TaxTMI 
TaxTMI 
2015 (10) TMI 986
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....D. CIT(A) inspite of the detailed discuss on the subject and a ground having been specifically taken by the appellant has by passed the issue by not even making whisper on the same. 3 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in not admitting the crucial additional evidence filed under Rule 46A of the Income -tax Rules on the ground that the appellant was allowed sufficient opportunities to adduce evidence during the course of assessment proceedings and it has failed to substantiate its claim for admission of additional evidence under the said rule. 4 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in summarily rejecting the additional ground of appeal raised u/s 250(5) of Income -tax Act, 1961. 4.1 That the Ld. CIT(A) has wrongly stated that he has considered ground No. 4 while deciding the request for admission of additional evidence at para 5.5. The same is incorrect as no such consideration has taken place at para 5.5. 4.2 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in rejecting the additional ground of appeal No. 2 raised u/s 250 (5) contending that the order u....
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....A) on the ground that form 10CCB cannot be relied upon, has discussed and applied the facts relating to Assessment Year 2009-10 while deciding the case for the impugned Assessment Year and has wrongly held that Audit report in Form No. 10CCB dated 20.2.2009 prepared by Chartered Accountant. CA Amit Gupta was an afterthought and no credence can be given to the said report. 8 That on the facts and in the circumstances of the case the LD. CIT(A) has erred in not allowing the depreciation on plant and machinery amounting to Rs. 72,21,35,592/- despite the appellant furnishing all the necessary evidence regarding their purchase and use during the year for the purpose of applicant's business. 8.1 That the Ld. CIT(A) has grossly erred in upholding the disallowance of normal depreciation which was denied by the Assessing officer on the basis of statement obtained u/s 131 from Mr. R. Sandal, the erstwhile Tax Auditor, as who was not even allowed to be crosse-xamined by the appellant. 9 That the Ld. CIT(A) has further erred in not allowing the additional depreciation on plant & machinery allowable u/s 31(1)(iia) of the Income -tax Act, 1961 a claim raised by way of additional ground of app....
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....2 and rejected the request vide para 5.5 which is as under: " I have carefully gone through the contents of the remand reports, the rejoinders and the impugned order. It is very evident from the assessment order that the assessee was afforded sufficient opportunities to explain its claim for deduction. However, it has failed to do so. It has also not put up a clear case for invoking Rule 46A(2). In other words, the assessee could not show how it can come within the ambit of the exceptional clause of Rule 46A(2). The impugned order and the copy of the order sheets Assessment year 2008-09 and Assessment year 2009- 10 supplied in the remand report dated 27.9.2012 clearly suggests that repeated opportunities was given to the assessee to explain its claim for more than two months. However, the assessee did not avail of the opportunities. In fact, of the documents now sought to be admitted, as listed in the above para, relating to amongst others, the Director of Boilers; copies of major bills of addition of trucks, Power Plant for Assessment year 2007-08, 2008-09 and 2009-10 as well as the Exports out of India, c....
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..... This establishes the factum of long period of storage of paddy by the company. ii) Tetra pack only to show that paddy is stored for maturing for long duration. iii) Change of accounting year and extension of AGM to show that Company was seeking to prepare of separate balance sheet for ROC and Income Tax for accounting year as well as financial year. iv) Gate in / out reports to establish transportation activity being undertaken by the company. v) Certificate from Chartered Engineer regarding Old Machinery abandonment since F.Y. 2005. vi) Certificate and clarification from Director of Boiler, Government of Punjab for commencement of Boiler on 31.10.2007 for Power Plant. vii) The copies of major bills of addition of Trucks, Power Plant & Expansion of integrated Rice unit, copy of building account to establish storage / warehousing. viii) The copies of bills of constructing of warehouse Silo. Copies of photographs also enclosed. ix) The copies of insurance policies of storage, transit, warehouse, power plant for the period April 2006 to March 2007, April 2007 to March 2008. x) Form 10 CCB for A.Y. 2008-09 xi) The copies of assessment orders passed by di....
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....itional evidence except for the circumstances mentioned in Rule itself. Clause (b) above show that wherever the assessee is prevented by a sufficient cause from producing the evidence then such additional evidence should be admitted. The reason for the same is very simple in the light of the settled position of law that appeal proceedings are continuation of the assessment proceedings. In this regard reliance was placed by the Ld. Counsel for the assessee on the decision of Hon'ble Supreme Court in case of CIT Vs. Kanpur Coal Syndicate, 53 ITR 125 is totally correct. In that case the Hon'ble Apex Court observed as under: "The Appellant Assistant Ld. Commissioner has plenary powers in disposing of an appeal. The scope of his powers is conterminous with that of the Income -tax Officer. He can do what the ITO can do and can also direct him to do what he has failed to do." 11 Now in the case before us, the assessee had sufficient reason which prevented it from producing various documents before the Assessing officer. A search was conducted in the premises of the assessee and ultimately a request was made by the assessee- company that since the DCIT, Central circle, Pat....
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....s that why this deduction should not be allowed on the following points: (i) The assessee has filed return late and therefore why deduction should not be denied in view of the provisions of section 80AC of Income -tax Act, 1961 (in short 'Act'); (ii) Since the audit report in form No. 3CB and 3CD and in Form No 10CCB has not been filed and therefore why deduction should not be denied. 13 In addition to above points, the Assessing officer raised another query that the assessee was already in business of manufacturing of rice then how the assessee had started new business. Further if the assessee has dismantled earlier machinery and used the same for starting new business then why it should not be considered as reconstructed business because more than 20% of old machinery has been used and accordingly why deduction should not be denied. Initially the assessee could not file much information. Ultimately on 16.12.2010 the assessee submitted some information through letter dated 12.12.2010. It was mainly stated in that letter that mega project for installation of new machinery for manufacturing of rice, solvent oil and generation of power were sanctioned by the Govt of Punjab a....
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....roduce has been defined in Ministry of Food Processing Industries. As per clause 2 of Allocation of Business in Ministry of Food Processing Industries (Goals and Objectives) covers food grain milling industry. The main goals and objectives stimulating demand for appropriate processed food, achieving maximum value addition and by product utilization, creating increased job opportunity particularly in rural area, enabling farmers to reap the benefit of modern technology, creating surpluses for exports. All these ingredients are fulfilled by the company. For this reason, the benefit u/s 80IB(11A) is admissible to the assessee. Following documents were also stated to be enclosed: 1 Form 10 CCB is enclosed. 2 The bills for the machinery purchased are being produced for examination. 3 Photo copy of bills of fixed asset additions are enclosed. However, the Assessing officer noted that though it was stated by the assessee that Form 10CCB and bills for the project machinery were enclosed but same were not found as enclosures. Ultimately it was accepted by the assessee that Form 10CCB was not readily available. In this background the Assessing officer denied deduction u/s 80IB by gi....
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....re - 14 Other Income Insurance Claim received 2445189.79 Round off income 0.00 Rebate and Discount 5223673.79 Misc. Income 142268.00 Dividend Received 17040.00 Interest Received 3319636.00 Truck dala received 2309847 Truck Income 5763285.00 Difference in exchange rates 653618.00 Export incentives 1911016.03 Long / Short term capital gain 2695340.00 Total 24480913.32 From above he noted that no income or receipt were shown in respect of integrated business of handling, storage and transportation of goods. (ii) The assessee has not filed Form 10CCB within the prescribed period. (iii) He further referred to provisions of section 80AC which provides that no deduction shall be allowed u/s 80IB unless the return of income has been filed on or before due dates specified in sub-sec (1) of Sec 139. Since the assessee has not filed the return before due date specified u/s 139(1) the deduction was not available. (iv) Finally he referred to the provisions of section 80IB(2)(i) which provides that deduction is available to industrial undertaking which fulfils the conditions given....
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.... Ltd. was formed in the year 1995 with the object of dealing in food grains and other by products obtained in the course of manufacturing. The name of the company was changed to Lakshmi Overseas Industries Ltd. w.e.f 01.08.1995 and then to Lakshmi Energy & Foods Ltd. Since the concern started business in the year 1995 and the machinery and building were very old, a Mega Project was undertaken with the sanction of Government of Punjab and for that purpose a memorandum of understanding was entered into. The project cost of the venture was around 800 crores. A copy of the MOU was filed before the Ld. A.O. which is an admitted fact on record. It was further pointed out that the main activity of the assessee-company comprises the procurement of paddy from market then transport the same to the godown which were specifically designed to provide maximum security and safety for the food grains from withering, spillage, loss by pests and other natural calamities. Thereafter the husk on the paddy is first removed to prevent the loss by inborn pests and then the product is consigned to stores. Food grains are kept in high class stores and in case of paddy same is kept for a period ranging from....
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....r from the reply filed before the Assessing officer vide reply dated 19.12.2010. 16 In reply to the issue of late filing of return and denial of deduction in view of Sec 80AC it was pointed out that the assessee has changed the accounting period from 1.4.2007 to 30.9.2008 for the purpose of Companies Act and the accounts were maintained for this period and balance sheet etc. were filed with the Registrar of Companies accordingly. However, for income-tax purpose accounts had to be prepared upto 31.3.2008 which took long time. It was contended that provisions of section 80AC are only of directory nature and not mandatory. In this regard reliance was placed on the decision of Delhi Bench of the Tribunal in case of Dhir Global Industrial (P) Ltd. 133 TTJ 580. In respect of the issue regarding non fulfillment of conditions of sub-sec (2)(i) of Sec 80IB, it was contended that the statement of Shri Rajinder Sandal could not have been relied by the Assessing officer which was taken at the back of the assessee without affording a cross-examination. The detail of plant & Machinery were filed during assessment proceedings and therefore it is not correct on the part of the Assessing officer....
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....annot be considered for such deduction u/s 80IB. In this backdrop, I deem it merely academic to go into the allowability of deduction / merits of the case, as I have held that the assessee is not eligible for deduction u/s 80 IB for the technical defaults as already elucidated. Consequently the assessee fails on this ground of appeal. " 18 The Ld. Counsel for the assessee made detailed submissions in respect of deduction u/s 80IB (11A). He mainly reiterated the submissions made before the Ld. CIT(A) and further elaborated the contentions which can be summarized as under: (a) Contention in respect of late filing of return In this year the assessee has adopted the accounting year of 18 months from 1..4.2007 to 30.9.2008 and therefore the books were maintained for 18 months and balance sheet was prepared accordingly and filed with the Registrar of Companies. However, for the purpose of income-tax the accounts have to be maintained only for a period of 12 months ending on 31.3.2008. This process was cumbersome and difficult which consumed lot of time leading to late filing of return. In this regard he referred the submissions made before the Ld. CIT(A) (copy of which is placed at....
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....roceedings before the Assessing officer or before the Ld. CIT(A) or even before the Tribunal. In this regard reliance was placed on the following decisions: (i) CIT Vs. Trehan Enterprises, 248 ITR 333 (J&K) (ii) CIT Vs. ACE Multitaxes Systems Pvt Ltd, 317 ITR 207 (Karn) (iii) CIT Vs. Jayant Patel, 248 ITR 199(Mad) (iv) CIT Vs. Magnum Export (P) Ltd. 262 ITR 10 (Cal) (v) CIT Vs. Shahzedanand Charity Trust 228 ITR 292 (PH) (vi) National Horticultural Board Vs. CCIT, CWP No. 9339 of 2008 (copy filed) It was also contended that appeal proceedings before the first appellate authority is mere continuation of assessment proceedings and therefore he can also accept form 10CCB. In this regard reliance was placed on the decision of Hon'ble Supreme Court in case of Kanpur Coal Syndicate (supra). (c) Nature or business and how the same is eligible for deduction u/s 80IB(11A) It was contended that the Assessing officer has himself referred to explanatory notes to the Finance Act, 2001 in respect of Sec 80IB(11A) where the Board itself has clarified that the deduction is allowable under this Section to a person engaged in the business of integrated bulk handling, s....
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....then if the activities of handling, storage, transportation would not be entitled to deduction but this is wrong approach because even if such services are used for assessee's own consumption the deduction has to be allowed and in this regard reliance was placed on the decision of Mumbai Bench of the Tribunal in case of Sanchita Marine Production Pvt Ltd Vs. DCIT, 15 SOT 280. It was also submitted that packaging of goods would be part of the process of manufacture because this activity form part of the manufacture and in this regard reference was made to the ruling of Advance Authority which has been referred in the written submissions filed before the Ld. CIT(A) (relevant portion is at page 476 of the paper book). It was further contended that even if the processing is not part of the handling, storage and transportation even then the proportionate deduction has to be allowed on proportionate basis and in this regard various decisions were quoted in respect of Sec 80IB(10).Reliance was placed on the decision of: (i) Nagpur Bench of the Tribunal in case of ITO Vs. Air Developers (copy available at page 543 to 550). (ii) G.V. Corporation Vs. ITO, 38 SOT 174 (mum) (iii) Visw....
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.... clear that old machinery was less than 20%, in fact it would be about 18.14%. In this regard it was emphasized that old machinery has to be reckoned on WDV and in this regard reliance was placed on the following decisions: (i) Hindustan General Industries Ltd. 67 Taxman 360 (Delhi) (ii) Harin Khola Ice & Cold Storage, 6 Taxman 362 (Kol) (iii) Rajiv Bhatnagar, 34 CCH 432 However, when it was pointed by the Bench that depreciation has been claimed in respect of plant & Machinery stated to be discarded and mega project was sanctioned in Sept 2005 after which assessee started implementing the same then it was admitted that first year of new project and deduction should be for Assessment year 2006-07. (f) It was also submitted that Revenue has raised the issue on the basis of claiming deduction initially at 35%. This was done mainly on the advice of Rajinder Sandal and as pointed out earlier that the assessee-company had differences and disputes with him and he may have given wrong advice. The Directors are not well versed with the income-tax provisions but once the mistake came to the knowledge of the assessee- company the claim for deduction was revised to 100%. In fact i....
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....r deduction separately u/s 80IA(4)(iv). Therefore expansion of paddy processing cannot be equated with integrated business of handling, storage and transportation of food grains as contemplated u/s 80IB(11A) of the Act. 20 The Ld. D.R. for the Revenue referred to the provisions of section 80IB(11A) and pointed out that the same was introduced by Finance Act, 2001 and initially benefit was given to the business of handling, storage and transportation of food grains. Later on the benefit was extended to the business of processing, preservation and packaging of fruits and vegetables by Finance Act, 2004 w.e.f. 1.4.2005 and thereafter by Finance Act, 2009 w.e.f. 1.4.2010 the benefit was further extended to the Meat products and Poultry or Merine or diary products. He referred to the Memorandum explaining the clauses as well as the speech of Finance Minister while introducing provisions of section 80IB(11A) in 2001 and submitted that prior to insertion of section 80IB (11A) a National Policy on Handling, storage and transportation of Foodgrains was notified in the Gazetted of India dated 15th July 2000 and para 5.45 of which elaborated that post harvest losses of food grains are a se....
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....ngs in which the word or expression is used demands so. In this regard he referred to the following decisions: (i) Sole Trustee, Loka Shikshana Trust Vs. CIT, 101 ITR 234 (ii) Smt. Tarulata Shyam and Others Vs. CIT, 108 ITR 345 Therefore while interpreting a particular word or expression the intention of the legislature behind insertion of the particular provisions has to be kept in mind. According to him when Sec 80IB(11A) is read along with Memorandum of explaining the provisions, it would emerge that the word "handling" in its ordinary sense and in the context of food grains would cover within it ambit the process and activities relating to creation of facilities for cleaning and removing of foreign material from the food grain so as to prevent damage from such material, Facilities for drying of food grains to prevent loss during storage due to excessive moisture, Pre storage bulk grain dumping and drying facilities, Creation of facilities for mechanized sampling, weighing and detection of live infectants, Mechanized receiving and handling by storing in Silos equipped with facilities of aeration and fumigation, Loading and unloading facilities and traffic management and....
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....). He also submitted that the assessee had also not produced the bills and details of investments made in the development of search facilities and Silos and the same were not produced before the Tribunal on its directions (This is not correct as bills have been produced before us and even the copies have been filed on record in response to the query by the Bench). The Ld. D.R. for the Revenue referred to various annual reports which clearly indicate that the assessee was engaged in the business of rice processing and also was in the business of wheat flour processing etc. The documents available even show that the loans were obtained from the bankers by stating that the loans were required for the purpose of expanding rice mill and power project. He submitted that various documents show that additional storage capacity has accrued in Financial year 2010-11. The company never declared in its annual report that it was also engaged in the handling, storage and transportation of food grains. The Ld. D.R. for the Revenue also distinguished various judgments cited on behalf of the assessee. 23 The Ld. D.R. for the Revenue also referred to the provisions of section 80AC and the circula....
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.... the Ld. Counsel for the assessee is not correct that the conditions of sub-sec (2) (i) is not applicable to sub-section Sec 11A because it is not a case of the assessee that it had started new undertaking of handling, storage and transportation of food grains. He submitted that the conditions specified in Sec 80IB(2)(i) has to be complied in the initial year i.e. the year of formation of the undertaking and in this regard he relied on the decision of Chandigarh Bench of the Tribunal in case of Jain Udhay Hosiery (P) Ltd Vs. ACIT, 1 SOT 193 and decision of Agra Bench of the Tribunal in case of Aqua Plumbing Pvt Ltd. Vs. ACIT, 46 SOT 366: 140 TTJ 496. He submitted that the assessee had made investments of Rs. 2.75 crores in plant & Machinery in the Financial year 2001-02 against the investments of Rs. 38,43 Lakhs in Financial year 1999- 2000 and Rs. 13.12 lakhs in Financial year 2000-01 with opening balance of Rs. 47.84 crores as on 1.4.1999. Therefore the WDV of old plant & Machinery as on 1.4.2001 would be far in excess limit of 20% prescribed in the Sec 80IB(2). The Ld. Counsel for the assessee has already admitted before the Bench that Assessment year 2008-09 is the third year o....
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....plies to the new points raised by the Department and also tried to distinguish the decisions relied on by him. 27 We have gone through the rival submissions carefully in the light of material and records, Paper books, judgments cited by the parties. First of all let us consider the relevant provisions which are important for adjudicating this issue: 80AB. Where any deduction is required to be made or allowed under any section [* * *] included in this Chapter under the heading "C.-Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.] 80AC- Where in computing the total income of an assessee of the previous year relevant to the assessment year comme....
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....t was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufa....
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....in such a case not exceed ten assessment years : [Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise referred to in sub-section (2) of section 80-IC:] [Provided also that in the case of an industrial undertaking in the State of Jammu and Kashmir, the provisions of the first proviso shall have effect as if for the figures, letters and words "31st day of March, 2004", the figures, letters and words "31st day of March, [2012]" had been substituted : Provided also that no deduction under this sub-section shall be allowed to an industrial undertaking in the State of Jammu and Kashmir which is engaged in the manufacture or production of any article or thing specified in Part C of the Thirteenth Schedule.] (5) The amount of deduction in the case of an industrial undertaking located in such industrially backward districts as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf as industrially backward district of category 'A' or an industrially backw....
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.... any hotel shall be- (a) fifty per cent of the profits and gains derived from the business of such hotel for a period of ten consecutive years beginning from the initial assessment year as is located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations, specify by notification in the Official Gazette and such hotel starts functioning at any time during the period beginning on the 1st day of April, 1990 and ending on the 31st day of March, 1994 or beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001: Provided that nothing contained in this clause shall apply to a hotel located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai, which has started or starts functioning on or after the 1st day of April, 1997 and before the 31st day of March, 2001: Provided further that the said hotel is approved by the prescribed authority ....
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....x theatre located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) of Chennai, Delhi, Mumbai or Kolkata; (b) the deduction under clause (a) shall be allowable only if- (i) such multiplex theatre is constructed at any time during the period beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2005; (ii) the business of the multiplex theatre is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of any building or of any machinery or of plant previously used for any purpose; (iii) the assessee furnishes alongwith the return of income, the report of an audit in such form and containing such particulars as may be prescribed and duly signed and verified by an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed. (7B) The amount of deduction in the case of any convention centre shall be- (a) fifty per cent of the profits and gains derived, by the assessee from the busines....
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....al oil before the 1st day of April, 1997; (ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997 : 2[Provided that the provisions of this clause shall not apply to blocks licensed under a contract awarded after the 31st day of March, 2011 under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated the 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or a State Government in any other manner;] (iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998 [but not later than the 31st day of March, 2012]; [(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (hereafter referred to as "NELP-VIII") under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of natural gas on or after the 1st day of April, 2009; (v) is enga....
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....ect is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; [***] (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed [three] per cent of the aggregate built-up area of the housing project or [five thousand square feet, whichever is higher];] [(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a cas....
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.... deduction does not exceed ten consecutive assessment years and subject to fulfillment of the condition that it begins to operate such business on or after the 1st day of April, 2001 :] [Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009.] [(11B) The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area shall be hundred per cent of the profits and gains of such business for a period of five consecutive assessment years, beginning with the initial assessment year, if- (i) such hospital is constructed at any time during the period beginning on the 1st day of October, 2004 and ending on the 31st day of March, 2008; (ii) the hospital has at least one hundred beds for patients; (iii) the construction of the hospital is in accordance with the regulations, for the time being in force, of the local authority; and (iv) the assessee furnishes along with the retur....
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....aziabad; (xii) District of Gandhinagar; and (xiii) City of Secunderabad; (d) the area comprising an urban agglomeration shall be the area included in such urban agglomeration on the basis of the 2001 census.] (12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger- (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. (13) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible business under this section. (14) ------Not relevant 28 In the assessment order itself the Assessing officer has observed that with reference to Sec 80AB that unle....
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....us year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Allowance Reserve Account") to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) : [Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.]" This provision came for interpretation by the Special Bench in case of Saffire Garments Vs. ITO (supra). After detailed discussion the Special Bench held that this proviso is of mandatory nature and if the return is not filed within due date then the assessee would not be entitled to deduction. The Special Bench in this regard mainly relied on the decision of Hon'ble Apex Court in case of Prakash Nath Khanna Vs. CIT (supra) which has been relied before us by the Ld. D.R. for the Revenue. In that case the assessee was a partnership firm and for Assessment year 1988-89 the return of income was to be filed on or before 31st July 1988 but was filed on 20th Mar 1991. Proceedings for late s....
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....operty before due date of filing of return. It was contended that the assessee had deposited the amount in capital gain deposit scheme before due date of filing of return as prescribed u/s 139(4). The Tribunal allowed the claim. 31 On appeal by the Revenue it was held as under by the Hon'ble High Court - "Held, dismissing the appeal, that the sale of the asset had taken place on January 13, 2006, falling in the previous year 2006-07, the return could be filed before the end of the relevant assessment year 2007-08, i.e., March 31, 2007. Thus, sub-section (4) of section 139 provides the extended period of limitation as an exception to sub-section (1) of section 139 of the Act. Sub-section (4) was in relation to the time allowed to an assessee under sub-section (1) to file the return. Therefore, such provision was not an independent provision, but relates to the time contemplated under sub-section (1) of section 139. Therefore, sub-section (4) had to be read along with sub-section(1). Therefore, the due dated for furnishing the return of income according to section 139(1) of the Act was subject to the extended period provided under sub-section (4) of section 139 of the Ac....
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....med because of bonafide mistake. Therefore clearly on these facts the applicability of provisions of section 80AC was not there for consideration because this provision was introduced only from Assessment year 2006-07 and therefore this case is distinguishable. 33 The Ld. D.R. for the Revenue has rightly pointed out to the decision of Amritsar Bench of the Tribunal in case of Balkishan Dhawan Vs. ITO (supra) wherein it was clearly observed that provisions of section 80AC are mandatory. Head note reads as under: "Sec 80IB r.w.s. 80AC of the Income -tax Act, 1961 deduction - profits and gains from industrial undertaking other than infrastructure development undertakings - Assessment year 2006-07 and 2007-08 - where an assessee wants to avail deduction u/s 80IB, he has to necessarily furnish his return of income containing such claim before due date specified in Sec 139(1) - held Yes" Therefore in view of the above legal position and discussion it is clear that once the return is filed late beyond due date provided u/s 139 (1) in Section 80AC then deduction u/s 80IB cannot be allowed. 34 Next reason for disallowing the deduction u/s 80IB is that according to lower authorit....
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....gradation and modernization of infrastructure for storage, handling and transportation of food grains is a central concern in which introduction of modern technology would bring greater efficiency in the grain management system and minimize post harvest food grain losses." In this regard circular NO. 14/2001 was also issued on 9.11.2001 which reads as under: "Tax holiday for undertakings engaged in the integrated handling, storage and transportation of foodgrains. 51.1 Under the existing provisions of section 80IB of Income -tax Act, 1961 a deduction is allowed in computing the taxable income in respect of profits derived from a new industrial undertaking or a ship, or the business of a hotel. 51.2 To address the country's basic concerns relating to enhanced food security and agricultural development, upgradation and modernization of infrastructure for storage, handling and transportation of foodgrains is a central concern. The introduction of modern technology would bring greater efficiency in the grain management system and minimize post harvest foodgrain losses. 51.3 To encourage building of storage capacities, section 80IB has been amended to provide that any und....
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....e" was interpreted. However, the copies of these judgments have not been enclosed, and therefore it is difficult to refer to these decisions. However, it is not difficult to understand the meaning of storage. Storage would imply when an article or a thing kept in some safe custody for a period of time which may vary from one day to many years depending upon the shelf life of the article or thing. For example fresh vegetable can be stored for a few days only but the vegetable like potato can be stored in a cold storage for many months. Similarly it is not difficult to understand the meaning of transportation which would imply movement of goods from one place to another by any mode of transport. Therefore main difficulty is in understanding the meaning of "handling". We have already extracted definition given in various Acts against which the Ld. D.R. for the Revenue has raised serious objections and submitted that definition has to be seen in the context of the particular Act. He has vehemently urged us to ignore the definition given in various Acts quoted by the Ld. Counsel for the assessee. We partly agree with him. For example the definition in National Environment Tribunal Act, ....
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....rocessing. An inter ministerial stakeholder meeting was held recently in this Ministry, where a consensus was reached on the definition of food processing industries. Henceforth this Ministry will include under food processing industries, items pertaining to these two processes viz. (a) Manufactured Processes; if any raw product of agriculture, animal husbandry or fisheries is transformed through a process [involving employees, power, machines or money] in such a way that its original physical properties undergo a change and it the transformed produce is edible and has commercial value, then it comes within the domain of Food Processing Industries and (b) Other Value-Added Processing; Hence, if there is significant value addition (increased shelf life, shelled and ready for consumption etc.) such produce also comes under food processing, even if it does not undergo manufacturing processes. 39 The above definition of food processing is clearly related to activity of food processing but as observed above this cannot be related with the integrated business of handling, storage and transportation of food grains. We have already explained the reasons for this by analyzing Sec 80IB(11....
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....ess is directly related to integrated business of handling, storage and transportation. It has been pointed with reference to schedule of fixed assts that the assessee has purchased more than 150 trucks during the implementation of mega project. It was also pointed out that new land was purchased during Financial year 2006-07, 2007-08 and 2008-09 and fresh addition were also made and majority of the expansion was carried out in building of stores. Even the addition to machinery was mainly on account of machinery installed in the stores for keeping the climate under control, creating of drying facilities and fumigation facilities etc. Even the Ld. D.R. for the Revenue has clearly stated that the word "handling" in its original sense and in the context of food grains would encompass within its ambit, processes and activities relating to Creation of facilities for cleaning and removing of foreign material from the food grain so as to prevent damage from such material, Facilities for drying of food grains to prevent loss during storage due to excessive moisture, Pre storage bulk grain dumping and drying facilities, Creation of facilities for mechanized sampling, weighing and detection ....
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....f warehousing facilities then instead of using the expression 'the integrated business of handling, storage and transportation of food grains' the deduction would have been provided 'for the business of modern warehouses' which has not been done. This clearly shows that perhaps the facilities which have been created by the assessee were the kind of facilities which were made eligible for the deduction under Sec 80IB(11A). 42 The Ld. D.R. for the Revenue has also pointed out that the assessee was basically engaged in the business of milling of paddy in earlier years which has continued even after the installation of mega project. It was further pointed out that in form 3CD for Assessment year 2005-06 the assessee has shown main business activities as "manufacturing of rice, cattle feed, crushing of oil seeds, solvent extractions etc. Similarly in the annual report also the main activity shown as manufacturing of rice. Even the bank loans were obtained for the purpose of manufacturing of rice. No doubt the company under the name of "Lakshmi Grain Processor Pvt Ltd" was incorporated in the year 1990 and was converted into a Public Ltd company in the year 1993 and the name was chang....
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....gricultural development, up gradation and modernization of infrastructure for storage, handling and transportation of foodgrains is a central concern in which introduction of modern technology would bring greater efficiency in the grain management system and minimize post harvest foodgrain losses.' The above clearly shows that deduction was provided for upgradation and modernization of infrastructure for storage, handling and transportation of food grains. 43 We do not find any force in the submissions that merely because business of the assessee has described its business as manufacturing or rice etc. in form 3CD as well as annual report and therefore such business cannot be regarded as integrated business of handling, storage and transportation of food grains. We find force in the submissions of the Ld. Counsel for the assessee in this regard that in the business world "Business of handling, storage and transportation" may not be recognized as such because same does not connote revenue generation and therefore same was shown as business of manufacturing of rice etc. Further the Ld. Counsel for the assessee has rightly referred to the decision of Hon'ble Supreme Court in....
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....hich is not there. In this regard the Ld. D.R. for the Revenue had strongly placed reliance on the decision of Mumbai Bench of the Tribunal in case of ITO Vs. Shankar K. Bhanage, ITA No. 3216 & 3217/2010. In that case the assessee was a contractor appointed by F.C.I. for handling the food grains at Turbhe/ Kalyan/ Bhivandi shed and stored food grains at Bhiwandi Depot and transported foodgrains from above goods sheds to Bhiwandi Depot. For these activities the assessee claimed deduction u/s 80IB (11A) and the same was allowed by the CIT(A). On appeal to the Tribunal the deduction was denied by observing that the assessee was not eligible for deduction because the assessee has not created any infrastructure for carrying out these activities. Thus it is clear that in this case the assessee was merely carrying on the activities without any infrastructure whereas in case before us the assessee has purchased trucks, created facilities for storage and installed various machines like dryers, climatic control equipment and fumigation facilities. Thus the assessee before us has not only carried out handling and storage activities but has also created infrastructure for handling, storage and....
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....rom the business of operating a cold storage plant. But, the cold storage of the assessee had a vital and important role to play so far as processing of frozen sea food was concerned. At different stages before, during and after processing of material, cold storage facilities were to be used in the business. Therefore, a significant part of the assessee's profit must have been held to be derived from the business of operating cold storage plant. There was no force in the stand of the revenue that the assessee was eligible for deduction under section 80-IB only when it received the money for use of cold storage by an outsider and not when it used the cold storage itself. The scheme of section 80-IB is that the deduction is available in respect of profits and gains derived from the business of operating a cold storage plant, and not the business of offering cold storage services to outsiders. As long as profit could be reasonably held to be from the business of operating cold storage plant, the assessee was eligible for deduction under section 80-IB irrespective of whether or not the services were used by the assessee itself or by outsiders on payment of consideration. Ideally,....
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....u/s 80IB(11A) which was allowed by the Assessing officer himself. Perusal of the assessment order further show that the assessee is engaged in the business of processing of rice. Since activities of the assessee before us are same to the activities of L.T. Overseas Pvt Ltd (supra) the deduction has to be allowed. In this regard the Ld. Counsel for the assessee rightly referred to the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. Sardari Lal Mehra (supra). In that case the assessee became a Member of two lucky schemes in August and Sept in 1967. According to the schemes each Member was required to pay a sum of Rs. 100 towards each scheme for a month for a period of six months. At the end of each month a draw was made and the person who won such draw was paid, a sum of Rs. 6000 and was further entitled to stop the contribution in future. All the members except those in whose favour draw had gone, were to get Rs. 6000 each at the end of six months and in addition to receive Rs. 500 as interest. The assessee had contributed Rs. 400 in the first scheme when the draw was declared and he received Rs. 6000. In the second scheme he contributed Rs. 700 when the dra....
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....that the deduction was allowed, in the course of proceedings under section 143 (3), as stated on behalf of the assessee and further no action under section 263 was taken. Keeping into consideration this fact that the assessee was allowed deduction in the same fashion even after the passing of the instant assessment order, we are at a loss to appreciate any logic in pursuing the matter in appeal. Albeit the principle of res judicata is not strictly applicable to the proceedings under the Act, yet, the doctrine of consistency does not permit the Departmental Authorities to change its stand when there is no change in the facts of laws in one year vis-à-vis the other, warranting departure. Our views gets support from a recent decision rendered in the case of DIT v. Lovely Bal Shiksha Parishad [2004] 266 ITR 349 (Delhi). In view of the aforenoted factual and legal position, it becomes apparent that the learned CIT(A) was justified in directing the Assessing Officer to allow deduction in respect of profit from the trading operations in Karnal unit. We uphold the impugned order on this score. Thus it is clear that if a deduction is held to be allowable in subsequent years then s....
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....f the foodgrains. 49 The next reason for denying of deduction was non furnishing of a certificate from C.A in form 10CCB. Admittedly a certificate has been filed before the Ld. CIT(A). Now it is almost settled that audit report can be filed before completion of assessment proceedings and in some of the decisions it has been further held that such report filed even before the first appellate authority as well as before the Tribunal would be valid. The Hon'ble Punjab and Haryana High Court in case of CIT Vs. Mahalaxmi Rice Factory(supra) has held as under: "2 Held, that the provisions of section 80J(6A) had to be held directory only to the extent that in case the audit report was not filed along with return, it could be filed any time before the assessment takes place, as it is at that time when the Assessing Officer applies his mind on the case. The assessee filed the audit report after the assessment had already been framed by the Assessing Officer. Therefore, the Tribunal was not right in granting relief to the assessee. 50 Similarly in earlier decision in case of CIT Vs. Shahzedanand Charity Trust, (supra) it was held that the provision u/s 12A for furnishing of audi....
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....arinder Gulati who was not tax auditor and this report shows that deduction at Rs. 50.95 crores whereas actual deduction claimed was only Rs. 17.32 crores. 54 We have carefully perused sec 80IB(13) refers to the requirement u/s 80!A (7) to be complied which is regarding auditing the accounts and furnishing of audit report. Careful perusal of this provision would show that nowhere it is mandated that such report has to be given by the same Chartered Accountant who is auditor / tax auditor of the company. As far as difference in the figures is concerned, we find merit in the contention of the Ld. Counsel for the assessee that the assessee-company was having serious disputes with the earlier C.A and that is why proper guidance was not available and deduction was claimed at Rs. 17.35 crores. We have already referred to the disputes with the C.A in earlier paras whose services were also terminated. In our opinion, the report in form 10CCB, filed before the Ld. CIT(A) should have been considered by the Ld. CIT(A) particularly in view of the fact that appeal proceedings are extension of assessment proceedings as held by the Hon'ble Supreme Court in case of Kanpur Coal Syndicate (su....
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....tted that actual new purchase of machinery was started in Financial year 2005-06 itself, therefore Assessment year 2006-07 may be taken to be the first year of the new project. 58 Reasoning for deduction in Assessment year 2006-07 as the first year is that mega project has been sanctioned by the Govt of Punjab on 6.9.2005 and admittedly the project was implemented over a period of time. Therefore in our opinion, Assessment year 2006-07 should have been reckoned as the first year for the purpose of eligibility of deduction u/s 80IB(11A). However, no such deduction has been claimed but that itself will not hinder the claim of deduction in the later years. 59 As on 1.4.2005 the brought forward WDV of plant & Machinery was Rs. 6,05,31,624 (this figure can be verified from the schedule of fixed assets filed in the paper book at page 225 to 229D). During this year the assessee has added two types of machinery and the details are as under: Addition made before Addition made after 30.09.2005 30.09.2005 Control Devices Rs. 215010567/- Rs. 20022590/- Plant & Machinery Rs. 65125655/- Rs. 33409022/- Thus total value....
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....said old machinery." Similar view was taken by the Hon'ble Calcutta High Court in case of CIT V. Harine Khola Ice Cold Storage (supra), therefore it is clear that for calculating the figure of 20% only the WDV i.e; book value of the old machinery has to be taken. 61 There was one more objection that control devices should not be reckoned into new plant & Machinery because the assessee has claimed 100% depreciation on these items and therefore new plant & Machinery would be only Rs. 9.85 crores. Even this objection cannot be upheld because the idea in Sec 80IB(2)(i) is to compare the purchase of new machinery with the value of old machinery, therefore value of the control devices can not be ignored simply because the assessee has claimed 100% depreciation on the control devices which have been installed before 30.9.2005. In this regard we further find force in the submissions and the decision relied on by the Ld. Counsel for the assessee in case of CIT V. Hindustan General Industries Ltd (supra) that for considering the meaning of reconstruction the value of old machinery may not be considered at all. Hon'ble Delhi High Court observed in this connection as under: "W....
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....tinct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. One thing is certain that the new undertaking must be an integrated unit by itself wherein articles are produced and at least a minimum of ten persons with the aid of power and a minimum of twenty persons without the aid of power have been employed. Such a new industrially recognizable unit of an assessee cannot be said to be reconstruction of his old business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the old business. For the purpose of section 15C the industrial units set up must be new in the sense that new plants and machinery are erected for producing either the same commodities or some distinct commodities. In order to deny the benefit of section 15C the new undertaking must be formed by reconstruction of the old business. " 63 Now when the value of old machinery at Rs. 60531624/- is compared to the value of new machinery in Assessment year 2006-07 amounting to Rs. 33,35,67,934/-, it becomes clear that the ....
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....restricted to a reasonable percentage. 67 On the other hand, Ld. D.R. for the Revenue had mainly contended that processing is most important of the activity and therefore in case the Tribunal holds that deduction is allowable the same has to be given at the lowest possible level. 68 After considering the rival submissions we are of the opinion that 100% deduction cannot be allowed to the assessee because we have already held while discussing the activities of the assessee that processing of paddy cannot be said to be covered by the activities given in Sec 80IB(11A). Therefore to find out the quantum of deduction we refer to the assessment order for Assessment year 2010-11 wherein it was observed that milling expenses vary from Rs. 15 to 25 per Qtl depending upon the nature of paddy to be milled. It is also to be noted that some of the bi-products are also obtained in the milling process which also generate some profits. It has to be noted that major profit would accrue to the assessee from storage activity because storing one quintal of basmati costing between Rs. 2500 to 3500 per Qtl which would involve lot of interest element as well as storage charges. This makes it clear ....
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....the assessment order which reads as under:- "Q. Please explain the nature of business M/s Luxmi Energy and Foods Ltd.? Ans. In the F.Y. 2007-08, the nature of business of the above concern was manufacturing of rice, cattle feed, crushing of oil seed, solvent, extraction and refinery and generation of power. Q. Please explain when the power plant started ? Ans. The power plant was started in July or August, 2008. Q. In column No. 8 of Form 3 CD, you have mentioned generation of power as one of the business. Please state when this business was started. Ans. I have completed my audit in Feb, 2009. Earlier I had told you that the business of power plant started in the month of July or August, 2008. Clerically my junior staff has mentioned power plant as one of the business in Form No. 3 CD." He noted that Shri Rajinder Sandal had also furnished a copy of depreciation chart as admissible under the Income Tax Rules which clearly depicted that according to the auditor, no depreciation was allowable on the power plant. Since the assessee has not claimed depreciation in the Accounts maintained under the Company's Act and moreover in the Directors report, it is clearly s....
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....ce, Shri Sandal could not have carried out the rectification without being aware of the return filed by the assessee claiming depreciation on power plant as per the depreciation schedule already filed and signed by him. This evidence is itself conclusive and sufficient to demolish all the purported statements against the assessee. Further, Mr. Sandal was not a qualified engineer to state categorically when the power plant was commissioned and in any case the assessee had disputes with him so his statement should not have been relied. 72. The Ld. CIT(A) after considering the submissions observed that since director's report has clearly mentioned that the power plant was commissioned in August 2008, the same shows that plant was not commissioned before March 2008. He also dealt with the various objections in this regard and the statement of Sandal and ultimately observed that the same is to be accepted. In this background, he confirmed the disallowance of depreciation. 73. Before us, Ld. Counsel for the assessee submitted that power plant was constructed during the financial year 2007-08 and the total cost was Rs. 1,44,72,71,183/- and since plant was commissioned on 25.3.2008, ....
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..... A letter from District & Town Planner was also filed which gave environment clearance on 12th April 2007. Another letter from the office of Chief Engineer, Commercial Tariff Regulation Board dated 23.5.2006 is also filed through which the Directorate has invited the assessee for a meeting in connection with the supply of the power from captive power plant. This clearly shows that power plant was being fabricated as early as in May 2006. He also referred to the various documents in the paper book like agreement with M/s Shriram epc, evidence for purchase of turbine etc. He referred to pages 992 and 993 of the paper book which is copy of the ledger of power plant from 1.4.2008 to 31.8.2008 which clearly shows that purchase of Rs. 19,28,949/- were made after 31.3.2008 which is only towards smaller items of repairs etc which clearly shows that no further equipment was purchased and plant was completed before 25.3.2008. 75. As far as mention in the Director's report regarding commissioning of the plant in August 2008 is concerned, it is pointed out that supply of a power to Govt. of Punjab began in August 2008 and therefore, in the Director's report mentioning about the commissioni....
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.... same effect. He also contended that depreciation has to be allowed on the basis of provisions of Income Tax Act and Income Tax Rules and it is not necessary to provide the depreciation under Company's Act if no such requirement is there. The plant was used for captive consumption from 25.3.2008 till the month of August 2008 and, therefore, depreciation should have been allowed. However, on a query by the Bench that how the rate of 100% is applicable; he admitted that depreciation would be admissible under the head 'Plant & Machinery' by column 8(ix). The rate mentioned in this column is 80% and he conceded that if depreciation has to be considered the same should be allowed @ 80%. 77. On the other hand, the Ld. DR submitted that assessee had claimed depreciation as per the books of account under the Companies Act amounting to Rs. 20,14,91,803/- whereas depreciation for the purpose of Income tax was claimed at Rs. 1,22,20,71,921/-. In fact no depreciation has been claimed in respect of power plant which makes it abundantly clear that power plant was not used by the assessee company. The assessee was bound by the provisions of Companies Act to claim depreciation, if the asset ....
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....r full depreciation. 78 The Ld. DR pointed out that various decisions relied on by the Ld. counsel wherein it has been held that depreciation is allowable even if the asset is kept ready, then depreciation should be allowable but these decisions cannot be equated with the proposition that such depreciation is to be allowed even when the passive user is there and the Directors report states otherwise. 79. We have heard the rival submissions carefully in the light of material available on record as well as judgments cited by the parties. Since there was some dispute whether bills were produced before the lower authorities and it was contended by Ld. Counsel for the assessee that during remand proceedings 19 boxes of the original bills and vouchers were produced before the Ld. CIT(A). In this regard a reference was made to the letter dated April 24, 2012 (copy of the same is available at pages 337 to 449 of the paper book) and the assessee was directed to produce the bills before the Assessing Officer and in this regard a reference was made to the letter written to Assessing Officer which was submitted in his office on 8.5.2012 (copy of the same is available at page 450 of the p....
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....ogeneration power Plant for Lakshi Energy & Foods Ltd at Khammano. The Plant was commissioned along with auxiliaries in March 2008 and given process steam and power to in house unit of Rice plant of M/s Lakshi Energy & Foods Ltd. For Shriram EPC Ltd Sd/- (SANJAY KUMAR) Asstt. General Manager-Projects" 80 The Assessing Officer had two objections on this certificate. Firstly, the certificate is from private party and secondly the boiler has been manufactured by M/s Thermax and then how M/s Shriram epc could give such a certificate. We find no force in these objection; firstly, M/s Shriram epc is a very large company in India engaged in the business of EPC contracts whereby they undertake the erection of various buildings and plants. This certificate should not have been rejected lightly particularly considering the fact that M/s Sriram epc was the fabricator of the Power Plant and not related to assessee. In fact the Hon'ble Punjab & Haryana High Court in the case of CIT v Shahbad Cooperative Sugar Mills Ltd (supra) confirmed the findings of the Tribunal wherein depreciation had been allowed on the basis of certificate issued by the Engineer. The sanctity of the cer....
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....d a certificate from Director of Boiler, Govt. of Punjab, copy of which is available at pages 328 of the paper book and through this provisional order the Director of Boiler had given permission to use boiler during a particular period from 31.10.2007 to 30.4.2008. Though there was no column in the Certificate to show the date of issue but obviously if the permission has been given w.e.f. 31.10.2007, the certificate must have been issued earlier. The only difficulty in respect of the certificate is that it was not earlier available and was filed on 24.12.2010. therefore, clearly the relevant authority i.e. Director of Boilers (Punjab) which in our opinion has clearly given permission to start the boiler which could mean that boiler was ready for functioning. In fact, it was pointed out that such certificates are issued after every six months after inspection of the boiler and later certificate were also produced before us for our verification 82. Another major objection of the Department is that Director's Report shows that plant was commissioned only in August 2008. We are satisfied with the explanation given by the assessee that the Director's Report is issued from a commercia....
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....We do not find any force in this objection also. First of all, it is to be appreciated that assessee company was having serious dispute with Shri Rajinder Sandal and ultimately his services were terminated. Secondly, Mr. Rajinder Sandal has prepared return in which clearly claim of depreciation has been made. In fact, there was some error in processing of the return and income was taken at Rs. 50,.96,67,625/- instead of Rs. 17,83,48,667/- and, therefore, a rectification application was made under his signatures and which was ultimately rectified vide order dated 25.11.2009, (copy of which is available at page 27 of the paper book). Thus, the claim of expenditure was clearly made in the return of income itself. Secondly, the assessee has sought cross examination of Shri Rajinder Sandal which was not granted and only copy of his statement was furnished to the assessee. Therefore, it can be said that statement of Shri Rajinder Sandal was recorded at the back of the assessee and the same cannot be relied on. In this regard, we further find force in the submissions of the Ld. Counsel on the basis of decisions cited by him. In case of CIT v Naresh Khattar (HUF) (supra), the Hon'bl....
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....al depreciation of value even when a machine or equipment is merely kept in a store. Secondly, keeping in view the nature of the assessee's business, it has to necessarily kept certain spare engines in store to meet an emergent situation. There is nothing on record to indicate that an engine, which was purchased a year or two earlier, will fetch the same price in open market even today. In this situation, it is clear that the authorities have taken a possible view. Nothing has been pointed out to show that the opinion is perverse of untenable. Resultantly, it cannot be said that a substantial question of law arises for consideration of this Court with in the meaning of section 260A." Thus, it is clear that Hon'ble High Court held that depreciation is to be allowed on the consideration of ageing of the machines and it was observed that ageing took place even when the particular plant is kept in the store. 87 The next decision relied upon is in the case of CIT v Shahbad Co-op Sugar Mills Ltd (supra). In this case the plant and machinery was kept ready for use but was not put to use and the Hon'ble High Court held vide para 5 as under:- "5. Ld. Counsel for the Revenue....
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....ingly, we do not find any ground to interfere with the finding of the Tribunal, holding that the assessee was entitled to depreciation on the machinery, as claimed." Similar observations have been made in the case of CIT v Oswal Woolen Mills Ltd (supra). Even Hon'ble Delhi High Court in the case of Capital Bus Service (P) Ltd v CIT (supra) wherein the assessee had purchased four buses which were in working order but were not used on the roads because there were not enough contracts during the year to ply for more than 30 days. The Hon'ble Court discussed the issue in detail and ultimately held that as such buses were ready for use then depreciation is to be allowed. Various other decisions were cited which has given the same findings. We have already observed that power plant was ready and no further major purchases have been made on account of power plant till August 2008, and the plant was commissioned, therefore, the same is entitled for depreciation. However, during the course of hearing when reference was made to the rules, we find that assessee is not entitled to depreciation @ 100%. The new Appendix X which provides for depreciation under the head plant and machinery....
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....ow that the assessee has installed new plant and machinery and has discarded the old plant and machinery. The Ld. CIT(A) has not raised any other objection as to the allowability of the deduction u/s 80IB(11A) except the aforesaid which is incorrect as much as sufficient evidence was filed to show that the old plant and machinery has been discarded, even otherwise the new plant and machinery acquired constitutes almost 98% of the total plant and machinery. 5.2 The Ld. CIT(A)has failed to consider the fact that on identical facts and issues, deduction u/s 80IB(11A) is being allowed by the Assessment Wing of the department to other assessee. A case in example was of LT Overseas Pvt Ltd. whose assessment orders allowing claim of deduction u/s 80IB(11A) were filed. 5.3 The LD. CIT(A) while disallowing the claim u/s 80IB(11A) on the ground that form 10CCB cannot be relied upon, has discussed and applied the facts relating to Assessment Year and has wrongly held that Audit report in Form No. 10CCB dated 20.2.2009 prepared by Chartered Accountant. CA Amit Gupta was an afterthought and no credence can be given to the said report. 5.4 That the Ld. CIT(A) has summarily rejected the ....
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....noticed by the Assessing Officer that assessee has claimed the loss of Rs. 16,08,70,635/- from power plant as set off against the business income from rice mill. The Assessing Officer issued a show cause notice that why this set off should not be disallowed in view of the provisions of section 80IA(5). In response it was submitted vide letter dated 24.12.2010 as under:- "The loss incurred in the power plant at Rs. 16,08,70,635/- was deducted against the income from the rice manufacturing unit shown at Rs. 93,63,71,267/- with the result that the net income remained at Rs. 77,55,00,632/-. 100% deduction u/s 80IB was claimed. In case the adjustment of loss of Rs. 16,08,70,635/- is not allowed the income from the rice until will be Rs. 93,63,71,267/- and the figure of deduction of Rs. 77,55,00,632/- will be substituted by Rs. 93,63,71,267/- resulting in no difference in the returned income." 95 However, the Assessing Officer was not satisfied with the above and in view of the specific provision to section 80IA(5) of the Act, the loss from power project was not allowed to be set off against the projects from other business. 96 On appeal, the assessee made various submissions. T....
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....n in Sirohi and a unit for chemical division in Jodhpur. For the assessment years 1990-91 and 1991-92 it had earned profits in both the units. But in the earlier years the assessee had suffered losses in the oil division. In relation to the deductions under sections 80HH and 80-I of the Income-tax Act, 1961, it claimed that each unit should be treated separately and the losses suffered in the earlier years by the oil division were not adjustable against the profits of the chemical division. But since the gross total income was nil the Assessing Officer held that the assessee was not entitled to the benefit of deductions under Chapter VI-A. The Appellate Tribunal and the High Court affirmed the view of the Assessing Officer. 100 On appeal of the assessee, the Hon'ble Supreme Court held as under:- "Held, affirming the decision of the High Court, that the High Court was justified in holding that the loss from the oil division was required to be adjusted before determining the gross total income and as the gross total income was "nil" the assessee was not entitled to claim deductions under Chapter VI-A which included sections 80HH and 80-I. The effect of clause (5) of sect....
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....otal income of the assessee is "nil" the assessee would not be entitled to deductions under Chapter VI-A of the Act. 101 In the above decision, the Hon'ble Apex Court has clearly explained the provisions of section 80-I(6) and 80B(5). Since section 80B(5) is starting with non-obstante clause, therefore full effect has to be given to the same. In any case, by reducing the loss of power plant from the other business the assessee is rather losing the deduction on the other business instead of getting any benefit. Therefore, in view of the decision of Hon'ble Apex Court, we decide this issue in favour of the assessee. 102 In the result, appeal of the assessee in ITA NO. 251/Chd/2013 is partly allowed. ITA No. 372/Chd/2013 - Revenue's appeal 103 In this appeal the Revenue has raised the following grounds: "1 Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in permitting the additional depreciation on the power plant while the ground of appeal before the Ld. CIT(A) was eligibility of set off claim of loss of power plant against the income of rice milling in view of section 80AI(5) of Income -tax Act, 1961. 2 Whether on the facts an....
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....er income but had allowed the additional depreciation to the assessee. 105 Before us, the Ld. DR pointed out that provision for additional depreciation u/s 32(i)(iia) in case of power plant came only form assessment year 2013-14 and, therefore, the CIT(A) was not justified. 106 On the other hand, the Ld. Counsel for the assessee admitted this position 107 After considering the rival submissions, we find that section 32(i)(iia) reads as under:- (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing 41[or in the business of generation or generation and distribution of power], a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : Provided that no deduction shall be allowed in respect of- (A) to (D) not relevant The plain reading of the above provision shows that in case of the business of generation and distribution of power, the provision for allowance of additional depreciation was inserted by Finance Ac, 2....
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....ed this issue vide para 10.2 which reads as under:- "10.2 I have perused the submissions of the assessee and the impugned order. It emerges from page 34-35 of the impugned order that on the date of search that is 12-02-2009, the stock as per the books of the assessee was Rs. 780.15 Crores and on comparing with physical inventory, an excess of Rs. 6 Crores was found which were required to be explained by the assessee. However as no Books of Accounts were produced other than a few bills of bardana, it was held that the difference remained reconciled. I refer to the statement of the CMD recorded in the course of search, reproduced at page 35 of the impugned order. It is very apparent from the question itself that the physical taking of the stock has been worked out to approx. 786 crores as against Rs. 780.15 crores + 70 crores govt. stock. It emerges that the CMD Shri Balbir Singh Uppal u/s 132(4) dated 30.02.2009 stated that the difference would be explained later, while also stating that 7 crore Government Stock as per the books had not been counted in physical stocktaking which were lying as Ferozepur Bhaamri etc. However during assessment proceeding it was stated that on stock ....