TaxTMI 
TaxTMI 
2013 (8) TMI 663
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....and Sri R.K. Babu, Production Manager, Unit-II were recorded. The AO made the following observations from the statements and information on record: 1) The premises on which unit-II of the company is located along with plant and machinery and Building originally belongs to M/s. Balaji Agro Industries Ltd. The same were taken on lease from M/s. Balaji Agro Industries for proposed expansion activities of the assessee. Expansion of activities claimed to have been packing works, warehouse & logistical purpose of the assessee company. 2) As per the lease agreement between M/s. Balaji Agro Industries and M/s. Alkali Metals Ltd., rentals are being paid as calculated on buildings, P&M & land as per lease agreement dt. 1.7.2000. However, the assessee claims that the land and building only is used by M/s. Alkali Metals, P&M is not useful for M/s. Alkali Metals even though lease rentals are being paid. 3) Unit I was the original Unit of M/s. Alkali existing for a long time and manufacturing chemical products like Sodium Hydride, Sodium Amide, Sodium Azide, Sodium Methoxide, Amino Pyridines, PPAN etc. This unit had both domestic and export sales. ....
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....holders is provided herewith. 5. Further during the proceedings a statement of Sri R.K. Babu, production manager of Unit-II recorded on 22-03-2006 was stated as follows categorically at Q. No, 7, 8 & 10: (7) Since when this unit started manufacturing the above product? (Ans) the production of AMINO PYRIDINES started in April 2002. The other products SODIUM AZIDE and ALKOXIDES started from December 2004 onwards. (8) You have stated that you have joined this unit as production manager in April 2001, where as the actual production of this unit started from April 2002. Please give the details of activities between the date of your joining and the date on which production started in this unit? (Ans) During that period the erection of the machinery was going on. I supervised the installation of the machinery. (10) Please give the details M/s. Balaji Agro Ind. and share holdings? (Ans) M/s Balaji Agro Industries has common promoters/ share holders as in AML and AHL List of share holders provided herewith. 6. In the statement dated 22-03-2006 recorded during the survey, the MD, Sri Y.S.R V....
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....ntents of the same. Ans. This is book maintained as per Mfg. License of Central Excise Act. Q. 14 Please go through the reply in response to Q. No. 6 wherein you have stated there is no production before Sep' 2003. However, clearance of goods were effected till March, 2003 as sales of Unit-II. However, the same are mfg. at Unit-1 and cleared from unit-III. In this connection once again please recollect and confirm facts. Ans. To the best of knowledge there is no production at Unit-II and I re-confirm the Ans. To Q. No. 6. Q. 15 Please give the details of the books maintained at Mfg. Unit situated at Uppal unit. Ans. The following books i.e., Internal production records (log sheets, log books, inward and outward gate passes, sales invoices, raw material register, sale register, Central Excise and Sales Tax Dept. statutory registers, etc.). Q. 16 Please give the details of the books maintained at Unit situated at Dommarpochampally. Ans. Prior to EOU being operational, since there being no mfg. activity only the following books are maintained; inward and outward clearance re....
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....hich has no relevance. I could not say anything beyond this. Q. 3 Who is the Production Manager of Unit-II. Ans. Shri R.C. Babu, s/o R. Dattatreyulu, was Production Manager for Unit-II. He is working approximately since 1990-91 and still working with us. He is technical supervisor looking after production activities at Unit-I originally and now shifted to Unit-II. Q. 4 Please go through Q. No. 7 and related Q. No. 8 of Shri R.C. Babu's statement dated 22.03.2006 recorded during the survey proceedings. What have you to say on this? Ans. The basic content of the statement is correct, but, I do not agree with the years mentioned in the statement as correct years of manufacture land production activity. I have nothing else to say. Q. 5 Please go through the Q. No. 10 of the same statement regarding plant & machinery existing, what have you to say on this? Ans. The old machinery of M/s. Balaji might have been taken into account by the Supervisor while giving the statement which is not useful for our stated products of Unit-E. That machinery was taken by M/s. Balaji during the FY 2006-07 as it....
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....d that the assessee entered into the lease agreement with its sister concern and had taken land, building and machinery on lease from M/s. Balaji Agro Industries and even though the machinery was not useful to it, it paid rentals for P & M also. Therefore, the AO held that unit-II was in commercial operation prior to F.Y. 2003-04. In view of the above, the AO has concluded that since there was commercial production before FY 03-04, and there was old machinery transferred to the new unit exceeding the 20% limit available as per Explanation 2 to Sec. 80-I(2) and, therefore, the claim u/s. 10B was not allowed in respect of Unit-II. 10. On appeal, the CIT(A) called for Remand Report from the Assessing Officer. The Assessing Officer submitted the Remand Report as follows: "During the appellate proceedings the AR of the assessee took the stand before my predecessor that the goods which were stated to have been sold from Unit-II prior to September, 2003 was in fact manufactured by Unit-I and duly evidenced by the gate passes of Unit-I showing as consigned to Unit-II and submitted the list of such out passes of Unit-I indicating the quantity consigned to Unit-II and show....
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....d any machinery in the leased premises before 31.3.2003 and the erection of new machinery started from April 2003, the registers maintained in the premises reflect only the transfers of finished goods from Unit-I to Unit-II and they have submitted the Central Excise invoices and gate passes for the finished goods transferred from Unit-I to Unit-Il and, therefore, there was no manufacturing activity in the leased premises before starting the 100% EOU. Subsequently, the assessee filed another letter dated 7.1. 2009 and submitted that in view of the judgement of the P&H High Court In the case of CIT vs. Excel Softech Limited (175 Taxman 257) where it was held that relevance to "newly established undertaking" is only to identify initial year of period of 10 years for which the assessee is eligible for claim of exemption u/s. 10B, since the undertaking was established in the F.Y. 200304, the assessee company is eligible for exemption u/s. 10B of the Act in respect of income earned by the 100% EOU from A.Y. 2004-05 onwards. 12. Further, the CIT(A) sought verification of production report, stock statement and other relevant details for the issue to prove that whether there was producti....
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....an accident on Ganesh Chaturdi immersion day. The assessee also contended that the Production Manager was confused during the survey because he stated that date of production of Sodium Azide is December, ?004 where. as such production already started in September, 2003. The undersigned is not in a position to offer any comments on this because only re-examination of the concerned Production Manager would bring out correct facts. It is also submitted that as per the consent order of A.P. Pollution Control Board dated 09.12.2003 cited above the production capacity of Sodium Amide, Sodium Hydride, Amino Pyridine etc., were clearly mentioned and quantities as seen from the production registers maintained by the assessee are of the same order. It is submitted that from the above, it is very clear that the assessee has established a Chemical Plant in the F. Y. 2002-03 itself and started production as seen from the impounded record. There is a possibility of collusion between officials of AP Pollution Control Board and the assessee to obtain certain consent orders either with back date or the inspection could have been conveniently done when the production ....
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.... also filed a further consent order No. APPCB/HYD/JDM/585/RO/W/ 20203/ 283 dated 09.12.2003, wherein the effluent analysis had been done by the A. P. Pollution Control Board. Finally the third public document that our company had submitted for consideration was the letter dated 04.09.2003 issued by the Assistant Commissioner (Customs) for maintenance of Customs Bonded Private Warehouse. The learned Additional Commissioner of Income Tax, Range. 1 puts the following grounds against the admissibility of the above documents. That no reason has been given as to why these documents were not produced at an earlier point of time. He seeks permission to cross examine the concerned officer from A.P. Pollution Control Board putting the onus on the assessee to produce the concerned officer as a witness. Alternatively he seeks permission to examine the officer from the Pollution Control Board in this respect. Our response to the above is as follows: All the three documents which have been produced are third party documents, emanating from public officers. There is a presumption in law that all official acts are properly done. If th....
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....the In any event whether our company would be eligible for the benefit of section 10B for the unexpired period commencing from the assessment year 2004-05 being regarded as second year in production is a legal question. The assessee in order to put at rest the needless controversy is willing to sacrifice the benefit of section 10B for one year and is ready and willing to accepted 2004-05 as the second year and for confining of the benefit for a period of nine years including assessment year 2004-05. This is however not an admission of any guilt on the part of the assessee and this ground is being made only to save valuable public time and to avoid needless controversy in the matter". 14. After considering the information submitted by the AO and the assessee, it is noticed by the CIT(A) that the alleged additional evidences on which the assessee has been relying were dated 09.12.2003 from A.P. Pollution Control Board, 04.09.2003 by Asst. Commissioner (Customs) and 22.03.2003 from Jt. Chief Environmental Engineer, after the assessee is in custody/ possession of these evidences all these days, it is not understood why it took 8 years for the assessee to produce the same before the ....
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....sp; ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence except in the circumstances specified under section 33B of the IT Act. iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Representations, have been received from various quarters as to whether an undertaking set up in Domestic Tariff Area, which is subsequently approved as 100% EOU by the Board appointed by the Central Government in exercise of powers conferred under section 14 of the Industries (Development and Regulation) Act, 1951, is eligible for deduction under section 10B of the Income tax Act. The matter has been examined and it is hereby clarified that an undertaking set up in Domestic Tariff Area (DTA) and deriving profit from export of articles or things or computer software manufactured or produced by it, which is subsequently converted into a EOU, shall be eligible for deduction under section 10B of the IT Act, on getting approval as 100% export oriented undertaking. In such a case, the deduction shall be av....
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....s directed to allow. deduction u/s. 10B from the date of its approval as 100% EOU by the competent authority for the unexpired period of 10 consecutive assessment years commencing from the assessment year 2004-05 being regarded as second year of production in first year of commercial production being A.Y. 2003-04. 18. Against these findings of the CIT(A), the Revenue is in appeal before us in all A.Ys. i.e., 2004-05 to 2009-2010. 19. The learned DR submitted that there was a survey on 22.3.2006 at three premises of the assessee i.e., the registered office at plot No. B-5, Block-III, IDA, Uppal, Factory premises at Unit-I of Uppal and Unit-II of Dommarapochampally village, Qutbullapur Mandal. During the course of survey statements were recoded from Sri Y.S.R. Venkat Rao, Managing Director (MD) of the company, Sri K.N. Prasad, DGM of the company and Sri R.K. Babu, Production Manager, Unit-II. As per their statements following information was on record. (a) The premises on which Unit-II of the company is located along with plant and machinery and Building originally belongs to M/s. Balaji Agro Industries Ltd. The same were taken on lease from M/s. Balaji Agro Ind....
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....e rentals towards plant and machinery in the factory shed. The Assessing Officer has not brought out any quantitative analysis of the new plant and machinery and the old ones. It is a fact that the Balaji Agro Industries (P) Limited was in the business of castor oil and it is not known what machinery was used in that business and whether the same was used in the manufacture of sodium metal and derivatives in the business of the assessee. The Assessing Officer had the opportunity to examine the issue of plant and machinery and dates on which the same were put to use when he went for the survey. But instead of doing that, simply because the lease deed mentioned plant and machinery and factory shed and they paid lease rent for both, has presumed that old plant and machinery used by the assessee in the EOU. The stand of the Assessing Officer could have been held valid had he given quantitative comparison of the old and new plant and machinery and arrived at the conclusion that old plant and machinery used exceeded 20% limit. 22. We have heard both the parties and perused the material on record. The main issue in this appeal is whether the assessee is entitled to claim benefit availa....
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....ndustries Ltd., for the purpose of manufacturing fine chemicals. Further though there was a survey action, the lower authorities not brought on record the bifurcation of the machinery which are already put in to use by Balaji Agro Oil Industries. The Assessing Officer not made an allegation that the assessee has not furnished the details of old and new plant and machinery but we find that the assessee vide its letter dated 7.12.2006 the assessee given the details of investment made by the assessee which is on page 134 and 135 of the Paper Book which is reproduced hereunder: "1. Details of leased premises: Lessor Balaji Agro Ind. Ltd. Lessee Alkali Metals Ltd. Assets taken on lease Land & Building Effective date 1.4.2000 Usage of Machinery (old) The plant and machinery is basically a expeller unit for extraction of castor oil from castor seeds. Thus plant and machinery of the lessor is not useful for lessee for the manufacture of chemicals. Investments in machinery (New by the lessee) 2001-02 Nil 2002-03 Nil Power Bills 2001-02 Rs. 2,78,844 2002-03 Rs. 5,55,325 2. 100% EOU Date of letter of pe....
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....went for the survey. But instead of doing that, simply because the lease deed mentioned plant and machinery and factory shed and they paid lease rent for both, has presumed that old plant and machinery used by the assessee in the EOU. The stand of the Assessing Officer could have been held valid had he given quantitative comparison of the old and new plant and machinery and arrived at the conclusion that old plant and machinery used exceeded 20% limit. There is no conclusive establishment by the Assessing Officer that there was transfer of old machinery in excess of 20% of limit. 25. Further, even otherwise, the existing DTA (domestic tariff area) unit can be converted into 100% EOU as per Government of India policy and this is enumerated in Circular No. 1/2005 dated 6.1.2005 issued by the CBDT. Being so, an assessee cannot be denied deduction u/s. 10B of the Act. Further, the assessee in this case applied for approval of Unit-II as 100% EOU to Development Commissioner on 18.12.2002 and the assessee was granted approval as 100% EOU by the Asst. Development Commissioner, Office of Development Commissioner, Visakhapatnam SEZ and issued green card under 100% EOU scheme on 25.4.2003....
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....be admissible under the provisions of subsection (2). 29. The assessee claimed in the fixed assets chart depreciation @ 100% on these items but the details of assets are not there and even before me the assessee has simply stated that the R&D machinery consisted of safety equipment and other R&D equipments. The CIT(A) observed that since the assessing officer had no occasion to verify the claim and the nature of the equipment and whether the same was in respect of the scientific research carried out by the assessee in relation to its business, the AO is directed to verify the same and allow the depreciation @ 100% if the said equipment was used in the scientific research related to the assessee's business as per the provisions of section 35(1)(iv) of the I.T. Act. Against this, the Revenue is in appeal before us. 30. We have heard both the parties and perused the material on record. Admittedly, the CIT(A) has no power to remit the issue back to the file of the Assessing Officer with effect from 1.6.2001 as the words "or he may set aside" have been removed from section 251(1)(a) of the Act. Considering this amendment, we are inclined to hold that the CIT(A) should not have sen....