TaxTMI 
TaxTMI 
2010 (7) TMI 831
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....2-03 was the first year of the claim of deduction u/s.80IB of the I.T. Act, 1961. With this brief background, now we shall discuss the merits as well as the legal aspect of the issue in hand. FACTS :- 3. During the course of assessment procee;dings for the Assessment Year 2003-04 u/s.143(3) of the I.T. Act, 1961 vide order dated 28/03/2006, it was noted by the Assessing Officer that the assessee-firm has one Unit which was said to be located in the Union Territory of Daman. The place was situated in the backward area which was claimed to be specified in VIIth Schedule of the I.T. Act, 1961. For the purpose of record, the said Unit was located at Plot No.376/2 at Kachigam Daman. It has also been noted that the assessee was engaged in the business of manufacturing of "telephone call monitors" and "coin pay phones". It is also worth to mention that the Assessing Officer has also recorded that originally the assessee was carrying on the same business from 397/3 at Mogarwada Daman. Rather, this was the allegation of the A.O., which we shall discuss hereinbelow, that the business which was being carried out earlier at Mogarwada Daman was the same business which was alleged to have ....
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....new building and installed new plant & machineries at new place, the fact is that it shifted its business from one place to another. Hence the assessee has not started a new business by reconstructing its existing business. Hence the condition laid down U/s.80IB(20(ii) read with explanation 2 is not fulfilled." 3.1. In response to show-cause notice a detailed submission was made by the assessee and the salient features of the reply of the show-cause notice can be summarized as under:- (a) The "Industrial Undertaking" at Kachingam Daman is a new undertaking, hence claimed u/s.80IB of the I.T. Act, 1961. (b) The "Industrial Undertaking" at Kachingam Daman was not formed by the transfer of machinery or plant from the old Unit at Mogarwada Moti Daman. (c) The "Industrial Undertaking" was not formed out of the splitting up or re-construction of the business already in existence. (d) The "Industrial Undertaking" was engaged in manufacturing activity. (e) The "Industrial Undertaking" had carried out the manufacturing activity with the aid of power and with the employment of more than 10 workers. (f) The "Industrial Undertaking" is a Small Scale Industrial Undertaking.....
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....erein the term as "re-construction" was defined. In his opinion, an old Unit was closed down which had given birth to a new Unit at a different place by shifting the business from one place to another. For this proposition, reliance was also placed on the decision(s) of Hon'ble Karnataka High Court in the case of Canara Wire and Wire Products Ltd. vs. CIT reported as 196 ITR 420(Kar.) and of Hon'ble Kerala High Court in the case of Kerala State Cashew Development Corporation vs. CIT reported as 205 ITR 19 (Ker.) . Finally at the end , disallowance of 80IB of the I.T. Act, 1961 of Rs.1,78,73,773/- was made. The matter was carried before the first appellate authority. 4. The first appellate authority has likewise discussed the issue at length. He has examined facts of the case, provisions of the Act and the case laws cited. From the side of the assessee, facts have further been elaborated in the following manner, few relevant important points are reproduced below:- "1. Our firm M/s.Computer Force is engaged in the manufacturing of telephone call monitors and coin pay phones. Our manufacturing unit is located at Plot No.376/2(4), Kachigam, Daman in the Union Territory of Daman &....
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....he Assessing Officer and held that factually the appellant has established an altogether new Unit which was eligible for deduction u/s.80IB of the I.T. Act, 1961. ARGUMENTS :- 6. With this aforesaid background, we have heard both the sides. On one hand, the Learned Departmental Representative has placed reliance on the findings of the Assessing Officer, however, on the other hand, Learned Authorised Representative of the assessee has placed reliance on the findings of the Learned CIT(Appeals). It is worth to mention that in addition to the evidences in respect of creation of new industrial undertaking at 376/2 at Kachigam , Daman as appreciated by the Learned CIT(Appeals) and placed in form of a paper-book before us, on enquiry Learned Authorised Representative of the assessee has also demonstrated through a statement, depicting therein the claim of depreciation, wherein under the 'block of immovable assets'; both the assets, i.e. factory premises at plot No.376/2 and at the premises at Plot No.397/3 have separately been mentioned. In respect of the new factory premises as per that chart for Assessment Year 2002-03, there was an addition of Rs.8,58,000/-. However, in respect ....
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....was argued that section 80IB of the I.T. Act, 1961, clause(2) prescribes that the deduction applies to any "Industrial Undertaking" which fulfils the conditions as laid down therein and one of them is that the "Industrial Undertaking" is not formed by splitting up, or the re-construction of a business already in existence. There is one more requirement that the "Industrial Undertaking" is not formed by the transfer of machinery or plant previously used for any purpose. So the argument before us was that neither it was a case of splitting up of the business nor it was the case of the re-construction of an already existed business. As far as the term "re-construction of business" was concerned, reliance was placed on the following decisions:- Sl.No(s) Decision in the case of ... Reported in... 1. Textile Machinery Corporation Ltd. vs. CIT 107 ITR 195 (SC) 2. CIT vs. Ganga Sugar Corporation Ltd. 92 ITR 173 (Del.) 3. CIT vs. Hindustan General Industries Ltd. 137 ITR 851 (Del.) 4. CIT vs. Rohtas Industries Ltd. 120 ITR 110 (Cal.) 5. CIT vs. Shree Digvijay Cement Co.Ltd. 144 ITR 532 (Guj.) 6. International Instruments P.Ltd. vs.....
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....icer has placed reliance on Gaekwar Form And Rubber Company Ltd. reported as 35 ITR 662) (Bom.). But in that case, the assessee-company had taken over all the assets of the business of a partnership including its good-will. In lieu of the consideration, facts of that case have revealed that, shares were allotted. Therefore, the said decision of the Hon'ble Bombay High Court was in respect of a business which was transferred lock, stock and barrel from one concern to another concern. Contrary to that, at present the facts are altogether different because admittedly a new place was allocated at Kachigam Daman onn which a new technology was deployed for manufacturing new instruments, namely, "telephone call monitors" and "coin pay phones" under the roof of a newly constructed business premises. Facts have undisputedly demonstrated that business as a whole was not transferred from old Unit to new Unit. Assets and Liabilities of the old Unit remained undisturbed as found from the position of the Depreciation Chart. Even the allegation of transfer of business activity was illfounded because of the reason that the business activity, i.e. manufacturing of Telephone Instruments was based up....
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....that there was no evidence with the Assessing Officer through which it could be demonstrated that the machinery was transferred from old unit to new unit. There was no iota of evidence to say that it was a case of "splitting up of the old business. The old unit was closed down way back in the year-1998 and the new unit had come up in the year-2002 and an entirely new building was constructed with the deployment of new technology to manufacture new type of telephone instrument. The assessee has successfully demonstrated that the new unit was set up with the substantial investment in plant & machinery. On account of these facts as well as on account of the legal position as discussed hereinabove, we find no force in the grounds of the Revenue, hence dismissed. 11. In this manner, for Assessment Years 2002-03, 2003-04 & 2004- 05 & 2006-07 in all four years ground No.1 of the Revenue is hereby dismissed. 12. For Assessment Year 2002-03, there was an another ground i.e. ground No.2 reads as follows:- (2) On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs.5,14,790/- made on account of creditors. 12.1. In short ,v....
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.... creditor but a case of a trade creditor to whom the payments were made through proper banking channel therefore there was no scope of any doubt , and if there was any , the AO could have verified through his own resources. 14. On hearing the rival submissions once the admitted factual position is that in the subsequent years, the payments have been made to those creditors and the ledger account has affirmed the same which was verified by the first appellate authority, therefore, in the absence of any contrary material, we have no reason to doubt the findings on facts of the first appellate authority. We hereby affirm those findings and dismiss this ground of the Revenue. 15. For Assessment Year 2002-03, there is one more ground, i.e. ground No.3 reproduced below:- (3) On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs.1,00,000/- made on account of capital introduced by the partner. 14.1. On perusal of capital account of one of the partners, namely, Shri Manjit Singh it was noticed by the Assessing Officer that a sum of Rs.1 lac was introduced as cash on 14/12/2001. In the absence of proper reply the said a....
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.... first day of the accounting year. In all, therefore, the decisions as cited by the side of the Revenue can be said to be misplaced and do not cover exactly the issue in hand. On the other hand, the decision of Hon'ble Gujarat High Court in the case of Pankaj Dyestuff Industries(supra) is directly on the issue wherein the Hon'ble Court has held quote "Once partners have owned that the monies deposited in their accounts are their own, the Income Tax Officer is entitled to and may proceed against the partners and assess the same in their hands, if their explanation is not found satisfactory."unquote. 15.1. Since Learned CIT(Appeals) being under the territorial jurisdiction of the Hon'ble Gujarat High Court has also directed the Assessing Officer to take due legal action in the hands of the partner considering the capital introduced by him in his respective capital account, therefore, in our considered opinion, being within the jurisdiction of the Gujarat High Court, the directions given by the Learned CIT(Appeals) deserves to be upheld and the deletion of addition in the hands of the assessee-firm is hereby confirmed. With the result, ground of the Revenue is dismissed. 16. For....