Income Tax Appellate Tribunal - Mumbai
Apar Industries Ltd, Mumbai vs Assessee on 31 July, 2015
आयकर अपील य अ
धकरण, मंब
ु ई
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES 'A' MUMBAI
सव ी जी.एस. प न,ू लेखा सद य एवं ी संजय गग , या यक सद य
BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
आयकर अपील सं. / ITA No.7029/MUM/2011
नधा रण वष /Assessment Year 2008-09
M/s. Apar Industries Ltd., बनाम/ The ACIT, Cen. Cir.- 34,
Apar House, Corporate Aaykar Bhavan,
Vs.
Park, Bldg. No.5, Sion MK Road, Mumbai 400020
Trombay Road, Chembur,
Mumbai - 400 071
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACG 1840M
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Appellant by Shri Vijay Mehta
Respondent by Shri Sanjay Singh
सनु वाई क" तार$ख / Da te o f Hearing : 2/07/2015
घोषणा क" तार$ख /Date of Pronouncement : 31/07/2015
आदे श / O R D E R
PER G.S.PANNU, A.M:
The present appeal is preferred by the assessee and is directed against the impugned appellate order dated 01/08/2011 passed by Ld. CIT(A)-32, Mumbai pertaining to the assessment year 2008-09, with reference to the assessment order dated 29/09/2010 passed in terms of section 143(3) of the Income Tax Act, 1961(the Act).
2. In this appeal the assessee has raised the following Grounds of appeal:-
" 1. Deduction u/s 80 IB.
2 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09
a) On facts and circumstance of the case and in law, the learned CIT(A) erred in denying deduction of Rs.5,67,09,436 u/s 80-IB in respect of OEPB licenses utilized during the year for duty free import of raw materials. He failed to appreciate that the said licenses were not sold during the year and that the said credits were only by way of contra entries in the accounts.
b) On facts and circumstance of the case and in law, the learned CIT(A) erred in denying deduction u/s 80-IB in respect of the Focus market incentive of Rs 3,74,09,929/- without appreciating that it is derived from industrial undertaking.
c) On facts and circumstance of the case and in law, the learned CIT(A) erred in denying deduction u/s 80-IB in respect of sundry income of Rs 1,86,7781- without appreciating that it is derived from industrial undertaking.
2. Disallowance u/s 14A.
2.1) On the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating that resort cannot be made to Rule 80(1)(b) since the learned AO has failed to provide any cogent reasons for not accepting the disallowance of Rs.19,64,974/- already made by the appellant and further disallowing Rs.26,22,666 which is the amount of entire dividend income. Thus enhancing disallowance u/s 14A by resorting to the computational machinery of Rule 80(2) is bad-in-law and needs to be deleted.
2.2) Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming that Rule 80(2)(ii) are applicable to the appellant without appreciating that the investments were made from own funds viz. sale of Polymer Business Rs.878,549,026 and sale of development rights of land Rs.304,000,000. CIT(A) also failed to appreciate that the Trade Investments of Rs.40.44 Lacs were for business and not for earning tax free dividend income. Thus disallowance of interest expense u/s 14A being bad-in-law needs to be deleted.
2.3) Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming that Rule 8D(2)(ii) are applicable to the appellant without appreciating that the appellant has sufficient own funds along with reserves which can be stated to have applied for making investments. Thus disallowance of interest expense u/s 14A being bad-in-Iaw needs to be deleted.
3. Exemption u/s 54G:
3 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09
a) On facts and circumstance of the case and in law, the learned CIT(A) erred in denying exemption u/s 54G of Rs 132,441,682 without appreciating that the appellant has shifted its industrial undertaking from Mahul to Valia within the meaning of section 54G. Thus the disallowance made by the learned AO being bad-in-law needs to be deleted.
b) Without prejudice to the above and without admitting, on facts and circumstance of the case and in law, the learned CIT(A) erred in denying exemption u/s 54G of Rs 2,06,56,184/- incurred prior to 28.9.2006 (i.e prior to 1 year before date of transfer of land which was 29/09/2007) without appreciating that shifting of the industrial undertaking completed on 1/11/2006. Thus since the shifting of industrial undertaking took place within 1 year before transfer of the land, exemption u/s 54G of the said Rs 2,06,56,184/- must be allowed. Accordingly, the disallowance made by the learned AO being bad-in-law must be deleted.
c) Without prejudice to the above and without admitting, on facts and circumstance of the case and in law, the learned CIT(A) erred in denying exemption u/s 54G of Rs 41,74,638/- incurred towards 'Approach RCC roads to plant' without appreciating that the approach road to the factory is considered as part of 'factory building'. Accordingly, the disallowance made by the learned AO being bad-in-law must be deleted.
4. Long Term Capital gain u/s.50B on slump sale of Polymer Division. The learned CIT(A) erred in confirming reduction of Rs 13,24,41,682/- from the net worth of the undertaking at Valia while calculating long term capital gains u/s 50B. There is no mandate available to the learned AO to adjust the net worth of the unit sold u/s 50B. Thus the said reduction made by the learned AO, on a without prejudice basis, is bad- in-law."
3. The appellant before us is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of manufacturing of Transformer Oil & other Oils, Conductors, Synthetic Rubber and trading. For the year under consideration, it filed a return of income declaring an income of Rs.81,14,46,450/- which was revised to Rs.81,06,17,190/- and the book profits under section 115JB of the Act was arrived at Rs.108,49,03,670/-. The return of income filed by the assessee was subject to a scrutiny assessment, wherein certain disallowances were made, 4 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 which were carried in appeal before Ld. CIT(A) who has dismissed the appeal of the assessee. Not being satisfied with the order of Ld. CIT(A), the assessee is in further appeal before us on the aforestated Grounds of appeal.
4. In so far as ground of appeal Nos.1(a) & (b) are concerned, the same relate to assessee's claim for deduction under section 80IB of the Act in relation to incomes by way of DEPB investments and focus market incentives amounting to Rs.5,67,09,436/-& Rs.3,74,09,929/- respectively. The AO as well as Ld. CIT(A) have denied the claim for deduction under section 80IB of the Act on the aforesaid two elements of income on the ground that the same do not constitute incomes "derived from" the industrial undertaking.
4.1 Ld. Representative of the assessee fairly conceded that the decision of the Hon'ble Supreme Court in the case of Liberty India vs. CIT, 317 ITR 78(SC) covers the controversy in favour of the Revenue.
5. By way of Ground of appeal No.1(c), the claim of the assessee for deduction under section 80IB of the Act is in relation to sundry income of Rs.1,86,778/-. On this aspect also, the Ld. Representative of the assessee fairly conceded that the said income has been rightly held to be "not derived from" the industrial undertaking and accordingly the denial of deductionsunder section 80IB of the Act is hereby affirmed.
6. Thus, in so far as Gground Nos.1 (a) ,(b) & (c) are concerned the same stand dismissed.
7. In so far as Ground of appeal Nos. 2.1 to 2.3 are concerned the same relate to a disallowance of Rs.26,22,666/- made by the AO by invoking the provisions of section 14A of the Act. In this context, at the time of hearing the only plea set up by the appellant is that the suo-moto disallowance made by 5 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 the assessee in its computation of income amounting to Rs.19,64,974/- out of interest paid for purchase of investment and SEBI filing fees for open offer for investments in shares of M/s. Uniflex Cables Ltd. be reduced from the total disallowance worked out by the AO. In this context the Ld. Representative of the assessee referred to page-1 of the Paper Book, wherein a copy of computation of income has been placed. In the said computation of income, an amount of Rs.7,53,425/- representing interest paid to YES Bank on loan for purchase of investments and Rs.12,11,549/- towards SEBI filing fees for Open offer for investments in M/s. Uniflex Cables Ltd. have been disallowed by the assessee itself.
7.1 The aforesaid plea of the assessee has not been opposed by Ld. D.R. 7.2 Consequently, we setaside the matter to the file of AO, who shall allow appropriate relief to the assessee on this aspect. Thus, on this limited aspect assessee succeeds and rest of the issues raised in the ground of appeal Nos. 2.1 to 2.3 in relation to the disallowance under section 14A of the Act are herebydismissed.
8. The last ground in this appeal is with regard to denial of exemption claimed by the assessee under section 54G of the Act of Rs.13,24,41,682/- on account of shifting expenses of High Styrine Rubber (HSR) Unit against the long term capital gain earned on sale of development rights of the land of Special Oil Refinery (SOR Unit) at Mahul. The SOR unit of the assessee was situated at Mahul comprising of manufacturing unit producing transformer oils and other oils and the HSR was a by-product of the manufacturing unit of Mahul Project. During the year under consideration, assessee sold the development rights of the land on which the industrial undertaking at Mahul, Mumbai was situated, which resulted in long term capital gain of Rs.15,49,65,520/-. Prior to the sale of land at Mahul, assessee shifted the 6 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 HSR undertaking at Mahul, Mumbai to Valia at Gujarat, which is referred to as Polymer Division at Valia. On the strength of the provisions of section54G of the Act, assessee claimed deduction of Rs.13,24,41,682/-, representing expenditure incurred in the course of or in the consequence of shifting such industrial undertaking, from the long term capital gains earned on the sale of land at Mahul. The claim for deduction under section 54G of the Act has been denied to the assessee by the AO as well as Ld. CIT(A) and the same is being agitated before us by way of Ground No.3.
9. At the time of hearing, the Learned Representative for the assessee, at the outset moved an application under Rule-29 of Income Tax Appellate Tribunal Rules, 1963(in short the Appellate Tribunal Rules' seeking admission of additional evidence which according to the assessee are relevant to adjudicate the aforesaid controversy. The additional evidence which is sought to be admitted has been placed in the Paper Book at pages 119 to 136 and is, inter-alia, detailed as under:-
Sr. Particulars No.
1. Confirmation of Surat Goods Transport Pvt. Ltd. relating to Transport of Machinery from SOR Mahul division to Polymer division, Valia
2. Details of machineries shifted from SOR Mahul division to Polymer division, Valia.
3. Confirmation of Gayatri Construction in relation to modification/ construction of factory building at Valia.
4. Certificate of Shri Kaushik Patel, B.E. Chemical, relating to physical verification of machinery installed at newly constructed factory building at Valia.
5. Production details of SOR Mahul unit and Valia Unit from F.Y. 2004- 05 to 2007-08.
6. Production details moth wise and product wise of Valia Unit for F.Y. 2006-2007 as per Excise records.
7. Product wise details of Valia Unit for F.Y. 2007-08 as per Excise records.
8. Affidavit of Shri Chitanya Desai, Director of Company, in relation to differentiation of HSR and NBR product.
7 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 9.1 The Learned Representative for the assessee explained that the claim of the assessee for deduction under section 54G of the Act has been rejected on various grounds, the principal ground being that the assessee could not prove shifting of plant and machinery from Mahul to Valia on the basis of any evidence. It is noted from the orders of the authorities below that various points raised in order to reject the assessee's claim can be summarized as follows: (i) that assessee did not produce any evidence to show the shifting of the industrial undertaking from Mahul to Valia; (ii) that assessee did not produce details of transportation from Mahul to Valia alongwith supporting evidences, such as number of contractors utilized, truck numbers, gate passes, toll naka receipts, etc.; (iii) that the certificate furnished by the assessee from its Works Engineer certifying shifting of the industrial undertaking was an internal document and was not reliable; and (iv) that the assessee could also not establish the commissioning of the plant at Valia.
9.2 Before us, the Ld. Representative for the assessee submitted that various evidences were furnished before the AO including the copies of work order issued in favour of M/s.M. Mech Engineers Pvt. Ltd. for executing work for dismantling of the assets at Mahul and its installation at Valia. Further, confirmation from the said concern were also furnished certifying commissioning of the related work on the machineries transferred from Mahul. Ld. Representative for the assessee also explained that a copy of the ledger account of freight expenses incurred on shifting of Rs.14,91,400/- was also furnished. Ld. Representative for the assessee pointed out that further additional documents which were not hitherto furnished before the lower authorities are relevant and are in the nature of corroborative evidence to support the already existing factual pleas raised by the assessee before the lower authorities.
8 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 9.3 Ld. Representative for the assessee has taken us through the additional evidence placed in the Paper Pook at pages 119 to 136, which we have enumerated above and explained its relevance and the reasons why the same is being produced as additional evidence at this stage. On this basis, it is prayed that the admission of additional evidence would not prejudice the Revenue and rather it is a relevant material to dispose of the appeal of the assessee in accordance with the law.
10. On the other hand, Ld. DR appearing for the Revenue has contended that the lower authorities have appropriately appreciated the material and evidence that was sought to be relied upon by the assessee and that there was no justification for not having furnished the aforesaid additional evidence before the lower authorities.
11. We have carefully considered the rival submissions. It is quite well understood that before the Tribunal, parties to an appeal cannot produce evidence which was not before the lower authorities. So however, in terms of Rule-29 of the Income Tax Appellate Tribunal Rules, 1963 the Tribunal has discretionary power to admit additional evidence in the circumstances prescribed therein. One of the aspects is that where the Tribunal requires any document to be produced or any witness to be examined to enable it to pass an order or for any other substantial cause, then the Tribunal for reasons to be, recorded, may permit admission of such additional evidence. In this context, reference was made to the judgment of Hon'ble Gauhati High Court in the case of Jeypore Timber and Veneer Mills (P) Ltd. vs. CIT, 137 ITR 415 (Gau) to point out that the avowed object of the provision is to dispense justice and to insulate or rectify the mistakes committed by the parties and/or the income tax authorities. It has also been vehemently argued on behalf of the appellant that the expression, "for any other substantial cause" contained in Rule-29 of the Appellate Tribunal Rules, 1963 suggests that additional 9 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 evidence should be admitted in situations where it advances the cause of justice, namely, determination of the correct tax liability in the hands of the assessee. In our considered opinion, in the matters of admission of additional evidence, the test to be applied is the furtherance of cause of substantial justice and not technical considerations. It is in this back ground, we may now examine the efficacy of assessee's plea for admission of the aforestated additional evidence, which were hither to not before the lower authorities.
11.1 As observed earlier, the sum and substance of the dispute arises from the claim of deduction under section 54G of the Act, which has been denied by the income tax authorities primarily on the ground that the assessee failed to establish that the industrial unit was shifted from Mahul to Valia.
11.2 The first additional evidence is in the form of confirmation from Surat Goods Transport Pvt. Ltd., whereby it is sought to be canvassed that the machineries were transported from Mahul to Valia during the relevant period. On this point, the Ld. Representative for the assessee explained that at the time of assessment proceedings it was difficult to seek and ensure the co- operation from the concerned transporter, as Mahul unit has since been closed down. The assessee was under the bonafide belief that since transportation was effected by an independent party and payments were made through cheques, it would be sufficient to prove the transportation of machinery. However, since the claim was rejected, the assessee was compelled to seek certificate from the transporter, which would corroborate the plea of the assessee that industrial undertaking was indeed shifted from Mahul to Valia. The second additional evidence is in the form of details of machineries shifted from Mahul to Valia. As per the Ld. Representative for the assessee, such details placed at pages 120 to 124 of the Paper Book are itemwise details of machineries shifted. Similarly, the third additional evidence is in the form of 10 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 confirmation of Gayatri, Construction Engineers and Contractors, who carried out necessary changes and modifications in the factory building at Valia. The said concern had also constructed adjoining factory building HSR unit and warehouse etc. As per the appellant, such confirmation would establish the construction and modification of the building at Valia. It was explained that during the course of proceedings before the lower authorities, the aforesaid concern could not be contacted for obtaining confirmation but nevertheless the payments were made through cheques. It was contended that the present confirmation would only corroborate the expllanation of the assessee and therefore, such evidence deserves to be admitted.
11.3 Similarly, the confirmation of Shri Kaushik Patel, Chemical Engineer has also been sought to be admitted as additional evidence, which is placed at page 126 to 129 of the Paper Book. The claim of the assessee was that the installation of machinery at Valia was carried out under the supervision of the said Chemical Engineer and the confirmation from him would corroborate the stand of the assessee.
11.4 At item Nos.5,6 & 7 are the additional evidences in the shape of the production details of the SOR in Valia unit from financial years 2004-05 to 2007-08, which would show the details of excisable products manufactured by the assessee. As per the assessee, the aforesaid records would demonstrate carrying on production at Valia unit from November 2006 and also for the financial year 2006-07 and 2007-08, which would corroborate assessee's assertions that the industrial unit was shifted from Mahul to Valia.
11.5 The last additional evidence is in the form of an affidavit of the Director of the assessee company explaining the difference in the manufacturing activity carried out at Mahul and the manufacturing activity later on carried out at Valia unit.
11 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 11.6 We have carefully considered the relevance of the aforesaid evidences which are now sought to be relied upon by the assessee, and were hitheto not produced before the lower authorities. Quite clearly, on the basis of the aforesaid material, the assessee does not intend to make out any new case, but the it merely seek to corroborate its earlier stand. Some of the additional evidences, for instance, confirmations from the transport contractor, engineering contractor, etc. are third party independent evidences and in our view it would be appropriate to consider the same for the purpose of adjudicating the assessee's claim for deduction under section 54G of the Act. In our considered opinion, having regard to the facts and circumstances of the present case, the avowed object of Rule 29 of the Appellate Tribunal Rules would be sub-served if the additional evidences are admitted in order to appropriately adjudicate assessee's claim for deduction under section 54G of the Act. We hold so.
11.7 So however, since the aforesaid evidences/material was not before the lower authorities, it would be in the fitness of things that the issues relating to assessee's claim for deduction under section 54G of the Act is restored back to the file of AO, who shall revisit the same as per law after taking into consideration the aforestated additional evidence, which have been placed before us in the Paper Book at pages 119 to 136. Needless to say, the AO shall allow the assessee a reasonable opportunity of being heard before adjudicating afresh on the assessee's plea for deduction under section 54G of the Act as per law.
12 आयकर अपील सं. / ITA No.7029/MUM/2011 नधा रण वष /Assessment Year 2008-09 11.8 Thus, in so far as Ground No.3 is concerned the same is treated as allowed for statistical purposes only.
12. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 31/07/2015 आदे श क" घोषणा खुले यायालय म+ ,दनांकः 31/07/2015 को क" गई ।
Sd/- Sd/-
( संजय गग / SANJAY GARG) (जी.एस. प नू / G.S.PANNU)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai; ,दनांक Dated 31/07/2015
आदे श क त ल प अ!े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु0त(अपील) / The CIT(A)-
4. आयकर आय0
ु त / CIT
5. 1वभागीय त न3ध, आयकर अपील$य अ3धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER,
स या1पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ
धकरण, मंब
ु ई / ITAT, Mumbai
व. न.स./Vm, Sr. PS