TaxTMI 
TaxTMI 
2013 (1) TMI 788
X X X X Extracts X X X X
X X X X Extracts X X X X
....de the order of the Assessing Officer and directed him to pass a fresh order in accordance with his discussions and in accordance with law. While doing so, the CIT has held as under: "I have carefully considered the reply given by the assessee. Although detailed submissions have been furnished, I find that the assessee's objections are mainly two fold. a. The order of the assessing officer cannot be considered as erroneous and prejudicial to the interests of revenue, as the issue involved is debatable. In this regard, the assessee has placed reliance, interalia on the decision of the Supreme Court in the case of M/s. Malabar Industrial Co. Ltd Vs. CIT (2000) 109 Taxman 66 (SC) . b. The eligibility for the claim of deduction u/s.80IA by applying the restraints of Sec.80IA (3) cannot be considered for every year of the claim of deduction u/s.80IA, but can be considered only in the year of formation of the undertaking. In this regard, the assessee has placed reliance on the decision of the Delhi Tribunal in the case of r-t/s. Tata Communication Internet Services Ltd Vs. ITO , (2010) 39 DTR (Del.) (Trib.) 17 (BCAJ). The objection that the issue involved is debatable and hence ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....submitted that at page 2 & 3 of the paper book is placed a copy of the provisional certificate dated 30.6.1999 as a small scale industrial unit and at pages 4 & 5 of the paper book is placed a copy of the permanent registration certificate as a small scale industrial unit dated 11.9.2000. He relied on the decision of the Hon'ble Bombay High Court in the case of CIT vs Paul Brothers, [1995] 216 ITR 548(Nag.) and submitted that in para 6 of the said order, the Hon'ble High Court has held as under: "6. Either in section 80HH or in section 80J, there is no provision for withdrawal of special deduction for the subsequent years for breach of certain conditions. Hence unless the relief granted for the assessment year 1980-81 was withdrawn, the Income-tax Officer could not have with-held the relief for the subsequent years. [See Gujarat High Court decision in the case of Saurashtra Cement and Chemical Industries Ltd. v. CIT [1980] 123 ITR 669]." 4. He then relied on another decision of the Hon'ble Bombay High Court in the case of CIT vs Western Outdoor Interactive Pvt. Ltd. in Income Tax Appeal No.1150 of 2010, 1200 of 2010 and 1269 of 2010, order dated 14.8.2012 and submitt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly in relation to the assessment year 2005-06 and subsequent years. The first year of claim of the assessee for deduction under section 80-IA undisputedly is the assessment year 2004-05. The business of fax mail has been started by the assessee in 1997 and the business of providing internet services during the year 2000 being October 17, 2000 relevant to the assessment year 2001-02. Therefore, what is to be seen is whether there has been any violation of the provisions for the claim of deduction under section 80-IA(4)(ii) for the assessment year 2001-02 or at the maximum in the first year of claim of deduction under section 80-IA being the assess-ment year 2004-05. This is because once it is held that the assessee is enti-tled to the deduction under section 80-IA and this finding has become final, the deduction under section 80-IA can at best be varied on account of the additions or disallowances but it cannot under any circumstances be denied as once the deduction under section 80-IA is granted it is accepted that the business of the undertaking is not hit by any of the violation or bar as provided in section 80-IA itself. Here, it is noticed that the assessee has been granted the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4-05 when the gross value of plant and machinery as per books of the assessee was Rs. 3,28,35,650/-. He submitted that in assessment year 2005-06 also deduction u/s 80IB was allowed to the assessee when the value of plant and machinery as per books of the assessee was Rs. 4,25,98,618/- in an assessment made u/s 143(3) of the Act. He submitted that the assessments of 2004-05 and 2005-06 have not been disturbed by the Assessing Officer till date. Therefore, it was his submission that the CIT was not justified in disallowing the claim of deduction u/s 80IB to the assessee for the reason that the investment in plant and machinery of the assessee exceeded Rs. 1 crore. His argument was that it was in the initial year of allowance of deduction u/s 80IB it had to be seen whether the investment in plant and machinery of the assessee was within the prescribed limit to be eligible as a small scale industrial unit. In the subsequent year there was no such requirement. He also submitted that even if we go by the language of section 80IB(14)(g) which provides that "small scale industrial undertaking" means an industrial undertaking which is, as on the last day of the previous year, regarded as a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....king any inquiry. On these facts the conclusion that the order of the Income-tax Officer was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commis sioner under section 263(1) was justified." 9. He further relied on the decision of the Hon'ble Gauhati High Court in the case of CIT v. B and A Plantation and Industries Ltd. [2012] 346 ITR 43(Gauhati) wherein it was held as under: "....that an error was noticed by the Commissioner in the order of the Assessing Officer that the assessee had made the claim for deduction of payment of bonus twice and it was corrected. Therefore, it could not be held that such an order was beyond the revisional jurisdiction of the Commissioner. Similar objection of the audit party did not in any manner affect the revisional jurisdiction, nor the fact that the error could be rectified by the Assessing Officer or he could have taken resort to reassessment provision could be a bar to exercise of revisional jurisdiction. It was also not a case of substitution of the opinion of the revisional authority for the opinion of the Assessing Officer. The order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat was considered by the Tribunal was section 80IA(3) of the Act and any of the conditions prescribed uns80IA(3) of the Act does not include a condition as in section 80IB(14)(g) of the Act and whether on the last day of the previous year the assessee was eligible as a small scale industrial undertaking on the basis of its investment in plant and machinery. 12. He submitted that the Hon'ble Madras High Court in the case of M/s SRM Systems & Software Pvt. Ltd vs ACIT, 2010-TIOL-646-SCMAD- IT, has held that there was no lapse or wrong exercise of power by the CIT u/s 263 of the Act when the Assessing Officer completely omitted to deal with the receipt of a sum of Rs. 68777922/- which was revealed from the CD seized in the course of search held on 12.8.2004. Similarly, in the instant case, the Assessing Officer has not considered the issue of deduction u/s 80IB at all in the assessment order and therefore, the CIT was fully justified in passing an order u/s 263 of the Act. 13. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. In the instant case, the CIT observed that the assessee's investment in plant and mac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this contention of the assessee. We find that clause (g) of sub-section(14) of section 80IB reads as under: "small scale industrial undertaking" means an industrial undertaking which is, as on the last day of the previous year, regarded as a small scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951)." 16. A plain reading of the above provisions shows that for being a small scale industrial undertaking u/s 80IB of the Act, the condition of the section is that the undertaking must be regarded as a small scale industrial undertaking u/s 11B of the Industries (Development and Regulation) Act, 1951 as on the last day of the previous year. We find that the certificate relied upon by the assessee is a certificate dated 11.9.2000 and not a certificate which has been issued on the last day of the relevant previous year or on any date subsequent thereto. 17. Further, we find that as per provisions of section 11B of the Industries (Development and Regulation) Act, 1951, an undertaking to be regarded as small scale industrial undertaking therein must not have investment in plant and machinery exceeding Rs. 1 crore. Thus, in our....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the IDR Act deals with new industrial undertaking which would come into existence after the passing of the Act and establish any new industrial undertaking, except under and in accordance with a licence issued in that behalf by the Central Government. However, in case of small scale industrial undertaking, exemption and favourable benefits are provided which means those small scale industrial undertakings which fulfil the conditions of being small scale industrial are not to be regulated as per the provisions of IDR Act. It is in this context, section 11B is inserted in the statute which gives power to the Central Government to specify the requirements which shall be complied with by small scale industrial undertakings. Omitting those portions of section 11B, which are not relevant for our purposes, rest of the section is extracted below : "11B. Power of Central Government to specify the requirements which shall be complied with by the small scale industrial undertakings. 1.The Central Government may, with a view to ascertaining which ancillary and small scale industrial undertakings need supportive measures, exemptions or other favourable treatment under this Act to enable t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 10-12-1997. Operative portion of the said notification lays down the following conditions to be fulfilled by the industrial undertakings before it could be regarded as a small scale or ancillary industrial undertakings: "Now, therefore, in exercise of the powers conferred by sub-section (1) of section 11B and sub-section (1) of section 29B of the said Act, and in supersession of the notification of the Government of India in the Ministry of Industry (Department of Industrial Development) number S.O.232(E), dated the 2nd April, 1991, the Central Government hereby specifies the following factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of the said Act :- 1. Small scale industrial undertaking.-An industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms of on lease or on hire purchase, does not exceed rupees three crores; 2. Ancillary industrial undertaking.-An industrial undertaking which is engaged or is proposed to be engaged in the manufacturing or production of parts components, subassemblies, tooling or interme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....taking. That registration is prescribed for altogether different purpose, viz., to avail the benefit under the IDR Act either of section 11B or section 29B. Thus, insofar as extending the provision of section 80-IB of the Income-tax Act is concerned, the only aspect which is relevant and is to be considered is as to whether the conditions stipulated in the notification issued under section 11B of the IDR Act for regarding the same as small scale industrial Act are fulfilled or not. It would be of interest to note that section 80-IB(14)(g) used the expression 'regarded as small scale industrial undertaking' under section 11B of the IDR Act. Likewise, even the notification dated 10-12-1997 while laying down the conditions for claiming the benefit of small scale industrial undertaking used the same expression when it states 'following factors on the basis of which an industrial undertaking is regarded as small scale industrial undertaking'. 14. When we look into the mandatory Form prescribed for availing this benefit, viz., Form 10CCB, such a form has to be filled and submitted by the assessee to the Assessing Officer for claiming the benefit. The details which are required to be gi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Income-tax Act. Replying in the negative and holding that there was no such requirement of such registration to avail the said benefit, the Gujarat High Court held as under : "Section 32 provides for depreciation. Sub-section (1) provides for depreciation in respect of building, machinery, plant or furniture owned by the assessee and used for the purposes of his business or profession. Clause (vi) of subsection (1) provided for one time depreciation of 20 per cent on the actual cost of ship, aircraft, machinery or plant. It gave an option to assessee to claim depreciation either in the year in which the machinery or plant was installed or the year in which the assessee had put it to use. But this special depreciation was confined to small scale industrial undertakings. Thus, it was a special provision made for the benefit of small-scale industrial undertakings. By the Explanation,"new ship" and "new machinery or plant" were defined. The Legislature also provided by that Explanation as to which undertaking was to be regarded as a small-scale industrial undertaking. By the said Explanation, it also provided how the value of the machinery or plant was to be determined. Thus, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ombay High Court at page 6 in para 6 of its order has held as under: "6. We have considered the submissions. We find that the submissions made by Mr. Pardiwalla on the basis of the decision of this Court in the matter of Paul Brothers (supra) and Director of Information Pvt. Ltd. (supra) merits acceptance. Therefore, in this case, it is not necessary for us to decide whether SEEPZ unit was set up/formed by splitting up of the first unit. In both the above decisions, this Court has held that where a benefit of deduction is available for a particular number of years on satisfaction of certain conditions under the provisions of the Income Tax Act, then unless relief granted for the first assessment year in which the claim was made and accepted is withdrawn or set aside, the Income Tax officer cannot withdraw the relief for subsequent years. More particularly so, when the revenue has not even suggested that there was any change in the facts warranting a different view for subsequent years. In this case for the assessment years 2000-01 and 2001-02 the relief granted under Section 10A of the Act to SEEPZ unit has not been withdrawn. There is no change in the facts which were in ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is in relation to the formation of undertaking and once the formation is complete the development of undertaking cannot be put under restrain of section 80IA(3); if for assessment year 2004-05, the assessee has been granted the claim of deduction u/s 80IA(4)(ii) the same cannot be denied for the subsequent assessment year by applying the restraints of section 80IA(3). 22. In contrast to the above, in the instant case, the formation of the industrial undertaking of the assessee is not an issue. Further, it is not the provisions of the law that for being eligible for deduction u/s 80IB of the Act, the assessee's industrial undertaking should be small scale industrial undertaking only in the year of formation and after having been formed in one year and in the subsequent year even the industrial undertaking does not remain small scale industrial undertaking then also the assessee is entitled for deduction u/s 80IB of the Act. In our considered view, for being eligible for deduction u/s 80IB, in the context of the present case, the assessee's industrial undertaking must be a small scale industrial undertaking in the year in which deduction is eligible. Therefore, the above quoted deci....