Income Tax Appellate Tribunal - Delhi
Ito, Rudrapur vs M/S Himalayan Auto Era (India) Pvt. ... on 16 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' : NEW DELHI)
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.5787/Del./2012
(ASSESSMENT YEAR : 2009-10)
ITA No.4521/Del./2013
(ASSESSMENT YEAR : 2010-11)
Income-tax Officer, vs. M/s. Himalayan Autoera (India) Pvt. Ltd.,
Rudrapur. Plot No.61 & 68, SIDCUL,
Pantnagar, Rudrapur.
(PAN : AACCH0708D)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Amit Goel, CA
REVENUE BY : Shri Arun Kumar Yadav, Senior DR
Date of Hearing : 02.08.2017
Date of Order : 16.08.2017
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
Since common questions of facts and law have been raised in both the aforesaid appeals, the same are being disposed off by way of consolidated order to avoid repetition of discussion.
2. Appellant, Income-tax Officer, Rudrapur (hereinafter referred to as 'the Revenue'), by filing the present appeals sought to set aside the impugned order dated 23.01.2012 and 29.05.2013 passed by the Commissioner of Income-tax-II, Dehradun, for the 2 ITA No.5787/Del./2012 ITA No.4521/Del./2013 Assessment Years 2009-10 & 2010-11 respectively on the grounds inter alia that :-
ITA NO.5787/DEL/2012 (AY 2009-10) "1. Whether the Ld. CIT(A) was correct, on facts and in the circumstances of the case, in owing the claim of deduction u/s 80IC of the I.T. Act, 1961 and not appreciating the fact that the assessee is not engaged in any manufacturing activity and no any new product is being manufactured except fine tuning of the product and other than this only manipulation of accounts"
2. Whether the Ld. CIT(A) was correct, on facts and in the circumstances of the case, in deleting the additions made in respect of introduction of capital without appreciating the fact that the assessee did not produce any documents in support of his claim which can prove that the capital was introduced out of his savings."
ITA NO.4521/DEL/2013 (AY 2010-11) "1. Whether the Ld. CIT(A) was correct, on facts and in the circumstances of the case, in allowing the claim of deduction u/s 80IC of the I.T. Act, 1961 and not appreciating the fact that the assessee is not engaged in any manufacturing activity and no any new product is being manufactured except fine tuning of the product and other than this only manipulation of accounts.
2. Whether the Ld. CIT(A) was correct, on facts and in the circumstances of the case, in deleting the additions made in respect of disallowance u/s 40a(ia) by admitting additional evidence without giving opportunity to the AO." 3 ITA No.5787/Del./2012
ITA No.4521/Del./2013
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : during Assessment Year 2009-10, Assessing Officer made an addition of Rs.1,72,270,653/- by making disallowance under section 80-IC of the Income-tax Act, 1961 (for short 'the Act') on the grounds that no manufacturing activity was taking place and thus, the assessee has failed to fulfill the basic eligibility criteria for claiming deduction u/s 80-IC and that sale and purchases represent only book entries and values and not supported with bank transactions. AO further made addition of Rs.13,00,000/- on account of disallowance of capital introduction in the name of Vinak K. Naik during the year under assessment on the ground that since the assessee company is closely held company where only family members are interested, the assessee is required to prove the genuineness of the capital introduction which the assessee has failed to prove and as such, capital introduction in case of Vinak K. Naik remained unexplained.
3. During Assessment Year 2010-11, assessee after declaring net profit of Rs.2,20,12,413.14 and claimed the entire amount as deduction u/s 80-IC of the Act. Assessee was called upon to explain manufacturing process indicating the name of raw material used and name of the final product being sold as finished product. 4 ITA No.5787/Del./2012
ITA No.4521/Del./2013 AO, being dis-satisfied with the explanation made by the assessee, proceeded to conclude that the assessee company was not doing any manufacturing activities as the product incoming and outgoing are same only their numbers are different and thereby disallowed the deductions to the tune of Rs.2,18,11,100/- claimed u/s 80-IC by the assessee.
4. Assessee carried the matter in both the assessment years before the ld. CIT (A) by way of appeals who has partly allowed both the appeals. Feeling aggrieved, the Revenue has come up before the Tribunal by challenging the impugned order passed by the ld. CIT (A).
5. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO.1 OF ITA NO.5787/DEL/2012 (AY 2009-10) GROUND NO.1 OF ITA NO.4521/DEL/2013 (AY 2010-11)
6. Ld. DR for the Revenue challenging the impugned order contended inter alia that that the assessee has failed to prove any manufacturing activities during the years under assessment but it was only doing jobwork for its sister concern; that the assessee has 5 ITA No.5787/Del./2012 ITA No.4521/Del./2013 made payment to the tune of Rs.1,03,00,000/- to its sister concerns; that the CIT (A) has accepted additional evidence without providing an opportunity of being heard to the AO; that only raw material was coming and going out of the assessee's unit with different nomenclature under internal arrangement with its sister concerns.
7. However, on the other hand, ld. AR for the assessee to repel the argument addressed by the ld. DR contended that no additional evidence has been taken on record by ld. CIT (A) nor any such evidence was pointed out by the ld. DR, rather remand report was called upon by the ld. CIT (A) during appellate proceedings; that assessee's unit is duly registered with State Sales-tax Department as a manufacturing unit and it is also registered as SSI Unit with Department of Industries; that even if, the assessee company is into jobwork, it is entitled for deduction u/s 80-IC of the Act.
8. Undisputedly, the assessee is manufacturing crank shaft. It is also not in dispute that assessee company is registered with Department of Commercial Tax, Government of Uttarakhand as a wholly manufacturing unit as per certificate of registration, available at page 64 of the paper book. It is also not in dispute that the assessee company is registered as a Small Scale Industry Unit 6 ITA No.5787/Del./2012 ITA No.4521/Del./2013 (SSI Unit), as per form no.808, available at page 77 of the paper book, registered with Department of Industry.
9. In the backdrop of the aforesaid undisputed facts, it is difficult to accept the contention raised by the ld. DR that the assessee is not into manufacturing activities and that raw material is coming and going out from the assessee unit only with a different nomenclature. From the process flow chart, available at pages 137 & 138 of the paper book, it is proved on record that comprehensive manufacturing activities are being carried out by the assessee company, which has never been disputed by the AO. It does not matter if the entire sale of the manufactured products as has been made by the assessee company, to its sister concern and it cannot be deprived from claiming deduction u/s 80-IC on this score.
10. Furthermore, it is settled principle of law that for arguments sake, even if the assessee company is assumed to be into jobwork even then it cannot be denied the benefit of section 80-IC of the Act as has been held by Hon'ble Delhi High Court in judgment cited as CIT- III vs. Sadhu Forging Limited - 2011 (6) TMI 9 - Delhi High Court wherein it is held as under :-
"Deduction u/s 80 IB - AO held that the scrap sale charges and job work/labour charges are to 7 ITA No.5787/Del./2012 ITA No.4521/Del./2013 be excluded for the purpose of giving effect to deduction under Section 80 IB of the Act - Held that - the activity of forging was "manufacturing" within the ambit of Section 80lB - It was immaterial that the assessee was doing the job of forging also for customers and was charging them on job-work basis or on the basis of labour charges. It will still be qualified as carrying eligible business under Section 80lB - the activities of the assessee in giving heat treatment for which it had earned labour charges and job-work charges, it can thus be said that the appellant had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking - These were gains derived from industrial undertakings and so entitled for the purpose of computing deduction under Section 80lB - Decided in the favour of the assessee"
11. Moreover, when the assessee is manufacturing crank shaft the process of manufacturing the same is held to be a manufacturing activity by Hon'ble Madras High Court rendered in a judgment cited as CIT vs. Tamil Nadu Heat Treatment and Fetting Services (P.) Ltd. - 1998 (2) TMI 71 - Madras High Court wherein it is held as under :-
"We have to take note of the fact that the process of heat treatment to crankshaft, etc., were absolutely essential for rendering it marketable. Automobile parts, as crankshafts, need to be subjected to heat treatment to increase the wear and tear resistance to remove the inordinate stress and increase tensile strength. The raw untreated crank shafts and the like can never be used in an automobile industry. Thus, in the crank shafts subjected to the process of heat 8 ITA No.5787/Del./2012 ITA No.4521/Del./2013 treatment, etc., a qualitative change is effected, to be fit for use in automobiles, although there is no physical change in them. In such state of affairs, it cannot at all be stated that the crank shafts, subjected to heat treatment, etc., cannot at all change the status of new products of different quality for a different quality for a different purpose altogether. In this view of the matter, we are of the view that the activities of the assessee in relation to raw or untreated crank shafts being subjected to heat treatment, etc., is definitely a "manufacturing activity" entitling it to claim "investment allowance" under section 32A of the Income-tax Act. We answer questions Nos. 2 and 3 accordingly. In fine, we hold that the assessee is engaged in manufacturing activities in relation to crankshafts being subjected to heat treatment, etc., for the assessment years 1984-85, 1985-86 and 1986-87 and, consequently, entitled to "investment allowance" under section 32A of the Income-tax Act, 1961. These tax case petitions are, thus, disposed of. There shall, however, be no order as to costs, in the circumstances of the case."
12. So far as question of entertaining additional evidence by ld. CIT (A) as raised by ld. DR for the Revenue, is concerned, apparently no additional evidence has been entertained but the documents which are relied upon by the assessee during assessment proceedings were only brought on record by calling remand report from the AO which is duly referred to by ld. CIT (A) in para 4.2 of the impugned order and the facts contained therein being self explanatory, the ld. CIT (A) has rightly proceeded to decide the issue before him.
9 ITA No.5787/Del./2012
ITA No.4521/Del./2013
13. So, in the given circumstances, we are of the considered view that the ld. CIT (A) has arrived at legal and logical conclusion that the assessee company is engaged in manufacturing activities and is entitled for deduction u/s 80-IC. Hence, Ground no.1 of ITA No.5787/Del/2012 (AY 2009-10) and Ground No.1 of ITA No.4521/Del/2013 (AY 2010-11) are decided against the Revenue. GROUND NO.2 OF ITA NO.5787/DEL/2012 (AY 2009-10)
14. AO made an addition of Rs.13,00,000/- on account of unexplained capital introduction by the assessee on the ground that assessee has failed to bring on record any evidence to prove the genuineness of the capital introduction. However, perusal of the assessment order itself shows that, "the assessee has brought on record ITR of Vinay K. Naik, Director of the Company, who has made capital introduction for AY 2009-10" but the AO has simply made an addition by observing that, "the assessee has simply said that the investment has been made from his saving and has submitted ITR for AY 2009-10 only and nothing else".
15. When the Director of the company has brought on record his ITR for AY 2009-10 it was for the Revenue to call supporting documents, if needed, but he has not preferred to do so and impliedly admitted the genuineness of the capital introduced by the 10 ITA No.5787/Del./2012 ITA No.4521/Del./2013 assessee. So, in these circumstances, we are of the considered view that there is no illegality or perversity in deleting the addition of Rs.13,00,000/- by ld. CIT (A) made by the AO. Consequently, Ground No.2 of ITA No.5787/Del/2012 (AY 2009-10) is determined against the Revenue.
GROUND NO.2 OF ITA NO.4521/DEL/2013 (AY 2010-11)
16. AO made an addition of Rs.5,08,408.06 (Rs.2,41,250/- + Rs.2,67,158/-) on the ground that the payment of Rs.2,67,158.06 made to M/s. Adecco under the head 'professional charges' without deducting any TDS as per provisions contained u/s 194J has been made and the assessee has also made the payment of Rs.2,41,250/- to Shri Sanjay Singh, Shri Bhushan Bapat and Shri Subodh Agarwal (i.e. Rs.60,000/-, Rs.90,000/- & Rs.91,250/- respectively) on account of professional charges by deducting TDS @ 10% i.e. Rs.24,125/- on the total paid amount of Rs.2,41,250/-. But AO proceeded to conclude that from the challan, it is proved that the TDS has been deposited in the bank on 26.03.2012 which is beyond the time limitation given u/s 139 (1) for the year under consideration.
17. However, CIT (A) deleted the addition of Rs.2,41,250/- on account of making payment of professional fees to Shri Sanjay 11 ITA No.5787/Del./2012 ITA No.4521/Del./2013 Singh, Shri Bhushan Bapat and Shri Subodh Agarwal (i.e. Rs.60,000/-, Rs.90,000/- & Rs.91,250/- respectively), keeping in view the fact that the said payment was admittedly deposited in Government accounts late but the same has been deposited prior to filing of the income-tax. So, there is no illegality in making the deletion by ld. CIT (A).
18. So far as question of addition of addition of Rs.2,67,158/- made to M/s. Adecco is concerned, since the said payment is made to M/s. Adecco, a labour supply agency, no tax was required to be deducted and this fact has already been intimated to the AO, and as such provisions contained u/s 194J of the Act are not attracted in this case. So, again ld. CIT (A) has validly deleted the addition of Rs.2,67,158/-. Consequently, ground no.2 of ITA No.4521/Del/2013 is determined against the Revenue.
19. Resultantly, both the appeals filed by the Revenue for AYs 2009-10 and 2010-11 are dismissed.
Order pronounced in open court on this 16th day of August, 2017.
Sd/- sd/-
(N.K. SAINI) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 16th day of August, 2017
TS
12 ITA No.5787/Del./2012
ITA No.4521/Del./2013
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-II, Dehradun.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.