Income Tax Appellate Tribunal - Ahmedabad
Zeepelin Mobile System (India) Ltd.,, ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "C"
Before SHRI MAHAVIR SINGH,JM & SHRI A N P AHUJ A, AM
ITA nos.1863 to 1867/Ahd/2009
with
CO nos.159 to 163/Ahd/2009
[Assessment Years:-2001-02 to 2003-04 and 2005-06 & 2006-07]
&
ITA no.1041/Ahd/2009
[Assessment Year:-2004-05]
&
ITA no.1440/Ahd/2010
W ith
CO no.199/Ahd/2010
[Assessment Year:-2007-08]
Assistant Commissioner of V/s
Zeppelin Mobile Systems
Income-tax, Circle-8, (India) Ltd., Abhijeet
Ahmedabad Building, 7 t h Floor, 701-704,
Mithakhali Six Roads,
Navrangpura, Ahmedabad
PAN: AAACZ 2270 K
[Appellant] [Respondent]
Revenue by :- Shri Shelley Jindal, DR
Assessee by:- Shri Sanjay R Shah, AR
O R D E R
A N Pahuja: These appeals by the Revenue and the corresponding cross objections[CO] by the assessee are directed against the following orders of the ld. CIT(Appeals)-XIV, Ahmedabad :
Sr . A pp e a l f il e d CO f i l ed b y A ga i ns t O r de r of C IT ( A) Da te of As s t .
No . b y Re v e nu e As s es s e e O r d er of Ye ar
CIT ( A)
1 18 6 3/ A /0 9 15 9 /A / 09 CIT ( A) - X I V, Ahm ed a b ad 23- 0 3- 09 01- 0 2
2 18 6 4/ A /0 9 16 0 /A / 09 - do - - do - 02- 0 3
3 18 6 5/ A /0 9 16 1 /A / 09 - do - - do - 03- 0 4
4 18 6 6/ A /0 9 16 2 /A / 09 - do - - do - 05- 0 6
5 18 6 7/ A /0 9 16 3 /A / 09 - do - - do - 06- 0 7
6 10 4 1/ A /0 9 --- - do - 06- 0 1- 09 04- 0 5
7 14 4 0/ A /1 0 19 9 /A / 10 - do - 19- 0 2- 10 07- 0 8
ITA nos.1863 to 1867/A/09 and others
The following grounds are raised in these appeals and cross- objections:-
ITA no.1863 to 1866/ A/09[AYs. 2001-02 to 2003-04 & 2005-06]
1. The Ld. CIT(A) has erred in law and on facts in not allowing the deduction u/s 80IB of the IT Act of Rs.47,68,774/-.in the AY 2001-
02, Rs.44,54,661/- in the AY 2002-03, Rs.1,01,17,628/-in the AY 2003-04 & Rs.1,29,53,650 in the AY 2005-06 1 On the facts and in the circumstances of the case, the ld.
Commissioner of Income-tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the AO.
2 It is, therefore, prayed that the order of the ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad may be set-aside and that of the AO be restored.
CO no.159/ A/09[AY 2001-02]
1. "The learned Commissioner of Income Tax (Appeals) has erred in holding that the proceedings u/s. 147 has been validly initiated. In the facts of the case, proceedings u/s. 147 are invalid and void-ab- initio and therefore required to have been quashed. It is submitted that it be so held now.
1.1 The learned Commissioner of Income Tax (Appeals) has erred in holding that notice u/s 148 has been validly issued. In the facts of the case, notice u/s 148 cannot be issued after the expiry of four years from the end of the relevant assessment if the assessee has duly filed the return of income and disclosed fully and truly all material facts at the time of assessment. It is submitted that notice u/s 148 after expiry of four years from the end of relevant assessment year is invalid. It be so held now.
1.2 The learned Commissioner of Income Tax has erred in not appreciating the fact that the proceedings u/s 147 of the Income tax Act were initiated on the basis of the same facts which were not only available to him but also dealt with during the assessment proceedings before passing the assessment order u/s 143 (3) of the Act resulting into initiation of the proceedings merely on account of change of opinion. It is submitted that reassessment cannot be done on account of change of opinion. It be so held now.
1.3 The learned Commissioner of Income Tax (Appeals) has erred in upholding the validity of order passed u/s. 147 r.w.s. 143(3). It is submitted that where assessment u/s. 143(3) has been made, no 2 ITA nos.1863 to 1867/A/09 and others action u/s. 147 can be taken after expiry of four years from the ends of relevant assessment year unless it is on account of failure of the assessee in view of proviso to Section 147. In absence of any failure on part of the assessee, no action u/s. 147 can be taken including passing an order under the said section. It be so held now.
The respondent prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of cross objection."
CO No.160/ A/09[AY 2002-03]
1. "The learned Commissioner of Income Tax (Appeals) has erred in holding that the proceedings u/s. 147 has been validly initiated. In the facts of the case, proceedings u/s. 147 are invalid and void-ab- initio and therefore required to have been quashed. It is submitted that it be so held now.
1.1 The learned Commissioner of Income Tax has erred in not appreciating the fact that the proceedings u/s 147 of the Income-tax Act were initiated on the bass of the same facts which were not only available to him but also dealt with during the assessment proceedings before passing the assessment order u/s 143(3) of the Act for AY 2001-02 & 2002-03 resulting into initiation of the proceedings merely on account of change of opinion. It is submitted that reassessment cannot be done on account of change of opinion. It be so held now.
The respondent prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of cross objection."
CO no.161/ A/09[AY 2003-04]
1. The learned Commissioner of Income Tax (Appeals) has erred in holding that the proceedings u/s. 147 has been validly initiated. In the facts of the case, proceedings u/s. 147 are invalid and void-ab- initio and therefore required to have been quashed. It is submitted that it be so held now.
1.2 The learned Commissioner of Income Tax has erred in not appreciating the fact that the proceedings u/s 147 of the Income tax Act were initiated on the basis of the same facts which were not only available to him but also dealt with during the assessment proceedings before passing the assessment order u/s 143 (3) of the Act resulting into initiation of the proceedings merely on account of change of opinion. It is submitted that reassessment cannot be done on account of change of opinion. It be so held now.
3ITA nos.1863 to 1867/A/09 and others 1.2 The learned Commissioner of Income Tax (Appeals) has erred in upholding the validity of order passed u/s. 147 r.w.s. 143(3). It is submitted that where assessment u/s. 143(3) has been made, no action u/s. 147 can be taken after expiry of four years from the ends of relevant assessment year unless it is on account of failure of the assessee in view of proviso to Section 147. In absence of any failure on part of the assessee, no action u/s. 147 can be taken including passing an order under the said section. It be so held now.
The respondent prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of cross objection.
CO no.162/ A/09[AY 2005-06]
1. "The learned Commissioner of Income Tax (Appeals) has erred in holding that the proceedings u/s. 147 has been validly initiated. In the facts of the case, proceedings u/s. 147 are invalid and void-ab- initio and therefore required to have been quashed. It is submitted that it be so held now.
1.1 The learned Commissioner of Income Tax has erred in not appreciating the fact that the proceedings u/s 147 of the Income-tax Act were initiated on the bass of the same facts which were not only available to him but also dealt with during the assessment proceedings before passing the assessment order u/s 143(3) of the Act for AY 2001-02 & 2002-03 resulting into initiation of the proceedings merely on account of change of opinion. It is submitted that reassessment cannot be done on account of change of opinion. It be so held now.
The respondent prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of cross objection."
ITA No.1041/ Ahd/2009[AY 2004-05] 1 The Ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.4,13,416/- made by the AO u/s 37(1) of the IT Act on account of foreign travel expenses.
2 The Ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in allowing the deduction of Rs.71,09,267/- made by the AO u/s 80IB of the IT Act.
3 On the facts and in the circumstances of the case, the ld.
Commissioner of Income-tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the AO.
4ITA nos.1863 to 1867/A/09 and others 4 It is, therefore, prayed that the order of the ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad may be set-aside and that of the AO be restored."
ITA no.1867/ A/09[AY 2006-07] 1 "The Ld. CIT(A) has erred in law and on facts in not allowing the deduction u/s 80IB of the IT Act of Rs.1,07,66,798/- .
2 The Ld. CIT(A) has erred in law and on facts in allowing depreciation on copy right expenses 25% on Rs.4,47,000/-.
3 On the facts and in the circumstances of the case, the ld.
Commissioner of Income-tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the AO.
4 It is, therefore, prayed that the order of the ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad may be set-aside and that of the AO be restored."
CO no.163/ A/09[AY 2006-07] 1 "The learned Commissioner of Income Tax has erred in rejecting the claim of copyright expense of Rs.2,23,500 (being 50% of Rs.4,47,000). It is submitted that the amount paid to a foreign company, Climator AB towards charges for agreeing to sell their products exclusively to the assessee for a period of one year. Since the benefit of such expense does not have enduring benefit, the same should have been treated as revenue expenditure. It is submitted that it be so held now.
2 The learned Commissioner of Income Tax has erred in confirming disallowance in respect of slow moving inventory of Rs.1,49,490/- holding that the amount being a provision cannot be allowed. It is submitted that provision of slow moving inventory is in accordance with sound accounting principles which requires to account for such losses. It is further submitted that said amount represents loss in the normal course of business of the appellant and therefore the same is allowable u/s 28 / 37 of the Act. It is submitted that it be so held now.
2.1 The learned Commissioner of Income Tax has erred in not adjudicating the alternate ground of the respondent that the deduction in respect of slow moving inventory of Rs.1,49,490/- is not allowed in the current year, the same shall be allowed in the year in which it is actually written off / written back. It is submitted that the AO be directed to allow the provision in the year in which it is actually written off / written back.
5ITA nos.1863 to 1867/A/09 and others The respondent prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of cross objection."
ITA no.1440/ Ahd/2010 [AY2007-08] 1 "The Ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.13479223/- made by the AO on account of deduction u/s 80IB.
2 The Ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition on account of additional depreciation @ 20% of Rs.244495/- on machinery.
3 On the facts and in the circumstances of the case, the ld. CIT(A)-
XIV, Ahmedabad ought to have upheld the order of the AO.
4 It is therefore, prayed that the order of the Ld. CIT(A)-XIV, Ahmedabad may be set-aside and that of the AO be restored."
CO No.199/ A/2010 [AY2007-08]
1. "The learned Commissioner of Income Tax has erred in confirming disallowance of Rs.1,14,491/- by invoking provisions of section 14A. It be so held now.
1.1 The learned Commissioner of Income Tax has erred in confirming invocation of provisions of Rule 8D. It be so held now.
1.2 The learned Commissioner of Income Tax has erred in ignoring the fact that no interest bearing funds were utilized for investment earning exempt income. It be so held now.
The respondent prays for leave to add, alter and / or amend all or any of the grounds before the final hearing of cross objection. "
Since similar issues are involved, these appeals/cross objections were heard simultaneously for the sake of convenience and are being disposed of through this common order.6
ITA nos.1863 to 1867/A/09 and others
2. Adverting first to ground no.1 in the appeals filed by the Revenue for Assessment Years 2001-02 to 2003-04 and 2005-06 to 2007-08 and ground no.2 in the appeal of the Revenue for the AY 2004-05 relating to deduction under section 80IB of the Income-tax Act, 1961 [hereinafter referred to the "Act"], facts ,in brief, as per relevant orders for the AY 2004-05 are that return declaring income of Rs.2,00,92,070/- filed on 31.10.2004 by the assessee-company, engaged in business of manufacturing & installation of prefabricated telecom shelters and refrigeration bodies, was selected for scrutiny with the issue of a notice u/s 143(2) of the Act on 31-01-2005.During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that the assessee claimed a deduction of Rs.71,09,267/- u/s 80-IB of the Act. To a query by the AO, the assessee explained that the assessee was engaged in the manufacture and installation of telecom shelters made for mobile phone operators. W hile explaining the process of manufacture, the assessee pointed out that these shelters set in completely knock down condition, were erected on site. Since these shelters were different from their components purchased by the company, relying on the decisions in CIT Vs. Tata Locomotive & Engineering Co. Ltd 68 ITR 325 and Ship Scrap Traders Vs. CIT 251 ITR 806, the assessee contended that they were entitled to deduction u/s 80IB of the Act. However, the AO while referring to provisions of sec. 80IB of the Act and decisions in Singh Engineering works Pvt. Ltd. Vs. CIT 119 ITR 891, Lucky Minmat Pvt. Ltd. vs. Commissioner of Income-Tax. 245 ITR 830 (SC), Commissioner of Income-Tax vs. N. C. Budharaja And Co. And Another 204 ITR 412 (SC), CIT Vs Shivalik Poultries (2005) 274 ITR 529, CIT Vs. Agra Const. Corpn. (2005) 146 Taxman 31 (All), CIT Vs Minocha Bros. 160 ITR 134(del.), CIT Vs. NUC Pvt. Ltd., 126 ITR 377 (Bom), CIT Vs. Bhakhtawar Singh Bal Kishan Bhital 234 ITR 652 (1997) (MP) and R.M.Enterprises vs. ITO (1992) 43 TTJ (BOM)(Special Bench) 165:
42 ITD 23 (SB) describing distinction between manufacture & 7 ITA nos.1863 to 1867/A/09 and others processing ,concluded that shelters erected by the assessee were building i.e. immovable property and could at the most be called as processing and not manufacture or production because all the raw material items do not undergo chemical change, the raw material being the same composition as it was before erection. The AO also concluded that shelters could not be termed 'article' or 'thing' as understood in the common parlance and in this connection relied upon decision in CIT Vs. Madgul Udyog 208 ITR 541(Orissa),holding that the word "article" refers to goods only and does not include immovable property . Therefore, the AO held that the assessee company was not an industrial undertaking and was not manufacturing or producing any article nor the shelters erected by the assessee were not an article or thing within the meaning of provisions of sec. 80IB of the Act. Accordingly, claim for deduction of Rs.71,09,267/- u/s 80IB of the Act was denied vide order dated 26.12.2006 in the AY 2004-05.
2.1 The AO also reopened the assessments for the AYs. 2001- 02 to 2003-04 & 2005-06 and denied the claim for deduction u/s 80IB of the Act on similar lines as aforesaid. Similar claim in the AYs. 2006-07 & 2007-08 was also denied in the scrutiny assessments for the relevant years.
3. On appeal, the assessee contended before the ld. CIT(A) vide letter dated 26-12-2008 that the telecom shelters were highly specialized and environmentally controlled protection cell for housing sophisticated telecom equipment used by the mobile phone service providers both GSM & CDMA in the country and abroad. These shelters protect the equipment inside from ingress of moisture, dust, and humidity and were vandal proof. Ideally the shelters should be supplied to the customers in fully built-up condition as was done in foreign countries. But because of the constraints of transportation, lifting facilities at the sites etc. these were dispatched as kits in knocked down condition and erected at the sites. Some of the manufacturing processes were then completed at the sites.8
ITA nos.1863 to 1867/A/09 and others It was pointed out that the shelters may have their outer and inner skins of either steel or aluminum formed sheets, which were in the form of rigid panels with injected polyurethane foam as insulation material. The shelter sizes were governed by the qualitative requirements (QR) and specifications given by the customers based on the QRs. Based on the design parameters set, production drawings of the panels were made for manufacturing. The main raw material and components required for these shelters was detailed as under:-
- Panels made of steel / aluminium sheets and injected with PU foam as per the drawings and specifications laid down by the design department.
- GI coils for external and internal angles.
- Locking mechanism using locks and rods manufactured to our
exclusive design.
- Antistatic PVC rolls for making the flooring.
- Marine grade / water resistant ply boards for making the base for
the antistatic PVC laid on the floor.
- GI coils / aluminium coils for manufacturing sun roof
- GI /aluminium coils for manufacturing 'Z' sections for fixing the sun
roof and for making flashing for AC and Roxtec.
- Skid clamps manufactured from steel sheets.
- Paints and chemicals including prirmers surfaces, sealant,
adhesives, thinner etc.
- Extruded aluminium door and jamb profiles, 'C' Rails manufactured
strictly as per our designs, specifications and drawings.
- Base frames manufactured out of ISMBs & ISMCs as per our design and specifications.
- Bought out items like insert nuts, hardware items like nuts / bolts, rivets, door closers.
3.1 It was explained that the assessee's manufactured product i.e., "pre-
fabricated building" (telecom shelter) had the tariff heading no.94060069l in the central excise tariff Act for the purpose of levying of excise duty and sales tax. The shelters were mobile in nature even after they were mounted on ISMB, supported by pillars as the four comers . While referring to purchase orders, it was submitted that since the telecom shelters were actually taken by the assessee to the customer place, question as to the nature of goods sold or its movability should not arise. Since the assessee paid excise duty on the telecom shelters, the process amounted to manufacture .Besides, sales tax leviable on sale of movable property was paid on sale of these shelters . These could not 9 ITA nos.1863 to 1867/A/09 and others be regarded as immovable property. Inter alia, the assessee referred to decisions in Lokashan Jain Udyog Mandir Ltd. Vs. Kalooram AIR 1965 Raj. 15 , Meghraj & Others AIR 1924 Allahabad 365 , Perumal Naicker Vs. J. Ramaswami Kone and another AIR 1969 Madras 346, CIT Vs. Tata Locomotive & Engineering Co. Ltd. 68 ITR 325 (Bom),Ship Scrap Traders Vs. CIT,251 ITR 806 (Bom.) and distinguished the decisions relied upon by the AO in Commissioner of Income Tax v. N. C. Budharaja & Co. 204 ITR 412 (SC) & Lucky Minmat Private Limited v. Commissioner of Income Tax 245 ITR 830 (SC) .
4. In the light of aforesaid decisions, the learned CIT(A) allowed the claim for deduction u/s 80IB of the Act in the AY 2004-05 in the following terms:-
"7.2 I have considered the facts of the case and the submissions of the A.R. carefully. The A.O. has disallowed the claim of deduction u/s.80 IB of the Act on two grounds, first that the final product is an immovable property and secondly the process of bringing the final product into existence is not manufacturing. As regards, first issue the appellant has contended that its final product is an article or thing and it is 'movable' and that the test of movability or immovability is not defined in IT. Act ; rather it is governed by general law. The A.O. has relied upon the decision of the Apex court in the case of N.C.Budhiraja & Co. to treat the Shelters as immovable properly as in that case it was held that dam is not an article. As contended by the A.R. and as can be seen from the purchase order issued by Reliance Communications Limited filed at page B-89 of the paper book submitted by the A.R., the transaction is liable to excise duty and sales tax which implies that the transaction involves a movable property .The purchase order also involves transportation, packing, forwarding and unloading of goods, these facts lead to the conclusion that the product is a movable property. Further as per the decisions cited under Excise Law i.e. Kailash Oil Cake Industries v. CCE 63 ELT 693 (CEGAT) & National Radio v. CCE 76 ELT 436 (CEGAT), immovable property or property attached to earth is not 'goods'; and hence excise duty is not leviable thereon. As in the case of the appellant Excise Duty has been paid on the Telecom Shelters sold by it , it can be reasonably said that the process amounts to manufacture and the resultant product is movable property. Further telecom shelter is not a thing which is fastened to the earth like building or dam and the same can be dismantled and installed at a new place. Hence I agree with the contention of the A.R. that the product is not an immovable property, though it has to be fitted by screws for the purpose of operational efficiency. The appellant does carry out mounting and erection or installation activities for operational efficiency purpose. However, there is a fundamental difference between the two things and 10 ITA nos.1863 to 1867/A/09 and others that is permanency i.e. whether such attachment is for permanent beneficial enjoyment of the immovable property to which it is attached. The example cited by the A.R. of oil engine attached to earth so long as the engine is used and that when it is not used, it can be detached and shifted to some other place does not make it immovable property is a lucid illustration of permanency. The A.O. has rightly pointed out that shelters are attached to earth or rooftop by screws, however, he has failed to carry out the permanency test and verify whether differences in permanency would render the decision in case of N. C. Budharaja applicable in the present case. I agree with the contention of the A.R. that 'immovable' does not derive its meaning from the tax laws and therefore it has to be referred to General Clauses Act and other relevant statutes dealing with property for its meaning. General Clauses Act as well as Registration Act lays down condition of permanency in addition to the property being attached to earth to qualify as immovable property. Thus, immovable property would carry characteristics of attachment to earth as well as permanency. This was not examined by the A.O. and application of decision in case of N. C. Budhararaja has been stretched on similarity of one fact (attachment to earth) without considering differences in vital factor (permanency). Further Excise & sales tax laws typically do not deal with immovability, but as far as their application is concerned, both the levies are not applicable if the property is immovable. Based on the above said criteria and the case laws cited by the A.R., I hold that telecom shelters are movable properties.
7.3 The second issue is whether the activity of the appellant can be said to be manufacturing or not. The A.O. has relied upon the decision in the case of Lucky Minmat Pvt. Ltd. Vs. CIT. However, the said decision has been rendered on a different set of facts and process. The appellant fills rightly pointed out that in case of Lucky Minmat, even after mining or cutting limestone and marble, the end product remains same commodity as commercially known and mere is no change in its character or its use and based on such reasoning, it was not treated as manufacture. In the appellant's case, however, it uses various raw materials as listed in its submissions like panels made of steel or aluminium sheets, GI coils, PVC rolls, GI / aluminum coils and skid clamps and many such materials are used to provide a weather proof shelter and once the telecom shelter is prepared, one can not recognize the panels, skid and screws etc. used to prepare the shelters .The final product is known as Telecom Shelter, which is not the same as materials used. The final product is a distinct marketable commodity and it has a separate market of its own. In this regard I would like to hold that the process carried out by the appellant is assembling of different raw materials which are also changed in its shape in the process of assembling. The resultant product of the appellant is a specialized product for the specific industry like telecom service providers' industry which is in itself a highly specialized and technical industry. Such industry visualizes the final product of the appellant with certain utilities specific to its requirements which it could never have been able to fulfill on its own. The correct issue to be addressed is whether such activity of shaping up the final product is manufacture or not. In this regard I would 11 ITA nos.1863 to 1867/A/09 and others like to rely on the landmark decision of the Apex court in the case of Narne Tulaman Manufacturers Pvt. Ltd. V. Collector Of C.E. reported in 182 ITR 577 (SC). Following is the relevant extract of the said case:
"Manufacture: assembly of three components--platform, load cells and indicator system into a new product (weigh bridge) is manufacture. Both the separate parts and the end product are excisable. The process by which the weighbridge comes into being is not relevant. If rules permit, set off can be claimed of duty already paid on the parts. "The appellant, however, did the work of assembling. As a result of the work of the appellant, a new product known in the market and known under the excise item "weigh bridge" comes into being. The appellant will become a manufacturer of that product and as such leviable to duty. That is precisely what the Tribunal found on the facts of the case. If the indicator system is a separate part and duty had been paid on it and if the rules so provide then the appellant may be entitled to abatement under the rules. But if the end product is a separate product which comes into being as a result of the endeavour and activity of the appellant then the appellant must be held to have manufactured the said item. When parts and the end product are separately dutiable-both are taxable. The appellant's case that it is liable only for the component part and not the end product cannot be entertained. The Tribunal was, therefore, right in the view it took."
In the decision in the case of CIT Vs. Tata Locomotive & Engineering Co. Ltd. f 1968] 68 .TR 325 (Bom.) also, the prevailing set of facts are similar to those prevailing in the case of the appellant. The said ratio is directly applicable in the case of the appellant.
Based on the above referred relevant extracts of the said decision of the Apex court I hold that the appellant does fulfill the test of manufacturing also. Also the decision of Ship Scrap Traders cited by the A.R. supports the case of the appellant. The said decision holding ship breaking activity as a manufacturing activity has been confirmed by the Apex court in case of Vijay Ship Breaking Corporation as reported in 175 Taxman 77 ( SC). In the case of Aspinwall & Co. Ltd. vs. CIT 251 ITR 323 the Supreme Court had held as under:
"Held, reversing the decision of the High Court, that the assessee after plucking or receiving the raw coffee berries made them undergo nine processes to give them the shape of coffee beans. The final product was absolutely different and separate from the input. The change made in the article resulted in a new and different article which was recognized in the trade as a new and distinct commodity. The coffee beans had an independent identity from the raw material from which they were produced. Conversion of the raw berry into coffee beans was a manufacturing activity. The assessee 12 ITA nos.1863 to 1867/A/09 and others was, therefore, entitled to the investment allowance under section 32A.
The word "manufacture" has not been defined in the Income-tax Act. In the absence of a definition, the word "manufacture" has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to manufacturing activity.
As held in the case of Aspinwall and Co. Ltd. 251 ITR 323 (SC ) manufacturing implies a complete transformation in the original article so as to produce a commercially different aside or commodity and the net product should be absolutely different and separate from tic input .The change made in the article results in a new and different article which is recognized in the trade as a new and distinct commodity i.e. the name, use and character re end product should be different. Considering the above facts and case laws, I hold that the product developed by the appellant is a distinct marketable commodity having distinct name, character and use different from the raw materials , hence I hold that it is a manufacturing activity and so the appellant is entitled to deduction u/s. 80IB. Hence I direct the A.O. to allow deduction u/s.801B of the IT. Act."
4.1 Following his aforesaid findings, the ld. CIT(A) allowed the claim for deduction u/s 80IB in the AYs. 2001-02 to 2003-04,2005-06 to 2007-08 also.
5. The Revenue is now in appeal before us against the findings of the learned CIT(A) in the aforesaid assessment years. The learned DR while carrying us through the impugned orders supported the conclusion of the AO. Inter alia, the ld. DR relied upon decision in Commissioner of Central Excise vs. Hutchison Max Telecom Pvt. Ltd.,2007-TIOL-809-HC-Mum-CX. On the other hand, the ld. AR on behalf of the assessee supported the findings of the ld. CIT(A) and further contended that telecom shelters were known by different trade name than the components used into making of the product. Since these have different name, character and use than its components, apparently the assessee manufactured or produced an 'article' or 'thing' in their industrial undertaking. W hile referring to 13 ITA nos.1863 to 1867/A/09 and others photographs of the product placed before us , the ld. AR pointed out that these can be dismantled and re-erected at different sites. Moreover, the assessee paid excise duty and sales tax on such products. Had these shelters not been moveable and marketable, these Acts would not be applicable. The product was covered in substantive definition of manufacture and fell in Tariff Entry no.9406 and can be contrasted with the labelling and relabelling of tobacco Products, considered as a processing liable to excise duty. The ld. AR pointed out that the decision of Bomaby High Court in case of Hutchison Max Telecom Pvt. Ltd.(supra) was not applicable to the facts of the case of the assesseee as that related to a telecom service provider and the product was 'telecom tower' whereas assessee supplied telecom shelters to such mobile service provider and their product was different from the one considered by Bombay High Court in Hutchison's case. Inter alia, the ld. AR relied on a decision of the Hon'ble Supreme Court in the case of Commissoner of Central Excise Vs. Solid and Correct Engineering W orks, 2010- 5 SCC 122 and submitted the product manufactured by the assessee was not an immovable property. The ld. AR added that assembling various raw material amounts to manufacture or production and relied upon decisions in CIT vs. Tata Engineering. & Locomotive Co. Ltd. 68 ITR 325 (Bom), Chirenjeev W ind Energy Ltd. vs. ACIT (Chennai Bench) (2010) 4 ITR (Trib) 9,Shilp Scrap Traders vs. CIT 251 ITR 806 (Bom) approved by SC in case of Vijay Shipbreaking Ltd. in 314 ITR 309,CIT vs. Maheshchandra Sharma 308 ITR 222 (P&H) and CIT vs. Anand Affiliated 221 CTR 167 (P&H) as also in ITO vs. Arihant Tiles and Marble Private Ltd.,320 ITR 79(SC)
6. W e have heard both the parties and gone through the facts of the case as also the decisions relied upon. The issue before us is as to whether or not the telecom shelter erected by the assessee at the site of mobile telephone service providers is an 'article' or 'thing' or is just an immovable property as concluded by the AO and whether the process involved in bringing 14 ITA nos.1863 to 1867/A/09 and others the telecom shelters into existence is manufacture or production of an article or thing within the meaning of provisions of sec. 80IB of the Act. Indisputably, raw material necessary for creating a telecom shelter comprised items detailed in para 3 above. According to the assessee the said telecom shelters are manufactured by the assessee in their industrial undertaking and then brought to the site of a customer in completely knocked down condition for erection. The process of manufacturing a telecom shelter as narrated by the assessee before the lower authorities is as under:
"(a) The ISMBs i.e. galvanized steel girders are placed on the pillars.
(b) The floor panels are joined together after putting polyurethane or silicon sealant between the joints and the cam locks are operated. Thereafter on the bottom of the floor panels insert nuts are inserted with special tools and the floor panel is then attached to the skids by bolting skid clamps to the floor panels.
(c) Angles are riveted on all four sides of the floor panels.
Any dimensional variation in the angles is filed to fit the angles accurately around the periphery of the floor panel.
(d) The side wall panels are joined together to make full walls and the longer side walls and the rear wall are placed on top of the floor panels and they are riveted with the angles already fitted on the floor panels.
(e) The front wall is put together by connecting the two side panels and the small panel above the door openings and the threshold strips. Before inserting the threshold strips, the door frame is inserted and riveted to the side panels.
(f) The side walls are riveted to the floor angle. Once all four walls are standing, the vertical corner angles are riveted to the side walls, the roof panels are joined together by applying the sealant and operating the cam lock. It is then placed on top of the side walls.
(g) Once the side walls have been matched accurately with the walls then the roof angles are joined to the roof panel and the wall panels. A total of approximately 3000 rivets 15 ITA nos.1863 to 1867/A/09 and others are used in the installation of a shelter with the help of a riveting gun, which is operated by an air compressor.
(h) Once the box of the shelter is ready the door panel is placed in the doorframe and insert nuts are accurately placed both on the door panel and the right side wall panel to fix the hinges. This is a very precise operation and requires extreme skills for doing it. Then holes are made in the doorframe and the door profile to fix the security nuts to ensure that the shelter door cannot be removed even if the hinges are unscrewed. A lock wedge is then fitted inside the door and the door locks are tested for operating smoothly.
(i) The sunroof sheets are joined together and made into one big cover for the entire shelter to provide an extra waterproof roof over the shelter. To provide proper slope on the top, sunroof sheet extended polyethylene (EPE) sheets are placed in proper order to ensure that the water does not collect on roof of the shelter.
(j) The C rails to mount the equipment required in the shelter are cut to the required length and riveted on the walls and ceiling of the shelters as may be required. Therefore cable trays to carry the various cables to the electric equipment are fitted just below the roof
(k) A rain shade is fitted above the door outside the shelter and a steel ladder to get into the shelter.
(l) Plastic guard film of the panels is removed and sealant is applied on all the joints and the edges of the angle to ensure that no leakage takes place."
In nutshell, the shelters are rooms made up of a material other than than cement & brick etc. 6.1 Indisputably, the product manufactured by the assessee is liable to excise duty and sales tax and accordingly, the ld. CIT(A) after analysing the process of manufacture and its erection concluded that the product brought in to existence by the assessee through the aforesaid process was a movable property and not an immovable property like a building or dam, since the same can be dismantled and installed at a new place. We may initially consider as to whether telecom shelter could be categorized as an immovable property. Now whether simply 16 ITA nos.1863 to 1867/A/09 and others because shelters are attached to earth or rooftop by screws in order to avoid skidding , mean that these shelters attached to earth become an immovable property. The expression 'movable property' or' immovable property' is nowhere defined in the Act. The expression "moveable property" has been defined in section 3(36) of the General Clauses Act, 1897 as under :
"Section 3(36) : "movable property" shall mean property of every description, except immovable property."
Thus, the reply to the question whether the telecom shelters are movable property, would depend upon whether the same are immovable property. Section 3 of the Transfer of Property Act, 1882 provides that unless there is something repugnant in the subject or context 'immovable property' under the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass. Section 3(26) of the General Clauses Act, 1897, similarly does not provide an exhaustive definition of the said expression. It reads :
"Section 3(26) : "immovable property" shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth."
The AO in the assessment order while relying upon the decision in NC Budhraja & Another(supra) and Shivalik Poultries (supra) concluded that the assessee did not manufacture or produce an article or thing. In both these decisions issue was altogether different. In the former, the Hon'ble Apex Court was examining the issue as to whether construction of dam was manufacture or production of an article and in the latter the issue was as to whether poultry shed could be treated as plant within the meaning of sec. 43 of the Act. The issue and context in these decisions were, apparently, altogether different . The construction of dam or sheds could not be equated with manufacture or production of telecom shelters. In the instant case , admittedly the telecom shelters erected by the assessee are liable to sales tax and excise duty .Simply because these shelters are attached to earth or permanently fastened to any thing attachéd to earth with screws i.e fixed to a foundation imbedded in earth, does not imply that these become immovable property nor these shelters are liable to registration or 17 ITA nos.1863 to 1867/A/09 and others payment of stamp duty under the relevant enactments. The term "attached to the earth" has nowhere been defined in the General Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the following meaning to the expression "attached to the earth" :
"(a) rooted in the earth, as in the case of trees and shrubs;
(b) imbedded in the earth, as in the case of walls and buildings;
(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached."
It is apparent from the aforesaid meaning of the expression "attached to the earth" that the telecom shelters fixed to a foundation with the help of nuts and bolts to provide stability to the shelter does not qualify for being described as attached to the earth under any one of the three clauses extracted above. The attachment of the shelters to the foundation is not comparable or synonymous with the trees and shrubs rooted in earth nor with the imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition. Imbedding of a wall in the earth is also in no way comparable to attachment of these shelters to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. So also the attachment of the shelters to the foundation at which it rests does not fall in the third category, for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. It is not the case of the Revenue that attachment of shelters to the foundation was meant for permanent beneficial enjoyment of either the foundation or the land in which the same was imbedded.
6.2 Hon'ble Apex Court while adjudicating the issue as to whether the setting up of an Asphalt Drum Mix Plant by using duty paid components tantamounts to manufacture of excisable goods within the meaning of Section 2(d) of the Central Excise Act, 1944,observed in their decision in Commissioner Of Central Excise, Ahmedabad, vs. Solid & Correct Engineering Works & 18 ITA nos.1863 to 1867/A/09 and others Ors,2010-(005)-SCC -0122-SC that the issue has to be examined as to whether the annexation of the plant is with the object of permanent beneficial enjoyment of the land or building. Accordingly, the Hon'ble Apex Court adjudicated the issue in the following terms:
"Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons :
(i) The plants in question are not per se immovable property.
(ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in Section 3 of the Transfer of Property Act.
(iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free.
(iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed.
6.21 Thereafter, while referring to the decisions in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad (1998 (1) SCC 400),M/s. Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad v. Collector of Central Excise, Hyderabad 1989 (1) SCC 172,(SC), Triveni Engineering & Industries Ltd. & Anr. v. Commissioner of Central Excise 2000 (120) ELT 273 (SC), the Hon'ble Apex Court concluded as under:.
". In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty. "
6.3 In the instant case, Indisputably, the product manufactured by the assessee is liable to excise duty and falls within the classification excise tariff entry no. 9406 of chapter 94 of the relevant Excise law and is also liable to sales tax .After analysing the manufacturing process as evident from the 19 ITA nos.1863 to 1867/A/09 and others impugned orders and explained before us, we are of the opinion the product I,e telecom shelter brought in to existence by the assessee through the aforesaid process was a movable property and not an immovable property like a building or dam. The assembling of the components of the telecom shelters brought into existence ,a completely new product; had a distinctive name, character and use.[M/s. Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad (supra)]. The use of various raw material as listed above like panels made up of steel or aluminium sheets, GI coils, PVC rolls, GI / aluminum coils and skid clamps and many such materials as are used to provide a weather proof shelter, resulted in production of telecom shelter, a new product, which can not be categorised same as the material used. The resultant product is a specialized product for the specific industry like telecom service providers' industry .Since the end product is a separate product which came into being as a result of the endeavour and activity of the assessee ,apparently the product was manufactured by the assessee. Since the product is movable as concluded by us already and the activities fullfill the conditions stipulated u/s 80IB of the Act, nothing prevents the assesee from claiming deduction u/s 80IB of the Act . This view of ours is supported by decision in CIT Vs. Tata Locomotive & Engineering Co. Ltd. f 1968] 68 .TR 325 (Bom.),wherein the assembling of the parts received by the assessee in C. K. D. condition and transforming those basic materials into the finished product, namely, a fully automotive truck/bus chasis, was held to be "manufacture". The Hon'ble Supreme Court in the matter of CIT v. N. C. Budharaja & Co. [1993] 204 ITR 412 (SC) held, "The test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a .new and distinct commodity." The Hon'ble Supreme Court in the case of CIT v, Sesa Goa Ltd. reported in 271 ITR 331 while considering the question under section 32A(2)(b)(iii) for grant of investment allowance dealt with the question of 'production' in a case where the assessee's undertaking was engaged in the business of excavating, mining and processing mineral ore. Mineral ore was not excluded by the Eleventh Schedule. The only question was whether such, 20 ITA nos.1863 to 1867/A/09 and others business was one of manufacture or production of ore. The Hon'ble Supreme Court held as under :- :
"The reasoning given by the High Court, in the decisions noted by us earlier, is, in our opinion, unimpeachable: This court had, As early as in 1961, in Chrestian Mica Industries Ltd. v. State of Bihar {1961] 12 STC 150, defined the word 'production' , albeit) in connection with the Bihar Sales .Tax Act, 1947. The definition was adopted from the meaning ascribed to the word in the j Oxford English Dictionary as meaning 'amongst other things that which is produced: a thing that results from any action, process of effort; a product: a product of human activity or effort'. From the wide definition of the word 'production' , it has to follow that mining activity for the purpose of production of mineral ores should come within the ambit of the word 'production' since ore is 'a thing', that which is the result of human activity of effort ..
6.4 In Union of India and Others, v. J.G. Glass Industries-Ltd. and Others (1998) 2 SCC 32, the Hon'ble Supreme Court laid down a two-fold test for determining whether a particular process amounts to 'manufacture' or not ? First, ,whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist.
Secondly, whether the commodity which was already in existence would not serve the desired purpose but for the said process.
6.5 The word 'manufacture' is now defined in the sec. 2(29BA) of the Act w.e.f. 1.4.2009 as under:
(29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,--
(a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or
(b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or inte-
gral structure;
6.6 In the light of aforesaid definition and as is generally understood, `manufacture' implies a change, and such change must entail a transformation; a new and different article must emerge having a distinctive name, character or use. Thus, `manufacture' , ordinarily signifies emergence of new and different 21 ITA nos.1863 to 1867/A/09 and others goods as understood in relevant commercial circles. The Corpus Juris Secundum defines it as the production of article for use from raw or prepared material by giving these materials new forms, qualities, properties, or combinations, whether by hand labour or machinery; also anything made for use from raw or prepared materials". According to Webster's Dictionary, manufacture means to work, raw or partly wrought materials, into suitable forms for use, as to manufacture wool, iron, etc. to make (wares or other products) by hand, by machinery or other agency. Thus, literally speaking the process of manufacture involves some transformation or change in the material as a result of application of art or a mechanical manipulation. The material, which is thus fashioned into a new product, may be distinct in form or in use. In the light of these features of the word manufacture, we reiterate that the assembling of various material used by the assessee into an altogether different finished product i.e telecom shelters, recognized in the trade as a new and distinct commodity, amounts to the manufacture or production ,eligible for deduction u/s 80IB of the Act.
6.7 The decision of Hon'ble Bombay High Court in case of Hutchison Max Telecom Pvt. Ltd.(supra) is not applicable to the facts of the case of the assesseee as the said decision related to a telecom service provider and the product was 'telecom tower' constructed by that assessee whereas in the instant case, the assessee supplied telecom shelters to such mobile service provider and their product was altogether different from the one considered by the Hon'ble Bombay High Court in the Hutchison's case. Thus, reliance by the ld. DR on the said decision is totally out of context.
7. In view of the foregoing, especially when the Revenue have not placed before us any material ,controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a different view in the matter, we are not inclined to interfere. Therefore, ground no.1 in the appeals filed by the Revenue for the AYs 2001-02 to 2003-04 and 2005-06 to 2007-08 and ground no.2 in their appeal for the AY 2004-05 are dismissed.
22ITA nos.1863 to 1867/A/09 and others
8. Now coming to ground no.1 in the appeal of the Revenue for the AY 2004-05 relating to disallowance of Rs.4,13,416/- on account of foreign travel expenses, the AO noticed that the assessee debited an amount of Rs.17,78,400/- under the head "travelling and conveyance", which included an amount of Rs.4,13,416/- on foreign travelling. To a query by the AO ,the assessee did not furnish the purpose of visit of director/employee(s) abroad and evidence of work done during foreign travel. In the absence of such evidence and purpose of travel , the AO disallowed the claim on the ground that the assessee failed to discharge the onus of establishing the nature and genuineness of the expenditure, despite sufficient opportunity allowed.
9. On appeal, the assessee contended that out of the expenses of Rs.10,38,343/-, an amount of Rs.6,24,851/- was incurred in connection with visit to Germany, where the holding company was located and the remaining amount of Rs.4,13,542/- was incurred towards director's business visits and project implementations to Bhutan, Bahrain, Dubai and Kuwait. Lt. Gen (Retd.), S K Bahri a director of the company, visited Germany to attend the Board Meetings of the company held in Germany in August & December 2003 while visits to Gulf were for soliciting orders for the telecom shelters as evidenced by the orders from Alwaleed Syscom W.I.I., Alan Dick & Co. and export worth Rs.19.52 Lacs,. While pointing out that visit to Bahrain & Bhutan was for installation of Telecom shelters supplied by the company, it was contended that the documentary evidence filed by the assessee had not been questioned by the Assessing Officer nor the purpose of visit and that the expenditure was incurred wholly and exclusively for the purpose of business. In the light of these submissions, the ld. CIT(A) concluded as under:
6.2 I have considered the facts of the case and the submissions of the A.R. carefully. The appellant has furnished details of expenses along with purpose of such expenses. As the expenses have been incurred for the purpose of business and the foreign visit was undertaken for attending board meetings in Germany by the directors and for procuring orders from foreign countries, I do not find any justification for disallowance of these expenses. The A.O. in his remand report has stated that the disallowance 23 ITA nos.1863 to 1867/A/09 and others of foreign traveling expenses be enhanced from Rs.4.31 lakhs to Rs.10.38 lakhs which is the total foreign traveling expenses. But as I find that the traveling expenses have been incurred wholly and exclusively for business purpose, I do not find any justification for enhancement in this regard. Thus the disallowance is deleted considering the nature of expenses and relying on the cases cited by the A.R."
10. The Revenue is in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO while the learned AR on behalf of the assessee supported the findings of the learned CIT(A).
11. W e have heard both the parties and gone through the facts of the case. Indisputably, the assessee did not furnish the relevant details sought by the AO in respect of purpose of visit of director/employees and evidence of actual work done by them abroad, despite sufficient opportunity allowed, as evident from the findings in the assessment order. On appeal, the assessee is stated to have pleaded before the ld. CIT(A) that details were submitted vide letter dated 28.12.2006 before the AO in response to a letter dated 28.7.2006 of the AO. However, we find that the assessment was completed in this case on on 26.12.2006. There is no material before us to establish that these details were available before the AO before completion of the assessment. In any case, the ld. CIT(A) deleted the disallowance after having a report from the AO. A copy of the said report is also not available before us. On perusal of page 34 to 64 of the paper book, where in copies of ledger accounts and copies of some of the bills are placed, it transpires that ,inter alia, Mrs. Bahri also accompanied the director Mr. S.K.Bahri to Kuwait & Dubai. Since break up of the expenditure or even in respect of the amount of Rs. 10,38,343/- or of Rs.4,13,542/- is not evident from the impugned orders nor the details of expenditure incurred on visit of each of the person abroad is available before us , it is not known as to how much expenditure has been incurred on the visit of either each of the director/employees or Mrs. Bahri. Moreover, there is 24 ITA nos.1863 to 1867/A/09 and others nothing to suggest as to whether her visit to Kuwait/Dubai was for the purpose of business of the company. In any case, the evidence of purpose of visit of each of the person abroad is not available before us nor any such evidence is subject matter of discussion in the impugned order. As is apparent from the orders of lower authorities, the assessee did not furnish even details of places visited abroad before the AO nor any evidence of purpose of visit at each of the places so visited abroad nor even furnished break up of expenditure incurred at each of these places. The onus is on the assessee to prove that expenditure is incurred wholly and exclusively for the purpose of business. The said onus has not been discharged by the assesseee even when the AO sought details/evidence of purpose of visit to foreign countries. The ld. CIT(A) without having complete facts and details, deleted the disallowance. Apparently, the order of the ld. CIT(A) is not well reasoned or speaking. Even before us, details of each of the places/companies or persons visited by the director/employees of the assessee has not been filed nor even break of expenses incurred by the assessee at each of these places so visited abroad nor the ld. AR even referred to us any evidence regarding purpose of visit at each of the places visited abroad . The ld. AR merely invited our attention to page 34-64 of the paper book, wherein only copy of ledger account is placed and reiterated that the expenditure is for the purpose of business. Not an iota of evidence has been referred to before us that the foreign visit of the director or his wife or employees was wholly and exclusively for the purpose of business of the assessee company. One of the requirements of the provisions of section 37(1) of the Act is that the expenditure must have been laid out wholly and exclusively for the purpose of business. The Hon'ble Supreme Court in case of CIT v. Chandulal Keshavlal & Co. [1960] 38 ITR 601, pointed out that it is for the assessee who claims deductions of the expenditure to satisfy the department for which the amount is spent. In Ram Bahadur Thakur Ltd. v. CIT [2003] 261 ITR 390(Kerala) it has been held that where the expenditure was incurred wholly and exclusively for the purpose of trade and business of the assessee, is required to be determined and where the assessee seeks to deduct from his or its business profits, certain items of expenditure, the onus of proving that such deductions are permissible is on the assessee. This is particularly so, when the claims are based on facts which are exclusively within the knowledge of the assessee. Thus, it is for the assessee to plead and prove before the 25 ITA nos.1863 to 1867/A/09 and others authorities that the foreign travel expenses on the visit of director or his wife or employees to Germany, Bhutan, Baharin, Dubai or Kuwait, were incurred wholly and exclusively for the purpose of the business of the assessee. In the absence of any evidence of purpose of visit at each of the places/persons visited or even break up of expenses incurred at each of such places, the ld. CIT(A) was not justified in deleting the disallowance. In these circumstances, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issue raised in the ground no.1 in the appeal of the Revenue for the AY 2004- 05, afresh in accordance with law in the light of our aforesaid observations, after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the issue, the learned CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act, bringing out clearly as to the purpose of visit at each of the places/persons visited by the assessee abroad. Therefore, ground no.1 in the appeal of the Revenue for the AY 2004-05 is disposed of .
12. Next ground no.2 in this appeal of the Revenue for the AY 2006-07 relates to depreciation on copy right expenses @ 25% of Rs.4,47,000/-. while ground no.1 in the corresponding CO relates to treating the amount of Rs. 2,23,500/-capital in nature. The assessee claimed expenses of Rs. 2,23,500/- in their P&L Account. To a query by the AO, the assessee submitted that the said expense represented the amount paid to a foreign company, Climator AB towards charges for agreeing to sell their products exclusively to the assessee for a period of one year. Total amount incurred for the above said purpose was Rs.4,47,000/-. However, only half of the amount was expensed out and balance was carried as prepaid expenses. Since exclusivity right was granted to the assessee only for one year and did not have enduring benefit, the same should be treated as revenue expenditure, the assessee pleaded. Alternatively, the assessee claimed depreciation u/s 32 of the Act @ 25% treating the same as an intangible asset. However, the AO did not accept the submissions of the assessee and concluded that copyright expenses were capital in nature and are entitled for depreciation as laid out in sec. 32(1)(iii) of the Act.
26ITA nos.1863 to 1867/A/09 and others The AO also observed that it was not the duration but the character of the expense that determined whether an expense was capital expense or revenue one and copyright expense, as the assessee itself admitted provided exclusivity rights to the assessee company and therefore, it was a capital expense. Accordingly, the expense of Rs.2,23,500/- was disallowed and after allowing depreciation of Rs.55,875/- @ 25%, an addition of Rs.1,67,625/- was made to the income of the assessee.
13. On appeal, the learned CIT(A) directed the AO to allow depreciation @ 25% on Rs.4,47,000/- with the following observations:-
4.1 Before me the A.R. made submissions as under:
"In this regards, the appellant submits to your good honour that that exclusivity right was granted to the appellant only for one year and therefore it does not have enduring benefit and accordingly, the same should be treated as revenue expenditure. We would like to state that any expenditure can be said to have enduring benefit if its benefit is available for more than a year. In the present case, since the benefit lasts for only one year, no enduring benefit can be said to have accrued. We also draw your attention to the decision in case of Amway India Enterprises v. DCIT - 111 ITD 112 (Delhi) (Special Bench).
30. Without prejudice to our contention that the same is revenue expenditure, it is submitted that in case your goodself treats the same as capital expenditure, the assessee should be entitled to depreciation at 25% (expenditure incurred in August 05) of Rs.4,47,000 (i.e. amount of total expenditure) as against 25% of Rs.2,23,500."
4.2 I have considered the facts of the case and the submissions of the A.R. carefully. I agree with the finding of the A.O. that it is a capital expenditure .However the AO is directed to allow depreciation @25% on Rs.4,47,000/-."
14. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A) in directing to allow depreciation @25% on the entire amount of Rs.4,47,000/- while the assessee in their cross-objection disputed the findings of the ld. CIT(A) in 27 ITA nos.1863 to 1867/A/09 and others treating the expenditure capital in nature.. The learned DR supported the order of the AO. On the other hand, the learned AR on behalf of the assessee reiterated their submissions before the learned CIT(A).
15. W e have heard both the parties and gone through the facts of the case. Though the assessee submitted before the lower authorities and even before us that the amount of Rs.4,47,000/- represented the amount paid to a foreign company, Climator AB towards charges for agreeing to sell their products exclusively to the assessee for a period of one year, the relevant terms and conditions or a copy of the agreement has not been placed before us . As is apparent from the aforesaid findings in the impugned order in the instant case, the ld. CIT(A) while agreeing with the AO did not analyse the issues raised by the assessee in their explanation nor even brought out as to how the expenditure is capital in nature and why the entire amount of Rs. 4,47,000/- is entitled to depreciation in the year under consideration. A mere glance at the impugned order reveals that the order passed by the ld. CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi-judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order. Section 250(6) of the Income Tax Act ,1961 mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure. The requirement of recording of reasons by the quasi-judicial authorities is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. We may reiterate that a 'decision' does not merely mean the 'conclusion'. It embraces within its fold the reasons forming basis for the conclusion.[Mukhtiar Singh Vs. 28 ITA nos.1863 to 1867/A/09 and others State of Punjab,(1995)1SCC 760(SC)]. As is apparent, the impugned order suffers from lack of reasoning and is not a speaking order. In view of the foregoing, especially when the ld. CIT(A) has not passed a speaking order on the aforesaid issues raised in these grounds, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issues afresh in accordance with law, after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the appeal, the learned CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act and various judicial pronouncements on the issues. With these observations, ground no.2 in this appeal of the Revenue for the AY 2006-07 and ground no.1 in the corresponding CO are disposed of.
16. Ground no.2 in the appeal of the Revenue for AY 2007- 08 relates to claim of additional depreciation on machinery. The AO noticed that the assessee claimed additional depreciation @ 20% on machinery of Rs.2,44,495/- u/s 32(1)(iii) of the Act. Since the AO concluded that the assessee was not engaged in manufacture or production of article or thing , the AO disallowed the claim for additional depreciation.
17. On appeal, the learned CIT(A) allowed the claim of the assessee in the following terms:-
"4.2 I have considered the submissions made by the AR of the appellant and the observations of the assessing officer in the assessment order. It is seen that my predecessor vide his order No. CIT(A)-XIV/Cir.8/146/07-08 dated 06-01-2009 clearly held that the activities of the appellant company are manufacturing activity. Hence, the provisions of section 32(1)(iia) are applicable to the instant case. The provisions of the said section laid down as under:-
"In the case of any new machinery or plant (other than ships and aircrafts), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty percent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)."29
ITA nos.1863 to 1867/A/09 and others 4.2.1 Therefore, having considered the facts and circumstances of the case, I am inclined to direct the assessing officer to allow the additional depreciation u/s 32(1)(iia) of the Act as claimed by the appellant and thereby to delete the addition made by him of Rs.2,44,495/-. Thus, this ground of appeal is allowed."
18. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO. On the other hand, the learned AR on behalf of the assessee supported the findings of the learned CIT(A).
19. W e have heard both the parties and gone through the facts of the case. Since we have already concluded that the assessee is manufacturing prefabricated telecom shelters ,entitled to deduction u/s 80IB of the Act and the ld. DR has not placed before us any material controverting the aforesaid findings of the ld. CIT(A), we are not inclined to interfere. Therefore, ground no. 2 in the appeal of the Revenue for AY 2007-08 is dismissed.
20. As regards ground nos.1 to 1.3 in CO no.159/A/09, ground nos.1 and 1.1 in CO no.160& 162/Ahd/09,and ground nos.1 to 1.2 in CO no.161/Ahd/09 relating to validity of reopening of the respective assessments, though the ld. AR initially tried to argue the issue in the light of his written submissions; after discussion, the learned AR on behalf of the assessee did not press these grounds and accordingly, sought to withdraw these grounds unconditionally. The ld. DR did not oppose these submissions on behalf of the assessee. Accordingly, the grounds raised in these COs are dismissed as such. .
21. Ground nos.2 and 2.1 in the CO for the AY 2006-07 relates to disallowance on account of provision Rs.1,49,490/-for slow moving inventory. The AO noriced that the assessee had written off slow moving inventory of Rs.1,49,490/- in its P&L Account. To a query by the AO, the assessee explained that during the year under 30 ITA nos.1863 to 1867/A/09 and others consideration, no orders were received for such shelters in which the specified material was to be used and therefore, the company decided to write them off, claiming the same u/s 28 / 37 of the Act as a loss arising in the course of business. However, the AO did not accept the submissions of the assessee on the ground that the assessee failed to furnish any evidence regarding the irrecoverability of the alleged trading loss and had merely made a provision in their balancesheet. Accordingly, the AO disallowed the claim of Rs.1,49,490/-.
22. On appeal, the learned CIT(A) upheld the disallowance in the following terms:-
"6.1 Before me the AR made submissions as under:
"The appellant had made provision of slow moving inventory of Rs.1,49,490/- in its profit and loss account as no orders were received for such shelters in which the specified material was used, claiming the same u/s 28 /37 of the Act being the loss arising in the course of business.
33. Details of the provision made of slow moving inventory is as under:-
S.N Item Name Unit Qty Value
o.
1 Skid Clamp (Ambulance) Nos 36.00 3,100.00
2 Air Filter 275 x 275 (Aluminium) Nos 35.00 7,264.72
3 Door Handle 100 mm Nos 32.00 1,876.95
4 Aluminium Jamb Profile 100 x 3200 mm Kgs 190.00 38,408.91
5 Aluminium Door Profile 100 x 3100 mm Kgs 160.000 42,415.22
6 Lock Set Godrej (Double Latch) Nos 7.00 8,492.40
7 G o d r e j U l t r a Mo t i s e - C K L o c k ( S i n g l e Nos 35.00 48,931.80
Latch)
140,490.00
34 However the learned AO disallowed the same on non availability of
any evidence regarding the irrecoverability of the alleged loss. In this connection, the appellant submits that the as no orders related to the materials were received the same were written off to the profit and loss account. The said loss being incidental to the carrying of business shall be allowed and hence the said disallowance being untenable needs to be deleted.
35 It is submitted that such provision of slow moving inventory is in accordance with sound accounting principles which requires the appellant 31 ITA nos.1863 to 1867/A/09 and others to account for such losses. In view thereof, it is submitted that the same must be allowed as business loss u/s 28.
36 Without prejudice to the above said contention, it is submitted that in case your goodself does not allow the same in the current year, we request your goodself to direct AO to allow the same in the year in which it is actually written off / written back."
6.2 I have considered the submissions of the AR carefully. As the amount is a provision, the same can not be allowed as deduction. Hence the disallowance is confirmed."
23. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR reiterated their submissions before the ld. CIT(A). On the other hand, the learned DR supported the findings of the learned CIT(A).
24. W e have heard both the parties and gone through the facts of the case. W e find that the ld. CIT(A) upheld the disallowance since amount claimed was merely a provision and had not been actually written off. The ld. AR on behalf of the assessee did not place any material before us controverting the aforesaid findings of facts recorded by the ld. CIT(A) so as to enable us to take a different view in the matter. In the absence of any basis, we are not inclined to interfere. Therefore, Ground nos.2 and 2.1 in the CO for the AY 2006-07 are dismissed.
25. Next ground nos.1 to 1.2 in the CO for the AY 2007-08 relate to disallowance of Rs.1,14,491/- by invoking provisions of section 14A of the Act. The AO noticed that though the assessee had shown exempt income of Rs.332314/-, it did not add back any expenditure corresponding to the earning of exempt income. To a query by the AO, the assessee explained that dividend of Rs.3,32,314 claimed exempt u/s. 10(35) of the Act , was received against investment of Rs.60 lacs in the Mutual Funds in earlier years. The investment was made in earlier years out of own funds of the company. Since no interest-bearing funds have been used to earn exempt income while the Mutual Funds were redeemed during 32 ITA nos.1863 to 1867/A/09 and others the year under consideration, no disallowance in respect of interest or administrative expenses should be made u/s. 14A of the Act. Aternatively, the assessee suggested that at the most disallowance can be made @ 0.5% of average investment in terms of Rule 8D of the IT Rules,1962 . However, the AO did not accept the submissions of the assessee and computed the disallowance u/s. 14A r.w.r. 8D of the IT Rules,1962 as under:
Direct expenditure Rs. NIL
Interest exp. 6264000 X [ 33,30,000 ]
213193000 Rs.97,841/-
Administrative Exp. ½ % of ( 3330000 ) Rs.16,550/-
----------------
Total Rs.1,14,491/-"
26. On appeal, the learned CIT(A) upheld the disallowance made by the AO in the following terms:-
"5.2. I have considered the submissions made by the A. R. of the appellant. I have also gone through the decisions, referred to above, which are relied upon by the A. R. and the observations of the assessing officer in the assessment order, I am not inclined to accept the contentions put forth by the AR of the appellant. In the case of ITO vs. Daga Capital Management (312 ITR (AT) 1) Mumbai Special Bench held that the onus is on assessee to prove that expenditure was incurred to earn taxable income and further in view of Rule 8D onus and apportioning expenditure have become academic.
5.2.1. The appellant did not furnish the year(s) of investment in mutual funds. They could not substantiate the claim that in the year(s) of investment, they had non-interest-bearing funds, which were utilized for the said investment.
5.2.2. Rule 8D was introduced w.e.f. 24-03-2008. However, as held in the case cited at 312 ITR (AT)1 (supra), when sub-section (1) of Sec. 14A itself is clarificatory, resultantly sub-section (2) and (3) providing mechanism to do cannot be construed as substantive and hence prospective.
5.2.1. Further, the similar issue arose in the appellant's own case for A. Y. 2004-05. My predecessor vide his order, referred to above, decided the same by holding as under:-33
ITA nos.1863 to 1867/A/09 and others "I have considered the facts of the case and the submissions of the A. R. carefully. As the appellant must have incurred expenditure, whether direct or indirect, for earning exempt dividend income, I find that the A. O. has rightly made the disallowance. I therefore do not agree with the submissions of the A. R. Further, the ITAT Chennai Bench has held in the case of Southern Petro Chemicals Industries vs. CIT, 93 TTJ 161, that investment decisions are very strategic decisions in which top management is involved. Therefore proportionate management expenses are required to be deducted co computing dividend income. Further, it was held in the case of Rhythem Exports (Pvt.) Ltd. Vs ITO, 2 SOT 429 (Mum.), that the expenditure incurred in relation to earning income which is exempt should be taken out and in case the appellant fails to do so, the AO has no option than to take the same on proportionate basis. Therefore, the addition is confirmed on this ground. "
5.2.2. Therefore, having considered the facts and circumstances .of the case, I uphold the disallowances made by the A, O. This ground of appeal is dismissed."
27. The assessee is now in appeal before us through the CO against the aforesaid findings of the learned CIT(A). The learned AR on behalf of the assessee reiterated their submissions before the ld. CIT(A).The learned DR, on the other hand, supported the findings of the learned CIT(A).
28. W e have heard both the parties and gone through the facts of the case as also the aforesaid decisions relied upon by the learned AR. W e find that the AO made an estimated disallowance of aforesaid expenses on account of interest and administrative expenses since the assessee earned exempt income, invoking provisions of sec. 14A of the Act. The ld. CIT(A) while relying on decision of his predecessor in the AY 2004-05 and decisions in ITO vs. Daga Capital Management (312 ITR (AT) 1) Mumbai Special Bench, Southern Petro Chemicals Industries vs. CIT, 93 TTJ 161(Chennai), and Rhythem Exports (Pvt.) Ltd. Vs ITO, 2 SOT 429 (Mum.), upheld the disallowance.
28.1 W e further find that recently ,Hon'ble Bombay High Court in their decision dated 12.8.2010 in case of Godrej & Boyce Mfg.Co.Ltd. Mumbai. in 34 ITA nos.1863 to 1867/A/09 and others the ITA no. 626/2010 while adjudicating a similar issue in the context of provisions of sec. 14A of the Act and Rule 8D of the IT Rules,1962 concluded that Rule 8D, inserted w.e.f 24.3.2008 cannot be regarded as retrospective because it enacts an artificial method of estimating expenditure relatable to tax- free income. It applies only w.e.f AY 2008-09. For the assessment years where Rule 8D does not apply, the AO will have to determine the quantum of disallowable expenditure by a reasonable method having regard to all facts and circumstances, the Hon'ble High Court concluded.
28.2. Hon'ble Supreme Court in their decision dated 6.7.2010 in CIT v. Walfort Share & Stock Brokers (P.) Ltd.,326 ITR 1, inter alia, observed that for attracting section 14A of the Act there has to be a proximate cause for disallowance, which is its relationship with the tax exempt income. Hon'ble Apex Court observed in the context of provisions sec.14A of the Act in the following terms:
"17. The insertion of section 14A with retrospective effect is the serious attempt on the part of the Parliament not to allow deduction in respect of any expenditure incurred by the assessee in relation to income, which does not form part of the total income under the Act against the taxable income (see Circular No. 14 of 2001, dated 22-11-2001). In other words, section 14A clarifies that expenses incurred can be allowed only to the extent they are relatable to the earning of taxable income. In many cases the nature of expenses incurred by the assessee may be relatable partly to the exempt income and partly to the taxable income. In the absence of section 14A, the expenditure incurred in respect of exempt income was being claimed against taxable income. The mandate of section 14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail the tax incentive by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. The basic reason for insertion of section 14A is that certain incomes are not includible while computing total income as these are exempt under certain provisions of the Act. In the past, there have been cases in which deduction has been sought in respect of such incomes which in effect would mean that tax incentives to certain incomes was being used to reduce the tax payable on the non-exempt income by debiting the expenses, incurred to earn the exempt income, against taxable income. The basic principle of taxation is to tax the net income, i.e., gross income minus the expenditure. On the same analogy the exemption is also in respect of net income. Expenses allowed can only be in respect of earning of taxable income. This is the purport of section 14A. In section 14A, the first phrase is "for the purposes of computing the total income under this Chapter" which makes it clear that various heads of income as prescribed under Chapter IV would fall 35 ITA nos.1863 to 1867/A/09 and others within section 14A. The next phrase is, "in relation to income which does not form part of total income under the Act". It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A. Further, section 14 specifies five heads of income which are chargeable to tax. In order to be chargeable, an income has to be brought under one of the five heads. Sections 15 to 59 lay down the rules for computing income for the purpose of chargeability to tax under those heads. Sections 15 to 59 quantify the total income chargeable to tax. The permissible deductions enumerated in sections 15 to 59 are now to be allowed only with, reference to income which is brought under one of the above heads and is chargeable to tax. If an income like dividend income is not a part of the total income, the expenditure/deduction though of the nature specified in sections 15 to 59 but related to the income not forming part of total income could not be allowed against other income includible in the total income for the purpose of chargeability to tax. The theory of apportionment of expenditures between taxable and non-taxable has, in principle, been now widened under section 14A. Reading section 14 in juxtaposition with sections 15 to 59, it is clear that the words "expenditure incurred" in section 14A refers to expenditure on rent, taxes, salaries, interest, etc. in respect of which allowances are provided for (see sections 30 to 37).................."
28.3. W e also find that Hon'ble Kerala High Court in their decision dated 17.6.2010 in the case of CIT Vs. Smt. Leena Ramachandran in ITA.No. 1784 of 2009, held in the context of provisions of sec.14A of the Act as under:
" 4. On facts we find that the interest paid by the assessee during the previous year for the funds borrowed for acquisition of shares in the company was at the rate of 24% p.a. and the total interest paid in the accounting year alone is as much as Rs.17,44,310/-. It is on record that assessee had received only a dividend income of Rs.3 lakhs and no other benefit is derived from the company for the business carried on by it. The disallowance prohibited under Section 14A is expenditure incurred for earning any income which does not constitute total income of the assessee. In other words, any expenditure incurred for earning any income which is not taxable under the Act, is not an allowable expenditure. Dividend income is exempt under Section 10(33) of the Income Tax Act and so much so, dividend earned by the assessee on the shares acquired by her with borrowed funds does not constitute total income in the hands of the assessee. So much so, in our view, disallowance was rightly made by the Assessing Officer. In fact, the Tribunal itself has estimated disallowance of Rs.2 lakhs by applying Section 14A. We do not know how the Tribunal can restrict the disallowance to Rs.2 lakhs and allow balance above Rs.15 lakhs when the whole borrowed funds were utilised by the assessee for purchase of shares in the company. In our view, the reasoning given by the Tribunal for disallowance of Rs.2 lakhs i.e. by applying Section 14A, squarely applies for the interest paid on borrowed funds because it is on record that the entire funds borrowed were utilised for acquisition of shares 36 ITA nos.1863 to 1867/A/09 and others by the assessee in the company. In fact, in our view, assessee would be entitled to deduction of interest under Section 36(1)(iii) of the Act on borrowed funds utilised for the acquisition of shares only if shares are held as stock in trade which arises only if the assessee is engaged in trading in shares. So far as acquisition of shares is in the form of investment and the only benefit assessee derived is dividend income which is not assessable under the Act, the disallowance under Section 14A is squarely attracted and the Assessing Officer, in our view, rightly disallowed the claim. As already pointed out, the Calcutta High Court decision which pertains to the period prior to introduction of Section 14A, has no application. The decision of the Supreme Court also does not apply because in this case apart from investment in shares of the company, there is nothing to indicate that the assessee's business was fully linked with the business of the leasing company or that assessee's business is solely dependent on the business of the leasing company. In fact, the whole transaction was a total fiasco in as much as, as against Rs.17,44,310/- paid towards interest on borrowed funds serviced at the rate of interest of 24% p.a., the dividend income received by the assessee during the previous year was a meagre sum of Rs.3 lakhs. This only shows that the business carried on by the leasing company was not very substantial to justify the assessee's investment through borrowed funds. Therefore, in our view, the principle of commercial expediency gone into by the Supreme Court does not apply to the facts of this case. Therefore, we hold that the Tribunal in principle rightly held that the utilisation of borrowed funds for acquisition of shares will not entitle the assessee for claiming deduction of interest paid on such borrowed funds. However, we hold that the Tribunal was not justified in allowing the claim in excess of Rs.2 lakhs. For the same reasoning applied by the Tribunal, the assessee is not entitled to deduction of any amount towards interest paid on funds borrowed by way of fixed deposits taken for acquisition of shares in the company, which helped the assessee only to earn some dividend. "
28.4 Hon'ble Punjab & Haryana High Court in their decision in CIT vs. Hero Cycles Ltd.,323 ITR 518 also observed that disallowance under section 14A requires finding of incurring of expenditure and where it is found that for earning exempted income no expenditure has been incurred, disallowance under section 14A cannot stand.
28.5 As is apparent from the impugned order, since the ld. CIT(A) did not succinctly brought out as to whether or not borrowed funds had indeed been invested in mutual funds or any other expenditure had nexus with earning of aforesaid dividend income nor he had the benefit of the view taken in the aforesaid decisions, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to 37 ITA nos.1863 to 1867/A/09 and others his file for deciding the issues raised in the ground nos.1 to 1.2 in the CO for the AY 2007-08, afresh in accordance with law in the light of various judicial pronouncements, including those referred to above, after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the issue, the learned CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act. With these observations, ground nos.1 to 1.2 in the CO for the AY 2007-08 are disposed of.
29. Ground nos.3 and 4 in the appeal of the Revenue for AY 2004- 05,2006-07 & 2007-08 as also ground nos. 2 & 3 in their appeals for the AYs 2001-02,2002-03 ,2003-04,2005-06 being general in nature and do not require any separate adjudication while no additional ground having been raised before us in terms of residuary ground in the COs, all these grounds are, therefore, dismissed.
30. In the result, appeals filed by the Revenue for the AYs.2001- 02,2002-03,2003-04 & 2005-06 & corresponding COs filed by the assessee are dismissed as also the appeal of the Revenue for the AY 2007-08 while the appeals of the Revenue for the AY 2004-05 & 2006-07 & the CO filed by the assessee for the AY 2006-07 & 2007-08 are partly allowed for statistical purposes .
Order pronounced in the court today on 22-03-2011
Sd/- Sd/-
(MAH AVIR SINGH) (A N P AHUJ A)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated : 22 -03-2011
Copy of the order forwarded to:
1. Zeppelin Mobile Systems (India) Ltd., Abhijeet Building, 7 t h Floor, 701-704, Mithakhali Six Roads, Navrangpura, Ahmedabad
2. The ACIT, Circle-8, Ahmedabad 38 ITA nos.1863 to 1867/A/09 and others
3. CIT concerned
4. CIT(A)-XIV, Ahmedabad
5. DR, ITAT, Ahmedabad Bench-C, Ahmedabad
6. Guard File BY ORDER Deputy Registrar Assistant Registrar ITAT, AHMEDABAD 39