TaxTMI 
TaxTMI 
2021 (7) TMI 323
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.... the assessee sought to recall the order vide a miscellaneous application filed in MA. No.101 / Chd/2019, pointing out that the ITAT ought have given a finding on the issue found arguable and that on the other issues also the fact of the assessee unable to convince the AO in set aside proceedings had been incorrectly recorded. Convinced with the mistake pointed out by the assessee, the ITAT recalled the entire order, vide order dated 27.05.2020. Hence, this appeal before us. 2. The facts relating to the case are that for the impugned assessment year the income of the assessee had been assessed u/s 143 (3) of the Act at Rs. 72, 89,920 /-. Subsequently, on perusal of assessment record, the Ld. Pr.CIT noted that the assessment had been completed without proper enquiry and application of mind and the issues had not been properly thrashed before concluding the assessment. Accordingly, he issued a show cause notice dated 08.11. 2017, exercising his revisionary jurisdiction as per provisions of section 263 of the Act, on the assessment order so passed, outlining therein the various issues on which he found the order passed by the AO to be erroneous. In response, the assessee filed writ....
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.... d. On perusal of the Profit & Loss account in respect of Unit- I (IU-II), you had shown net profit of Rs. 45,97,055/- on which deduction @ 25% was claimed at Rs. 11,49,264/-. Nevertheless, the said claim was rejected by the A.O., by holding that it is splitting up/reconstruction of existing business i.e. Unit -I(IU-I) instead of new industrial undertaking but still deduction was allowed to you; whereas, the department is already in appeal in ITAT against allowance of the same by CIT{A) for A.Y. 2012-13. e. On perusal of profit & Loss account in respect of Unit I(IU-II) in which you had cairned deduction @ 25% u/s 80IC, expenses on account of electricity and Water has been claimed at Rs. 82,70,4S4/-, whereas only Rs. 1,66,020/- (there is no schedule or details of these expenses also) has been claimed for Unit -II as electricity and Water expenses, in which 100% deduction under section 80IC was claimed. It is also noticed that there is no electricity security deposited with the HPSEB for installation of electric connection in respect of this unit. Thus there appears to be no electric connection for unit -II and therefore, whole electricity/water expenses have been cl....
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....commencement of business and had been allowed by the Revenue after scrutiny assessment in assessment year (A.Y) 2013 - 14. Our attention was drawn to the copy of assessment order for the said year placed before us at P. B 68 - 79. The Ld. Counsel for the assessee contended that for the impugned year also it had been allowed 100% deduction of profits earned in the impugned unit, in the order passed by the AO u/s 143 (3) of the Act, but the Ld. Pr. CIT found that the AO had information in his possession that the product being manufactured by the assessee did not qualify for exemption as it fell in the negative list specified by the government, by way of letter issued to this effect by the Directorate of Industries, Himachal Pradesh and the Department of Industrial Policy & Promotion, Government of India dated 03 - 06 - 2016 and 11 - 03- 2016.And that despite possessing this information the AO had allowed deduction u/s 80 IC of the Act to the assessee, which made his order erroneous on this count. 8. The Ld. Counsel for the assessee, thereafter proceeded to make detailed arguments before us in support of his contention that there was no error at all in the order of the AO allowing ....
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....of notifications. Entry against sub class 24119 is also reproduced below: 24119- Manufacture of basis organic chemicals NIC. The Dissolved Acetylene manufactured by assessee is also known as 'Industrial Gas' in trade parlance and fall under sub class No. 24111 of NIC Classification, 1998, which reads as under:- 24111- Manufacture of industrial gases (includes manufacture of elemental gases, liquid or compressed air, acetylene refrigerant gases and mixed industrial gases etc. Industries engaged in the manufacture of items classifiable under sub class is No, 24111 and 24119 of the NIC Classification, 1998, do not find mention under any of the entries contained in Negative Lists. One cardinal rule of interpretation while interpreting the entries in taxation statutes/notifications is that the words used in the entries must be construed strictly and there is no scope of intendment. Therefore, it cannot be a case of Revenue to cover the Dissolved Acetylene against entries in Negative Lists and also to deny the benefit of exemption as it does not satisfy all the conditions mentioned therein. It may appreciate that it is a settled principle of ta....
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...., 1961, which was allowed to the assessee in respect of Unit-II where Dissolved Acetylene Gas was being produced, which falls under the negative List of Schedule XIII of the Income tax Act, 1961. However, the information related to the production of Dissolved Acetylene Gas (that it falls under the said list) was available with the A.O. from the letters issued by Directorate of Industries, H.P. and Department of Industrial Policy and Promotion, Govt. of India vide letter dated 20,05.2016 and 11.03.2016 respectively, despite thereof, the deduction u/s 801C has been allowed by the A.O. to the assessee. For the sake of convenience, the basic clarifications given vide these letters is as under.- a) As per the clarification given by the GO1, Ministry of Commerce & Industry, Deptt. of Industrial Policy and Promotion, New Delhi's letter No. 8(4)/2016-SPS dated 11th March, 2016, the "Dissolved Acetylene Gas" is covered under S.No. 5 of the Negative List at Annexure -III of OM NO. 1(1)/2001-NER dated 7th January, 2003. (copy of letter and Annexure -111 enclosed - as P/l-1 to P/l-6). b) As per the letter No. Ind. Dev. CClS/Enquiry/ 2015-16 of the Director of Industries, ....
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....e meaning of section 263 of Income Tax Act 1961." The Ld.Counsel for the assessee contended that when the Ld. Pr. CIT himself could not point out any infirmity in this explanation of the assessee how could he have held the view taken by the AO as being erroneous. c) The Ld.Counsel for the assessee contended that the letters of the Department of Industrial Policy & Promotion, Government of India mentioned the item manufactured by the assessee falling at Sl.No 5 of the negative list, but the explanation of the assessee to the AO sufficiently demonstrated that it could not be categorically so said by any chance. Explaining the same, he pointed out that there was an anomaly in S. No. 5 of Schedule- XIII of the Income Tax Act, which lists the items manufactured in Himachal Pradesh not eligible for exemption u/s 80IC of the Act, in short the negative list. He pointed out that while it mentions organic chemicals included in Chapter- 29 of the Excise Classification, which also deals with organic chemicals, it goes on further to mention the NIC Code 24117, which relates to inorganic chemicals. In this regard he drew our attention to Schedule XIII of the Income Tax Act plac....
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....ufactured by the assessee in the said unit fell in the negative list and despite which he allowed the assesses claim. To adjudicate the issue it is relevant to bring out clearly all the necessary facts. 12. The contents of the aforestated letters placed before us in the paper book at page 94- 96 are as under: Letter of the Directorate of Industries, Himachal Pradesh "No.lnd.Dev.CCIS/Enquiry/2015-16 Government of Himachal Pradesh Directorate of Industries Dated : Shimla, The From Director of industries Himachal Pradesh. To 1. The Income Tax Officer, Income Tax Office, Mandi Distt. Mandi (HP). 2. Deputy Excise & Taxation Commissioner Mandi Distt. Mandi (HP). 3. The Assistant Commissioner, Central Excise & Service Tax Division Loha Bazar Mandi Distt. Mandi (HP) 4. The General Manager Distt. Industries Centred Mandi Distt. Mandi (HP). Subject:- Fraud and illegal claim & payment of Central Capital Investment Subsidy, Central Transport Subsidy, interest Subsidy, Electricity duty and illegal exemption o....
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....cy and other concessions for the State of Uttaranchal and the State of Himachal Pradesh- Chandigarh. Sir, I am directed to refer to your letter No.Ind.Dev.(CC Subsidy)161/2010 dated 24/02/2016 on the subject cited above. The matter has been examined in consultation with the Technical Wing DIPP and it is informed that "Dissolved Acetylene Gas is covered under Sl.No.5 of the Negative List at Annexure-III of O.M. No.1(10)/2001-NER dated 7th January 2003. Yours faithfully, Sd/- (Ms ARUNIMA K SINHA) Under Secretary to the Government of India MANAGER Directorate of Industries H.P. A perusal of the above reveals that it mentions the item manufactured by the assessee, Dissolved Acetylene Gas, as falling in S.no.5 of the negative list . This S.No.5 of the negative list , which it was stated is listed as Schedule XI I I of the Income Tax Act , is as under (P.B 74-76) "THE THIRTEENTH SCHEDULE ([See Section 80-IC(2)]) LIST OF ARTICLES OR THINGS ............................... ................ . . . . . . . . ............................... FOR THE STATE O....
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.... organic chemicals, while the NIC Code 24117 mentioned therein on the contrary refers to inorganic chemicals. 14. Putting together all the facts brought out above, the letter of the GOI to the DIC, Himachal, which as per the Ld. Pr.CIT the AO failed to consider, stated the item manufactured by the assessee as covered under serial no. 5 of the negative list, but the item manufactured by the assessee does not have the NIC CODE mentioned against the said serial NO. of the negative list and also that the description of items in the said serial no. is ambiguous mentioning organic chemicals under some descriptions and inorganic chemicals against other description. There is no dispute vis a vis the aforestated facts. 15. Perusing the manner of description of items falling in the negative list, i.e. Schedule XIII of the Income tax, there is no doubt that to qualify as an item covered therein, all the manners of describing the items has to be satisfied. It has to fit into the description, belong to the specified chapter of Excise classification and also qualify as item of the specified NIC CODE. In the present case the uncontroverted fact is that the NIC CODE of the item manufactured ....
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....(IU-II) at Rs. 60, 000 /- and on interest on securities deposited with Sales Tax Department and H. P. S.E. B. amounting to Rs. 5, 000 /- and Rs. 4, 58,000 /- respectively. 20. With respect to the above, the contention of the Ld. Counsel for the assessee was that the AO had rejected assessee' s claim of deduction/exemption u/s 80 IC of the Act with respect to the profits earned in the said unit i. e. Unit- I (IU-II) and, therefore, there was no question of any exemption/deduction having been allowed to the assessee on account of the aforesaid two incomes of rent and interest on securities earned in the said unit. He contended, therefore, that the finding of error by the Ld. Pr. CIT on these two counts was not based on the facts on record and, therefore, needed to be dismissed. He drew our attention to para 5. 3 of the assessment order pointing therefrom the findings of the AO rejecting the claim of deduction u/s 80IC of the Act with respect to the profits of Unit- I (IU-II) as under: "5.3 From the above facts it is established that assessee's business i.e. of Unit-I (IU-II) is not a new business. The assessee added Plant & Machinery in the existing business costing m....
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....Ld.Counsel for the assessee was that it had been explained to the Ld. Pr. CIT that this issue has been examined during assessment proceedings also and it had also been pointed out to him that two units were different units manufacturing different products, with Unit- I (IU-II) manufacturing oxygen and nitrogen gas and Unit- II manufacturing Dissolved Acetylene and the process involved, therefore, were totally different and no occasion, therefore, arose for bifurcating the expenses between the two units or even for that matter on the basis or in proportion to their turnover. The Ld.Counsel for the assessee contended that it was explained to the Ld. Pr. CIT that both the units were independent units with their own facility, infrastructure and staff and there was no inter- dependence between the two units. He drew our attention to the reply f i led to the Ld. Pr. CIT in this regard, placed before us at Paper Book page 8 as under: e) In Unit-II the assessee has installed the transformer as well as electric meter himself as per practice of HPSEB as such no security was paid to the HPSEB. More over the bills raised by HPSEB does not show any meter charges. It is not correct that....