AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 848
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....CIT (Appeals) - XI, New Delhi qua the assessment years 2004-05, 2007-08, 2007-08 & 2008-09 respectively on the grounds inter alia that :- "ASSESSEE'S APPEALS ITA No.1712/Del./2010 (AY : 2004-05) 1. That the CIT (Appeals) erred on facts and in law in confirming the action of the assessing officer in denying the deduction under section 80-18 of the in respect of its undertakings engaged in wire line logging perforation activity for mineral oil concern allegedly holding that (i) the appellant was not engaged in manufacture and production of articles or things, (ii) the industrial undertaking of the appellant is created by splitting up, or restructuring of business already in existence. 2. That the CIT(Appeals) erred on facts and in law in holding that wire line logging undertakings of the appellant were not engaged in manufacture and production of articles or things on the ground that (i) gathering of information or putting down information collected could not be regarded as processing or manufacturing activities and (ii) merely describing factual position cannot be termed as manufacture and production of articles or things. 3. That the CIT....
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....n additions/disallowances made in the earlier years while computing revised written down value of fixed assets. 11. That the CIT (Appeals) erred on facts and in law in confirming the disallowance of expenditure amounting to Rs. 7,56,940/- by applying ad hoc percentage of 15% of the gross dividend under section 14A of the Act, holding the same to be expenditure incurred for earning exempt income. (a) That the CIT (Appeals) erred on facts and in law in holding that Rule 80 of the Income Tax Rules, 1962 ('the Rules') read with section 14A is mandatory and retrospective. (b) That the CIT (Appeals) erred on facts and in law in not appreciating that no expenses had, in fact, been incurred by the appellant for earning such dividend income. (c) That the CIT (Appeals) erred on facts and in law in not appreciating there was no nexus between the expenditure incurred and exempted dividend income." ITA No.3708/Del./2012 (AY : 2006-07) 1. That on the facts and circumstances of the case and in law the order passed by the learned Commissioner of Income-tax, (CIT) under section 263 or the Income-tax Act, 1961 ('the Act') is beyon....
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....t. 1.1 That the CIT(A) erred on facts of the case and in law in not appreciating that Agartala unit of the appellant being set up in north-eastern region, was eligible deduction @ 100% of the profit of the business, in terms of the second proviso to subsection (4) of section 80-IB of the Act read with notification No. SO 627 (E) dated 04.08.1999." ITA No.5511/Del./2012 (AY : 2007-08) "1. That on the facts and circumstances of the case and in law the order passed by the learned Commissioner of Income-tax, ('CIT') under section 263 of the Income-tax Act, 1961 ('the Act') is beyond jurisdiction, bad in law and void ab initio. 1.1 That the CIT erred on facts and in law in exercising reversionary powers under section 263 of the Act without appreciating that the twin conditions of that section viz., assessment order being erroneous as well as prejudicial to the interests of the Revenue, were not satisfied in the appellant's case. 1.2 That the CIT erred on facts and in law in setting aside the assessment order, without arriving at any conclusive finding on merits as to how the assessment order was erroneous as well as prejud....
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....law in making extraneous observations that "for deciding the manufacturing activity, it is a vital factor how the Department of Central Excise has treated the process undertaken by the appellant and whether the product ('log') was an excisable goods or the appellant's work was simply like a service provider. It appears that the appellant's case was not examined from this angle and perhaps these facts were not brought to the notice of the Hon'ble Court. It is without prejudice to the decisions of the Hon'ble Courts on the issue. However, the AO may examine the issue from this angle and take necessary permission from the Hon'ble Court to have a relook on its own decision". 1.3. Without prejudice that the aforesaid observations of the Commissioner of Income-tax (Appeals) being extraneous and in contradiction of the binding decision of the Hon'ble Delhi High Court and, therefore, calls for being expunged. 2. That the CIT(A) erred on facts of the case and in law in not admitting the additional ground of appeal raised' by appellant qua claim of deduction under section 8018 of the Act in respect of 100% profits of the Duliajan unit in ....
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.... the addition of Rs. 1,94,36,126/- on account of disallowance of deduction u/s 80IB claimed @ 30% despite the fact that the assessee company is not registered for excise duty & only service provider and this fact was not brought to notice of Hon'ble Delhi High Court; and that the CIT (A) was not correct in allowing the deduction after noting the fact as the decision of the Hon'ble Court was based on different facts? 3. Whether Ld. CIT (A) was correct on facts and circumstances of the case and in law in holding that the assessee company is manufacturing unit ignoring the fact that the assessee company is paying service tax; therefore service provider & not registered for excise duty and also not complying the condition of section 80IB(2)(iv) of the Act that where industrial undertaking manufactures or produces articles or things, the undertaking employ ten or more workers in manufacturing process?" 4. Briefly stated the facts necessary for adjudication of the controversy at hand are : M/s. HLS Asia Ltd., the assessee is engaged in wireline logging perforation and related oil fields activities for various national and international mineral oil companies i.e. Oil I....
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....005-06, assessee company shown an amount of Rs. 51,43,856/- during years on account of service tax but remaining unpaid. The assessee has also not passed service tax through profit & loss account. Assessee had raised part bills with service tax with charge to the same. However, AO added the amount of Rs. 51,43,856/- to the income of the assessee as trading receipts subject to its entitlement to deduction as and when it is paid to the Government or written off from customer account. 9. Assessee carried the matter before the ld. CIT (A) by way of filing the separate appeals for AYs 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 who have confirmed the disallowance of deductions claimed by the assessee u/s 80IB made by the AO in AYs 2004-05, 2007-08 & 2008-08 however ld. CIT (A) in AYs 2005-06 & 2006-07 allowed the relief to the assessee company. Feeling aggrieved by the orders passed by the ld. CIT (A), both the assessee as well as Revenue have come up before the Tribunal by way of filing the present cross appeals. 10. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authoritie....
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....nder IT Act, each case is required to be examined in the light of facts and circumstances of that very case. The most important aspect of this exercise should be the analysis of the process involved in the impugned activity and an enquiry into the nature of transformation that the product has undergone to find out whether it is distinct in identity from the raw commodity involved in its manufacture. 27. In the instant case, production of log by way of wireline logging is the concerned activity. We are given to understand by the learned counsel for the assessee that wireline logging assists the mineral oil concerns primarily to ascertain as to whether there is any gas or oil in the well, and if there is such presence, then its availability at what depth and the quantity of such reserves, and whether such gas or oil can be extracted. This is usually done through electrical, acoustic radio-active and electromagnetic analysis of the properties of rocks. The Assessee has stated that it has carried out wireline logging, perforation and related operation by engaging highly experienced engineers and log analysts, using high-tech equipments and computers. The logging tools....
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....ntre, accounts administration/ operation office, godown, stores, communication and transport facilities, special protective storage for radio-active material and residence for personnel. 30. After referring to various activities undertaken at a specific unit, Mr. Vohra, learned counsel for the assessee pleaded that the logs generated by it are ―an article or a thing and the process of generating the same amounts to manufacturing/ production. To counter the submissions of the assessee, Ms. Bansal, learned senior counsel for the revenue has submitted that geo-physical and petro-chemical properties of the rocks is like information taped into rocks and what assessee is doing is just retrieving the same and printing it on the paper or on other formats. Ms. Bansal, however did not controvert all that was submitted and explained by Mr. Vohra as noted by us in the preceding paragraphs (27, 28 & 29). 31. Having analyzed the submissions of learned counsel of both the parties and the material available for our perusal and the cited case law, we find force in the submissions of Mr. Vohra, learned counsel for the assessee. No doubt, the raw material i.e. the primary inpu....
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....s judicial pronouncements. Aforesaid second limb of the argument of Mr. Vohra is of vital importance because the AO itself, while framing the assessment order dated 23.03.1995 for the assessment year 1992-93 had relied upon the same analogy to come to sharply opposite conclusions. The same can be reproduced as under: "Can we say X-Ray machine is manufacturing X- Ray? Obviously no. Because it is only taking the information of the human body and by radiation having a graph on an X-Ray. But, it is not manufacturing X-Ray." 33. Various High courts of India have held that X-Ray machine is qualified for investment allowance under section 32A. In the case of Commissioner of Income-tax Vs. Dr. S. Surender Reddy [243 ITR 110 (AP)] the Andhra Pradesh High Court has categorically observed as under: "9. Next comes the equipment used for purposes of X-ray. By putting the X-ray film in to the X-ray machine a different article is produced. It is a different article from the film which is produced from the X-ray machine and, therefore, it is a thing within the meaning of Section 32A(2)(b)(ii). Therefore, the Tribunal is right in its view that when X-ray....
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....e assessee in respect of plant & machinery owned and used below the ground in field operation in mineral oil concern is concerned, this issue has also been decided in favour of the assessee company by the Hon'ble Delhi High Court in assessee's own case (supra) by framing the substantive question of law as under:- "2. Whether, on the facts and in the circumstances of the present case, the assessee is entitled to a higher depreciation allowance @ 100% under Rule 5, appendix I, Part 1, III (ix) of the Income Tax Rules, 1962?" 17. Hon'ble Delhi High Court decided the aforesaid question of law in favour of the assessee company by holding that assessee's wireline logging and perforation equipments are eligible for deprecation @ 100% under clause (ii) of section 32(1) of the Act r/w Item III(3)(ix)(b) of the schedule of rates of depreciation in Appendix I to the Income-tax Rules, 1962 by returning following findings :- "46. After hearing learned counsels for the parties at length on this issue, we are of the opinion that the Revenue's stand on this issue lacks substance. Sec. 32(1) of the Act provides for a deduction in the computation of business income, on accou....
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....re of the particular asset and the character of its user including the types of business and the environmental conditions in which it is used. When the OIL has certified in this regard, that the wireline logging & perforation equipments/tools which are used by the assessee are similar to those equipments/ tools owned and used by mineral oil concerns and when there is no shadow is casted over the fact that the similar assets would qualify for a depreciation @ 100% under the said entry if these are owned by a mineral oil concern like OIL, we do not find any substance in the department's approach to deny the same to the assessee on the ground that the owner of the similar assets, we are concerned with, will not be so entitled. Mentioning of the fact, in the letter of OIL dated 13 Nov 1998 that these equipments/tools are meant only for use in underground oil field operations for wireline logging & perforation leaves no iota of doubt that the nature of assessee' equipments and its user is similar to those equipments which are owned by the mineral oil concerns and eligible for depreciation under the aforesaid entry. The artificial distinction regarding the mobile nature of t....
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....nd income from mutual funds which are governed by SEBI Guidelines nor the assessee is having any separate Department or persons exclusively engaged in looking after investment activities and there is no proximate nexus between the earning of the said exempt income. It is also the case of the assessee company that during the year under assessment, net income of Rs. 0.50 crores was credited by the assessee to the profit & loss account after deduction of mutual fund charges. Such expenditure is being directly related to exempt dividend income has already been disallowed by the assessee. 22. Keeping in view the facts and circumstances of the case wherein the assessee has stated to have already disallowed expenditure directly related to earning exempt dividend income. We are of the considered view that when investment is made by the assessee company time and manpower need to be utilized to steer the investment in right places so we reasonably restrict the disallowance made by the AO and CIT (A) from 15% to 5% of the gross exempt dividend income earned by the assessee during the year under assessment. So Ground No.11 of ITA No.1712/Del/2010 (AY : 2004-05) of assessee's appeal is pa....
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....1,43,856/- made by the AO treating the service-tax receipt as trading receipt, hence, Ground No.4 of ITA No.323/Del/2012 (AY : 2005-06) of Revenue's appeal is hereby deleted. ADDITIONAL GROUNDS ITA NO.1712/DEL/2010 - AY : 2004-05 (ASSESSEE'S APPEAL) ITA NO.4144/DEL/2014 - AY : 2007-08 (ASSESSEE'S APPEAL) 29. Assessee company by filing separate applications sought to raise identical additional grounds under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 which are as under :- "1. That on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) / assessing officer ought to have allowed deduction under section 80-IB of the Act @ 100% of the profit of the undertaking at Duliajan being a mineral based industry, in terms of Notification No.SO 627 (E) dated 04.08.1999, read with the second proviso to sub-section (4) of section 80-IB of the Income-tax Act, 1961 ("the Act") as against deduction @ 30% claimed by the appellant. 2. That on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals)/ assessing officer ought to have allowed deduction under section 80-IB of the Act @ 100%....
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....red to be claimed @ 100%. Similarly, in AY 2007-08, assessee company failed to claim the deduction. It is the settled principle of law laid down by Hon'ble Supreme Court in case of National Thermal Power Co. Ltd. (supra) that in order to correctly assess the tax liability of an assessee, the Tribunal is only required to consider the question of law arising from facts which are on record in assessment proceedings even by entertaining additional ground raised first time before the Tribunal. Operative part of the law laid down by Hon'ble Supreme Court in case of National Thermal Power Co. Ltd. (supra) is as under :- "Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that....
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....s 2004-05 and 2007-08. 35. Undisputedly, in AY 2004-05, assessee company has claimed deduction u/s 80IB (4) in respect of unit at Duliajan @ 30% of the profit of the said eligible unit. It is also not in dispute that in AY 2007-08, assessee company has not claimed any such deduction u/s 80IB (4) of the Act qua its Duliajan unit. Keeping in view the findings returned by the Bench in preceding paras that the assessee company has been held to be mineral based industry being into the business of wireline logging operation for ONGC and Oil India Corporation in the mineral oil operational areas at Ankleshwar, Najira, Duliajan and Agartala. 36. Assessee company by relying upon the notification No.SO 627 (E) dated 04.08.1999 read with second proviso to sub-section (4) of section 80IB contended that it is eligible for deduction @ 100% of profit. Bare perusal of the Notification (supra) goes to prove that industries running in the North Eastern region including mineral based industry are eligible for deduction @ 100% of profits u/s 80IB(4). 37. However, on the other hand, ld. DR for the Revenue contended that the assessee has brought on record plethora of evidence including list of ....
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....ee company in AYs 2004-05 and 2007-08 by way of additional grounds having been decided by the Bench in favour of the assessee as per findings given in preceding paras, so for the same reasoning additional grounds as well as additional evidence sought to be raised/led by assessee before the ld. CIT (A) is allowed. Since this identical issue in AYs 2004-05 and 2007-08 has been remitted back to the AO to decide afresh after providing opportunity of being heard to the assessee by examining the evidence led by the assessee in the light of the second proviso to sub-section (4) to section 80IB read with Notification No.627 (E) (supra), grounds no.1, 1.1, 1.2, 1.3 & 2 of ITA No.2208/Del/2014 for AY 2008-09 of assessee's appeal are also determined in favour of the assessee for statistical purposes to be decided by the AO as per findings returned by the Bench in preceding Para 36 for A.Y. 2004-05 & 2007-08. ADDITIONAL GROUND ITA NO.5855/DEL/2011 - AY 2006-07 (REVENUE'S APPEAL) 42. Additional grounds have been raised by the assessee in the appeal bearing ITA No.5855/Del/2011 for AY 2006-07 filed by the Revenue are as under :- "1. That on the facts and circumstances of the case ....
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....ing in India; that now in view of TDS certificate received from BGFCL, assessee company is entitled for the claim and such TDS withheld by BGFCL in respect of the income earned from Bangladesh; that in terms of the Article 25 of Indo- Bangladesh Double Taxation Avoidance Agreement read with section 90 (2) tax paid by Indian Resident in Bangladesh in respect of income earned therefrom, which is also taxpayer in India is allowable as agreed against tax liability in India. 43. However, on the other hand, ld. DR for the Revenue opposed the present application filed by the assessee company for raising additional grounds on the grounds inter alia that this application is not maintainable as the assessee being not aggrieved with the order passed by the ld. CIT (A) in any manner as neither it filed any appeal nor any cross objection; that application under Rule 11 of Income-tax (Appellate Tribunal) Rules, 1963 is only maintainable if filed in appeal or cross objections by the assessee; that this is a new issue which was neither raised before AO nor before the ld. CIT (A) and as such cannot be entertained at this stage; that this new claim u/s 80IB is also not a pure question of law a....
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....ioner of Income-tax (Appeals) and the Tribunal and those set out in the statement of the case are not in dispute. The core question is whether the Tribunal ought to have- considered the plea of the applicantcompany that it was entitled to the benefit of weighted deduction under Section 35B(1)(b)(iv) of the Act in the absence of any appeal or any cross-objection filed by it against the order of the Commissioner of Income-tax (Appeals). The applicant-company in the reassessment proceedings had claimed the benefit of weighted deduction in respect of warehouse charges on the basis of Section 35B(1)(b)(ix) read with Rule 6AA. The point remains that the head of expenditure on account of which the weighted deduction is claimed by the applicant-company is "warehouse charges". The apex court in CIT v. Assam Frontier Tea Ltd. [2002] 253 ITR 549, as referred to above, had held that in a case where the warehouse in the foreign country is run by an agent of an assessee but the expenditure incurred thereon is reimbursed by the assessee to the said agent, it amounted to maintenance of the warehouse by the assessee for the promotion of sales of its tea outside India and that therefore the assessee....
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....gard by the emphatic observations of the apex court contained in its decision of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. We have also taken note of the observations of the apex court to the effect that the purpose of the assessment proceeding before the taxing authority is to assess correctly the tax liability of an assessee in accordance with law. We consider it to be a solemn duty of the taxing authorities to correctly assess the tax liability of an assessee by duly following the relevant provision of law and therefore do not countenance an inflexible and mechanical adherence to the law of procedure and in the process deny an assessee a benefit to which it is otherwise entitled in law. In our considered opinion, that could not have been the purpose of framing the Appellate Tribunal Rules. There cannot be any estoppel against law. In this regard, we are reinforced by the observations of the apex court in Sangram Singh v. Election Tribunal, AIR 1955 SC 425, with reference to the Code of Civil Procedure as under (page 429) : "Now a code of procedure must be regarded as such. It is 'procedure', something designed to facilitate justice and further i....
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....not considering the contention of the assesseeapplicant company that the warehouse charges was covered by Sub-clause (iv) of Section 35B(1)(b) of the Act only on the ground that the applicant-company had not filed any appeal or cross-objection. We therefore answer the question referred, in the affirmative and remand the proceeding to the Tribunal for consideration of the said contention of the applicant-assessee on merits. We however make it absolutely clear that in case the basic facts relating to the claim of the applicant-company for weighted deduction under Section 35B(1)(b)(iv) are not available on record, the applicant-company would not be permitted to urge that ground and the Tribunal would pass appropriate orders as it would deem fit in accordance with law." 47. Following the decision rendered in the case of Assam Co. (India) Ltd. (supra), we are of the considered view that the application filed by the assessee in the appeal filed by the Revenue is maintainable, however, subject to the condition that the relevant facts on which additional grounds are raised are available on record. When we examine the assessment order as well as order passed by the ld. CIT (A), it is a m....
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....ed in AY 2006-07 by the assessee company being identical in nature are also required to be decided by the AO by examining the plant and machinery viz. the wireline logging unit set up at Duliajan in terms of Notification No.SO 627 (E) dated 04.08.1999 read with second proviso to sub-section (4) of section 80IB and examine the eligibility of the assessee for deduction @ 100%. So, this issue is remitted back to the AO to decide afresh after providing an opportunity of being heard to the assessee. ITA No.3708/Del./2012 (AY : 2006-07) & ITA No.5511/Del./2012 (AY : 2007-08) CHALLENGING THE ORDERS PASSED BY THE LD. CIT (A) U/S 263 OF THE ACT 50. Applicant, M/s. HLS Asia Limited (hereinafter referred to as the 'assessee'), by moving applications supported with affidavits in both the aforesaid appeals sought to condone the delay of 199 days and 303 days for filing appeals on the grounds inter alia that in both the AYs 2006-07 & 2007-08, assessments were assessed u/s 143 (3) of the Act but the ld. CIT initiated proceedings u/s 263 of the Act on the ground that the assessment orders dated 29.12.2009 & 11.12.2009 for AYs 2006-07 & 2007-08 respectively are erroneous and prejudicial to....
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....al approach by the Bench in order to impart the substantial justice to the assessee, we are of the considered view that delay of 199 days and 303 days in AYs 2006-07 & 2007-08 respectively is required to be condoned, hence condoned which would otherwise not cause any prejudice to the Respondent. So, applications moved by the assessee company for AYs 2006-07 & 2007-08 respectively for condonation of delay are allowed, and both the appeals are ordered to be taken up for hearing on merits. 53. Briefly stated, the assessee is into the business of wireline, logging, perforation and other related services to oil and gas services engaged in exploration and/or production of oil and gas. For AYs 2006-07 & 2007-08, assessments were framed at the total income of Rs. 25,20,22,288/- and Rs. 34,96,66,530/- respectively u/s 143(3) of the Act. Ld. CIT treating the orders passed by the AO u/s 143(3) of the Act erroneous and prejudicial to the interest of the Revenue u/s 263 of the Act after considering the contentions made by the assessee company, directed the AO to disallow the additional depreciation of Rs. 3,46,41,428/-; verify that rate of depreciation at plant & machinery is to be allowe....
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....ompany has been held to be engaged in manufacture or production of an article or thing. This issue has been dealt with by the Bench in detail while returning findings in preceding paras 11 to 15. So, now this issue has since been attained finality as SLP filed by the Revenue before the Hon'ble Supreme Court has already been dismissed. When we examine the impugned order passed by the ld. CIT in AYs 2006-07 & 2007-08 by following AY 2004-05, ld. CIT held the assessment orders erroneous only on the ground that, "assessee company is not engaged in manufacture or production of an article or thing". So, now this issue has been settled once for all so far as functional profile of the assessee company is concerned. 58. When the assessee company has been held to be engaged in the manufacture or production of an article or thing by the order passed by the Hon'ble Delhi High Court affirmed by Hon'ble Supreme Court, the assessee is entitled for additional depreciation u/s 32(1)(iia) of the Act and as such, the AO has rightly allowed the additional depreciation to the assessee, hence assessment orders passed by the AO are not erroneous sufficient to exercise revisionary jurisdiction u/s 263 ....