M/s SBS Biotech, Sirmour V. DCIT, Shimla

ITA 878/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6579 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 29-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: TEJ MOHAN
• Section: 43B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHB, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.878 & 879/CHD/2017 (ASSESSMENT YEAR : 2013-14 & 2014-15) M/S SBS BIOTECH VS. DCIT, UNIT-1, NAHAN ROAD CIRCLE, SHIMLA KALA AMB, SIRMOUR PAN/TAN: ABOSFS6830P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TEJ MOHAN DEPARTMENT BY : SHRI. RAVI SARANGAL SHRI. MANJIT SINGH DATE OF HEARING : 28.09.2017 DATE OF PRONOUNCEMENT : 23/11/2017 O R D E R PER BENCH : BOTH THE APPEALS HAVE BEEN FILED BY THE ASSESSEE A GAINST THE SEPARATE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), SHIM LA, DATED 30/03/2017 & 31/03/2017 RESPECTIVELY. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 878/CHD/2017 FOR THE AY 2013-14: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE REDUCTION OF DEDU CTION UNDER SECTION 80IC OF THE ACT TO 25% AS AGAINST 100% CLAIMED AS THE ASSESSEE HAS ADMITTEDLY CARRIED OUT SUBSTANTIAL EXPANSION WHICH MAKES THE UNIT ELIGIBLE FOR DEDUCTION @ 100% AND AS SUCH NO ALLOWANCE OF DEDUCTION AT 100% IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FAILED TO CONSTRUE THE BENEVOLENT PROVISIONS AS ENACTED IN CHAPTER VI OF THE ACT IN A HARMONIOUS AND LIBERAL MANNER ESPECIALLY WHEN THERE ARE DECISI ONS OF VARIOUS COURTS IN FAVOUR OF THE ASSESSEE AND AS SUCH THE ASSESSMENT ORDER IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FURTHER ERRED IN UPHOLDING AN ADDITION OF RS.23,814/- APPLYING THE P ROVISIONS OF SECTION 43B OF THE ACT WHICH IS NOT ATTRACTED AND AS SUCH THE ADDITION ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ER RED IN UPHOLDING THE ADDITION OF RS.90,000/- APPLYING THE PROVISIONS OF SECTION 40(A)(IA) FOR ALLEGED NON DEDUCTION OF TDS ON ACCOUNT OF LEGA L AND PROFESSIONAL CHARGES PAID WHEN IN FACT IT WAS JUST A REIMBURSEMENT OF EX PENSES AND AS SUCH THE ADDITION MADE IS ILLEGAL, ARBITRARY AND UNJUSTIFIED . 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 879/CHD/2017 FOR THE AY 2014-15: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE REDUCTION OF DEDU CTION UNDER SECTION 80IC OF THE ACT TO 25% AS AGAINST 100% CLAIMED AS THE ASSES SEE HAS ADMITTEDLY CARRIED OUT SUBSTANTIAL EXPANSION WHICH MAKES THE UNIT ELIG IBLE FOR DEDUCTION @ 100% AND AS SUCH NO ALLOWANCE OF DEDUCTION AT 100% IS ILLEGA L, ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FAILED TO CONSTRUE THE BENEVOLENT PROVISIONS AS ENACTED IN CHAPTER VI OF THE ACT IN A HARMONIOUS AND LIBERAL MANNER ESPECIALLY WHEN THERE ARE DECISI ONS OF VARIOUS COURTS IN FAVOUR OF THE ASSESSEE AND AS SUCH THE ASSESSMENT ORDER IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FURTHER ERRED IN UPHOLDING AN ADDITION OF RS.6,88,315/- TREATING THE RATE DIFFERENCE TO BE NOT DERIVED FROM MANUFACTURING ACTIVITIES AND AS SUCH T HE ADDITION ILLEGAL, ARBITRARY AND UNJUSTIFIED. 4. THE ISSUE INVOLVED IN THE GROUND NO. 1 AND 2 OF ITA NO. 878 AS WELL AS 879 PERTAINS TO RESTRICTION OF DEDUCTION, CLAIMED UNDER SECTION 80IC AT THE RATE OF 100% ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN . 5. BRIEF FACTS RELEVANT TO THE CASE ARE THAT THE AS SESSEE STARTED ITS MANUFACTURING ACTIVITY/OPERATION ON 04/05/2007 AND INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S 80IC OF THE ACT WAS A.Y. 200 809. THE ASSESSEE CLAIMED DEDUCTION U/S 80 IC TO THE EXTENT OF 100% OF THE EL IGIBLE PROFITS FOR 5 YEARS PERIOD STARTING FROM A.Y.200809 TO A.Y. 201213. DURING A SSESSMENT PROCEEDINGS FOR THE IMPUGNED YEAR THE AO NOTICED THAT THE ASSESSEE FIRM HAD AGAIN CLAIMED HUNDRED PERCENT DEDUCTION OF ITS ELIGIBLE PROFITS ON ACCOUNT OF HAVING CARRIED OUT SUBSTANTIAL EXPANSION IN A.Y. 2012-13. THE ASSE SSING OFFICER, FOR DETAILED REASONS MENTIONED IN THE ASSESSMENT ORDER ,HELD THA T THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IC ONLY AT THE RATE OF 25% AS AGAINST THE CLAIM OF 100% MADE BY THE ASSESSEE. 6. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(APPEAL) WHO DISMISSED THE ASSESSEES APPEAL AND RESTRICTED THE DEDUCTION CLAIMED TO 25% OF THE PROFITS, RELYING UPON THE JUDGEMENT OF THE CHAN DIGARH BENCH OF THE ITAT IN THE CASE OF M/S HYCRON ELECTRONICS VS ITO IN ITA NO . 798/CHD/2012 AND OTHER RELATED CASES. 7. AGGRIEVED BY THE SAME THE ASSESSEE HAS NOW COME UP IN APPEAL BEFORE US. 3 8. DURING THE COURSE OF HEARING BEFORE US, LD. COUN SEL RELIED ON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) WHILE THE SR . DR ARGUED THAT THE ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE DECISION O F THE CHANDIGARH BENCH OF THE ITAT, IN THE CASE OF M/S HYCRON ELECTRONICS VS ITO IN ITA NO. 798/CHD/2012 AND OTHER RELATED CASES. 9. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. FACTS EMERGING IN THE PRESENT C ASE AND WHICH ARE RELEVANT FOR ADJUDICATING THE ISSUE AT HAND ARE THAT THE ASS ESSEE CAME INTO EXISTENCE AND COMMENCED ITS MANUFACTURING ACTIVITY/OPERATION ON 04.05.2007, WAS ELIGIBLE TO CLAIM DEDUCTION OF 100% OF ITS PROFITS U/S 80IC OF THE INCOME TAX ACT,1961, AND HAD CLAIMED THE SAME FOR FIVE YEARS F ROM A.Y 2008-09 TO A.Y 2012- 13. FURTHER IT IS NOT DISPUTED THAT THE ASSESSEE UN DERTOOK SUBSTANTIAL EXPANSION OF ITS UNDERTAKING IN A . Y. 2012-13 AND ON ACCOUNT OF THE SAME CLAIMED DEDU CTION AGAIN @ 100% OF ITS ELIGIBLE PROFITS WHICH HAS BEEN DENIED TO IT, RESTRICTING THE SAME TO 25% OF THE PROFITS ,WHICH HAS BEEN CHALLE NGED BEFORE US. 10. WE HAVE GONE THROUGH THE ORDER OF THE LD CIT(A) AND FIND NO INFIRMITY IN THE SAME. THE ISSUE OF QUANTUM OF DEDUCTION AVAILAB LE TO NEW UNDERTAKINGS WHICH CAME INTO EXISTENCE AFTER 01.07.2003, AND WHI CH HAVE ALREADY CLAIMED DEDUCTION OF 100% OF THEIR ELIGIBLE PROFITS FOR THE STATUTORILY SPECIFIED PERIOD OF FIVE YEARS, ON SUBSTANTIAL EXPANSION OF THE SAID UN DERTAKING, HAS BEEN DEALT WITH BY THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S HYC RON ELECTRONICS (SUPRA).THE HONBLE BENCH IN THE SAID ORDER, AFTER DEEPLY ANALY ZING THE PROVISIONS OF SECTION 80IC ,HAS CATEGORICALLY HELD THAT THE BENEFIT OF C LAIMING 100% DEDUCTION OF PROFITS ON UNDERTAKING SUBSTANTIAL EXPANSION IS NOT AVAILABLE TO NEW UNDERTAKINGS SET UP AFTER 01.07.2003. IT HAS BEEN CATEGORICALLY HELD BY THE ITAT THAT THERE CAN BE ONLY ONE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION @ 100% OF PROFITS U/S 80IC OF THE ACT. IT HAS ALSO B EEN HELD THAT AS PER SECTION 80IC, ELIGIBLE UNDERTAKINGS SET UP IN SPECIFIED AR EAS OF THE STATE OF HIMACHAL PRADESH ARE NOT ENTITLED TO CLAIM DEDUCTION @ 100% OF THE PROFITS BEYOND A PERIOD OF FIVE YEARS. 11. THE LD CIT(A) ,WE FIND HAS CORRECTLY APPRECIATE D THE FACTS OF THE PRESENT CASE AND APPLIED THE AFORESAID DECISION OF THE ITA T TO RESTRICT THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IC @ 25% OF THE PROFI TS, SINCE UNDISPUTEDLY THE ASSESSEE COMMENCED BUSINESS OPERATIONS AFTER 01.07. 2003, I.E. ON 04.05.2007 AND HAD ALREADY CLAIMED DEDUCTION OF 100% OF ITS PR OFITS FOR FIVE YEARS FROM A.Y 2008-09 TO A.Y 2012-13 . THE LD CIT(A) HAS CORRECTLY HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS PROFI TS IN THE IMPUGNED YEAR ON 4 ACCOUNT OF HAVING UNDERTAKEN SUBSTANTIAL EXPANSION IN A.Y 2012-13 IN VIEW OF THE DECISION OF THE CO-ORDINATE BENCH OF ITAT, CHAN DIGARH IN THE CASE OF M/S HYCRON ELECTRONICS (SUPRA). 12. IN VIEW OF THE SAME WE FIND NO MERIT ON THIS GR OUND IN THE APPEALS RAISED BY THE ASSESSEE AND THE SAME ARE BEING DISMISSED. 13. REGARDING THE GROUND NO. 3 OF ITA 878/CHD/2017 FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER HAS DISALLOWED THE C LAIM OF RS. 23,814/- UNDER SECTION 43B. THE LD. CIT(A) HAS CONFIRMED THE DISAL LOWANCE. 14. WE HAVE GONE THROUGH THE RECORD AND FIND THAT T HE DISALLOWANCE WAS ON ACCOUNT OF NON PAYMENT OF TDS AS REPORTED IN FORM 3 CD PARA 21 B. THE TDS WAS DEPOSITED AFTER DUE DATE OF THE RETURN. HENCE WE SE E NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) BEING A FACTUAL ISSUE O N RECORD. 15. THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMIS SED. 16. REGARDING THE GROUND NO. 4 OF ITA 878/CHD/2017 FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER HAS DISALLOWED THE C LAIM OF RS. 90,000/- BY APPLYING PROVISION OF SECTION 40(A)(IA). THE ASSE SSING OFFICER DISALLOWED THIS AMOUNT BEING THE LEGAL AND PROFESSIONAL CHARGES PAI D ON 11/09/2012 TO THAKUR AND ASSOCIATES A PHARMA AND CHEMICAL PROJECT CONSUL TANT WITHOUT DEDUCTING TDS. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE HOLDING THAT THIS IS NOT ANY REIMBURSEMENT OF EXPENSES BUT A PROFESSIONAL CHARGE PAID FOR PREPARATION OF DRAWINGS. 17. WE HAVE GONE THROUGH THE RECORD AND FIND THAT T HE DISALLOWANCE WAS ON ACCOUNT OF NON DEDUCTION OF TDS. SINCE THE PAYMENT OF PROFESSIONAL CHARGES ATTRACT PROVISIONS OF TDS, WHICH THE ASSESSEE FAILE D TO DEDUCT AND HENCE WE FIND NO COGENT REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) BEING A FACTUAL ISSUE ON RECORD. 18. REGARDING THE GROUND NO. 2 IN ITA NO. 879/CHD/2 017 FOR THE AY 2014-15 THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF RS. 6,88,315/- AS CREDIT FROM ROUNDING OFF FIGURES UNDER SECTION 80IC. THE ASSESS ING OFFICER HELD THAT THE ROUNDING OFF OF FIGURES CANNOT BE TAKEN AS RECEIPT DERIVED FROM MANUFACTURING ACTIVITY. 19. THE AO RELIED ON THE ORDER IN CASE OF LIBERTY I NDIA LTD. VS. CIT 317 ITR 218 AND PANDIAN CHEMICALS VS. CIT 262 ITR 278. 20. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE AS NO THING MORE WAS BROUGHT ON RECORD BEFORE THE LD. CIT(A) AS TO WHAT IS THE R ATE DIFFERENCE CREDITED TO THE P&L ACCOUNT AND HOW THE SAME IS DERIVED FROM MANUFA CTURING TO MAKE IT A PART OF THE ELIGIBLE INCOME THAT IS ENTITLED FOR DEDUCTI ON UNDER SECTION 80IC. 5 21. BEFORE US, THE LD. AR ARGUED THAT THE RECEIPTS ARE CONSEQUENTIAL TO BUSINESS AS THEY ARE DERIVED / ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSSE AND ARE THUS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC. 22. THE LD. CIT, DR SHRI. RAVI SARANGAL ARGUED THAT THE SIMILAR MATTER HAS BEEN COVERED BY THE ORDER OF THE COORDINATE BENCH OF ITA T CHANDIGARH IN CASE OF HYCRON ELECTRONICS & OTHRS. IN ITA NO. 374/CHD/2014 FOR THE AY 2010-11. 23. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS ISSUE HAS BEEN A LREADY EXAMINED EARLIER BY THE COORDINATE BENCH OF ITAT CHANDIGARH. HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. VS. CIT(SUPRA) AND THE JU DGMENT IN CASE OF LIBERTY INDIA LTD. VS. CIT CLEARLY EXPLAINED THE MEANING OF THE EXPRESSION DERIVED FROM WHICH IS APPLICABLE FOR CLAIMING DEDUCTION UNDER SECTION 80IC AS WELL AS DEDUCTION U/S 80HH 24. THUS FOLLOWING THE EARLIER ORDER OF THE TRIBUNA L ON THE SIMILAR ISSUE, THIS GROUND OF THE ASSESSEE IS HEREBY DISMISSED. 25. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23/11/2017 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR