ITO, Circle, Parwanoo V. M/s Globe Precision Industries Pvt. Ltd., Baddi

ITA 999/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5083 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 14-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 872/CHD/2017 ASSESSMENT YEAR: 2012-13 M/S GLOBE PRECISION INDUSTRIES PVT. LTD. VS. THE DCIT, CIRCLE PLOT NO.11, INDUSTRIAL AREA, BADDI, PARWANOO SOLAN PAN NO. AAACG6736G & ITA NO. 998/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, VS. M/S GLOBE PRECISION INDUSTRIES PVT. LTD. CIRCLE PARWANOO, PLOT NO.11, INDUSTRIAL AREA, BAD DI, PARWANOO SOLAN PAN NO. AAACG6736G ITA NO. 873/CHD/2017 ASSESSMENT YEAR: 2013-14 M/S GLOBE PRECISION INDUSTRIES PVT. LTD. VS. THE DCIT, CIRCLE PLOT NO.11, INDUSTRIAL AREA, BADDI, PARWANOO SOLAN PAN NO. AAACG6736G & ITA NO. 999/CHD/2017 ASSESSMENT YEAR: 2013-14 THE DCIT, VS. M/S GLOBE PRECISION INDUSTRIES PVT. LTD. CIRCLE PARWANOO, PLOT NO.11, INDUSTRIAL AREA, BAD DI, PARWANOO SOLAN PAN NO. AAACG6736G (APPELLANT) (RESPONDENT) ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 2 APPELLANT BY : SH. VINEET KRISHAN RESPONDENT BY : SMT. CHANDERKANTA, ADDL CIT. DATE OF HEARING : 27.03.2018 DATE OF PRONOUNCEMENT : 27.03.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THESE ARE THE CROSS APPEALS PREFERRED BY THE ASSESS EE AND REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)], SHI MLA DATED 24.03.2017. 2. FIRST, WE TAKE THE ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2012- 13, WHEREIN ASSESSEE HAS FOLLOWING GROUNDS OF APPEA L:- 1. THAT THE ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. CIT(A) SHIMLA IN APPEAL NO. 67/2015/16/SML DATED 24.3.2017 IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A), GRAVELLY ERRED IN UPHOLDING THE ACTION OF T HE LD. ASSESSING OFFICER IN HOLDING THAT THE APPELLAN T IS NOT ENTITLED TO 100% DEDUCTION UNDER SECTION 80I B ON ACCOUNT OF SUBSTANTIAL EXPANSION MADE BY THE APPELLANT DURING THE 8 TH YEAR FOR WHICH DEDUCTION IS ALLOWABLE AS PER SECTION 80IC OF THE INCOME-TAX ACT , 1961. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) GRAVELY ERRED IN UPHOLDING THE ACTION O F THE LD. ASSESSING OFFICER IN RESTRICTING THE DEDUCT ION U/S 80IC OF THE INCOME-TAX ACT, 1961 AS 30% AS ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 3 AGAINST 100% CLAIMED BY THE APPELLANT IN RESPECT OF BADDI UNIT AS THE SUBSTANTIAL EXPANSION WAS DONE BY THE APPELLANT WHICH FACT HAS NOT BEEN CONTROVERTED BY THE LD. ASSESSING OFFICER. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) GRAVELLY ERRED IN UPHOLDING THE ACTION O F THE LD. ASSESSING OFFICER IN DISALLOWING THE DEDUCTION U/S 80IC BY HOLDING THE DIFFERENCE IN FOREIGN EXCHANGE OF 1,14,718/- AND LIABILITIES WRITTEN BACK AMOUNTING TO RS. 3,24,124/- CANNOT BE CONSIDERED AS INCOME DERIVED FROM MANUFACTURING ACTIVITY OF THE INDUSTRIAL UNDERTAKING TO BE ELIGIB LE FOR DEDUCTION U/S 80IC. 3. GROUND NO.1 IS GENERAL IN NATURE AND NEEDS NO AD JUDICATION. 4. GROUND NOS. 2 & 3 ARE RELATING TO THE GRANT OF 1 00% DEDUCTION U/S 80IC ON ACCOUNT OF SUBSTANTIAL EXPANSION. THE LD. COUNSEL FOR THE ASSESSEE, IN THIS RESPECT, HAS SUBMITTED THAT T HE ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION DATED 28.11.2017 OF THE HON'BLE JURISDICTIONAL HIMACHAL P RADESH HIGH COURT AT SHIMLA IN THE CASE OF THE ASSESSEE ITSELF FOR EARLIER ASSESSMENT YEAR, WHICH WAS DECIDED IN GROUP OF CASE S DECIDED TOGETHER BY HON'BLE HIGH COURT WITH THE LEAD CASE A S M/S STOVEKRAFT INDIA V CIT THE CASE OF ASSESSEE LISTED AT S.NO.32 OF THE SAID ORDER BEARING ITA NO. 70/2017. THE HON'BLE HIGH COURT IN THIS REGARD AT PARA 55 OF THE ORDER HELD AS UNDER:- 55.THUS, IN VIEW OF THE ABOVE DISCUSSION, THESE AP PEALS ARE ALLOWED AND ORDERS PASSED BY THE ASSESSMENT OFFICER AS WELL AS THE APPELLATE AUTHORITY AND THE TRIBUNAL, IN THE CASE OF EACH ONE OF THE ASSESSES, ARE QUASHED AND SET ASIDE , HOLDING AS UNDER: ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 4 (A) SUCH OF THOSE UNDERTAKINGS OR ENTERPRISES WHIC H WERE ESTABLISHED, BECAME OPERATIONAL AND FUNCTIONAL PRIO R TO 7.1.2003 AND HAVE UNDERTAKEN SUBSTANTIAL EXPANSION BETWEEN 7.1.2003 UPTO 1.4.2012, SHOULD BE ENTITLED TO BENEF IT OF SECTION 80-IC OF THE ACT, FOR THE PERIOD FOR WHICH THEY WERE NOT ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECT ION 80-IB. (B) SUCH OF THOSE UNITS WHICH HAVE COMMENCED PRODU CTION AFTER 7.1.2003 AND CARRIED OUT SUBSTANTIAL EXPANSIO N PRIOR TO 1.4.2012, WOULD ALSO BE ENTITLED TO BENEFIT OF D EDUCTION AT DIFFERENT RATES OF PERCENTAGE STIPULATED UNDER SECT ION 80-IC. (C) SUBSTANTIAL EXPANSION CANNOT BE CONFINED TO ONE EXPANSION. AS LONG AS REQUIREMENT OF SECTION 80-IC( 8)(IX) IS MET, THERE CAN BE NUMBER OF MULTIPLE SUBSTANTIAL EX PANSIONS. (D) CORRESPONDINGLY, THERE CAN BE MORE THAN ONE INI TIAL ASSESSMENT YEARS. (E) WITHIN THE WINDOW PERIOD OF 7.1.2013 UPTO 1.4.2 012, AN UNDERTAKING OR AN ENTERPRISE CAN BE ENTITLED TO DED UCTION @ 100% FOR A PERIOD OF MORE THAN FIVE YEARS. (F) ALL THIS, OF COURSE, IS SUBJECT TO A CAP OF TEN YEARS. [SECTION 80-IC(6)]. (G) UNITS CLAIMING DEDUCTION UNDER SECTION 80-IC SH ALL NOT BE ENTITLED TO DEDUCTION UNDER ANY OTHER SECTION, C ONTAINED IN CHAPTER VI-A OR SECTION 10A OR 10B OF THE ACT [S ECTION 80- IB(5)]. 5. LD. DR FAIRLY ADMITTED THAT THE ISSUE IS SQUAREL Y COVERED BY THE ABOVE DECISION OF THE HON'BLE JURISDICTIONAL HIGH C OURT. IT WAS, HOWEVER, SUBMITTED THAT THE ISSUE BE RESTORED TO T HE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AS TO WHETHER TH E ASSESSEES HAVE ACTUALLY CARRIED OUT THE SUBSTANTIAL EXPANSION TO B E ENTITLED TO CLAIM DEDUCTION U/S 80IC OF THE ACT. 6. WE DO NOT AGREE TO THE ABOVE CONTENTION RAISED B Y THE REVENUE AT THIS STAGE. A PERUSAL OF THE ORDERS OF THE ASSESSIN G OFFICER REVEAL THAT THE ASSESSING OFFICERS HAVE NOT DISPUTED THAT THE A SSESSEES UNITS HAVE CARRIED OUT SUBSTANTIAL EXPANSION AS PROVIDED UNDER CLAUSE (B) OF SUB SECTION (2) READ WITH CLAUSE (IX) OF SUB SECTION (7 ) OF SECTION 80IC OF ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 5 THE ACT. ALMOST SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF M/S STO VEKRAFT INDIA VS. COMMISSIONER OF INCOME TAX (SUPRA) IN THE FOLLOWIN G CONCLUDING PARA OF THE ORDER:- 58. ON FACTS, WE MAY CLARIFY THAT THE REVENUE HAS NOT DISPUTED, (A) THE UNITS HAVING CARRIED OUT SUBSTANT IAL EXPANSION WITHIN THE DEFINITION OF THE SECTION, (B) THEIR ENTITLEMENT AND EXTENT OF DEDUCTION WOULD BE DEPEND ENT UPON INTERPRETATION OF THE RELEVANT PROVISIONS. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION AT THI S STAGE TO GIVE THE ASSESSING OFFICER A SECOND INNINGS TO RE-EXAMINE U NDISPUTED FACTS. 7. IN VIEW OF THE ABOVE DISCUSSION, THE IMPUGNED OR DER OF THE CIT(A) IS SET ASIDE AND THE ASSESSING OFFICER IS DI RECTED TO GRANT TO THE ASSESSEE DEDUCTION AT THE RATE OF HUNDRED PERCENT OF ITS ELIGIBLE PROFITS, AS PER THE DECISION OF THE JURISDICTIONAL HIGH COUR T IN THIS REGARD IN THE CASE OF M/S STOVEKRAFT INDIA VS. COMMISSIONER OF I NCOME TAX (SUPRA). IN VIEW OF THIS, GROUND NOS. 2 & 3 ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 8. NOW, COMING TO GROUND NO. 4 OF ASSESSEES APPEAL , THE LD. COUNSEL HAS SUBMITTED THAT THE ISSUE RAISED VIDE GR OUND NO.4 OF THE APPEAL IS RELATING TO THE NON ALLOWANCE OF DEDUCTIO N U/S 80IC OF THE ACT ON ACCOUNT OF INCOME EARNED BY THE ASSESSEE ON FOREIGN EXCHANGE AND LIABILITY WRITTEN BACK. LD. COUNSEL HAS SUBMITT ED THAT THE INCOME FROM THESE ACTIVITIES WAS INTRINSICALLY LINKED WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. HE HAS FURTHER SUBMIT TED THAT THE LOWER ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 6 AUTHORITIES HAVE FAILED TO FULLY APPRECIATE THE TR UE FACTS RELATING TO THE ISSUE. HE, IN THIS RESPECT HAS SUBMITTED THAT T HE ASSESSEE MAY BE GIVEN OPPORTUNITY TO DEMONSTRATE BEFORE THE ASSESSI NG OFFICER THAT THE INCOME EARNED FROM THESE ACTIVITIES WAS LINKED TO THE BUSINESS ACTIVITY / MANUFACTURING ACTIVITY OF THE ASSESSEE. 9. THE LD. DR, HOWEVER, HAS RELIED UPON THE FINDING S OF THE LOWER AUTHORITIES. 10. ADMITTEDLY, THE DEDUCTION U/S 80IC OF THE ACT WILL BE AVAILABLE TO THE ASSESSEE FROM THE INCOME EARNED FROM THE EL IGIBLE UNIT U/S 80IC OF THE ACT, IF THE INCOME FROM THE ACTIVITIES IS INTRINSICALLY LINKED TO THE AFORESAID BUSINESS ACTIVITY / MANUFAC TURING ACTIVITY OF THE ASSESSEE, THE ASSESSEE IN THIS RESPECT WANTS TO DEMONSTRATE THE NEXUS OF THE INCOME WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE. IN VIEW OF THIS, GROUND NO.4 IS RESTORED TO THE FIL E OF THE ASSESSING OFFICER FOR DECISION AFRESH. NEEDLESS TO SAY THAT T HE ASSESSING OFFICER WILL PROVIDE PROPER OPPORTUNITY TO THE ASSESSEE TO PROVE ITS CASE AND THEREAFTER DECIDE THE SAME AFTER DUE APPRECIATION O F THE FACTS AND EVIDENCE IN ACCORDANCE WITH LAW. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. NOW COMING TO THE REVENUES APPEAL FOR ASSESSME NT YEAR 2012- 13, THE SOLE ISSUE RAISED BY THE REVENUE IN ITS GRO UNDS OF APPEAL IS RELATING TO THE DENIAL OF DEDUCTION ON THE INCOME E ARNED BY THE ASSESSEE ON SALE OF SCRAP. 12. THE LD. COUNSEL, AT THE OUTSET HAS INVITED OUR ATTENTION TO THE IMPUGNED ORDER OF THE CIT(A) WHEREIN THE LD. CIT(A) HAS GIVEN A ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 7 CATEGORICAL FINDINGS THAT SCRAP WAS GENERATED IN PR OCESS OF MANUFACTURING ACTIVITY OF THE ASSESSEE. THAT THE GE NERATION OF SCRAP AND THE MANUFACTURING OF THE GOODS GO SIDE BY SIDE. IF THE MANUFACTURING OF GOODS IS STOPPED, THE GENERATION O F SCARP WILL AUTOMATICALLY WILL STOP AND, THEREFORE, HAS SUBMITT ED THAT THE PRODUCTION / GENERATION OF SCRAP HAS FIRST DEGREE N EXUS WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE. THE LD. CIT (A) AFTER CONSIDERING THESE FACTS AND WHILE REPLYING UPON THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. MICRO T UNERS FOR ASSESSMENT YEAR 2006-07 HAS ALLOWED THE RELIEF TO THE ASSESSEE ON THIS ISSUE. 13. BEFORE US, THE LD. DR COULD NOT BRING TO OUR NO TICE ANY DISTINGUISHABLE FACTS OR THE CASE LAWS REQUIRING OU R INTERFERENCE IN THE WELL REASONED ORDER OF THE CIT(A), ON THIS ISSU E. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 14. NOW COMING TO THE ASSESSEES APPEAL FOR AY 2013-14 , WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN:- 1. THAT THE ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. CIT(A) SHIMA IN APPEAL NO. 217/16-17/SML DATED 24.3.2017 IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GRAVELLY ERRED IN UPHOLDING THE ACTION O F THE LD. ASSESSING OFFICER IN RESTRICTING THE DEDUCT ION U/S 80IC OF THE INCOME-TAX ACT, 1961 @ 30% AS ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 8 AGAINST 100% CLAIMED BY THE APPELLANT IN RESPECT OF BADDI UNIT. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE LD. C IT(A) GRAVELY ERRED IN UPHOLDING THE ADDITION OF RS. 1,50,100/- MADE BY THE ASSESSING OFFICER BY INVOKIN G THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT . THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE IN THIS CASE OF THE APPELLANT AS NO EXEMPT INCOME WAS EARNED FROM THE INVESTMENT MADE BY THE APPELLANT. 15. GROUND NO.1 IS GENERAL IN NATURE AND NEEDS NO A DJUDICATION. 16. GROUND NOS. 2 IS RELATING TO THE ALLOWABILITY O F DEDUCTION U/S 80IC ON ACCOUNT OF SUBSTANTIAL EXPANSION CARRIED OU T BY THE UNIT. IN VIEW OF OUR FINDINGS GIVEN ABOVE, IN RELATION TO G ROUND NOS. 2 & 3 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13, SINCE, THE ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE HON'BLE JURISDICTIONAL HIMACHAL PRADESH HIGH COURT AT SHIMLA IN THE OWN CASE OF THE ASSESSEE, WHICH WAS DECIDED IN GROU P OF CASES DECIDED TOGETHER BY HON'BLE HIGH COURT WITH THE LEA D CASE AS M/S STOVEKRAFT INDIA V CIT THE CASE OF ASSESSEE BEING LISTED AT S.NO.32 OF THE SAID ORDER BEARING ITA NO. 70/2017, HENCE, T HIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 17. NOW, COMING TO GROUND NO. 3 OF THE APPEAL, A DI SALLOWANCE OF RS. 1,50,100/- WAS MADE BY THE ASSESSING OFFICER U /S 14A OF THE I.T. ACT IN RESPECT OF TAX EXEMPT INCOME EARNED BY THE A SSESSEE. ADMITTEDLY, THE UNIT OF THE ASSESSEE IS ELIGIBLE FO R DEDUCTION U/S 80IC OF THE ACT. THE DISALLOWANCE HAS BEEN MADE BY THE INCOME TAX AUTHORITIES UNDER SECTION 14A, THE RESULTANT EFFE CT WILL BE AN ITA NOS. 872,873,998 & 999/CHD/2017- M/S GLOBE PRECISION INDUSTRIES, SOLAN 9 ADDITION TO THE INCOME OF THE ASSESSEE, WHICH OTHE RWISE IS EXEMPT U/S 80IC OF THE ACT. IN VIEW OF THIS, NO TAX LIABIL ITY WILL BE LAID ON THE ASSESSEE EVEN AFTER DISALLOWANCE U/S 14A OF THE ACT. IN VIEW OF THIS, ANY DISCUSSION ON THE ISSUE WILL ONLY BE OF A CADEMIC IN NATURE, SINCE THIS DISALLOWANCE IS TAX NEUTRAL. THIS GROUND IS DISMISSED WITH LIBERTY TO THE ASSESSEE TO RAISE THE SAME IN AN APP ROPRIATE CASE. 18. NOW COMING TO THE REVENUES APPEAL FOR ASSESSME NT YEAR 2013- 14, THE ISSUE IN THE APPEAL IS IDENTICAL TO THAT HAS BEEN RAISED BY THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 2012-13, WHEREIN, AFTER CONSIDERING THE SUBMISSIONS, WE HAVE DECIDED THE IS SUE AGAINST THE REVENUE. THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27.03.2018 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR