TaxTMI 
TaxTMI 
2013 (8) TMI 633
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....manufacturing of ceramic tiles and trading in bath accessories. The return of income for A.Y. 2004-05 was originally filed by the assessee on 1-4-2004 declaring total income of Rs. 30,39,56,198/-. Subsequently, the assessee filed a revised return on 22-3-2006 declaring a total income of Rs. 27,93,89,640/- after claiming inter alia deduction u/s 80IB of the Act at a revised figure of Rs. 4,18,04,400/-. In the assessment originally completed u/s 143(3) of the Act vide an order dated 29-12-2006, the total income of the assessee was computed by the A.O. at Rs. 29,68,79,580/-. The said assessment was set aside by the ld. CIT vide an order dated 26-3-22009 passed u/s 263 of the Act with a direction to the A.O. to examine inter alia the claim of the assessee for deduction u/s 80IB of the Act. The said deduction was claimed by the assessee in respect of profits derived from Karaikal Unit which was purchased as going concern from M/s EID Parry (India) Ltd. on 2-3-2000. Since the said unit was established by EID Parry Ltd. in the year 1996, it was claimed to be eligible for deduction u/s 80IB of the Act in the year under consideration i.e 2004-05 being 9th year of operation. As per the direc....
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....duction. The A.O. held that in the case of the assessee, it was clear from the reply of EID Parry (India) Ltd. that it had not availed the deduction u/s 80IB of the Act and the assessee was not successor to EID Parry (India) Ltd. in respect of claim of deduction u/s 80IB of the Act. Accordingly, the claim of the assessee for deduction u/s 80IB in respect of Karaikal Unit was disallowed by the A.O. in the assessment completed u/s 143(3) r.w.s. 263 of the Act vide an order dated 19-11-2009. 5. Against the order passed by the A.O. u/s 143(3) r.w.s. 263 of the Act, appeal was preferred by the assessee before the ld. CIT(A) disputing the disallowance of its claim for deduction u/s 80IB of the Act. Before the ld. CIT(A), the assessee filed additional evidence in support of its claim for deduction u/s 80IB of the Act which was forwarded to the A.O. for his examination and comments by the ld. CIT(A). The A.O. submitted the remand report to the ld. CIT(A) offering his comments as under:- "(i) The assessee in the revised return of income has claimed deduction u/s. 8013 of Rs. 4, 18,04,4001- being 30% of Rs. 13,93,48,000!-. This claim is in respect of Karaikal Unit at Pondicherry. This ....
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....uring the proceedings u/s 263 to prove that the claim of deduction u/s. 80IB in respect of Karaikal Unit was availed by predecessor. However, the assessee has failed to so. In view of the above, the deduction U/S. 80IB claimed of Rs. 4,18,04,400/- was disallowed in the assessment order. (ii) The assessee has now filed two certificates stating to be received from M/s EID Parry (India) Ltd., certifying that the Karaikal Unit was established by them as a new unit and it is not formed by the transfer to a new business of plant or machinery previously used for any purpose and such machinery or plant was not at any time previous to the date of the installation by the company, used in India and that Karaikal Unit has started the commercial production during March, 1996. The assessee has also filed copy of fixed asset register of M/s EID Parry (India) Ltd. In this connection, it is submitted that during the course of assessment proceedings, sufficient opportunities were given to the assessee to furnish supporting evidence in respect of claim of deduction u/s. 80IB vide letters/notices dated 12.08.2009 and 06.11.2009. The assessee, instead of merely stating that it has satisfied al....
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....ts as well as the submissions earlier made by the assessee, the comments made by the A.O. in the remand report and material available on record, the ld. CIT(A)allowed the claim of the assessee for deduction u/s 80IB of the Act in respect of Karaikal Unit for the following reasons given in para No. 2.9 of his impugned order:- "2.9 After considering of the facts and circumstances, it is established that EID Parry India Ltd. was started in 1996. Secondly, it is confirmed that appellant company has purchased this unit as a running concern from M/s EID Parry India Ltd. on 02.03.2000. Thirdly it is true that neither the old company M/s. EID Parry India nor the appellant company has claimed deduction u/s 80IB in the earlier years. Fourthly, it is again true that this is the year of this company for claiming deduction u/s. 80IB. The conditions laid down u/s. 80IB that - (i) it should not be formed by splitting up or reconstruction is fulfilled by the appellant company and (ii) it is not formed by the transfer of machinery, new business because it has taken over as a running concern. The other conditions relating to claiming of depreciation has also been fulfilled by this unit. The argum....
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....a) Ltd. in the year 1996 and therefore the satisfaction of eligibility condition was required to be established with reference to that initial year especially when no deduction u/s 80IB of the Act was claimed by EID Parry (India) Ltd. in the initial year. He contended that the decision of the ld. CIT(A) allowing the claim of the assessee for deduction u/s 80IB of the Act in respect of Karaikal Unit for the year under consideration thus is not well founded and his impugned order on this issue is liable to be set aside. 8. The ld. counsel for the assessee, on the other hand, strongly supported the impugned order of the ld. CIT(A) allowing the claim of the assessee for deduction u/s 80IB of the Act in respect of Karaikal Unit. He submitted that the fixed asset register of EID Parry (India) Ltd. was produced by the assessee to show that all the assets purchased and installed in Karaikal Unit were the new assets. He submitted that no deduction was claimed in respect of the said unit u/s 80IB of the Act in the earlier years because there were continuing losses. He contended that whatever enquiries made by the A.O. in relation to the assessee's claim for deduction u/s 80IB of the Act w....
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....pportunity of being heard. The appeal of the Revenue for A.Y. 2004- 05 is accordingly treated as allowed for statistical purpose. 10. Now, we shall take up the appeal of the Revenue for A.Y. 2005-06 wherein the following grounds are raised by the Revenue:- "1. On the acts and in the circumstances of the case and in law, the CIT(A) erred in directing deduction u/s.801B without considering the fact that the unit established in Karaikal, Pondicherry did not fulfill the condition for eligibility of such deduction." 2. On the facts and in the circumstance of the case and law, the CIT(A) erred in deleting the disallowance made u/s 36(1)(va) on account of deposit of employees contribution to PF/ESTC made beyond the due date. 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting disallowance of interest attributable to amounting utilized for acquiring office premises ignoring the provisions as per Explanation to Section 43(1) wherein it stipulates that interest expenses incurred for acquisition of asset after putting the same to use shall not only form part of the actual cost of the assets." 11. We have heard the arguments of both the ....
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....ase of capital assets should not be capitalized as per Explanation 8 to section 43 of the Act. In reply, it was submitted by the assessee that as per proviso to section 36(1)(iii), interest in respect of capital borrowed for acquisition of asset for the extension of existing business is not allowable as revenue expenditure and since the office premises was acquired for the purpose of existing business and not for the extension of the existing business, the proviso to section 36(1)(iii) of the Act was not applicable and the interest was allowable as deduction as per the main provisions of section 36(1)(iii) of the Act. This explanation of the assessee was not found acceptable by the A.O. He held that although the proviso of section 36(1)(iii) was not applicable in the case of the assessee, since the concerned office premises had not been put to use during the year under consideration, interest attributable to the same was not allowable as a revenue expenditure. Accordingly, such interest attributable amounting to Rs. 1.39 crores was disallowed by the A.O. and the same amount was capitalized by him towards the cost of capital asset. 15. Before the ld. CIT(A), it was contended on b....