TaxTMI 
TaxTMI 
2018 (1) TMI 842
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....g disposed off by a common order. For the sake of convenience, we shall be dealing with the facts in ITA No.39/Chd/2017 relating to A.Y 2006-07. ITA No.39/Chd/2017 (A.Y. 2006-07): 4. Briefly stated, the assessee is in the business of manufacturing and trading of biscuits, namkeen and buns, etc. and trading of confectionary biscuits, rusk and bread. The assessee is running four separate industrial units i.e. one at Noida, one at Tahliwal, and two at Phillaur. During the impugned A.Y the assessee claimed deduction of profits earned from NOIDA Unit u/s 80IB & Tahliwal Unit u/s 80IC of the Act. 5. Ground Nos.1, 2 and 3 raised by the Revenue relate to the issue of eligibility of the assessee to claim deduction u/s 80IB of the Income Tax Act, 1961 (in short 'the Act') amounting to Rs. 39,14,380/- with respect to the profits earned by its Noida unit. The Assessing Officer denied the same to the assessee since he found that the NOIDA Unit did not fulfill the basic criteria for claiming the same, being an SSI unit not manufacturing any item prohibited by the section as listed in schedule XI of the Act. The Assessing Officer held that the Noida undertaking was not an SSI Unit as ....
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....owed in the past and the AR has contended that there is no justification to refuse the same in the subsequent years. In this regard reliance has been placed on the judgment in the case of Ace Multi Axis Systems Ltd vs DCIT 367 ITR 266 (KAR) at (Bang) in support of his contention that deduction under section 80IB is allowable for 10 years and if the conditions are satisfied initially, the benefit is to be allowed for 10 years even if the investment in machinery exceeds Rs. 1 crore due to the growth in the industry. The AR contended that since the deduction u/s 80IB has been allowed right from the beginning, there is no justification to disallow it during the year under consideration. Reliance in this regard was also placed on the case of Glaxo Smithkline consumers Health Care Ltd. Vs. CIT 2007 112 TTJ 94 (CHD) and Micro Instruments Co. vs. ITO (2008) 112 TTJ 94 (Chd) besides other case-laws. Further, the appellant filed SSI certificate issued by the appropriate authority which the AR stressed, is the final authority, regarding the same. The AR clarified that the said certificate was valid during the year under consideration. As regards the circulars ofT997 and 1999; it was explained....
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....section 80IC of the Act have nowhere been linked in the Act with the ownership of the undertaking. In view of the same the disallowance made by the Assessing Officer is not justified and the same is hereby ordered to be deleted. This ground of appeal is allowed." 8. Aggrieved by the same the Revenue has raised ground No.1,2 &3 before us, which read as under: 1. "Whether upon facts and circumstances of the case, the Ld.CIT(A) was justified in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit by simply relying solely on the submissions of the assessee and not by giving any independent findings?" 2. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit and by not giving any finding as to why some machineries have been excluded from the total plant id machinery for making it eligible for a Small Scale Industry?" 3. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit and by not g....
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....se under Sections, 11, 11A and 13 of the I.D.R. Act by the Central government and are covered by the provisions of paragraphs (l) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered at the discretion of the owner as such within a period of 180 days from the date of publication of this notification. Two things follow from the reading of the aforesaid notification: (a) To be regarded as a small scale industrial undertaking - such an undertaking should be given which has invested in fixed assets in plant and machinery either on ownership terms of on lease or on hire purchase." 13. Ld.DR contended that as per the AO the value of the assets both owned and leased by the assessee would exceed Rs. 1 crore, the limit specified as per the IDR Act. 14. Besides, the Ld. DR further stated that in terms of certificate No.S.O.1288(E) dated 24.12.1999 read with S.O.857(E) dated 10.12.1997 issued by the Ministry of Commerce & Industry, the investment in plant and machinery is to be considered of all the undertakings run or controlled by the assessee and since the combined investment of all the undertakings exceeds Rs. 1 crore, the assessee....
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....h store raw materials, finished products only and are not linked with the manufacturing process; and xi. cost of fire fighting equipments." 16. The Ld. counsel for assessee thereafter referred to the detail reflecting the fixed assets both owned and leased by the assessee and the assets which are to be considered as plant and machinery as per the aforesaid notification placed before the CIT(A) and before us at Paper Book page No.37 as under: PARTICULARS OF ASSETS Gross Block Balance as on 31.03.2008 To be Considered For Purposes of SSI Not to be considered For the purpose SSI Land & Land Development(Noida) 11903847 11903847 Air Conditioner 143000 143000 Bicycles 2940 2940 Building 13649941 13649941 Car & Pickup van 243521 243521 Computer 134855 134855 Crates and Moulds 3938644 3938644 Electric Fitting 449383 449383 Fan & Coolers 98384 98384 Fire Extinguishers 22810 22810 ....
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....strial undertaking is a subsidiary of, or is owned or controlled by any other industrial undertaking or undertakings in terms of sub clause(i), sub clause (ii) or sub clause (iii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertakings and the other industrial undertaking or undertaking clubbed together exceeds the limit of investment specified in Paragraph I or II of this table, as the case may be, none of these industrial shall be considered to be a small scale or ancillary industrial undertaking." 19. The Ld. counsel for assessee thereafter pointed out that in the case of the assessee being a limited company it was covered under sub-clause (iii) for deciding the issue of clubbing of investment. The Ld. counsel for assessee thereafter drew our attention to circular No.S.O.857(E) dated 10.12.1997 and pointed out therefrom that in the said circular in clause (v) sub-clause (iii) was stood omitted. The relevant portion of the circular S.O.857(E) is placed at Paper Book page No.47 and is reproduced hereunder: "v. where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other industrial ....
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.... criteria of investments in plant and machinery being below the specified limit of Rs. 1 crore as required under the IDR Act, 1951. As rightly pointed out by the Ld. counsel for assessee, not all assets qualify as plant and machinery, therefore, after excluding those assets specifically pointed out by the circular of the Ministry of Industries in S.O.857(E), the investment in plant and machinery amounted to only Rs. 55,96,008/-. The Revenue has neither controverted the contention of the Ld. counsel for assessee that not all assets qualified as plant and machinery, nor has disputed the detail of qualifying assets filed before us. Therefore, for all purposes, the investments in plant and machinery of the Noida undertaking is well within the specified limit of Rs. 1 crore to qualify as an SSI undertaking. Further, the Ld. counsel for assessee has also demonstrated that as per the applicable circular of the Ministry of Commerce clubbing of investments of undertakings of the assessee is not required. This fact has also not been controverted by the Revenue. Therefore, we find no merit in the contention of the Revenue that for the purpose of determining quantum of investments in plant and....
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....s profits u/s 80IB of the Act as rightly held by the Ld.CIT(Appeals). 27. In view of the above, the order of the Ld.CIT(Appeals) in deleting the disallowance of deduction u/s 80IB of the Act claimed by the assessee of Rs. 39,14,180/- is upheld. Ground of appeal Nos.1, 2 and 3 raised by the Revenue are, therefore, dismissed. 28. Ground No.4 raised by the Revenue reads as under: "4.Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the disallowance Rs. 12,16,332/- made by the A.O. on deduction u/s 80IC claimed by the assessee on Tahliwal Unit without giving any reasons and by simply stating that the A.O. is highly unjustified in denying deduction u/s 80IC to the assessee on the basis of some notional expenses such as knowhow, goodwill, trade name etc. where the A.O. has very clearly held that the provisions of the section 80IA (8) and (10) read with section 80IC are applicable to the assessee's Tahliwal Unit only?" 29. The above ground is with respect to the deduction claimed u/s 80IC amounting to Rs. 1,21,63,320/- in respect of Tahliwal unit which has been reduced by the Assessing Officer by 10% of the amount of net profi....
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....and the arguments of the AR. The AO has reworked the claim under section 80IC between the Tahliwal unit and the Phillaur unit on estimated basis without bringing any evidence on record to show whether there has been any transaction between the two units. The appellant has made the allocation of all common expenses on turnover basis and the AO has failed to mention any expense which has not been considered in the said exercise. Thus, the reducing of the eligible profits to the extent of 10% by the AO without any sound basis is unwarranted and is hereby ordered to be deleted. 32. Before us, the Ld. DR relied upon the order of the Assessing Officer while the Ld. counsel for assessee reiterated the contention made before the Ld.CIT(Appeals) and relied upon the order of the Ld.CIT(Appeals). 33. We find no infirmity in the order of the Ld.CIT(Appeals). Undeniably, the reduction of profits to the extent of 10% has been done by the Assessing Officer on estimate basis without demonstrating by way of evidence whether any expenses on account of knowhow, goodwill, trade name, etc. had been incurred by the Phillaur unit with respect to Tahliwal unit. The same has not been demonstrated eve....
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....ction under section 80IB of the act. Similar view was taken by the Hon'ble Delhi High Court in the case of CIT vs Northern Aromatics Ltd (2005) 196 CTR (Delhi) 479. In view of the same, the reduction in the claim made by the appellant under section 80IC on this account deserves to be deleted. These grounds of appeal are allowed." 37. Before us, the Ld. DR did not point out any infirmity in the order of the Ld.CIT(Appeals), nor did he bring to our notice any contrary decision of the jurisdictional High Court as opposed to that relied upon by the Ld.CIT(Appeals) while adjudicating the issue. In view of the same, we uphold the order of the Ld.CIT(Appeals) in deleting the reduction in the claim made by the assessee on account of job work charges amounting to Rs. 16,36,199/- The ground of appeal No.5 raised by the Revenue is, therefore, dismissed. 38. Ground No.6 raised by the Revenue reads as under: "6. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 15 Lakh made on account of disallowance out of claim of interest u/s 36(l)(iii) of the Income-tax Act, 1961 simply relying on the submissions of the assesse....
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....ng any reasons?" 42. The above ground is against the allocation of Rs. 25 lacs being common expenses of the head office against the income of Tahliwal unit while computing the deduction u/s 80IC of the Act. The Assessing Officer held that the transportation expenses incurred for exporting biscuits to Afganistan have been incurred by Phillaur unit the expenses on transportation should be apportioned on the ratio of sales to Afganistan. Further in the absence of any detail of sales made to Afganistan an amount of Rs. 25 lacs was added on account of wrong distribution of common expenses by the head office. 43. Before the Ld.CIT(Appeals), the assessee contended that all expenses both direct and indirect had been properly apportioned between different units run by it. The Ld. counsel for assessee stated that separate books of account were maintained for each unit and all expenses relating to particular unit were debited to that unit. As far the common expenses incurred, same were apportioned in the ratio of turnover. The Ld. counsel for assessee submitted that complete list of allocation of expenses was filed to the Assessing Officer and without pointing any error in the same the ....