Ashirvad Pipes Private Limited, Bangalore V. DCIT, Bangalore

ITA 980/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57475 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOPALA RAO CI TI
• Assessee Lawyers: G SRINIVAS
• Section: 80IB

Judgement Text

PAGE 1 OF 9 ITA NO.980 /BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.980/BANG/2010 (ASSESSMENT YEAR 2006-07) M/S ASHIRVAD PIPES PVT. LTD., 4-BK, ATTIBELE INDUSTRIAL AREA, HOSUR ROAD, ANEKAL, BANGALORE07. PA NO. AABCA 7061 K VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(1), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 25.01.2012 DATE OF PRONOUNCEMENT : 03.02.2012 APPELLANT BY : SHRI G SRINIVAS, C. A. RESPONDENT BY : SHRI GOPALA RAO, CIT- I ORD ER PER GEORGE GEORGE K : THIS APPEAL OF THE ASSESSEE COMPANY IS DIRECTED AG AINST THE IMPUGNED ORDER OF THE LD. CIT (A)-I, BANGALORE DATE D 7.6.2010. THE RELEVANT ASSESSMENT YEAR IS 2006-07 . 2. THE ASSESSEE COMPANY HAD, INITIALLY, RAISED SEVEN GROUNDS AND, SUBSEQUENTLY, IN ITS REVISED GROUNDS TOO, IT HAD RAI SED IDENTICAL SEVEN GROUNDS, OF COURSE, THE CONTENTS OF WHICH ARE SLIGH TLY DIFFERENT FROM THE EARLIER ONE. THE SUBSTANCES OF THE GROUNDS RAISED TURNED OUT TO BE A SOLITARY ISSUE, NAMELY: PAGE 2 OF 9 ITA NO.980 /BANG/2010 2 THE INVESTMENTS IN PLANT AND MACHINERY AS ON 31.3.2 006 WERE ONLY RS.2,84,02,499/- AND THE VALUE OF (I) CUMM INS DIESEL OIL ENGINE; AND (II) ELECTRONIC DRIVE PANEL MOTOR BE EXCLUDED FOR THE PURPOSE FOR DETERMINATION OF LIMIT OF RS.300 LAKHS AND, THUS, THE ASSESSEE WAS A SMALL SC ALE UNDERTAKING AND THE CLAIM FOR DEDUCTION U/S 80IB WA S ALLOWABLE. 3. BRIEFLY STATED, THE ASSESSEE COMPANY [THE ASSESS EE IN SHORT] HAS BEEN IN THE BUSINESS OF MANUFACTURE AND SALE OF PVC AND CPVC PIPERS AND FITTINGS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, TH E ASSESSEE HAD FURNISHED ITS RETURN OF INCOME, ADMITTING A TOTAL INCOME OF R S.2,54,90,970/- AFTER CLAIMING DEDUCTION OF RS.1.09 CRORES U/S 80-IB OF T HE ACT. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ACCORDING TO THE AO, IT WAS NOTICED THAT SINCE THE TOTAL VALUE OF PL ANT AND MACHINERY OF THE ASSESSEE EXCEEDED THE LIMIT PRESCRIBED BY THE MINIST RY OF COMMERCE AND INDUSTRIES VIDE ORDER NO.4(I) 2000-SSI BD. & POL. D ATED 19.10.2000, THE ASSESSEE CEASED TO BE A SSI AND FOR THE DETAILED RE ASONS RECORDED IN HIS IMPUGNED ORDER UNDER CHALLENGE, DISALLOWED THE CLAI M U/S 80IB OF THE ACT TO THE TUNE OF RS.1.09 CRORES. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE WITH THE LD. CIT (A) FOR RELIEF. THE CIT(A) HAD, AFTER DELIBERATING THE ASSESSEES CONTENTIONS, PERUSING THE REMAND REPORT OF THE AO AND ALSO EXHAU STIVELY QUOTING VARIOUS JUDICIAL VIEWS ON A SIMILAR ISSUE, OBSERVED THUS: 7. IN TOTO, THERE IS NO DENIAL OF THE FACT THAT TH E ELECTRONIC DRIVE PANEL AND DIESEL OIL ENGINEERS ARE UTILIZED AND NECESSARY FOR PRODUCTIONS OF CPVC AND P VC PAGE 3 OF 9 ITA NO.980 /BANG/2010 3 PIPES AND, THEREFORE, CANNOT BE EXCLUDED FROM THE DEFINITION OF PLANT AND MACHINERY. HENCE, THE ISSUE IS DECIDED AGAINST THE APPELLANT. 5. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE PR ESENT APPEAL. DURING THE COURSE OF HEARING, THE LD. A R HAD SUBMI TTED THAT THE CIT (A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAD CA LCULATED THE VALUE OF INVESTMENTS IN PLANT AND MACHINERY AT RS.2.84 CRORES AFTER CORRECTLY EXCLUDING THE VALUES OF (I) CUMMINS DIESEL OIL ENGI NE OF RS.10.18 LAKHS; AND (II) ELECTRONIC DRIVE PANEL MOTOR OF RS. 13.38 LAKHS AS ON 31.3.2006 WHICH WAS IN LINE WITH THE DEFINITION U/S 80IB (14)(G) OF THE AC T; THAT THE VALUE OF PLANT AND MACHINERY AS ON 31.3.2006 WAS ONLY RS.2.84 CRORES WHICH WAS WELL BELOW THE LIMIT OF RS.3 CRORES AS CERTIFIED BY THE DEPARTM ENT OF INDUSTRIES AND COMMERCE VIDE THEIR LETTER NO.SIAC/BMS/E2/PMT/SSI/2 000-01 DATED 22.9.2001 WHICH CATEGORICALLY STATES THAT THE UNIT ENTITLED TO ENJOY THE STATUS OF SMALL SCALE INDUSTRY SO LONG THE INVESTMEN T ON PLANT AND MACHINERY INSTALLED BY THE UNIT IS BELOW RS.300 LAKHS; T HAT THE CIT (A) OUGHT TO HAVE EXCLUDED THE VALUE OF BOTH THE ITEMS OF MACHINERY CI TED SUPRA FOR THE PURPOSE OF ARRIVING AT THE LIMIT OF RS.300 LAKHS VI DE NOTIFICATION NO. S.O 2(E) DATED: 1.1.1993. IT WAS, FURTHER, ARGUED THAT THE CIT (A) OUGHT TO HAVE CONSIDERED THE CLARIFICATION GIVEN BY THE DEPARTMENT OF INDUSTRIES AND COMMERCE THAT BOTH THE MACHINERIES (SUPRA) SHALL BE EXCLUDED FROM THE MACHINERY LIST FOR THE PURPOSE OF ARRIVING AT THE LI MIT PRESCRIBED AT RS.300 LAKHS TO QUALIFY AS SMALL SCALE INDUSTRIAL UNDERTAKI NG FOR DEDUCTION U/S.80- IB OF THE ACT. IN CONCLUSION, IT WAS PRAYED THAT TH E INVESTMENTS IN PLANT & MACHINERY AS ON 31.3.2006 WAS ONLY RS.2.84 CRORES AN D THAT THE VALUE OF TWO MACHINERIES (CITED SUPRA) BE EXCLUDED FOR THE PURPO SE OF DETERMINATION OF PAGE 4 OF 9 ITA NO.980 /BANG/2010 4 LIMIT OF RS.300 LAKHS. TO DRIVE HOME HIS POINT, TH E LD. A R FURNISHED A PAPER BOOK CONTAINING 1 26 PAGES WHICH CONSIST OF, INTE R ALIA, COPIES OF SSI CERTIFICATE DT.18.3.1998, CORRESPONDING NOTIFICATI ON NO.S.O.2(3) DATED 1.1.1993 ETC. THE LEARNED COUNSEL ALSO RELIED ON T HE ORDER OF THE DELHI TRIBUNAL IN THE CASE OF INDIAN COMMUNICATION NETWOR K V IAC 50 ITD 411 (DELHI). 5.1. ON THE OTHER HAND, THE LD. D R ARGUED THAT TH E AO NOTICED THAT THE TOTAL VALUE OF PLANT & MACHINERY HAD EXCEE DED THE LIMIT PRESCRIBED BY THE MINISTRY OF COMMERCE AND INDUSTRIES VIDE ITS C OMMUNICATION DATED 19.10.2000 REFERRED ABOVE, AND, THUS, THE ASSESSEE HAD LOST ITS STATUS AS SSI AND, CONSEQUENTLY, DID NOT QUALIFY FOR DEDUCTION U/S 80IB OF THE ACT. THE DEDUCTION SO CLAIMED BY THE ASSESSEE, ACCORDING TO THE LD. D R, WAS RIGHTLY DENIED BY THE AO WHICH HAS BEEN JUDICIOUSLY SU STAINED BY THE CIT (A). IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE AUTHORITIES BELOW REQUIRES TO BE UPHELD. 6. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, C AREFULLY PERUSED THE RELEVANT CASE RECORDS AND ALSO THE DOCU MENTARY EVIDENCES ADDUCED BY THE LD. A R AT THE TIME OF HEARING IN THE SHAPE OF A PAPER BOOK. 6.1. AT THE OUTSET, WE WOULD LIKE TO RECALL THE NO TIFICATION NO. S.O 2(E) DATED 1.1.1993 WHEREIN IT HAS BEEN CATEGORICAL LY CLARIFIED THAT (B)IN CALCULATING THE VALUE OF PLANT AND MACHINERY, THE FOLLOWING SHALL BE EXCLUDED, NAMELY:- PAGE 5 OF 9 ITA NO.980 /BANG/2010 5 I. THE COST OF EQUIPMENTS SUCH AS TOOLS, JIGS, DIES, M OULDS AND SPARE PARTS FOR MAINTENANCE AND THE COST OF CONSUMABLES STORES; II. THE COST OF INSTALLATION OF PLANT & MACHINERY; III. THE COST OF RESEARCH AND DEVELOPMENT (R & D) AND POLLUTION CONTROL EQUIPMENT; IV. THE COST OF GENERATION SETS, EXTRA TRANSFORMER, ETC ., INSTALLED BY THE UNDERTAKING AS PER THE REGULATIONS OF THE STATE ELECTRICITY BOARD; V. THE BANK CHARGE AND SERVICE CHARGE PAID TO THE NATI ONAL SMALL INDUSTRIES C OPERATION OR THE STATE SMALL INDUSTRIES CORPORATION; VI. THE COST INVOLVED IN PROCUREMENT OR INSTALLATION OF CABLES, WIRING, BUS BARS, ELECTRICAL CONTROL PANELS (NOT TH OSE MOUNTED ON INDIVIDUAL MACHINES), OIL CIRCUIT BREAKERS/MINIATURE CIRCUIT BREAKERS ETC., WHICH AR E NECESSARILY TO BE USED FOR PROVIDING ELECTRICAL POWE R TO THE PLANT AND MACHINERY/SAFETY MEASURES; VII. 6.2. FURTHER, THE ASSESSEE HAS BEEN CLASSIFIED AN D REGISTERED AS A SMALL SCALE INDUSTRIAL (SSI) UNIT W.E.F. 18.3.1998 BY THE DIRECTORATE OF INDUSTRIES AND COMMERCE, GOVERNMENT OF KARNATAKA [C OURTESY: 6 OF PB AR] . IN A FURTHER CLARIFICATION, THE JOINT DIRECTOR, DIS TRICT INDUSTRIAL CENTRE IN HIS COMMUNICATION DATED 9.2.2009 TO THE ASSESSEE [S OURCE: P 7 & FREE ENGLISH TRANSLATION ON P 8 PB] WHEREIN IT HAS BEE N STATED THAT WITH REFERENCE TO THE ABOVE SUBJECT AND TO INFORM YOU TH AT THE SAID D.G. SET ENGINE AND ELECTRONIC DRIVE PANEL WIRING ARE NO T INVOLVING DIRECTLY IN PRODUCTION AND, HENCE, DOES NOT COME UNDER THE MACH INERIES LIST AND, HENCE, THIS SENT FOR INFORMATION PURPOSE. TO STRENGTHEN THE ASSESSEES STAND THE DEPUTY DIRECTOR OF SMALL INDUSTRIES ASSIST ANCE CENTRE IN HIS COMMUNICATION DATED 22.9.2001 [REFER: P 9 OF PB] HA D CERTIFIED THAT THIS IS PAGE 6 OF 9 ITA NO.980 /BANG/2010 6 TO CERTIFY THAT M/S ASHIRVAD PIPES PRIVATE LIMITED, PLOT NO.4-B, ATTIBELE INDL. AREA, ANEKAL TALUK, BANGALORE DISTRICT IS A R EGISTERED SMALL SCALE INDUSTRY VIDE NO.08/01/F-00033/PMT/SSI DATED 18.08. 1998 FOR MANUFACTURE OF RIGID PVC PIPES & ITS FITTINGS. A S PER GOVT. OF INDIA ORDER NO. SO 857(E) DATED 10.12.1997 AND CLARIFICAT ION LETTER NO.4(1)2000- 01-SSI BD. & POL. DATED 19-10-2000 ISSUED BY THE ADD L. DEVELOPMENT COMMISSIONER (SSI), GOVT. OF INDIA, NEW DELHI, THE UNIT ENTITLED TO ENJOY THE STATUS OF SMALL SCALE INDUSTRY SO LONG THE INVESTMENT ON PLANT AND MACHINERY INSTALLED BY THE UNIT IS BELOW RS.300 LAKHS. 6.3 THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL R ELIED ON BY THE LEARNED AR IS APPLICABLE TO THE FACTS OF THE INSTAN T CASE. IN THE CASE CONSIDERED BY THE DELHI BENCH, THE ASSESSEE COMPANY W AS MANUFACTURING ELECTRONIC TYPEWRITERS AND OTHER OFFICE APPLIANCES W ITHIN THE PROVISIONS OF SCHEDULE XI, CLAIMED THAT BEING REGISTERED AS A SMA LL SCALE INDUSTRIAL UNIT BY THE DIRECTORATE OF INDUSTRIES, IT WAS ENTITLED TO G RANT OF INVESTMENT ALLOWANCE EVEN THOUGH IT MANUFACTURED THE ARTICLES SO SPECIFIED IN THE SAID SCHEDULE. THE ASSESSEE SUIBMITTED THAT CLAUSE (2) OF THE EXPLANATION TO SECTION 32A(2) HAS DEFINED THE TERM SMALL SCALE IN DUSTRIAL UNDERTAKING AS THOSE UNITS WHOSE AGGREGATE VALUE OF MACHINERY AND P LANT (OTHER THAN TOOLS, JIGS, DIES AND MOULDS) INSTALLED AS ON THE LAST DAY OF THE PREVIOUS YEAR FOR THE PURPOSES OF THE BUSINESS OF THE UNDERTAKING, DI D NOT EXCEED RS.20 LAKHS. SO IT CONTENDED THAT THE AGGREGATE VALUE OF MACHINE RY AND PLANT HAD TO BE DETERMINED WITH REFERENCE TO ONLY THOSE ITEMS OF MAC HINERY AND PLANT THAT WERE ACTUALLY INVOLVED IN THE PRODUCTION OR MANUFACT URING PROCESS. THE REVENUE REJECTED THE ASSESSEES CLAIM FOR INVESTMEN T ALLOWANCE BY RESORTING PAGE 7 OF 9 ITA NO.980 /BANG/2010 7 TO THE SCHEDULE XI ON THE GROUND THAT ALL ITEMS THA T WERE INSTALLED IN THE FACTORY PREMISES, WITH THE EXCEPTION OF TOOLS, JIGS, DIES AND TOOLS WERE TO BE AGGREGATED AND CONSEQUENTLY, SINCE THE VALUE OF MACH INERY AND PLANT EXCEEDED RS.20 LAKHS, THE ASSESSEE COULD NOT BE CAT EGORIZED AS A SMALL SCALE INDUSTRIAL UNIT. 6.4 ON SECOND APPEAL, IT WAS HELD THAT THE POLICY OF THE GOVERNMENT TO PROMOTE THE SMALL SCALE UNITS BY PROVI DING VARIOUS CONCESSIONS THROUGH THE MINISTRY OF INDUSTRY, CONSIDERING THEIR C ONTRIBUTION TO THE OVERALL GROWTH AND ECONOMIC DEVELOPMENT OF THE COUN TRY, WAS ECHOED IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL, 1986. THE BENEFITS AS WERE EXTENDED TO THE SMALL SCALE UNITS BY THE INDUSTRY MINISTRY WERE CONSIDERED UNDER THE ACT FOR THE FIRST TIME IN 1976, WHICH WAS THE GRANT OF INVESTMENT ALLOWANCE TO SUCH UNITS AND THI S CONTINUED OVER THE YEARS. IN 1986, THROUGH THE FINANCE BILL, 1986, IT W AS OBSERVED THAT THE UPWARD REVISION OF THE VALUE OF THE MACHINERY AND PL ANT WAS BEING MADE IN THE LIGHT OF THE UPWARD REVISION MADE BY THE DEPARTM ENT OF INDUSTRIAL DEVELOPMENT THROUGH THE NOTIFICATION DATED 17/3/198 5, TO BE EFFECTIVE FROM 1/4/1985. FROM THE TIME SMALL SCALE UNITS WER E GIVEN CONCESSIONS UNDER THE ACT, THERE WAS NEVER ANY EXPLANATION OR PR OVISION ADDED TO THE ACT, AS TO MANNER OF DETERMINATION OF THE AGGREGATE VALUE OF THE MACHINERY AND PLANT, THAT WAS CONTRARY TO THE ONE LAID BY THE M INISTRY OF INDUSTRY. UNLIKE THE PROVISIONS OF SECTIONS 80-I, 80HH ETC., WHERE THE PRE-REQUISITES FOR A NEW INDUSTRIAL UNDERTAKING HAS BEEN DEFINED, THERE ARE NO CONDITIONS SPECIFIED IN SECTION 32A FOR GRANT OF RECOGNITION A S A SMALL SCALE UNIT, OTHER THAN BORROWAL OF THE DEFINITION FROM THE ONE RECOGN IZED BY THE MINISTRY OF PAGE 8 OF 9 ITA NO.980 /BANG/2010 8 INDUSTRIES. THIS SUGGESTS THAT THE ONLY AUTHORITY WH ICH HAS THE POWER TO GRANT RECOGNITION TO A UNIT AS A SMALL SCALE UNIT B EING THE INDUSTRY MINISTRY OR THE CONCERNED DEPARTMENT UNDER THAT MINISTRY, SO LONG AS A UNIT IS RECOGNIZED BY THAT AUTHORITY, FOR PURPOSES OF HARMON IOUS CONSTRUCTION OF THE TERM SMALL SCALE UNIT, THE SAME SHOULD BE ADOPT ED FOR THE PURPOSES OF THIS ACT AS WELL. IN THE ABSENCE OF ANY SPECIFIED E XPLANATION OR PROVISION FOR THE DETERMINATION OF THE AGGREGATE VALUE OF MAC HINERY AND PLANT UNDER THE ACT, IT WOULD BE ONLY PROPER THAT THE MANNER OF COMPUTATION OF THE AGGREGATE VALUE OF THE MACHINERY AND PLANT AS RECOG NIZED BY THAT MINISTRY IS ALSO ADOPTED, SO THAT UNIFORMITY FOR THE SAME CLASS OR CATEGORY UNDER DIFFERENT ACTS CAB BE MAINTAINED. SUCH INFIRMITY OF VIEW IS WHAT IS INTENDED BY THE LEGISLATURE AND WILL ONLY BE PROPER FOR ACHIEV ING THE OBJECTIVE OF THE GROWTH OF THESE UNITS AND THEIR CONTRIBUTION TO THE OVERALL ECONOMIC DEVELOPMENT OF THE COUNTRY AND, LAST BUT NOT THE LEA ST, TO REDUCING AVOIDABLE LITIGATION. THEREFORE, THE ASSESSEES PLEA THAT TH E AGGREGATE VALUE OF MACHINERY AND PLANT SHOULD BE DETERMINED IN THE LIKE MANNER AS DONE BY THE DIRECTORATE OF INDUSTRIES WAS TO BE ACCEPTED. SINC E THE DIRECTORATE OF INDUSTRIES HAD ACCORDED RECOGNITION TO THE ASSESSEE AS A SMALL SCALE INDUSTRIAL UNIT, THE ASSESSEES CLAIM OF INVESTMENT ALLOWANCE ON SUCH ITEMS AS WERE INSTALLED IN THE FACTORY PREMISES WAS UPHELD. 6.5. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMS TANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS, W E ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS ENTITLED TO AVAIL THE DE DUCTION U/S 80-IB OF THE ACT. IT IS ORDERED ACCORDINGLY. PAGE 9 OF 9 ITA NO.980 /BANG/2010 9 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . THE ORDER PRONOUNCED ON THE 3 RD DAY OF FEBRUARY, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.