Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs M/S. Ayurvedant (P) Ltd., New Delhi on 4 August, 2017
1 ITA No. 3874/Del/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'A' NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A .No. 3874/DEL/2012 (A.Y .2007-08)
ACIT Vs Ayurvedant (P) Ltd.
Circle-2(1), Room NO. 398D, B-6/5, Safdarjung Enclave,
C. R. Building Near HDFC Bank
New Delhi New Delhi
(APPELLANT) AADCA3197Q
(RESPONDENT)
Appellant by Sh. R.C. Danday, Sr. DR
Respondent by Sh. Subodh Gupta, CA &
Sh. Mukhes Agrawal, CA
Date of Hearing 14.06.2017
Date of Pronouncement 04.08.2017
ORDER
PER SUCHITRA KAMBLE, JM
The appeal is filed by the Revenue against the order dated 08/05/2012 passed by the CIT(A)-V, New Delhi.
2. The grounds of appeal are as under:-
"1. The Ld.CIT(A) has erred in law and on facts in holding that claim of the assessee for deduction u/s 80IC is allowable."
3. The assessee company is engaged in the business of Ayurvedic Medicine & Cosmetics from its units situated at Nagpur (MH) and Baddi (HP).The Income Tax Return declaring Nil income after claiming deduction under Chapter - VIA at Rs. 36,80,828/- was transmitted electronically without digital signature on 2 ITA No. 3874/Del/2012 31.10.2007. The assessee company paid tax under the provisions of Sec. 115JB of the Income Tax Act, 1961 on book profit of Rs. 78,61,516/-. The return was processed u/s 143(1) of the Act. The case was selected for scrutiny and accordingly, initial notice u/s 143(2) was issued. The assessee was asked to furnish details alongwith supporting documents that are pre-requisite conditions under the provisions of Section 80IC of the Act to claim the deduction. The assessee filed details/ documents. There are two units of the company one at Nagpur (MH) and another at Baddi (HP) and assessee was claiming deduction u/s 80IC with its unit at Baddi (HP). The Assessing Officer disallowed the deduction claimed u/s 80IC on the ground that the assessee is not carrying out any manufacturing/production activities at Baddi (HP) and observed that it is carrying out its business activity in a rented hall measuring 78X38 sq. ft. from where it is not possible to produce/manufacture items shown in the P&L account and further such a small space cannot have installed capacity of machinery of Rs. 18,26,057/- The Assessing Officer further held that the assessee had shown closing stock of label and sleeves and bottle caps only at Baddi Units and not at the other unit i.e. Nagpur. Thus, the AO held that there is no production/manufacturing activity being carried out at Baddi, the specified area for the purpose of Section 80IC and (iv) the purchases made by the assessee and the declaration issued by the Excise and Taxation dept. dated 11.05.2006 shows the purchases being made for trading activity only.
4. Being aggrieved by the said Assessment Order the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal.
5. The Ld. DR submitted that since the assessee company has not manufactured/produced the specified goods in Baddi (HP) and its activity at Baddi was limited to the packing of the goods/article, which is not eligible for claiming deduction under Section 80IC of the Act was rightly disallowed by the Assessing Officer. The CIT(A) is incorrect in allowing claim of the Assessee. The 3 ITA No. 3874/Del/2012 Ld. DR relied upon the decision of the Hon'ble Madhya Pradesh High Court in case of Aartech Solonics Ltd. Vs. CIT (2013)32 Taxmann.com 207 wherein it was held that unless some technical expert person examines the aspect of the manufacturing/assembling process, the finding cannot be given in respect of granting claim of Section 80IC of the Act.
6. The Ld. AR submitted that all the relevant evidences were produced before the Assessing Officer. The CIT(A) has taken proper cognizance of the said evidences.
7. We have heard both the parties and perused the records. The Ld. AR rightly pointed out the evidences which were produced before the Revenue Authorities. It is pertinent to note that all the records were available to the department at the time of the Assessment Proceedings but the Assessing Officer merely on presumption given the finding that there is no manufacturing process involved in small place of work. In fact, the Assessing Officer ignored the evidence relating to workers as well. The CIT(A) has given a proper finding as to the manufacturing process carried out by the assessee. The CIT(A) held in para 5 as under:
"5. The issue involved and the submissions made by the appellant have been considered. The AO even in the remand report has questioned the appellant's version that no manufacturing/production is being carried out at Baddi; and again referred to the measurement of the rented hall from where the installed capacity of plant and machinery to the extent of Rs.18,26,057/- has been contended to be not adequate for production to the tune of Rs. 2,50,94,880/- and use; again drawn attention to the letter dated 11.5.2006 of the Excise authorities showing the items purchased by the assessee for trade and has referred to the version of Shri Bir Singh conveying that the unit was closed, and a boiler pertaining to the earlier company i.e. the appellant which has closed his business in March, 2008 4 ITA No. 3874/Del/2012 was available there.-Shri Bir Singh's version was taken in Sept., 2011 i.e. three years after the unit was closed.
The appellant's version on the AO's report has been reproduced as above. The basic question involved is whether there was any manufacturing/production activity being carried out at Baddi. During appeal proceedings, the appellant was asked to produce electricity bills pertaining to appeal under consideration which it has duly produced showing electricity expenses of Rs. 1,18,391/- and electricity misc. expenses at Rs. 1,397/-. These bills are in the name of the appellant and receipts have been duly given by Himachal Pradesh state Electricity Board for the payments made by the appellant. The aforesaid bills were asked to ascertain whether there was any person in the name of the appellant. As regards, the business activity being carried out by the appellant from Baddi, the specified area in Himachal Pradesh, it has been seen:
(i) Keeping in view the activity being carried out by the appellant i.e. grinding, beating, mixing, heating etc. of various ingredient of natural herbs with additives and chemicals etc.; it is immaterial whether the space is about 3000 sq. ft. (78X38) or more. Such an activity can be carried out from even a smaller place. The existence of boiler identified by Shri Bir Singh even three years after the closure of the activity, shows that .../production activity was being carried out at the place mentioned by the appellant.
(ii) Whether the raw material used for manufacture/production of finally tradable items was purchased in the name of 'trade' only as per the certificate given by the Excise authority or it was for the purpose of being used as raw material is immaterial; fact remains that the material was used in the process of bringing new product (marketable) into existence and that also at Baddi.
(iii) Availability of closing stock of the label, sleeves and bottle caps at Baddi only and no closing stock at other unit at Nagpur; rather establishes 5 ITA No. 3874/Del/2012 that after carrying out the manufacturing/production process at Baddi the product was packed and bottled at Baddi to make it marketable.
(iv) Whether machinery is used in the production/manufacturing process; is immaterial so long as human element is involved in bringing into existence a new marketable product, different from the raw material.
The appellant has submitted details and documentary evidence of payment of wages during the year to its workers namely; Shri Praful Samal, Shri Shivanand Tripathi and Shri Rajesh Thakur. The details of payments of wages during the relevant year are available at page 63 to 109 PB and the details of making full and final payments at the time of closure of the unit on 28.3.2008 are available at pages 3 to 6 submitted alongwith submission dated 27.03.2012.
In view of the above, the claim of the appellant for deduction u/s. 80IC is held as allowable. More so, when there is a certificate issued by the Chartered Accountant (pg 128 to 134 of PB) for this purpose. Therefore, the AO is directed to allow deduction u/s 80IC of the Act. The grounds of appeal are allowed."
Thus, the CIT(A) has given a proper finding and there is no need to interfere with the said finding.
8. In result appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 04th August, 2017.
Sd/- Sd/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 04/08/2017 R. Naheed * 6 ITA No. 3874/Del/2012 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date 1. Draft dictated on 14/06/2017 PS 2. Draft placed before author 14/06/2017 PS 3. Draft proposed & placed before .2017 JM/AM the second member 4. Draft discussed/approved by JM/AM Second Member. 5. Approved Draft comes to the PS/PS Sr.PS/PS 4.08.2017 6. Kept for pronouncement on PS 7. File sent to the Bench Clerk 4.08.2017 PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 7 ITA No. 3874/Del/2012