TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 848
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....ent 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 (Appeals) erred on facts and in law in holding that the appellant was only assi....
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....red 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 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 ....
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.... 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 prejudicial to the interest of Revenue. 3. That the CIT erred on facts and in law in holding that the order passed by the assessing officer was erroneous and prejudicial to the interest of the Revenue on account of the following: (i) Allowing additional depreciation of Rs. 1,62,45,285 despite findings tha....
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....rom 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 terms. of the provisions of second proviso to sub-section (4) of section 80-1B of the Act read with notification No. SO 627 (E) dated 04-08-1999." 3. Appellant, DCIT, Circle 12 (1), New Delhi (hereinafter referred to as 'the Revenue') by filing the present appeals sought to set aside the impugned orders dated 19.10.2011, 10.10.2011 & 29.01.2014 passed by the CIT (Appeals)-XXVII, New Delhi, C....
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....cumstances 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 India Ltd. and Oil & Natural Gas Corporation Ltd. in the geographical mineral oil operational areas and the said concern in Duliajan, Agartala, Nazira, Bangaldesh etc. under contracts entered with them. 5. Assessee company in AYs 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 claimed deduction u/s 80IB of the Income-tax Act, 1961 (for short 'the Act') qua its two units, namely, Unit 2 Duliajan and Unit 3 Agartala. Declining the contentions raised by the assessee company, Assessing Office....
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....e 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 authorities below in the light of the facts and circumstances of the case. GROUNDS NO.1 TO 8 OF ITA NO.1712/DEL/2010 AY : 2004-05 (ASSESSEE'S APPEAL) GROUND NO.2 OF ITA NO.323/DEL/2012 AY : 2005-06 (REVENUE'S APPEAL) GROUND NO.1 OF ITA NO.5855/DEL/2011 AY : 2006-07 (REVENUE'S APPEAL) GROUNDS NO.1 & 1.1 OF ITA NO.4144/DEL/2014 AY : 2007-08 (ASSESSEE'S APPEAL) GROUNDS NO.1 & 2 OF ITA NO.2241/DEL/2014 AY : 2008-09 (REVENUE'S APPEAL) 11. AO denied the claim of deduction by the assessee u/s 80IB by reaching ....
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....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 are sensitive sensors with electromechanical systems which can work in extreme conditions of pressure and temperature as found in down hole below the earth surface. There, inside the hole, these equipments perform quite sophisticated measurements. The prime target is the measurement of various geophysical properties of the subsurface rock formations. Of particular interest are porosity, permeability, and fluid content. Porosity is the proportion of fluid-filled space found within the rock. It is this space that contains the oil and gas. Perm....
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....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 input in the impugned activity is the ―information but can we equate this ―information with something which is being copied from there in toto. Whether the characteristics regarding which the information is being sent back to computers on surface from logging tools working inside the down hole can be compared to a characteristic which is available and readable without conducting highly technical scientific tests and calculations down inside the borehole. Even after the geophysical and petro-chemical properties of the rocks have been measured, further scientific processing is required ....
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....stment 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 films are produced the assessee produces a thing and, therefore, he is entitled for investment allowance. As regards the equipment used for conducting the pathological tests the assessee is not qualified to claim investment allowance under Section 32A of the Act. The assessee is also entitled for investment allowance on stabilizer, electric fans, scanner and air- conditioner used to keep the analytical systems, as they are necessary for purposes of production of an article or a thing." 34. Similar view has been expressed by the Gujarat High Court in CIT Vs. Down Town Hospital (P) Ltd. [267 ITR 439 (guj)]; Karnataka High Court in CIT Vs. ....
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....ine 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 account of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession. This provision reads as under: Depreciation. 32. (1)[In respect of depreciation of-- (i) buildings, machinery , plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned , wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed--] [(i) in the case of assets o....
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....ioning 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 the assessee' equipments, which has been created and relied upon by the department, is of no use because even if such a distinction exists it would neither alter the nature of the assessee' equipments nor the character of its user. We, therefore, are of the considered opinion that the assessee's wireline logging and perforation equipments are eligible for a higher depreciation @ 100% under cl. (ii) of s. 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." 18. So, following the decision rendered by the Hon'ble Delhi High Court in assessee's own case (supra), we are of the considered view that AO/CIT(A) have erred in disallowing the claim by the assessee company in r....
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....e. 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 partly allowed in favour of the assessee. 23. Likewise in AY 2005-06, AO made disallowance of Rs. 1,56,276/- being 15% of the dividend income of Rs. 10,41,843/- which the ld. CIT (A) has restricted to Rs. 89,141/- @ 6.5% of the total dividend income earned. Since the facts of the AY 2005-06 are identical, we restrict the disallowance made by the ld. CIT (A) to 5% of the total dividend income earned which is reasonable disallowance as has been held by the Bench for AY 2004-05. Consequently, Ground No.1 of ITA No.323/Del/2012 (AY : 2005-06) of Revenue's appeal is partly allowed in favour of the Revenue. GROUND NO.4 OF ITA NO.323/DEL/2012 AY : 2005-06 (REVENUE'S APPEAL) GROUND NO.3 OF ITA NO.2241/DEL/2014 AY : 2008-09 (REVENUE'S APPEAL) 24. Assessee company has show....
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....27 (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% of profit of the unit at Duliajan amounting to Rs. 1,67,46,153 as against Rs. 31,89,691 for AY 2004-05 determined by the appellant and amount of Rs. 6,20,85,869/- as against no deduction claimed by the assessee in return of income in AY 2007-08." on the grounds inter alia that at the time of filing the return of income assessee company being not aware of the correct legal position and as such inadvertently claimed deduction u/s 80IB of the Act @ 30% of the profit of aforesaid unit at Duliajan instead of 100% of the profit under Second Provision to sub-section (5) of section 80IB for AY 2004-05 and claimed no deduction qua Duliajan unit in AY 2007-08 admissible @ 100% of the profit; that additional grounds so raised by the assessee company are legal ground and non-raising of such grounds were neither willful no....
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....ribunal 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 a nontaxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the ....
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....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 new plant and machinery viz. wireline logging units for both the years 2004-05 and 2007-08 which facts are required to be verified by the assessing authorities. The contention of the ld. DR is sustainable. 38. Hence, we are of the considered view that this issue is required to be sent back to the AO to decide afresh after providing an opportunity of being heard to the assessee in the light of the Notification (supra) on the basis of finding of fact if machinery stated to have been applied by the assessee company at its Duliajan unit was new machinery and has actually been put to use so as to make it eligible for deductions claimed. Consequently, additional grounds raised by the assessee in AYs 2004-05 and 2007-08 are allowed for statistical purposes. GROUNDS NO.1, 1.1, 1.2, 1.3 & 2 OF ITA NO.2208/DEL/2014 AY : 2008-09 (ASSESSEE'S APPEAL) 37. Asses....
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.... 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 and in law, the Commissioner of Income-tax (Appeals) / assessing officer ought to have allowed deduction under second proviso to section 80-IB(4) of the Act to the assessee @ l 00% of the profit of the undertaking set up 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-lB of the income-tax Act. 1961 ('the Act'). 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-JB of the Act @ 100% of profit of the unit at Duliajan amounting to Rs. 5,59,59,323 as against no deduction claimed by the appellant in the return of income. 3. That on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) / assessing ....
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....nal) 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 as it requires elaborate enquiry to verify the claim made by the assessee; that when the assessee has claimed to be a mineral based company in terms of Notification No.SO 627 (E) (supra), the AO would require to conduct complete enquiry if the assessee company is into mineral based industry. Ld. DR filed written submissions running into 12 pages which have been made part of the judicial record. 44. Ld. AR for the assessee to support the maintainability of its application contended that since the grounds raised by way of additional evidence are purely legal ground emanated from the facts already on record, the assessee company is within its right to claim the deductions u/s 80IB and it is also entitled to claim the credit of tax withheld by its customer in Bangladesh and relied upon the decision rendered by Hon'ble High Court of Gauhati cited as Assam Co. (India) Ltd. vs. CIT (2002) 256 ITR 42....
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....he 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 was entitled to the benefit of the allowances under Section 35B(1)(b)(iv) of the Act. We have already observed that in a given fact situation an assessee may be entitled to the benefit of weighted deduction under more than one Sub-clause of Section 35B(1)(b) of the Act. It would, however, depend on the primary evidentiary facts available in a given case. It therefore follows that only because the applicant-company had objected to the withdrawal of the benefit of weighted deduction by relying on Sub-clause (ix) of Section 35B(1)(b) of the Act it could not be decisively held, without reference to the entire gamut of facts on record, that the applicant-company under all circumstances could be precluded from raising a plea that it was entitled to the benefit of such deduction under Section 35B(1)(b)(iv) of the Act as well. Whether or not the applicant-company can be permitted to raise that plea only on....
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....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 its ends : not a penal enactment for punishment and penalties ; not a thing designed to trip people up. Too technical a construction of sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to 'both' sides) lest the very means designed for the furtherance of justice be used to frustrate it." 31. We are therefore not in favour of granting such a primacy to the rules of procedure so as to wipe off a substantial right otherwise available to the assessee in law. We find this view of ours also reinforced by the language of Rule 11 which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal provided the party who may be affected thereby had sufficient opportunity of being heard on that ground. In taking this view, we are conscious about the observations of the Madras H....
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....e 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 matter of record that the assessee has claimed deduction u/s 80IB @ 100% to the tune of Rs. 5,59,59,323/- and AO as well as ld. CIT (A) after duly discussing the facts and case laws reached the conclusion that when assessee company is not proved to be in manufacture or production of article or thing but is in fact providing services to the mineral oil concern, it is not entitled for deduction u/s 80IB. So, we are of the considered view that facts qua additional grounds no.1 & 2 sought to be raised by the assessee are duly pleaded and discussed by the AO as well as ld. CIT (A). However, so far as additional ground no.3 raised by the assessee so as to claim the credit for tax withheld by the customer in Bangladesh amounting to Rs. 40,96,030/- is concerned, there is not a whisper of these facts before AO as well as ld. CIT (A) nor any such claim has been made by the assessee in the return of income, so we are of the considered view that in these circumstances....
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..../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 the interest of the Revenue and consequently issued a notice to the assessee vide letter dated 04.02.2001 & 24.08.2011 in AYs 2006-07 & 2007-08 respectively; that consequent to the proceedings initiated u/s 263, ld. CIT set aside the assessment orders with a direction to the AO to reframe the assessment after following specific directions contained in the order; that assessee has filed the appeals on 16.07.2012 and 29.12.2012 challenging the orders passed by the ld. CIT with a delay of 199 days and 303 days respectively; that both these cases were being handled by M/s. Samit Grover and Co., a firm of Chartered Accountants, who has received the impugned orders passed by the ld. CIT directly from the ld. CIT office but they failed to intimate the impugned orders passed by the ld. CIT u/s 263 of the Act to the assessee entailing delay in filing the appeals; that subsequently assessee engaged new consultant who obtained the necessary documents from M/s. Samit Grover &....
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....t 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 allowed at 15% and not at 25% and verify as to whether provisions of section 33(1)(ii) are applicable in respect of commission of Rs. 33,51,000/- paid to Managing Director and that the assessee company is not engaged in manufacture or production of an article of thing and as such, is not entitled for deduction u/s 80IB of the Act as conditions laid down thereunder are not fulfilled. 54. Ld. AR for the assessee challenging the impugned orders passed by the ld. CIT contended inter alia that the assessment orders passed by the AO are not erroneous; that the assessment orders passed by the AO are not prejudicial to the interest of the Revenue; and relied upon the decision rendered by Hon'ble Delhi High Court in assessee's own case for AYs 1989-90 to 2003-04 (supra) which has since attained finality as the SLP field by the Revenue against the said order has also been dismissed by the Hon'ble Apex Court. 55. As against this, ld. DR for the Revenue in order to repel the arguments add....