TaxTMI 
TaxTMI 
2022 (12) TMI 1578
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.... with water does not amount to manufacturer or produce of any article or thing with a different chemical composition or integral structure as envisaged u/s (2)29(BA) of the I.T Act and thereby not eligible for deduction u/s 80IC of the Act 2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in allowing the deduction u/s 80IC(2) of the I.T Act for Uttaranchal Unit- 1 of Rs. 13,54,86,409/ without appreciation of the facts that the assessee himself argued in detail before CEGAT that making Ujala Supreme does not result into any new product with distinct name, use and character and also got decision in its favour then the assessee cannot make a u-turn and say that making Ujala Supreme brings into existence a new product with distinct name, use and character 3. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in deleting the disallowance of deduction u/s 14A of Rs.328,92,328/ ignoring the facts that the assessee has made strategic investment and the facts of this case is similar to the facts of the case Maxopp Investment Ltd in which the Hon'ble Supreme Court has held that the disallowance u/s 14A ....
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....le, the process of making Ujala Supreme did not amount to production of any article and the assessee's product was prohibited under Schedule XIII etc. On similar reasoning the A.O has disallowed the claim of deduction of Rs.31,62,34,803/- claimed u/s 80IC(2)(a) of the Act for Uttaranchal undertaking. 4. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision is reproduced as under: 4. Decision:- 4.1 I have carefully considered the submissions and arguments of the AR of the appellant. I have also gone through the assessment orders as well as appellate orders for AY 2011-12 and AY 2012-13 I have also gone through the assessment order of the instant AY 2013-14. The case laws relied by the appellant. AO and other relevant case laws have been perused and considered. 4.2 Ground No.1 is general in nature and does not require any specific adjudication Hence, this ground of appeal is dismissed. 4.3 Ground Nos.2, 2.1 to 2.9 and 3, 3.1 to 3.3 are related to disallowance of deduction u/s 801C(2)(a) amounting to Rs.31,62,34,803/- 4.3.1 The appellant company has c....
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....essment order that the facts involved in the year under consideration are identical to those discussed in the assessment order for AY 2011-12 and AY 2012-13. According to the AO, the appellant in its submissions made for AY 2013 14, has reiterated the submissions made before the AO during the course assessment proceedings for AY 2011-12 In thereof the AO has cited and relied on the detail findings and conclusions arrived at in the assessment order for AY 2011-12 4.3.4 It is clear from the above, that there is no dispute in facts of these assessment years and arguments and submissions have followed from the preceding years. The grounds of appeal raised in this regard are also more or less identical Further, the AR has reiterated the complete submissions on merits as in the assessment year 2011-12 and the same is not being dealt with in this order. 4.3.5 It is clear that facts and circumstances of this year's case are absolutely identical to that of AY 2011-12 and AY 2012-13 As a matter of fact, the AO for the instant year has also relied upon the discussion, analysis and arguments made by his predecessor in the assessments of preceding year i.e AY 2011-12 and A....
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....ise Tariff, it falls under serial no 6 of Thirteenth Schedule 8. Further the AO has relied on various decisions in support of his action as under" i. Commissioner of Sales Tax Vs. Ruby Surgical & Allied Products Pvt Ltd [1997] 106 STC 26 ii. Tejan Beverages vs, State of Kerala &Ors (2013) 131 STC 538 Ker iii. Tungabhadra Industries ltd. Vs. CTO (1960) 11 STC 827 (SC) iv. CIT vs NC Buddhiraja & Co (1993) 204 ITR 412(SC) v. DD Shah & Bros (2015) 148 Taxmann 4 (Raj) vi. Vijay Ship Breaking Corporation vs. CIT (10 SSC 39) (SC) 9. On the other hand, the AR of the appellant vehemently argued that the appellant company is engaged in the manufacturing activity and production of Ujala Supreme and claimed of 801C(2) deduction correctly for the following reason:- i. The Ld. AO stated that the CEGAT order in the assessee's own case reported in 1994 (50) ECR 36 (T) held that in terms of Chapter Note 6 to Chapter 32 when applied to the process by which Ujala Supreme is manufactured, it cannot be said that the process of manufacture as divisaged in the Chapter Note has taken place and hence it is to be concluded ....
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....AO, the AR of the appellant pleads that the decisions in the case of Ruby Surgicals & Allied Pvt Ltd. as quoted by the AO support the claim of the appellant company. ix. Whereas in case of Teejan Beverages; ground water as well as mineral water can be considered as same product and can be consumed by the consumer, in the appellant company's case, Acid Violet 49 cannot be directly used by the consumer for whitening the washed clothes But it has to be mixed with water and then it becomes fit to whiten the washed white clothes Thus the decision in case of Teejan Beverages vs. State of Kerala & Ors does not apply to the appellant's case. x. In case of Tungabhadra Industries Ltd vs, CTO, groundnut oil and hydrogenated groundnut oil, both can be directly consumed by the consumer In case of Ujala Supreme, it is not possible for the consumer to whiten clothes by bying Acid Violet 49 as the same can be done with Ujala Supreme xi. With regard to D D Shah Bros, the case is related to blending of different qualities of tea so as to produce the specified blend of tea and the facts of the case are not similar to the present case. xii. With regard to CI....
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....th Schedule, the AR of the appellant very well explained that the raw material is purchased from the outside market and appellant company is not producing the said Acid Violet 49 and accordingly it will never come under the negative list as per the Income tax Act and is eligible to claim 80IC(2) In this regard as brought to my notice by the AR of the appellant company, CEGAT order did 12.08 1993 as per page 13 & 14, para 148, the Excise authority held a clear decision that Ujala is a blueing agent only, not a dye The relevant portion is as under "It has been established by sufficient evidence on record that Ujala is blueing agent which cannot be regarded as a dye for which it is relevant to refer to Encyclopedia of Chemical Technology, page 395, on Acid Dyes and Theory of Dyeing It has been mentioned therein that these dyes are applied in the presence of Organic or minerals acids. There is no evidence of the presence of such acids in the case of the appellant's product I agree with the contention of the appellant that the scheme of classification under the VAT Act is different from the Income-tax Act and the classification under VAT Act cannot be used....
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....the other hand, the AR of the appellant relies on the following case laws CIT vs Vinbros & Co (2009) 177 Taxmann 217 Jalna Seeds Processing and Refrigeration Company Limited 246 ITR 156 I have gone through the case Jaw of CIT vs Vinbros & Co. wherein it is held that ENA is blended with water and thereafter it become fit for human consumption otherwise ENA directly cannot be consumed by the customer. In the case of Jalna Seeds Processing & Refrigeration Co Lid, before manufacturing the seeds are edible for consumption but after processing of manufacturing is not fit for consumption but only for cultivation. Similarly in the appellant's case, acid violet 49 cannot be directly used for whitening of washed clothes but has to be diluted with water in stipulated proportion for whitening of washed clothes. Hence I held that the view of these citations referred above le CIT vs, Vinbros & Co and Jalna Seeds Processing & Refrigeration Co Ltd., is similar to the facts of the case of the appellant company. Respectfully following the judicial decision in the case of Jalna Seed Processing & Registration Co. Ltd. (246 ITR 156) and Vinbrose & Co. [(2009) 77 ....
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....ove during the course of assessment the A.O has not allowed the claim of deduction u/s 80IC in respect of Uttaranchal unit of the assessee on the reasoning that the process of making if Ujala Supreme did not result into any new product. During the course of appellate proceedings before us the ld. Counsel submitted that coordinate bench of the ITAT in the case of the assessee itself for assessment year 2011-12 and 2012-13 have adjudicated identical issue on similar facts vide ITA No. 7281/Mum/2016 & ITA No. 7280/Mum/2016 in favour of the assessee. 7.1 With the assistance of the ld. Representative we have gone through the decision of the ITAT vide ITA No. 7280/Mum/2016 wherein the relevant issue was decided after following the decision of the ITAT in the case of the assessee for assessment year 2011-12 vide ITA No. 7281/Mum/2016. The relevant part of the decision is reproduced as under: "7. Heard both the side and perused the material on record. Without reiterating the facts as elaborated above during the course of assessment the A.O has not allowed the claim of deduction u/s 80IC in respect of Uttaranchal Unit of the assessee and deduction u/s 80IB in respect of Himachal....
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....ual position is relevant. In so far as the assessee's claim for deduction under section 80IC of the Act with respect to Uttranchal Unit is concerned, the first year of claim was Assessment Year 2009-10 and the instant year is the third year of claim. Similarly, the claim of deduction under section 80IB of the Act in respect of Wayanad Unit was made by the assessee for the first time in Assessment Year 2002- 03 and the instant year is the eighth year of claim. In respect of Himachal Unit, the first year of claim of deduction under section 80IB of the Act was Assessment Year 2003-04, and thus the instant year is the seventh year of claim. Pertinently, the reliefs under sections 80IB and 80IC of the Act are available for ten consecutive years starting from the initial assessment year when the relevant undertaking of the assessee commences manufacture or production. Therefore, factually speaking, the instant assessment year is not the initial year of the claim, either for section 80IB or for section 80IC of the Act. At the time of hearing, the learned A.R. furnished a copy of the assessment year passed under section 143(3) of the Act for A.Y. 2002-03 dated 24.12.2004, which is the firs....
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....essment Year 2018-19. As has been seen in the earlier part of this order, in the initial assessment years, i.e. Assessment Years 2002-03, 2003-04 and 2009-10, the respective deductions under Section 80IB and/or Section 80IC of the Act were allowed by the Assessing Officer. It has also been brought out before us, without any controversion from the other side, that the deductions have been allowed thereafter till the immediately preceding Assessment Year, i.e. Assessment Year 2010-11. It is only in the instant Assessment Year, i.e. Assessment Year 2011-12 that the claims have been denied. 12. In the context of the preliminary point raised by the respondent assessee, the judgment of the Hon'ble Bombay High Court in the case of Simple Food Products (P) Ltd. (supra) squarely covers the controversy. In the said case, the issue related to claim of deduction under Section 80IB of the Act in relation to Assessment Years 1999-2000 to 2005-06. In Assessment Year 1999-2000, the Assessing Officer disallowed the claim of deduction under Section 80IB of the Act for the first time even when in the initial Assessment Year of 1996-97 the deduction under Section 80IB of the Act stood all....
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....ect Assessment Years, the facts with regard to the performance were different from facts with regard to the performance in which the claim for deduction in initial year was allowed, the grant of deduction in the subsequent subject Assessment Year cannot be withheld. The other issue raised by Mr. Bhattad that merely because a claim was allowed in an earlier year would not prohibit the revenue from disallowing the claim in subsequent assessment years is no longer res-integra as this Court in Paul Brothers (supra) as it is categorically held that in absence of deduction granted in the initial Assessment Years being withdrawn, the relief for subsequent Assessment Years could not be withheld. The basis for the same is found in sub-clause (3) under Section 80IA/IB of the Act which gives deduction for 10 consecutive years to the profit and gains of an Industrial undertaking from initial year of assessment when the deduction was allowed, subject to the condition laid down therein. It is not the Revenue's contention that the condition in clause (3) of Section 80IB of the Act has not been fulfilled. Therefore, once deduction is granted in the initial Assessment Year, the same would conti....
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....is also withdrawn at the time of withholding the relief under Section 80IA/IB of the Act." [underlined for emphasis by us]. 16. As per the Hon'ble High Court, once the deduction is granted in the initial assessment year, the same would continue for the specified period unless the relief for initial year is also 'withdrawn at the time of withholding the relief under Section 80IA/80IB of the Act'. Clearly, in the instant year when the claim of deduction is rejected by the Assessing Officer, the relief allowed in the initial assessment year has not been withdrawn. Mere initiation of proceedings under Section 148 of the Act to reopen the assessment of the past year cannot be understood to mean that the 'claim is withdrawn'. Therefore, in our view, the Assessing Officer could not have rejected the claim for deduction under Sections 80IB as well as 80IC of the Act in the subject assessment order because the relief allowed in the initial assessment year was not withdrawn at the time of such rejection in the instant year. 17. In the above background, we, therefore, find merit in the preliminary point made out by the respondent-assessee and the appeal of Revenue on ....
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....hin the meaning of section 2(29BA) of the Act. The assesse's unit is a composite unit manufacturing the product liquid and plastic container for filling the same. The process of manufacture of Ujala Supreme (Fabric whitener) are as follows: (a) Blow Moulding of High Density Polyethylene (HDPE) containers required for the above product. These containers are not sold but used for production of end product Ujala Supreme (Fabric Whitener). (b) Injection Moulding of closures for captive consumption only. (c) Sleeve labelling of the containers with brand name, commodity name, instruction to use and other statutory descriptions. (d) Blending (mixing) of the raw material acid violet 49 paste (hereinafter referred to as 'AVP' or "Acid Violet Paste") in water in a specified proportion (1% of AVP mixed with 99% of water) and stirring for 45 minutes using electrically operated stirrer. This dilution is undertaken with the use of plant and machinery involving electric power as well as manpower. (e) This liquid is pumped through filter cloth to remove impurities/undissolved particles & stored in distribution tank from where it is transferred t....
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.... same as supra in ITA No. 3875/Mum/2018, therefore, applying the same findings mutatis mutandis, this appeal of the revenue also stand dismissed. C. O. No. 149/Mum/2019 Ground No. 1: Pertaining to not allowing deduction u/s 80IB/80IC for Jammu Maxo Unit & Himachal Poly Vinyle Emulsion Unit: 13. Since as supra the claim of deduction u/s 80IC has been adjudicated in favour of the assessee, therefore, the cross objection pertaining to without prejudice grounds for the claim of deduction u/s 80IB/80IC as discussed at para 4.6.8 of the order of ld. CIT(A) has become infructuous, therefore the same stand dismissed. Ground No. 2: Claim of set off of the total deductions u/s 80IC/80IB to the amount of Rs.35,46,49,672/- against the gross total income of Rs.48,15,59,637/-: 14. The ld. CIT(A) has discussed the issue at para 4.6 to para 4.6.6 of his order. The Assessing Officer has disallowed the claim of set off of deduction u/s 80IC against the income from other sources on the ground that the interest earned by the assessee on fixed deposits, loans to subsidiaries, inter corporate deposits were not derived from the business activity of the assessee. The ld. CIT(A) has uphold the ....
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....rence to the income included in the gross total income Where any deduction is required to be made or allowed under any section included in this Chapter under the heading "C Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income." As stated above, Section 80AB was inserted in the year 1981 to get over a judgment of this Court in Cloth Traders (P) Lid (supra) The Circular dated 22-9 1980 issued by the CBDT makes it clear that the reason for introduction of Section 80AB of the Act was for the deductions under Part C of Chapter VI-A of the Act to be made on the net income of the eligible business and not on the total profits from the eligible business. ....