OF SECTION 80IC OF INCOME TAX ACT, 1961 ARE QUIT EXPLICIT IN ITS LANGUAGE AND A CURSOR Y LOOK AT THIS SECTION REVEALS THAT THE DATES HAVE A VERY IMPORTAN T ROLE TO PLAY FOR ELIGIBILITY OF DEDUCTION UNDER THIS SECTION. PR ODUCTION MAY HAVE STARTED ON THE BASIS OF PROVISIONAL REGISTRATION BU T THAT BY ITSELF WILL NOT MAKE THE UNIT ELIGIBLE FOR DEDUCTION U/S 8 0IC OF INCOME TAX ACT, 1961. WITH DUE RESPECT, I AM NOT IN AGRE EMENT WITH THE 6 FINDINGS OF THE JUDGMENTS QUOTED BY THE LD. COUNSEL FOR THE APPELLANT OF HONBLE ITAT, AHEMDABAD IN THE CASE OF PRIYA PRINTEK [1ITR (TRIB.) 302] AND HONLDLE ITAT, HYDERABAD IN THE CASE OF MEENAKSHI INFRASTRUCTURES (P) LTD. [52 DTR (HYD. TR I) 396]. HENCE, IT IS HELD THAT THE UNIT IS ELIGIBLE FOR DEDUCTION U/S 80IC, ONLY WITH EFFECT FROM THE DATE CERTIFIED BY THE DY. DIRECTOR, INDUSTRIES FOR COMMENCEMENT OF COMMERCIAL PRODUCTION AND SO THE DE DUCTION U/S 80IC IS TO BE ALLOWED TO THE APPELLANT WITH EFFECT FROM 07.03.2007, WHICH IS THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION AS PER AFORESTATED LETTER OF DY. DIRECTO R, INDUSTRIES 2.4 THE NEXT QUESTION IS AS TO HOW THE DEDUCTIO N U/S 80IC OF INCOME TAX ACT, 1961 IS TO BE CALCULATE D FOR THE PERIOD 07.03.2007 TO 31.03.2007. THE MOST LOGICAL WAY IS TO COMPUTE PROPORTIONATE PROFIT OF THE UNIT IN THE RATIO OF TU RNOVER FOR THE PERIOD 07.03.2007 TO 31.03.2007 DIVIDED BY TOTAL TU RNOVER AND THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY TO RECOMP UTED THE DEDUCTION U/S 80IC OF INCOME-TAX ACT,1961 AND ALLOW THE SAME TO THE APPELLANT. GROUND OF APPEAL NO. 1 IS PARTLY ALLOWE D. 7. IT IS UNDISPUTED FACT THAT DY.DIRECTOR (INDUSTRI ES) VIDE LETTER DATED 26.05.2009 HAS CLEARLY SPECIFIED THE D ATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION OF THE UNIT A S 7.3.2007. THE ASSESSEE APPELLANT HAS FAILED TO DIS LODGE SUCH CLEAR EVIDENCE OF COMMENCEMENT OF COMMERCIAL PRODUC TION OF THE UNIT. IT IS FURTHER MENTIONED THAT PAGE 43 OF THE PAPER BOOK CLEARLY MENTIONS THAT ELECTRICITY CONNECTION W AS EFFECTED ON 7.3.2007 IN THE NAME OF THE ASSESSEE APPELLANT. AT PAGE 42, IT HAS BEEN CATEGORICALLY MENTIONED BY THE DY.D IRECTOR (INDUSTRIES) AT PAGE 42 OF THE PAPER BOOK, A LETTER ADDRESSED BY THE DY. DIRECTOR OF INDUSTRIES, TO THE COMMISSIO NER OF INDUSTRIES, SHIMLA, WHEREIN IT HAS BEEN CLEARLY MEN TIONED THAT UNIT WAS SANCTIONED AND RELEASED 98 KW POWER L OAD VIDE SERVICE ORDER NO. 200-07/2007 W.E.F. 7.3.2007. AFT ER PHYSICAL VERIFICATION AND INSPECTION OF THE PLANT & MACHINERY, MENTIONING PROCESS AND DOCUMENTS, SUBMITTED BY THE UNIT, DOP I.E. 7.3.2007 WAS GRANTED. FURTHER, THE ASSESS EE HAS PURCHASED MACHINERY AFTER THE DATE OF COMMENCEMENT OF 7 COMMERCIAL PRODUCTION AS ADMITTED BY THE ASSESSEE A ND IS EVIDENT FROM THE CHART SHOWING DETAILS OF MACHINERY PURCHASED IN PARA 8 OF THE ORDER. IN VIEW OF THE C LEAR DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION, AS RECORDED BY THE INDUSTRIES DEPARTMENT, COUPLED WITH FAILURE OF THE APPELLANT, TO ADDUCE COGENT AND CREDIBLE EVIDENCES, FOR THE PU RPOSE OF ESTABLISHING THAT COMMERCIAL PRODUCTION STARTED ON 25.5.2006, THE FINDINGS OF THE CIT(A), IN THE MATTE R CANNOT BE ASSAILED. LD. CIT(A) HAS PASSED DETAILED AND SPEAKI NG ORDER, AFTER APPRECIATION OF THE LEGAL AND FACTUAL MATRIX OF THE CASE AND THE RELEVANT PROVISIONS OF THE ACT, INCLUDING R ULE 18BBB OF THE ACT. THE CASE LAWS RELIED UPON BY THE ASSESS EE ARE NOT APPLICABLE TO THE FACT-SITUATION OF THE CASE, AS RI GHTLY DISTINGUISHED BY THE CIT(A). 8. DETAILS OF MACHINERY, PURCHASED BY THE ASSESSEE, AFTER THE COMMENCEMENT OF COMMERCIAL OPERATION ON 26.6.20 07, ARE AS UNDER : SR. NO. BILL NO. DATE NAME OF SUPPLIER NAME OF ITEMS VALUE 1 03 29.03.06 M/S POLYCOATING, DERA BASSI INJECTION MOLDING MACHINE 372,169.20 2 084 23.03.06 M/S MECHTECH ENTERPRISES, MUMBAI CAVITY INJECTION MOLDING TRIMMING MACHINE, NEEDLE EXPANSION MACHINE, MANDRILL CORE PULLAR CONTROL PENEL & MOULD HEATER 200,000.00 3 010 25.04.06 COMTECH INDIA, CHANDIGARH VECUME MIXTURE 3 NOS SEALING MACHINE - 2 NOS. OVEN & WEIGHING MACHINE - 1 NO. 80,800.00 4 9558 04.05.06 VIBGYOR INTERNATIONAL PVT. LTD. STAPPING MACHINE 34,918.00' 5 KTS2075 22.07.06 KAITEC CO. LTD, CHINA DISCREAT EXPANDER FOR HS TUBES 1,110,440.00 6 KTS2075 22.07.06 KAITEC CO. LTD, CHINA HOTMELT APPLICATION EXTRUDER 1,306,683.57 8 7 12 13.10.06 PRECISION TOOL GLAXY INJECTIND MOULDING TOOLS 38,000.00 8 196 23.10.06 KAILA ENGEERING PVT LTD. AIR COMPRESSOR 98,767.00 9 294 02.02.07 PARAM INTERNATIONAL PRINTING MACHINE WITH ACCESSORIES 52,000.00 3293777.77 9. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIO NS, WE DO NOT FIND ANY GROUND TO INTERFERE WITH THE FINDINGS OF THE CIT(A) AND HENCE, THE SAME ARE UPHELD. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH AUG.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH AUG.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH