Assistant Commissioner of Income Tax, Circle-1(1), Panaji., Panaji V. Sesa Goa Ltd., Panaji

MA 30/PAN/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 2690 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 14-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY GUPTA VP TAXATION; BENECIO MENEZES AGM TAXATION
• Assessee Lawyers: ASHA DESAI
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; Additional depreciation; Speculation loss; Capital expenditure
• Section: 10AA; 133A; 14A; 10B; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER MA NO. 30/PNJ/2014 (ARISING OUT OF ITA NO S . 72& 85/PNJ/2012 ) : (ASST. YEAR : 2009 - 10) M/S. SESA GOA LTD. SESA GHOR, 20 EDC COMPLEX, PATTO, PANAJI, GOA (APPLICANT) PAN : AACCS7101B VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI (RESPONDENT) APPLICANT BY : VIJAY GUPTA, V.P (TAXATION) & BENECIO MENEZES, AGM (TAXATION) RESPONDENT BY : SMT. ASHA DESAI, DR DATE OF HEARING : 14/11/2014 DATE OF PRONOUNCEMENT : 07 /01/2015 O R D E R PER P.K. BANSAL : 1. THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THIS TRIBUNAL IN ITA NOS. 72 & 85/PNJ/2012 DT. 8.3.2013 STATING THEREIN THAT SUBSEQUENT TO THE ORDER OF THE TRIBUNAL A SURVEY U/S 133A WAS CONDUCTED IN ASSESSEES CASE ON 20. 3.2014. BASED ON THE INFORMATION FOUND DURING THE COURSE OF THE SURVEY AND POST SURVEY INQUIRIES CONDUCTED/STATEMENTS RECORDED FROM VARIOUS FABRICATORS IT WAS NOTICED THAT THE ASSESSEE COMPANY SUPPRESSED CERTAIN VITAL MATERIAL FACTS REGARDING TO THE SETTI NG UP OF THE EOU UNITS OF AMONA AND CHITRADURGA. THESE MATERIAL FACTS ARE VERY IMPORTANT IN CONSIDERING WHETHER THE TWO EOUS FULFILLED THE CONDITIONS MENTIONED U/S 10B 2 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) OR NOT. ON ACCOUNT OF SUPPRESSION OF THE MATERIAL FACTS BY THE ASSESSEE COMPANY, THE T RIBUNAL CAME TO THE INCORRECT CONCLUSION ON FACTS THAT THE ABOVE TWO UNITS FULFILLED THE CONDITIONS REQUIRED FOR CLAIMING EXEMPTION U/S 10B. IT WAS FURTHER STATED THAT IT IS ESSENTIAL NOW TO CONSIDER THE MATERIAL FACTS SUPPRESSED BY THE ASSESSEE BEFORE TH E INCOME TAX AUTHORITIES AND HON'BLE TRIBUNAL FOR ARRIVING AT THE CORRECT DECISION REGARDING SETTING UP OF THE ABOVE UNITS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10B. IT WAS ALSO STATED THAT THERE IS MISTAKE APPARENT FROM THE RECORD WHICH NEEDS RECTIFI CATION IN THE CASE OF THE ASSESSEE COMPANY AND FOR THIS, DETAILED SUBMISSIONS WERE MADE RUNNING INTO 14 PAGES OF SINGLE SPACE. ULTIMATELY, IT WAS REQUESTED TO CONSIDER THE MATERIAL FACTS SUPPRESSED BY THE ASSESSEE COMPANY BEFORE THE INCOME TAX AUTHORITIES AND THE TRIBUNAL AND ALSO THE APPARENT MISTAKES ON THE ISSUE OF MANUFACTURI NG FOR THE PURPOSE OF SEC. 10B IN THE TRIBUNALS ORDER AND MODIFY THE ORDER SUITABLY. 2. THE LD. DR VEHEMENTLY CONTENDED ON THE BASIS OF THE MISCELLANEOUS APPLICATION THAT MISTAKE HAD CREPT INTO THE ORDER OF THIS TRIBUNAL. THIS TRIBUNAL HAS NOT CONSIDERED THE MATERIAL WHICH HAS BEEN FOUND BY THE REVENUE DURING THE COURSE OF THE SURVEY U/S 133 A CARRIED OUT SUBSEQUENT TO THE ORDER OF TRIBUNAL DT. 8.3.2013 ON 20.3.2014 AND IF THESE MATERIAL FACTS ARE NOW CONSIDERED BY THE TRIBUNAL, THIS TRIBUNAL WILL FIND THAT AMONA UNIT IS AMALGAMATED/RECONSTRUCTED UNIT FROM THE EXISTING TWO DRY PLANTS FOR BENEF ICIATION AND THE LIMIT OF 20% OLD MACHINERY USED IN NEW UNIT IS NOT APPLICABLE TO THE RECONSTRUCTED UNIT U/S 10B. SHE ALSO CONTENDED THAT THIS TRIBUNAL IN ITA NO. 44/PNJ/2009 FOR A.Y 2005 - 06 IN THE CASE OF V.S. DEMPO & CO. PVT. LTD. TOOK THE VIEW THAT PRO CESSING OF ORE WITHOUT EXTRACTION DOES NOT AMOUNT TO PRODUCTION OR MANUFACTURE FOR THE PURPOSE OF SEC. 10B CLAIM RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHOWGULE & CO. PVT. LTD. VS. UNION OF INDIA, AIR 1981. THE ASSESSEE WAS PR OCESSING CRUDE ORE 3 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) AND THEREFORE THERE WAS NO MANUFACTURING IN THE CASE OF THE ASSESSEE. OPERATION OF MINING CANNOT BE TERMED AS MANUFACTURE. WHEN A QUERY WAS RAISED BY THE BENCH WHETHER ANY APPEAL HAS BEEN FILED BEFORE THE HON'BLE HIGH COURT, THE LD. DR WAS FAIR ENOUGH TO CONCEDE THAT THE REVENUE HAS FILED AN APPEAL BEFORE THE HON'BLE HIGH COURT. EVEN THE REVENUE HAS FILED MISCELLANEOUS APPLICATION ON THE ISSUE OF CONSIDERATION OF DECISION OF CHOWGULE & CO. PVT. LTD. AS WELL AS THE ISSUE WHETHER THE ASS ESSEE IS ENGAGED IN MANUFACTURING OR NOT BEFORE THIS TRIBUNAL EARLIER BEING M.A. NO. 10/PNJ/2013 . WHEN INQUIRED ABOUT THE FATE OF THE MISCELLANEOUS APPLICATION, THE LD. DR WAS FAIR ENOUGH TO CONCEDE THAT THE MISCELLANEOUS APPLICATION WAS DISMISSED BY THIS TRIBUNAL VIDE ORDER DT. 19.9.2013. 3. THE LD. AR ON THE OTHER HAND VEHEMENTLY CONTENDED THAT THIS TRIBUNAL HAS ALREADY DECIDED THE APPEAL AND HAS DULY CONSIDERED THE DECISION, WHATEVER HAS BEEN CITED BY THE ASSESSEE AS WELL AS THE REVENUE. IT IS NOT A C ASE OF NON - CONSIDERATION OF THE DECISIONS. THE TRIBUNAL HAS DECIDED THE ISSUE WHETHER THE ASSESSEE IS ENGAGED IN MANUFACTURING OR NOT ON THE BASIS OF THE EVIDENCE AND MATERIALS FURNISHED BY THE ASSESSEE AS WELL AS BY THE REVENUE. THE REVENUE HAS ALSO GON E IN APPEAL BEFORE THE HON'BLE HIGH COURT. BEFORE THE HON'BLE HIGH COURT THE REVENUE HAS TAKEN AS MANY AS 15 QUESTIONS IN ITS APPLICATION. QUESTION ( A ) TO (D) RELATE TO THE ISSUE WHETHER THE ASSESSEE IS ENGAGED IN MANUFACTURING OR NOT FOR THE PURPOSE OF CLAIM OF DEDUCTION U/S 10B WHILE QUESTION (E) RELATES TO WHETHER ASSESSEE HAS RENOVATED UNITS AS NEW EOU WHEN THERE WAS ONLY ADDITION/REPLACEMENT AND DEPRECIATION HAS BEEN CLAIMED ON THE PLANT AND MACHINERY OF THE EXISTING UNIT. FOR THIS, OUR ATTENTION WA S DRAWN TOWARDS PG. 132 - 133 AND IT WAS POINTED OUT THAT ULTIMATELY THE HON'BLE HIGH COURT ADMITTED THE APPEAL BEING T.A NO. 13/2013 VIDE ITS ORDER DT. 23.9.2013 ON THE FOLLOWING THREE QUESTIONS : 4 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) I. WHETHER ITAT IS CORRECT IN APPLYING THE DEFINITION OF MANUFACTURE GIVEN IN SEZ ACT 2005 WHICH IS APPLICABLE FOR THE PURPOSE OF ONLY SECTION 10AA OF THE IT ACT WHICH IMPOSES VARIOUS CONDITIONS FOR THE UTILIZATION OF PROFITS? II. WHETHER ITAT IS CORRECT IN DIRECTING THE AO TO RESTRICT THE OPEN MARKET RATE OF THE IRON ORE TO AVERAGE PURCHASE VALUE TO THE ASSESSEE WHEN THERE ARE DIFFERENCES IN GRADE/QUALITY BY APPLYING THE PROVISIONS OF SECTION 10B(7) R.W.S. 80IA(8) OF THE I.T. ACT B EING THE AVERAGE PURCHASE VALUE NOT AT THE ARMS LENGTH PRICE ? WHETHER ITAT IS ALSO CORRECT IN NOT CONSIDERING PRO RATA OVERHEAD COSTS IN DETERMINING PROFITS FROM EOUS ? III. WHETHER ITAT IS CORRECT IN DELETING THE DISALLOWANCE OF RS.12.29 CRORES MADE U/ S 14A OF THE IT ACT IN ACCORDANCE WITH RULE 8D OF IT RULES AS PROVIDED BY THE DECISION GIVEN BY THE MUMBAI SPECIAL BENCH AT ITAT IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. (2009) 117 ITD 169 ? 4. THUS, THE QUESTION WHETHER THE ASSESSEE HAS RENOVATED UNITS AS NEW EOUS WAS NOT ADMITTED. THE LD. AR ALSO POINTED OUT THAT THE REVENUE HAS GIVEN EFFECT TO THE ORDER OF THIS TRIBUNAL ONLY ON 17.10.2014, THAT ALSO ON THE DIRECTION OF THIS TRIBUNAL VIDE INTERIM ORDER DT. 21.8.2014 IN ITA NO. 187/ PNJ/2014. EVEN THE REVENUE WAS NOT READY TO GIVE APPEAL EFFECT. THE TRIBUNAL IS BOUND TO CONSIDER THE MATERIAL AND EVIDENCES WHICH ARE BEFORE IT AT THE TIME OF THE HEARING. FOR THIS, OUR ATTENTION WAS DRAWN TO RULE 18(6) OF APPELLATE TRIBUNAL RULES, 1963 . REVENUE HAS MOVED MISCELLANEOUS APPLICATION ON THE BASIS OF SURVEY CONDUCTED ON 20.3.2014 I.E. MUCH AFTER THE ORDER HAS BEEN PASSED BY THIS TRIBUNAL. SINCE THE REVENUE FAILED AT EVERY STAGE, THEREFORE THEY CONDUCTED SURVEY DT. 20.3.2014 AND NO NEW /FRES H EVIDENCE HAVE BEEN FOUND IN THE SURVEY. WHATEVER EVIDENCES ARE THERE, THEY WERE AVAILABLE EVEN AT THE TIME OF ASSESSMENT ALSO. BY FILING THE MISCELLANEOUS APPLICATION THE REVENUE IS TRYING TO COMPEL THE TRIBUNAL TO RE - CONSIDER AND REVIEW ITS JUDGEMENT WHICH THE TRIBUNAL CANNOT DO. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. KAMAKSHI FINANCE CORPORATION LTD., (1991) 53 ELT 433 IN WHICH THE HON'BLE SUPREME COURT HAS HELD AS UNDER: 5 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) JUDICIAL PROPRIE TY DEMANDS THAT THE ORDER OF THE TRIBUNAL SHOULD NOT ONLY BE RESPECTED BUT IT SHOULD BE FOLLOWED BY A LOWER AUTHORITY. IF THE AUTHORITY SUBORDINATE TO THE TRIBUNAL IS ALLOWED TO PICK UP HOLES, GAPS OR SOME INFIRMITIES OR IS OF THE VIEW THAT DIFFERENT LINE OF THINKING IS POSSIBLE, THEN THERE WILL BE JUDICIAL CHAOS AND THERE WILL NOT BE ANY FINALITY TO LITIGATION. THIS PROCESS, IF PERMITTED, WILL LEAD TO UNNECESSARY HARASSMENT TO THE TAXPAYER WHICH IS NOT ENVISAGED BY THE STATUTE NOR PERMITTED BY LAW. 5. IT WAS POINTED OUT THAT THE REVENUE HAS ALLEGED THAT THE AMONA UNIT IS A MERGED/RECONSTRUCTED UNIT FROM THE EXISTING TWO DRY PLANTS AND ONE WET PLANT FOR BENEFICIATION IS SUPPRESSED BY THE ASSESSEE BEFORE THE ASSESSING AUTHORITY AND THE APPELLATE AUTHORITI ES INCLUDING THE TRIBUNAL. IN THIS REGARD, IT WAS STATED THAT THE OLD UNIT AMONA WAS SET UP IN 1985 AND HAD BECOME OUT - DATED, OBSOLETE AND EVEN DANGEROUS AND UNECONOMICAL TO RUN AFTER A SPAN OF 17 YEARS. THE ASSESSEE THEREFORE UNDERTOOK A MAJOR REVAMPI NG OF THIS PRODUCTION FACILITY AND IN THE PROCESS ENDED UP SETTING UP AN ALTOGETHER NEW UNIT DURING F.Y 2002 - 03. THIS FACT HAS BEEN NOTED BY THE TRIBUNAL AT PARA 45.14 OF THE IMPUGNED ORDER. THE ASSESSEE HAS MADE HUGE INVESTMENT IN THIS UNIT. THIS FACT HA S ALSO BEEN CONSIDERED BY THE TRIBUNAL AT PARA 45.11 OF ITS ORDER DT. 8.3.2013. IT WAS ALSO NOTICED BY THE TRIBUNAL UNDER PARA 45.11 THAT THE PRODUCTION CAPACITY OF AMONA UNIT HAS INCREASED AND GOT DOUBLED FROM 1 MTPA TO 2 MTPA. THIS FACT HAS FURTHER BEE N RECOGNISED BY THE TRIBUNAL IN PARA 45.14 OF ITS ORDER. IT WAS FURTHER POINTED OUT THAT THE TRIBUNAL HAS ALSO CONSIDERED THE PERMISSIBLE LIMIT OF 20% OF THE OLD MACHINERY UNDER PARA 45.11 & 45.14 OF ITS ORDER AND THE TRIBUNAL HAS DULY LAID DOWN THE VARIO US GUIDING PRINCIPLES FOR RECKONING OF NEW UNIT UNDER PARA 45.16 AND 45.17 OF ITS ORDER. THE AO HAS NOT CONTROVERTED ANY OF THE FINDINGS OF THE TRIBUNAL BUT HAS COME UP WITH THE THEORY OF NEW DISCOVERY DURING THE COURSE OF SURVEY U/S 133A CONDUCTED ON 20.3.2014. IN THE SURVEY ONE BOOK WAS IMPOUNDED AND MARKED AS BB - 2 8. THE BOOK IS TITLED M/S. SESA GOA LTD. CAPITAL EXPENDITURE PROPOSAL FOR 2002 - 03. 6 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) 6. THE LD. AR POINTED OUT THAT A CCORDING TO THE DEPARTMENT THE MOST IMPORTANT MATERIAL FACTS REVEALED DURING THE COURSE OF THE SURVEY AT THE PREMISES OF THE APPELLANT ON 20.3.2014, AND THE POST - SURVEY INVESTIGATIONS, ARE THAT, THE AMONA EOU WAS AN AMALGAMATED/RECONSTRUCTED UNIT FROM THE EXISTING TWO DRY PLANTS AND ONE WET PLANT, WHICH FACT, ACCORDING TO A.O. WAS SUPPRESSED BY THE ASSESSEE BEFORE THE ASSESSING AUTHO RITY AND APPELLATE AUTHORITIES A ND THE BASIS OF SUCH CONTENTION IS THE ABOVE BOOK IMPOUNDED. THE IMPLICATION IS THAT THE ASSESSEES UNITS DID NOT FULFILL THE CONDITIONS LAID DOWN UNDER CLAUSE (II) OF SECTION 10 B(2) OF THE ACT, AND CONSEQUENTLY THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S. 10 B OF THE ACT IN RESPECT OF THE SAID UNIT, AND THAT THE ASSESSEE HAD CLAIMED THE SAID DEDUCTIONS BY SUPPRESSING THE AFORESAID FACTS. 7. IN THIS REGARD, THE ASSESSEE STATE D THAT THE OPERATIONS OF THE SAID THREE PROCESSING FACILITIES WHICH WERE NEITHER SYNCHRONISED NOR INDEPENDENT ON THEIR OWN AND HAD BECOME OBSOLETE AND HAD FINISHED OR NEARLY FINISHED ITS ECONOMIC LIFE WERE DISMANTLED & OUTDONE SO AS TO ALLOW CONSTRUCTION / SETTING UP OF ALTOGETHER NEW UNDERTAKING WITH UPGR ADED AND SUBSTANTIALLY INCREASED CAPACITY - WHICH WAS THUS LOOSELY NOMENCLATURE AS AMALGAMATION OF AMONA PLANTS BY THE TECHNICAL & ADMINISTRATIVE STAFF PRIMARILY ENTRUSTED WITH THE UP KEEPING & OPERATION OF SUCH FACILITIES SO AS TO BE CLEAR IN THEIR MIND AS TO THE MAIN EFFECT & EFFECTED FACILITIES BY VIRTUE OF SUCH OPERATION. THUS, WHAT WAS KNOWN AS AMALGAMATION OF AMONA PLANTS WAS THE EXERCISE TO CONCURRENTLY SETTING UP A NEW SINGLE NEW UNIT WITH NEW TECHNOLOGY AND UPGRADED CAPACITY (THUS DULY DESTROYI NG THE IDENTITY OF THE OLD UNIT) AT AMONA AT A TOTAL COST OF RS.3,94,30,906/ - , WHICH INCLUDED THE DEPRECIATED VALUES OF THE PREVIOUSLY USED EQUIPMENTS, TRANSFER FROM THE OLD PLANTS OF RS.26,17,712/ - . THE ASSESSEE ALSO STATE D THAT THE NEW UNIT WAS CONSTRU CTED WITH A RATIONAL CONFIGURATION OF EQUIPMENTS WITH LATEST TECHNOLOGY AND WITH MUCH HIGHER THROUGH - PUT CAPACITY FOR PROCESSING THE IRON ORE. THIS ASPECT HAD BEEN ELABORATED ON THE SAID PAGE NO. 7 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) 20 OF THE CAPITAL EXPENDITURE PROPOSAL FOR 2002 - 03, TO WHI CH PROPOSAL THE A.O. HAS REFERRED TO IN IN THIS MA AS NEW EVIDENCE. IT IS TRUE THAT THE COMPREHENSIVE EXERCISE OF SIMULTANEOUS DISMANTLING/DISCARDING THE OPERATIONS OF THE SAID THREE PLANTS AND REPLACEMENT OF SAME BY A NEW PLANT HAD BEEN LOOSELY REFERRED TO IN THE SAID CAPITAL EXPENDITURE PROPOSAL UNDER REFERENCE AS AMALGAMATION OF AMONA PLANTS FOR THE PURPOSE OF INTERNAL REFERENCE OF THE PROJECT, AND IT CANNOT BE CONSIDERED AS THE LEGAL DEFINITION OF THE PROJECT FOR TAX PURPOSE LET ALONE THE DEFINIT ION OF AMALGAMATION AS UNDERSTOOD IN COMPANY LAW PARLANCE. 8. THE LD. AR ALSO EXPLAINED THAT B ECAUSE OF THE INNOVATIVE TECHNOLOGY & CONCURRENT ACTION VIS - A - VIS THE DIFFERENT FACILITIES THERE, AS DULY EXPLAINED IN FOREGOING PARAS, IT WAS ONLY A NAME THAT W AS GIVEN TO THE PROJECT. THE ASSESSEE FURTHER SUBMIT TED THAT, SINCE THE ALTERATIONS AND CHANGES OF NEW UNIT ARE SUBSTANTIAL IN NATURE AND DID CULMINATE INTO BRINGING AN ALTOGETHER NEW UNDERTAKING IN PLACE OF THE OLD ONE, THERE WAS LITTLE SCOPE FOR DESCRIBI NG THE NEW UNIT AS RECONSTRUCTION OF THE BUSINESS FOR THE PURPOSE OF THE CONDITION MENTIONED UNDER CLAUSE (II) OF SECTION 10 - B (2) OF THE ACT. AS THE BOOK IS TITLED M/S SESA GOA LIMITED, CAPITAL EXPENDITURE PROPOSAL FOR 2002 - 03, IT SUGGESTS THAT THE SAI D DOCUMENT REFERS TO THE CAPITAL PROPOSALS AND NOT THE REVENUE PROPOSALS. THE SAID BOOK FORMS PART OF THE DOCUMENTS OF THE BOARD OF DIRECTORS MEETING OF THE ASSESSEE COMPANY WHEREIN THE CAPITAL EXPENDITURE WAS APPROVED BY THE BOARD OF DIRECTORS. THE LD. A R STATED THAT THE TRIBUNAL HAS ALSO TAKEN NOTE OF THE MINUTES OF THE MEETINGS OF THE BOARD OF DIRECTORS APPROVING CAPITAL EXPENDITURE AT AMONA AT PAGE NOS 696 OF THE PAPER BOOK NO. 3 AND AT PARA 45.10 OF ITS ORDER. THE AO HAS NOT BROUGHT ON RECORD HOW TH E SAID PAGE IN A DOCUMENT WHICH IS CONTAINING AROUND 50 PAGES CAN BE A PIECE OF EVIDENCE W HEN THERE IS A DETAILED ESTIMATED BREAK UP OF CAPITAL EXPENDITURE TO SET UP THE NEW UNIT. THE SAID ESTIMATES HAS NO WHISPER ABOUT REPAIRS AS EXAGGERATED BY THE AO, 8 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) TH US TOTALLY TRYING TO MISLEAD THE TRIBUNAL AND WITH THE UNSCRUPULOUS INTENT TO RATTLE THE ESTABLISH FACTS. JUST BECAUSE THE WORD AMALGAMATION OF AMONA PLANTS WAS USED FOR THE PROJECT, IT CANNOT BE DETRIMENTAL TO THE OTHERWISE ELIGIBILITY OF THE LIMIT FOR THE PURPOSE OF SECTION 10 B AS CONTEMPLATED BY THE AC. THE RELEVANT EXTRACT OF THE SAID CAPITAL PROPOSAL ALONG WITH ASSESSESS DETAILED EXPLANATION AS ENCLOSED IN THE COMPILATION SUBMITTED ON 17.10.2014 AS ANNEXURE B AT P G. NO S. 50 - 52 . 9. THE LD. AR SUBMITTED THAT T HE FINDINGS OF THE TRIBUNAL IN COMING TO THE CONCLUSION THAT NEW UNITS HAS ACTUALLY BEEN ESTABLISHED BY THE ASSESSEE IN THE FY 2002 - 03 AT AMONA ON PAGE 154 - 160 (OF ITS ORDER) DOES NOT GET SHAKEN ON THE NEW DISCOVERY OF THE DEPARTMENT ON T HE CONTRARY THE SAME IS FORTIFIED THAT THE ASSESSE HAS SET UP ALTOGETHER A NEW UNIT: AS IT ESTABLISHES THAT THE ASSESSE HAD OBTAINED THE BOARD OF DIRECTORS APPROVAL FOR THE CAPITAL EXPENDITURE FOR THE NEW PROJECT. THE AMOUNT IS CAPITALISED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN F.Y 2002 - 03. AT THE RELEVANT TIME OF ESTABLISHING THE UNIT, THE ASSESSEE DID NOT EVEN ENVISAGE THAT THE SAME WAS CAPITALIZED FOR CLAIMING DEDUCTION U/S 10 B AS NO DEDUCTION WAS CLAIMED IN RESPECT OF THE SAID UNIT TILL F.Y. 2008 - 09 LET ALONE THE STATUS OF EOU TO SUCH UNIT. FURTHER THE VARIOUS CORRESPONDENCE WITH THE PANCHAYAT, THE PANCHANAMA, THE NEWSPAPER CLIPPINGS, THE LICENCES OBTAINED FROM VARIOUS GOVERNMENT AGENCIES FOR THE SETTING UP OF THE NEW UNIT WHICH ARE ON RECORD ETC. ARE GLARING EVIDENCES THAT THE AMONA UNIT IS NOT AN AMALGAMATION/RECONSTRUCTION UNIT FROM THE EXISTING TWO DRY PLANTS AND ONE WET PLANT FOR BENEFICIATION AS ENVISAGED BY THE 9 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) DEPARTMENT AND THE ASSESSEE HAS NOT SU PRESSED ANY CONTRARY FACTS BEFORE ASSESSING AUTHORITY NOR THE APPELLATE AUTHORITIES. 10 . WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT IN THIS CASE THE REVENUE HAS GONE IN APPEAL BEFORE THE HON'BLE HIGH COURT AGAINST THE ORDER OF THIS TRIBUNAL IN ITA NOS. 72 & 85/PNJ/2012 DT. 8.3.2013 BY WAY OF TA NO. 13 OF 2013. BEFORE THE HON'BLE HIGH COURT THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : A. WHETHER ITAT IS CORRECT IN HOLDING THAT THE PROCESSING PLANT (EOU) IN ITSELF WAS MANUFACTURING IRON ORE ERRONEOUSLY PRESUMING THAT THE PROCESSING PLANT WAS BLENDING IRON ORE THAT THE PROCESSED ORE WAS A DISTINCT COMMODITY THAN THE INPUT OF ROM IGNORING THE DECISION OF THE APEX COURT IN THE CASE OF CHOWGULE & CO. PVT. VS. U NION OF INDIA 1981 AIR 1014 AND BOMBAY HIGH COURT IN THE ASSESSEES OWN CASE (2004) (ITR 266 ITR 126) WHERE IT HAS BEEN HELD THAT MINING IS AN INTEGRAL PROCESS OF VARIOUS ACTIVITIES STARTING FROM EXTRACTION OF IRON ORE TO BLENDING AND LOADING TO THE SHIP A ND THAT THE PROCESS OF PRODUCING ORE OF CONTRACTUAL SPECIFICATIONS CANNOT BE SAID TO INVOLVE THE PROCESS OF MANUFACTURING SINCE THE ORE PRODUCED CANNOT BE REGARDED AS A COMMERCIALLY NEW AND DISTINCT COMMODITY? B. WITHOUT BRINGING INTO EXISTENCE A NEW AN D DISTINCT OBJECT OR ARTICLE OR THING BY THE PROCESSING PLANTS (THE E O US) WHETHER ITAT WAS CORRECT IN INTERPRETING THE NEW SECTION 2(29BA) THAT THE PROCESSING OF ROM AMOUNTS TO MANUFACTURE OF IRON ORE? C. WHETHER ITAT IS CORRECT IN APPLYING THE DEFINITI ON OF MANUFACTURE GIVEN IN SEZ ACT 2005 WHICH IS APPLICABLE FOR THE PURPOSE OF ONLY SECTION 10AA OF THE IT ACT WHICH IMPOSES VARIOUS CONDITIONS FOR THE UTILIZATION OF PROFITS? D. WHETHER I TAT IS RIGHT IN NOT FOLLOWING THE DECISION OF THE COORDINATE BENC H IN THE CASE OF CHOWGULE & CO LTD VS. ACIT (ITA NO.162/PNJ/2006) WHERE IT HAS BEEN HELD THAT THE PROCESSING OF IRON ORE WITHOUT EXTRACTION IN THE PROCESSING PLANT DOES NOT GIVE RISE TO ANY NEW PRODUCT AND THEREFORE, THE PROCESS IS NOT EVEN PRODUCTION PA RTICULARLY WHERE THE PROCESSING HAS BEEN SPECIFICALLY OMITTED FROM THE DEFINITION OF MANUFACTURING W.E. F. 01.04 . 2001 FOR THE PURPOSE OF SECTION 10 B? 10 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) E. WHETHER THE ITAT IS CORRECT IN ACCEPTING RENOVATED UNITS AS NEW EOUS WHEN THERE WAS ONLY ADDITIONS/ REPLACEMENTS AND DEPRECIATION HAS ALSO BEEN CLAIMED ON THE PLANT & MACHINERY OF THE EXISTING UNIT ? WHETHER 1TAT IS ALSO CORRECT IN ACCEPTING NEW EVIDENCE, ABOUT THE SALE OF SCRAP AND ERRONEOUSLY PRESUMING THE DISMANTLING OF THE OLD PLANT ? THE 1TAT FAILED TO APPRECIATE THAT IT IS NOT A CASE THAT CERTAIN ITEMS OF PLANT & MACHINERY OF OLD PLANT HAVE BEEN USED IN THE NEW PLANT BUT IT IS A CASE OF ADDITION OF SOME NEW ITEMS OF PLANT & MACHINERY IN THE EXISTING OLD PLANT? F. WHETHER THE FINDING OF ITAT IS PERVERSE OF ACCOUNT OF THE FACT THAT THE FINDINGS ARE NOT BASED ON THE DOCUMENTS AVAILABLE ON RECORD DURING THE ASSESSMENT AND BEFORE THE C I T(A) AND AS SUCH THE AO OUGHT TO HAVE BEEN GRANTED AN OPPORTUNITY TO VERIFY THE NEW D OCUMENTS FILED BY THE ASSESSEE BEFORE THE I TAT ? G. WHETHER THE ITAT WAS RIGHT IN ADMITTING FRESH EVIDENCE WITHOUT GIVING AN OPPORTUNITY TO THE AO TO VERIFY THE DOCUMENT PLACED ON RECORD BY THE ASSESSE BEFORE THE 1TAT THEREBY VIOLATING PRINCIPLES OF NATURA L JUSTICE AND CAUSING GRAVE PREJUDICE TO THE REVENUE ON ACCOUNT OF SUCH LACK OF O PPORTUNITY? H. WHETHER ITAT IS CORRECT IN DIRECTING THE A O TO RESTRICT THE OPEN MARKET RATE OF THE IRON ORE TO AVERAGE PURCHASE VA L UE TO THE ASSESSEE WHEN THERE ARE DIFFERENC ES IN GRADE/QUALITY BY APPLYING THE PROVISIONS OF SECTION 10 B(7) R.W.S. 80 I A(8) OF THE I.T. ACT BEING THE AVERAGE PURCHASE VALUE NOT AT THE ARMS LENGTH PRICE ? WHETHER ITAT IS ALSO CORRECT IN NOT CONSIDERING PRO R A TA OVERHEAD COSTS IN DETERMINING PROFITS F ROM EOUS? I. WHETHER THE ITAT IS CORRECT IN DELETING THE DISALLOWANCE OF RS.12.29 CRORES MADE U/S.14A OF THE I T ACT IN ACCORDANCE WITH RULE 8D OF IT RULES AS PROVIDED BY THE DECISION GIVEN BY THE MUMBAI SPECIAL BENCH OF ITAT IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. (2009) 117 I TD 169? J. WHETHER ITAT IS CORRECT IN DELETING THE ADDITION OF RS.9.88 CRORES TOWARDS PAYMENT OF COMMISSION TO FOREIGN AGENTS WHERE TDS WAS NOT DEDUCTED IGNORING THE DECISION OF AAR IN THE CASE OF RAJIV MALHOTRA I NRE (AAR) 284 ITR 564 AND SK F BOILERS AND DRIERS PVT. LTD. ? K. WHETHER ITAT IS CORRECT IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF NON DEDUCTION OF TDS ON DEMURRAGE AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ORIENT GOA CO. PVT. LTD . (325 ITR 554) ? L. WHETHER THE ITAT IS CORRECT IN HOLDING LOSS ON FOREIGN EXCHANGE FORWARD CONTRACTS IS NOT SPECULATIVE LOSS ? 11 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) M. WHETHER THE ITAT IS RIGHT IN DELETING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION IN RESPECT OF IRON ORE DIVISION INCLUD ING EOUS AND METALLURGICAL COKE DIVISION WHEN THE ACTIVITIES CARRIED OUT DO NOT AMOUNT TO MANUFACTURE OR PRODUCTION? N. WHETHER THE FINDING OF INCOME TAX APPELLATE TRIBUNAL IS PERVERSE OF ACCOUNT OF THE FACT THAT THE FINDINGS ARE NOT B ASED ON THE DOCUMEN TS AVAILABLE ON RECORD DURING THE ASSESSMENT AND BEFORE THE COMMISSIONER OF INCOME TAX(A) AND AS SUCH THE A O OUGHT TO HAVE BEEN GRANTED AN OPPORTUNITY TO VERIFY THE NEW DOCUMENTS FILED BY THE ASSESSEE BEFORE THE ITAT? O. WHETHER THE INCOME TAX APPELLATE T RIBUNAL WAS RIGHT IN ADMITTING FRESH EVIDENCE WITHOUT GIVING AN OPPORTUNITY TO THE A O TO VERIFY THE DOCUMENT PLACED ON RECORD BY THE ASSESSE BEFORE THE INCOME TAX APPELLATE TRIBUNAL THEREBY VIOLATING PRINCIPLE OF NATURAL JUSTICE AND CAUSING GRAVE PREJUDICE TO THE REVENUE ON ACCOUNT OF SUCH LACK OF OPPORTUNITY? P. SUCH AND OTHER GROUNDS TO B E TAKEN AT THE TIME OF HEARING. THE HON'BLE BOMBAY HIGH COURT IN TA NO. 13 OF 2013 HAS ADMITTED THE FOLLOWING QUESTIONS OF LAW VIDE ORDER DT. 23.9.2013 : I. WHETHER ITAT IS CORRECT IN APPLYING THE DEFINITION OF MANUFACTURE GIVEN IN SEZ ACT 2005 WHICH IS APPLICABLE FOR THE PURPOSE OF ONLY SECTION 10AA OF THE IT ACT WHICH IMPOSES VARIOUS CONDITIONS FOR THE UTILIZATION OF PROFITS ? II. WHETHER ITAT IS CORRECT IN DIRECTING THE AO TO RESTRICT THE OPEN MARKET RATE OF THE IRON ORE TO AVERAGE PURCHASE VALUE TO THE ASSESSEE WHEN THERE ARE DIFFERENCES IN GRADE/QUALITY BY APPLYING THE PROVISIONS OF SECTION 10B(7) R.W.S. 80IA(8) OF THE I.T. ACT BEING THE AVERAGE PURCHAS E VALUE NOT AT THE ARMS LENGTH PRICE ? WHETHER ITAT IS ALSO CORRECT IN NOT CONSIDERING PRO RATA OVERHEAD COSTS IN DETERMINING PROFITS FROM EOUS ? III. WHETHER ITAT IS CORRECT IN DELETING THE DISALLOWANCE OF RS.12.29 CRORES MADE U/S. 14A OF THE IT ACT IN ACCORDANCE WITH RULE 8D OF IT RULES AS PROVIDED BY THE DECISION GIVEN BY THE MUMBAI SPECIAL BENCH AT ITAT IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. (2009) 117 ITD 169 ? 12 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) 11. WE NOTED THAT THE HON'BLE BOMBAY HIGH COURT HAS REJECTED QUESTION NO. (A) AS RAISED BY THE REVENUE WHICH RELATES TO THE APPLICABILITY OF DECISION OF CHOWGULE & CO. PVT. LTD. VS. UNION OF INDIA, 1981 AIR 1014. EVEN QUESTION NO. (D) THAT PROCESSING OF IRON ORE WITHOUT EXTRACTION DOES NOT AMOUNT TO MANUFACTURING HAS ALSO NOT BEEN ADMITTED. EVEN QUESTION NO. (E) PUT UP BY THE REVENUE BEFORE THE HON'BLE HIGH COURT WHICH RELATES TO WHETHER THE RENOVATED UNITS ARE NEW EOUS HAS ALSO BEEN DISMI SSED BY THE HON'BLE HIGH COURT. WE NOTED THAT RULE 18(6) OF THE APPELLATE TRIBUNAL RULES STATES THAT DOCUMENTS THAT ARE REFERRED TO AND RELIED UPON BY THE PARTIES DURING THE COURSE OF ARGUMENTS SHALL ALONE BE TREATED AS PART OF THE RECORD OF THE TRIBUNAL. THE REVENUE HAS PUT UP AN APPLICATION BEFORE US MENTIONING THEREIN THAT DUE TO CERTAIN INFORMATION FOUND DURING THE COURSE OF SURVEY AND POST INQUIRIES CONDUCTED/STATEMENT RECORDED FROM VARIOUS FABRICATORS IT WAS NOTICED THAT THE ASSESSEE COMPANY SUPPRES SED CERTAIN VITAL MATERIAL FACTS REGARDING SETTING UP OF EOUS AT AMONA AND CHITRADURGA AND THESE FACTS WERE NECESSARY TO DECIDE WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10B. FROM THE SUBMISSION OF THE REVENUE IT IS APPARENT THAT THE MATERIAL AND INFORMATION ON WHICH THE REVENUE RELIED BY PUTTING UP THE MISCELLANEOUS APPLICATION HAS BEEN PROCURED SUBSEQUENT TO THE PASSING OF THE ORDER NOT ONLY BY THE HON'BLE TRIBUNAL BUT ALSO AFTER DISMISSING THE VARIOUS QUESTIONS BY THE HON'BLE HIGH COURT VIDE IT S ORDER DT. 23.9.2013. RULE 18(6) OF THE APPELLATE TRIBUNAL RULES EXPLICITLY MENTIONS THAT ONLY THE DOCUMENTS THAT ARE REFERRED TO AND RELIED UPON BY THE PARTIES DURING THE COURSE OF THE ARGUMENT SHALL ALONE BE TREATED TO BE PART OF THE RECORD OF THE TRIB UNAL. 12. THE HON'BLE SUPREME COURT IN THE CASE OF UDHAVDAS KEWALRAM VS COMMISSIONER O F INCOME - TAX , 66 ITR 462 HELD THAT THE TRIBUNAL MUST, IN DECIDING THE APPEAL, CONSIDER WITH DUE CARE ALL THE MATERIAL FACTS AND RECORD ITS FINDING AND ALL THE CONTENTI ONS RAISED BY THE ASSESSEE AND REVENUE IN THE LIGHT 13 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) OF THE EVIDENCE AND RELEVANT LAW. THE DECISION HAS TO BE MADE ONLY ON THE BASIS OF THE FACTS INVOLVED THEREIN. THE WORD RECORD, IN OUR OPINION, MEANS THE ENTIRE RECORD CONSISTING OF NOT ONLY GROUNDS O F APPEAL AND THE CASE LAWS RELIED ON AND REFERRED TO BEFORE THE TRIBUNAL, BUT ALSO THE CONTENTIONS, PLEAS AND ARGUMENTS RAISED BY THE PARTIES BEFORE THE TRIBUNAL. 13. SEC. 254(2) EMPOWERS THE TRIBUNAL TO RECTIFY MISTAKE WHICH IS APPARENT ON RECORD WITHI N 4 YEARS FROM THE DATE OF THE ORDER SUO MOTO OR ON APPLICATION BY THE ASSESSEE OR REVENUE. THE PROVISIONS OF SEC. 254(2) C AN NOT BE CONST RUED IN A MANNER THAT PRODUCES AN ANOMALY OR OTHERWISE PRODUCES IRRATIONAL OR ILLOGICAL RESULT. THE LD. DR EVEN THOU GH VEHEMENTLY ARGUED, BUT COULD NOT BRING TO OUR KNOWLEDGE THAT THIS TRIBUNAL FAILED TO CONSIDER THE CASE LAW AS CITED BEFORE THE TRIBUNAL OR THE TRIBUNAL HAS NOT CONSIDERED THE CONTENTIONS, PLEAS AND ARGUMENTS RAISED BEFORE THE TRIBUNAL BY BOTH THE SIDES. THE POWER U/S 254(2) DOES NOT CONTEMPLATE RE - HEARING WHICH WOULD HAVE THE EFFECT OF RE - WRITING THE ORDER AFFECTING THE MERIT OF THE CASE. IF THE POWER GIVEN U/S 254(2) IS READ IN THAT MANNER, THEN, IN OUR OPINION, THERE WILL NOT BE ANY DIFFERENCE BETWEE N THE POWER TO REVIEW AND THE POWER TO RECTIFY THE MISTAKE. THE LEGISLATURE HAS NOT DELIBERATELY CONFERRED THE POWER OF REVIEW ON THE TRIBUNAL AND THE TRIBUNAL CANNOT REVIEW ITS ORDER UNDER THE GARB OF POWER GIVEN U/S 254(2). IN VIEW OF OUR AFORESAID DIS CUSSION, WE ARE OF THE VIEW THAT THE DECISION OF THE TRIBUNAL IS BASED ON THE APPRECIATION OF THE FACTS AND THE CASE LAWS. THEREFORE, THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE, IN OUR OPINION, DOES NOT RELATE TO MISTAKE APPARENT ON THE RECORD REC TIFIABLE U/S 254(2) OF THE ACT. SINCE THE REVENUE HAS GONE IN APPEAL BEFORE THE HON'BLE HIGH COURT ON THE SAME VERY ISSUES, THIS TRIBUNAL IN VIEW OF THE DECISION OF THE SPECIAL BENCH, ITAT, MUMBAI IN THE CASE OF TATA COMMUNICATIONS LTD. VS. JCIT, 317 ITR 1 ( SUPRA ) CANNOT INTERFERE IN ITS ORDER PASSED ON 8.3.2013. 14 MA NO. 30/PNJ/2014 (A.Y : 2009 - 10) (ARISING OUT OF ITA NOS. 72&85/PNJ/2012) 13. IN THE RESULT, THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE STANDS DISMISSED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 /01/2015. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 0 7 /01/ 201 5 *SSL* COPY TO : (1) APPLICANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER