Income Tax Appellate Tribunal - Chandigarh
Acit, Chandigarh vs M/S International Fresh Farm Products ... on 27 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.311/Chd/2015
(Assessment Year : 2010-11)
M/s International Fresh Farm Vs. The A.C.I.T.,
Products(India) Ltd., Circle 1(1),
#3, Sector 5, Chandigarh. Chandigarh.
PAN: AAACI5038D
ITA No.703/Chd/2015
(Assessment Year : 2012-13)
M/s International Fresh Farm Vs. The A.C.I.T.,
Products(India) Ltd., Circle 1(1),
#3, Sector 5, Chandigarh. Chandigarh.
PAN: AAACI5038D
And
ITA No.754/Chd/2015
(Assessment Year : 2012-13)
The A.C.I.T., Vs. M/s International Fresh Farm
Circle 1(1), Products(India) Ltd.,
Chandigarh. #3, Sector 5, Chandigarh.
PAN: AAACI5038D
(Appellant) (Respondent)
Appellant by : Shri Parikshit Aggarwal
Respondent by : Smt.Chandra Kant, Sr.DR
Date of hearing : 12.07.2017
Date of Pronouncement : 27.07.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Th e a b o v e a p p e a l s p e r t a i n t o t he s a m e a s s e s s ee w i t h t h e a pp e a l i n I TA N o . 3 1 1 / Ch d / 2 0 1 5 h av i n g b e e n f i l e d by the a s se s se e a g a i n st the order p a ss e d by the L d . CI T( A p p e a l s ) , Chandigarh dated 4 . 1 0. 2 0 1 3 fo r 2 a s s e s s m e nt y e ar 2 0 1 0 - 1 1 w h i l e t h e a pp e a l s f i l e d i n I TA N o . 7 0 3 / C hd / 2 0 15 a n d i n I TA N o. 7 5 4 / C h d /2 0 1 5 are cross a p p e a l s f i l e d b y t h e a ss e s s e e an d R e v e n ue a g ai n s t th e order of L d. CI T( A p p e a l s ) -I , Ch a n d i g a r h d a t ed 3 . 6 . 2 0 15 r e l a t i n g t o a s se ss m e n t y e ar 2 0 1 2- 1 3 .
2. I t w as c o mm o n g r o u n d b e t w e en b o t h t he p ar t i e s t h at t h e i s su e i n v o l ve d i n t h e a p p e al s w a s i d e nt i c a l . Th e r e f o re they were heard together and are being disposed off by way o f t h i s c o m m o n o r d e r . F o r t h e s ak e o f c o n v e n i e n ce w e s h a l l be d e a l i ng wi t h the as s es s e e ' s a pp e a l in I TA N o . 3 1 1 / C hd / 2 0 15 .
I T A N o . 3 11 / C h d/ 2 0 1 5 ( A s se s s e e 's A p p e a l ):
3. Ground No.1 r ai s e d by the assessee reads as under:
"That the Learned CIT(A) has erred in upholding disallowance of deduction U/s 80IB(11) of the Income Tax Act, 1961. That the action of the learned CIT(A) is de-void of any merits as non- claim of deduction in earlier years due to ignorance cannot be aground for sustaining the disallowance of deduction. The appellant company satisfies all the conditions for claim of deduction U/s 80IB(11) of the Income Tax Act, 1961. It is prayed that the deduction be allowed .
4. Th e assessee in the a f o r es ai d g r o u nd h as c h a l l e n g ed t h e a c t i o n o f t h e L d. CI T( A p p e a l s ) i n u p h o l d i ng t h e d e n i a l of d ed u c t i o n c l ai m e d u / s 8 0I B ( 1 1) o f t h e I n c o m e Ta x A c t , 1 9 6 1 ( i n s h o r t ' th e A c t' ) .
5. Brief f ac t s r el ev a n t to the i ssu e are t ha t t he assessee had claimed deduction a m ou n t i n g to R s . 2 7 , 6 6 ,0 3 1 / - u/s 8 0I B( 1 1 ) of the A ct which a l l o ws d e d u c t i o n o f p r of i t s d e r i ve d f r o m t h e b u s i n e ss o f s e t t i n g u p 3 a n d o p e r a ti n g a c o l d c h a i n f a c i l i t y f o r a g r i c u l t u r al p r o d u c e . B e f o r e t h e A s s e ss i n g O ff i c e r t h e a s s e s s e e d e m on st r a t e d t h a t it was running a cold chain facility for s to r a g e and t r a n s p o r ta t i o n of a g r i c u l t ur a l produce. Th e Assessing O f f i c e r a f t er e x am i n i n g t h e a g r ee m e n t e n t e r ed i n t o b y t h e a s s e s s e e w i t h M/ s P e p s i co I n d i a H o l d i n g ( P ) L t d. f o r c o ld storage ma n a g em e n t , d i sa l l o wed the c l ai m of d e d u c t i on s t a t i n g t h a t t h e a s s e s se e w as no t d o i ng any c o l d c ha i n b u s i n e s s d i r e c tl y b u t w as o n l y p r o v i d i n g s e rv i c e s t o M/ s P e p s i c o I n d i a Ho l d i n g ( P ) L td . a n d e a r ni n g i nco m e f r o m c o n t r a c t a n d r e nt . Th e A s s e s s i n g O f f i c e r f u r t h er s t a t e d t h at t h o u g h t h e a s s es s e e h a d e n t e r ed i n t o t h e s a i d a g r e e m e n t w i t h M / s Pe p s i co I n d i a H ol d i n g ( P ) L t d . i n t h e y e a r 2 0 05 a n d h a d b e e n pr o v i d i n g s e r v i c es t o i t s i nc e t he n i t h a d n e v e r c l a i m e d th e s a i d d e d u c ti o n i n e ar l i e r y ea r s . Th e A s s e s s i n g O f f i c er, t h e r e f o re , h e l d t h a t t h e a s se s s ee w a s n o t e n t i t l e d to d e d uc t i o n u / s 80I B ( 1 1 ) o f t h e Ac t si n c e i t d i d n o t f u l f i l l c o n d i t i o n s l ai d d o w n t h e r e i n. Th e d e d u c t i o n, t h e r e f o r e, c l a i m ed o f R s . 2 7 , 6 6 , 031 / - w a s a d d e d ba c k t o t h e i n c o m e o f t h e ass e s s e e .
6. Th e matter wa s c a r r i ed in a pp e a l b ef o r e the L d . CI T( A p p e a l s ) who upheld th e order of t he A s s e s s i ng Officer. Th e r e l e v a n t f i n d i n g s o f t h e L d . CI T( A p p e a l s ) at p a r a s 2 . 3 t o 2 .3 .5 a r e a s u n d e r :
2.3 I have considered the facts of the case and the submission of the Ld. Counsel. The appellant had claimed deduction u/s 80IB of Rs. 27,66,031/-, whereas as per the audit report in form No. 10CCB, the allowable deduction is 4 only Rs, 10,77,611/- and so the claim of deduction of the appellant is not as per the audit report (claim is higher by Rs.16,88,420/-).
2.3.1 The appellant company had claimed before the Assessing Officer that it was eligible for deduction u/s 80IB(11), since it was running cold chain facility and satisfied the conditions laid down for the said deduction. However, before me the appellant has argued that the Assessing Officer has disallowed the claim of deduction 80IB (11A)of the Act, but this argument of the appellant is not correct, since the Assessing Officer has actually disallowed the claim u/s
80.IB(11), claimed by the appellant. Thus, there was misrepresentation either before the Assessing Officer or the undersigned in the appellate proceedings.
2.3.2 It is also seen that the. appellant had not claimed deduction u/s 80IB in any of the earlier years and has claimed the same for the first time during the year under consideration.
Relevant provision relating to this issue is sub-section (11) of section 80IB, which is reproduced below for the sake of ready reference:
"Notwithstanding anything contained in clause (iii) of sub-section (2) and sub-sections (3), (4) and (5), the amount of deduction in a case of industrial undertaking deriving profit from the business of setting up and operating a cold chain facility for agricultural produce, shall be hundred per cent, of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent, (or thirty per cent, where the assesses is a company) of the profits and gains derived from the operation of such facility in a manner that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assesses is a co-operative society) and subject to fulfilment of the condition that it begins to operate such facility on or after the 1st day of April, 1999 but before the 1st day of April 2004."5
2.3.3 Thus, the deduction is 100% of the profits and gains derived from eligible industrial undertaking for first five years beginning with the initial assessment year and thereafter 30% of the profits and gains derived from such industrial undertaking. The point is why such a claim was not made by the appellant during the earlier years. When questioned, the representative of the appellant stated that the claim was not made in the earlier years because the appellant was not aware of the law in this regard. To me, it appears that the claim was not made in the earlier years because the appellant was too well aware of the law and was conscious of the fact that it was not entitled to benefit of this provision. Even for the year under appeal, for which the appellant obviously, took a chance, it has not held a consistent stand.
2.3.4 It is also observed that the appellant has provided services to M/s Pepsico and earning income from contract and rent. The appellant has not segregated the amount eligible for deduction u/s 80IB out of the Receipts from Pepsico, but this observation/ finding is not much relevant, since it has been held that the appellant is not eligible for deduction u/s 80IB of the Act.
2.3.5 In view of the above, it is held that the appellant is not eligible for deduction u/s 80IB of the Act and the finding of the Assessing Officer in this regard is upheld, though on different grounds. Ground of appeal No.1 is dismissed."
7. A g g r i e v e d b y t h e s a m e , t h e a s s e ss e e h a s c o m e u p in appeal before us. D u r i n g t h e c o u r s e o f h e a ri n g b e f o r e u s , t h e L d . c o un s e l f o r a ss e s s ee m a d e d e t ai l e d a r g u m e n t s a g a i n s t t he d i sa l l o w a n c e s o ma d e . Th e L d . c o u n s e l f or a s s e s s e e p o i n t ed o u t t h a t t h e a ss e s s e e w as r u n ni n g a c o l d c h a i n f a c i l i t y an d a s s e s s m e nt y e a r 2 0 0 4 - 0 5 wa s t h e f i r st year of c o m m en c i n g o p e r a ti o ns . Th e Ld. counsel f or a s s e s s e e p o i n t e d o u t t h a t t h e i m p u g n e d a s s es sm e n t y e a r , i . e . 2 0 1 0- 1 1 , wa s t h e 7 t h ye a r s i n c e i t h a d co m m e n c ed 6 o p e r a t i o ns a n d i t w a s i n th i s y e ar t h a t t h e a s s e s se e h a d f or t h e f i r s t t i m e cl a i m e d d e du c t i o n u / s 8 0I B ( 1 1 ) of t h e A c t. Th e r e a f t e r t h e L d . c o u n s e l f o r a s s e s s e e p o i nt ed o u t t h a t f r o m t h e o rd e r o f t h e L d . CI T( A pp e a l s ) i t em e r g ed t h a t t he p r i m a r y r e a s on f o r d e n y i n g d e du c t i o n u / s 8 0I B( 1 1 ) o f t h e A c t w e r e t w o fo l d;
a ) s i n c e t h e af o re s a i d d e du c t i o n h a d n o t be e n c l ai m e d i n t h e e ar l i e r y e ar ;
b ) s i n c e i t h a d m e r e l y r e n t ed o u t p r e m i s es t o M / s Pepsico India Holding (P) Ltd. f or s t or a g e of a g r i c u l t ur a l p r od u c e and t he revenue e ar n e d was rental income which w as t a xa b l e u n d er the h e ad ' i n c o m e fr o m h ou s e p r o p er t y ' and n o t b u si n e s s i n c o m e .
8. Th e r e a f t e r t h e L d . c o u n se l f or a s s e s s e e s t a ted that it was a mp l y d e m o n s tr a t ed both to the Assessing O f f i c e r a nd t h e L d . CI T( A p p e a l s ) t h a t t h e a s s es s ee h a d n o t m e r e l y l e a se d o ut i t p r e m i s e s o f co l d s t o r a g e t o M/ s P e p s i co I n di a H o l d i n g ( P) L t d . f o r s t o r i ng i t s a g r i c u l t u ral p r o d u ce b u t h a d a l s o r e nd e r e d s e r vi c e s an d t a k e n al l r e sp o n s i b i l i t y f o r t h e p r o p er s t o r a g e o f t he g o o d s a n d t h at i t w a s a c o n s o l i d at e d a g re e m e n t f o r p r ov i d i n g c o l d s t o r ag e f a c i l i t y t o M / s P e ps i c o I n di a H o l di n g ( P ) Lt d . . Th e L d . cou n s e l fo r a s s e s s e e a t t h i s j u n c t u r e d r e w ou r a t t e n ti o n t o th e c o p y o f t h e a g r ee m e n t en t e r e d i n t o wi t h M / s P ep s i c o I nd i a H o l d i n g ( P ) L t d . w h i ch wa s r e p r od u c e d i n t h e a ss e s s m en t o r d e r a l s o at pages 4 to 8. Th e s a m e i s r e pr o d u c e d h e r e u n de r a l s o f or r e f e r e n c e:
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COLD STORE MANAGEMENT AGREEMENT This agreement is made at this 15th day of May, 2005 BETWEEN PepsiCo India Holdings Pvt Ltd, (FritoLay Division), a company incorporated under the Companies Act 1953 and having its registered office at 3B, DLF Corporate Park, Ciutab Enclave- Hi, Gurgaon, Haryana and head office at 4m Floor, Tower A, Global' Business Park, Gurgaon Haryana, and factory at Village Channo hereinafter referred to as PIH (which expression shall unless the context'" otherwise 'repugnant to the context or meaning there of be deemed to include Its successors in business and assigns) of the ONE PART AND M/S international Fresh Farm Products (India) Limited a company incorporated under the Companies Act, 1956 and having, its registered office at House, no 3," Sector 5, Chandigarh, hereinafter referred to IFF (which expression shall unless the context otherwise repugnant to the context or meaning there of be deemed to include its successors in business and assigns). On the Other PART.
WHEREAS
1) PIH Is engaged in the distribution of snack food products (hereinafter called "PIH Products") manufactured by Peps! Foods Private Limited for PIH at its factory located at Channo (hereinafter called PFL Factory").
2) IFF approached PIH and offered Its services for management of cold store for storage of potatoes owned and owned and stored by PIH (hereinafter "PIH Products") at the cold store owned and managed by IFF and located at Village Channo (hereinafter "IFF Cold Store").
3) PIH has decided to entrust alt functions relating to cold store management to IFF AND WHEREAS PIH and IFF have agreed to the terms and conditions set out in this agreement as under;
NOW THIS AGREEMENT WITNESSETH AS UNDER
1. Responsibilities of IFF PIH hereby agrees to entrust and allow IFF and IFF, In turn, agrees to undertake for and on behalf and for the benefit of PIH the following functions in respect of the PIH Products from time to time:
a) Receipt of PIH goods at IFF Cold Store.
b) Storage and Preservation of PIH goods as per the terms of this agreement.
c) Transportation of PIH goods from IFF Cold Store to PIH Factory located at Village Channo.8
d) Conduct Physical Verification of PIH goods.
1. Warehousing
a) IFF shall store the PIH Products received by it in IFF Cold Store
b) IFF shall receive the PIH Products from the PIH as per instructions received from PIH from time to time and issue a Goods Receipt for the same.
c) IFF shall take all reasonable care for storage of the PIH Products and shall be deemed to be in the position of a bailee in relation to such goods.
d) Both the parties agree that transaction relating to Receipt & Issue of PIH Products, affecting the stock balances in the inventory system for stocks at IFF Cold Store shall be effected under the control of IFF' and PIH reserves the right to audit such transactions to determine the source of each transaction.
e) IFF shall be responsible to follow such storage norms as are specified in Annexure-2
f) The parties hereto agree to the Review and Reporting Schedule contained in the operating protocol contained in Annexure 3.
g) The ownership of entire stocks at the IFF Cold Store shall remain with PIH at all times.
2. T r a n s f e r f r o m IF F C o l d st o r e
a) A IF F s h al l k e e p 2 ( T wo ) n o . o f tr u c k s of th e s p e c if ic at i o n me n t io n e d A n n e x u r e 1 of th i s ag r e e me n t a t al l ti me s a t th e IF F C o l d S to r e f o r tr an s p o r t of th e P IH P r o d u c ts to th e P IH F ac to r y.
b) BIFF shall be liable for any loss, damage, mis-delivery, non-delivery or shortage of the Products by reason of any acts of omission or commission on their part or by its employees, contractors, agents or sub-agents. IFF shall within two weeks from the date of any demand made by PIH in that behalf without demur and notwithstanding any objection raised by them, and without any right of set-off or counter claim, reimburse PIH the amount of loss incurred by PIH, failing which PIH shall be entitled to recover such amounts from them in any manner it deems fit.
c) IFF shall, in the performance of its obligations under this agreement, use its best endeavors to promote the interest of PIH and comply with the instructions and directions of PIH issued from time to time. 9
d) IFF will be fully responsible for the Products received by it for any shortages/loss/damage in transit between IFF Cold Store and PIH Factory.
e) IFF shall arrange to procure all required licenses and/or comply with all regulations and laws.
3. Relationship It is clearly understood between PIH and IFF that the relationship between PIH and IFF shall be on principal to principal basis and IFF shall not act as an Agent or shall not represent itself as a representative of PIH in any manner to third party. Both parties, shall be responsible towards their respective employees and compliance with statutory laws. IFF agrees to indemnify and keep indemnified PIH against any non-compliance and vice-versa
4. Consideration PIH hereby agrees to pay IFF consideration as per Annexure- 4
5. Validity This agreement shall be effective from Feb 15th, 2005 and shall be valid for a period of 3 years, provided that either party may with three months prior notice in writing terminate this agreement in the event of breach of any of the terms of this agreement by the other party.
Provided further that the parties may review the scope of services and pursuant costs after every 12 months, the first review by November 15th, 2005.
6. Arbitration If any dispute or differences shall arise between the parties hereto relating to the operations mentioned herein above or any other aspect thereof or if any matter shall arise as to the meaning or construction of any of the provisions of this agreement all such disputes or differences shall be referred to in accordance with Arbitration- & Conciliation Act 1996, and the place of such arbitration shall be in the State of Punjab. This Agreement is made and executed on this the 27th day of January 2006, between M/s international Fresh Farm Products (India) Ltd., a limited company having its registered office at, H No. 3, Sector 5, Chandigarh - 160
022. Herein after called 'IFFPIL' (which expression shall unless otherwise repugnant to the context or meaning thereof be deemed to include its successors in business and assigns) of the ONE FART 10 AND M/s PepsiCo India Holdings- Private Limited (FritoLay Division), a company incorporated under the Companies Act, 1956 and having its registered office at 3B, Corporate Park OLF Qutab Enclave, Phase 111, Gurgaon, Haryana and an office a( 13'" Floor. Mohan Dev Building 13 Tolstoy Marg, New Delhi and having its factory at Village Chnnno Distt Bhawanigarh, Punjab herein after called 'PIH1 (which expression shall unless otherwise repugnant to the context or meaning thereof be deemed to include its "successors In business and assigns) of the OTHER PART. WHEREAS
1) PIH manufactures, sells and distributes a large range of packaged salted snack food products under the trade marks Lays, Uncle Chipps, Kurkure, Namkeen, Lehar Namkeen, Cheetos etc.. and requires cold storage facilities for the storage of potatoes used in the manufacture of some of these products
2) IFFPL has entered into a Cold Store Agreement dated December 1, 2004 with PepsiCo India Holdings Private Limited (FritoLay Division) for lease of its Cold Store located at Village Channo (the "Cold Store").
3) IFFPL and PIH have agreed to in make certain improvements to the facilities available In the Cold Store To this end IFFPI shall, at its own cost, install certain additional amenities and fixtures In the Cold Store which PJH has agreed to take on lease on the terms and conditions contained herein.
NOW THEREFORE IN CONSIDERATION OF THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN THIS AGREEMENT WITNESSETH AS FOLLOWS:
1) IFFPIL will build racks in 3 chambers (chamber #1,2 and
3) and in half area of chamber #4 of the Cold Store (the "Facilities") as per the agreed design and, handover to PIH for use by February 1, 2006
2. PIH shall take the Facilities on lease from IFFPL for rent of Rs.227,000/-( Rupees two lacs twenty seven thousand only} (the "Rent") per month to be paid by PIH to IFFPIL from the date the Facilities are handed over for use to PIH.
3) This agreement shall subsist for a period of 5 (five) years form the date of handover of the Facilities to PIH (!.«. February 1,2006) on the terms and conditions contained herein and shall expire on January 31, '20.11 unless terminated earlier in terms hereof.
4) The either party may terminate this agreement at any time during the term without assigning any reason by giving to the other 3 months written notice at the address contained herein.
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5) In the event of-any dispute or difference lathe between the parties regarding the interpretation of this agreement or any other issue parties hereto shall refer the dispute to arbitration per the terms of the Arbitration and Conciliation Act, 1996. Courts in Delhi shall have exclusive jurisdiction.
9. Th e Ld. c o u ns e l for a ss e s se e pointed o ut t h e r e f r o m t h a t a s p e r cl a u s e -2 o f t h e s a i d a g re e m e n t th e assessee had of f e r e d s e r vi c e s for m a n a g e me n t of cold s t o r a g e fo r s t or ag e o f p o ta t o e s o f M / s P e p si c o I ndi a H o l d i ng ( P ) L t d . ( he r e i na f t e r r e f er r e d to a s ' PI H ' ) . Re f e r r i n g to c l a u s e - 3 o f t h e sa i d a g r e em e n t the L d . c o un s e l fo r a s s e s s e e pointed out t h at all functions relating to c ol d s t o ra g e m a n a g e m e nt ha d been e n t ru s t e d to the a s s e s s ee . Th e r e a f t e r t h e Ld . c o u n s e l f o r as s e s s e e d re w o ur a t t e n t i on t o t h e r e s p on s i b i l i t i e s o f t h e as s e s s e e i n di s ch a r g i n g i t s f u n c t i o n s a n d po i n t e d o ut t h a t i t i n c l ud e d a l l a c t i v i t i es r i g h t fr o m r e c e i p t o f g o o d s f r o m PI H a t t he c ol d s t o r a ge t o t r a n s p o r ti n g t he g o o d s t ak e n t o P I H o n de m a n d i n c l u d i ng storing and p r es e r v i n g them in the interim pe r i o d a nd c o n d u c t i ng p h y si c a l v e r i f i ca t i o n of the same. Th e Ld. c o u n s e l f or a s s es s e e d r e w ou r a tt e n t i o n t o t h e wa r e h o u s i ng clause an d p oi n t e d out to po i n t N o. ( c ) t h er e i n which r e q u i r e d th e a s se s s e e t o t a ke a l l r e a s o n a b l e c a r e o f s t o r a g e o f t h e p r o d uc t s a n d s t at e d th a t t h e a s s e s s ee wo u l d b e i n t h e p o s i t i o n o f b a i l e e t o s u c h go o d s . Th e L d . c o u n s e l f o r a s s e s s e e th e r e a ft e r d r e w o ur a tt e n t i o n t o c l a u se d e a l i ng w i t h t r an s f e r f r om a s s e s s ee ' s c ol d s t o r a g e a n d po i n t e d o ut t h a t t h e s a i d c l a u s e r e q u i r ed t h e a s s e s s e e t o k e e p t w o t r u c k s at i t s d i sp o s a l f or t r a ns p or t i n g g oo d s t o PI H a n d t ha t 12 t h e a s se s s e e w ou l d b e l i a bl e i n c a s e o f a n y l o s s o r d a m ag e , m i s - d e l i v e r y o r n o n - d e l i ve r y o n i t s p a r t .
10. Th e L d . c o u n s el f o r a ss e s s e e t h e r e a f t er s t at ed t h a t i t i s e v i d en t f r o m t h e a f or e s a i d a g r e e me nt t h a t t h e a s s e s s e e ha d n ot m e r e l y l et o u t i t s c o l d s to r a g e f a c i l i t y t o PIH, s i n c e t h e r e s p o n s i bi l i t y o f s t o r i n g t h e a g r i c u l t u r al produce of PI H properly in i ts facility r es t e d with the a s s e s s e e a n d i t w a s t h e d u t y of t h e a s s e ss e e t o a d e q u a t e l y store the a g r i cu l t u r a l p r o du c e sent by PIH to its cold s t o r a g e fa c i l i t y . Th e L d . c o u n s el f o r a s s es s e e s ta t e d t h a t a f t e r r e c ei v i n g t h e g o o d s f ro m P I H f o r c o l d st o r a g e t h e e n t i r e re s p o n s i bi l i t y f or m a i nt a i n i n g t h e g o o d s i n p r o p er condition in i ts cold storage facility rested with the a s s e s s e e an d PI H t h e r e a ft e r h ad n o t h i n g t o d o w i t h t he g o o d s an d w as a l s o n ot i nv o l v ed i n p r o p e r m a i n t e n a n c e of the goods in th e cold s to r a g e facility p r o v i de d by t he assessee. Th e Ld . c o u n se l fo r as s e s s e e s t a t e d th a t i t w as e v i d e n t f r o m t he a b o v e t h a t t he a s s e s se e w as n o t m e r el y p r o v i d i n g p r e mi se s t o PI H b u t wa s p r o v i d i n g co l d s t o r a ge f a c i l i t y t o PI H an d , t h e re f o r e , t he L d . CI T( A p p e al s) h a d e rr e d i n h o l di n g th a t t h e as s e s s ee w a s a s a co n s eq u e n c e no t e n t i t l e d to d e d uc t i o n u / s 8 0I B ( 1 1 ) o f t h e A ct . Th e L d . c o u n s e l f or a s s es s e e p l a c ed r e l i a n c e o n t h e fo l l o w i n g c a s e l a w s i n s u p p o r t o f i t s ab o v e c on te n t i o n :
1) C I T V s . N a t i o na l S t o r a g e P. L t d .
6 6 I TR 5 9 6 ( 1 9 67 ) ( S C )
2) C I T V s . D i s t r i c t C o - o p e r a ti v e F ede r a t i o n
2 7 1 I TR 2 2 ( 2 0 0 4) ( A l l )
13
3) C I T V s . Am b i k a S h e e t G r ah ( P ) L td .
8 4 C C H 28 9 ( 2 0 13 ) ( A l l )
4) I TO V s . Am b i k a S h e e t G r ah ( P ) L td .
1 1 9 I TD 2 3 5 ( 2 00 9 ) ( A g r )
11. Th e L d . c o u n s e l f o r a s s e ss e e f ur t h e r p o i nt e d o ut t h a t i t h a d r e t ur n e d i t s i n c o m e f r o m c o l d s t o r ag e f a c i l i t y p r o v i d e d a s i nc om e u n d e r t h e h ea d ' p r o f i t s a nd ga i n s f r o m b u s i n e s s a n d pr o f e s s i o n' a n d t h e A s s e s s i n g Of f i c e r h ad a s s e s s e d i t a s su c h . Th e L d . c ou n s e l f o r as s e s se e p o i n t e d o u t t h a t t h e Ass e s s i n g O f f i c er h a d n o t t r e a t e d t h e r e nt a l i n c o m e e a r n e d by i t a s i n c o m e u n d e r t h e h e a d 'I n c o m e f r o m house p r op e r t y '. Th e r e f o r e al s o , L d .C o u n s el for the a s s e s s e e s t a te d th a t , h av i n g a s s es s e d t he i nc o m e a s i n c ome u n d e r t h e h e a d ' i n c o m e f r om b us i n e s s a n d p r of es s i o n ' a n d not under the head 'income f ro m house p r o pe r t y ' , the A s s e s s i n g O f f i cer h a d n o t t r e a t ed t h e a f o re s a i d i n c o m e a s m e r e l y r e n t r e ce i v e d b y t h e a ss e s s e e by l et t i ng o u t i t s property.
12. Th e L d . c o u n s e l f o r a s s e s s e e t he r e a f t e r t oo k u p the second r e aso n for denying deduction i .e . since the a s s e s s e e h ad n ot c l a i m e d s ai d de d u c t i o n i n ea r l i e r y e a r s . Th e L d . c o u n s e l f o r a s s e s s e e p oi n t e d o u t t h a t i t h a s b e en held by courts in a number of decisions th a t m e r e ly b e c a u s e d e d uc t i o n h a s n o t b e en c l a i m e d i n e ar l i e r y e a r s, t h e a s s e s s e e c oul d n o t b e d e n i e d d e d u c t i o n i n a su b s e q u e n t y e a r . Th e L d . c ou n s e l f o r as s e s se e s t a t e d th a t i t h a s b e en h e l d t h a t c l a i mi n g d e d u c t i o n f ro m t h e i n i t i a l as s e s s m e n t year it is not a condition w h i c h i s a p r e - r e qu i s i t e f o r c l a i m i n g d ed u c t i o n i n s u b s e q u ent y e a r s . Th e L d . c o u n s e l 14 f o r a s s e s s ee d r e w o u r a t t e n t i o n to t h e f o l l o w i n g de c i s i o n s i n s u p p o r t of i t s a bo v e c o n t en t i o n s:
1) C I T V s . Ex c e l So ft e c h L t d .
2 1 9 C TR 4 0 5 ( 2 00 8 ( P & H )
2) P r a v e e n So n i V s. CI T
3 3 3 I TR 3 2 4 ( 2 01 1 ) ( D e l )
3) C I T V s . L a x m i Me t a l I n d us t r i e s
2 3 6 I TR 1 3 0 ( 1 99 9 ) ( A l l )
4) C I T V s . Su n d e r Fo r g i n g
I TA N o . 2 42 o f 201 2 ( P & H )
13. Th u s t h e L d . c o u n s e l f o r a s s es s e e a r g u e d t h at d e n i a l of d e du c t i o n u / s 8 0I B ( 11 ) w a s a g a i n s t th e f a c t s a nd c i r c u m s t an c e s of t h e c a s e a n d i n c o n t r a v e nt i o n of t h e l a w i n t h i s r e g ar d .
14. Per contra, the Ld. DR relied upon the orders of t h e A s s e s s i n g Of f i c e r a n d L d. CI T( A p p e a l s ) . Th e L d . D R further p oi n t e d out that th e Assessing O f f i cer had not i n v e s t i g at e d wh e t h e r the as s e s s e e had commenced o p e r a t i o ns b e f o re 1 . 4 . 2 0 0 4 w h i ch i s a n e s s e n t i al c o n d i t i on for claiming ded u c t i o n u/ s 80 I B ( 1 1 ) of the Act a n d, t h e r e f o r e, r e q u est e d t h a t t h e m a tt e r b e r e s to r e d ba c k t o t h e A s s e s s i n g O f f i ce r t o e s t a bl i s h t h i s f a c t .
15. To t h i s , t h e L d . c o u n s e l f o r a s ses s e e c o u n t e re d b y s a y i n g t h a t th e d a t e o f c o m m en ce m e n t o f o p e ra t i o n b y t h e a s s e s s e e w a s c l ea r l y p oi n t e d o u t i n t h e A u d i t R e po r t o f t he Chartered A c cou n t a n t c e r t i f y i ng the a s s e ss e e 's claim of d e d u c t i o n u / s 80 I B ( 1 1 ) o f t h e A ct , a s 2 7. 3 . 2 0 0 4. Th e s a m e w a s f i l e d b ef o r e t h e A s s es s i n g O ff i c e r du r i n g t h e c o u r s e of a s s e s s m e nt p r o ce e d i n g s w h en h e w a s e x a m i n i ng t h e s a i d 15 c l a i m o f t h e a ss e s s e e an d m e re l y b e c au s e t he A s s e s s i n g O f f i c e r h a d n o t m e n t i o n e d s o i n h i s o r d e r a b o u t t h i s a s p e ct i t w o u l d n o t m ea n t h a t h e h a s n o t a p p l i e d h i s m i n d t o i t and arrived at a c o n cl u s i o n that th e a s se s s e e h ad c o m m e n c e d o p e ra t i o n s b ef o r e the p r e s c r i b e d d a te . Th e L d . c o u n s e l f o r as s es s e e f u rt h e r p o i n t e d o u t t h a t by a c c e d i n g t o t h e r e q ue s t of t h e L d . D R i t w o u l d am o u n t to r e v i e w i n g t h e o r de r of t he A s s e s si n g O f f i ce r , t h e p o we r for w h i c h l a y o n l y w i t h t h e CI T a n d f ur t h e r p o i n t e d ou t t h at i t w o u ld t a n t a m o u nt to giving s ec o n d innings to the Assessing O f f i c e r o n th e i m p u g n e d i s s u e . Th e L d . D R c ou n t e r e d b y s a y i n g th a t si n ce t h i s w a s th e m o s t b a si c c on di t i o n t o b e f u l f i l l ed by t he assessee fo r claiming d edu c t i o n u/s 8 0 I B ( 1 1 ) o f t h e A c t w h i c h a pp a re n t l y th e A ss e s si n g O f fi c er h a d n o t l o o k ed i n t o , t h e m a t te r s h o u l d b e s e nt ba c k t o t h e Assessing O f fi c er with the d i r ec t i o n s to i n v e s ti g a t e the same.
16. W e h a v e h e ar d th e c o n t e n ti o n s of b o t h t h e p a r t i es and p e r u se d t h e o r d e r s o f t h e a ut h o r i t i e s b e l o w. Th e i s s u e b e f o r e us p e rt a i n s t o c l a i m o f ded u c t i o n u / s 80I B ( 1 1 ) of t h e Act which reads as under:
"(11) Notwithstanding anything contained in clause (iii) of sub-section (2) and sub-sections (3), (4) and (5), the amount of deduction in a case of industrial undertaking deriving profit from the business of setting up and operating a cold chain facility for agricultural produce, shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from the operation of such facility in a manner that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive 16 assessment years where the assessee is a co-operative society) and subject to fulfilment of the condition that it begins to operate such facility on or after the 1st day of April, 1999 but before the [1st day of April, 2004]."
17. Th e said section allows d e d uc t i o n of p r o f i ts d e r i v e d b y i n d us t r i a l u n d er t a k i n g s f r o m t h e bu s i n e s s of setting up a nd o p e r at i n g of cold chain fa c i l i t y for a g r i c u l t ur a l p ro du c e .
18. I n t h e p r e s e nt ca s e , t h e f a c t t h at t h e a s s e s s ee i s t h e o w ne r of a co l d s t or a g e f a c i l i t y i s n o t d e n i e d. Th e bone of c o n te n t i o n or the p r i ma r y reason for de n y i n g the d e d u c t i o n to t h e a s s e s s e e b y t h e R e v e n u e i s t h at t h e p r o f i t s e a r n e d b y t h e a s s e s s e e h av e no t b e e n d e r i ve d f r o m t h e b u s i n e s s o f o p e ra t i n g t h e c o l d cha i n f a c i l i t y f or ag r i c u l t u ra l p r o d u c e b u t i n fa c t a r e m e r e r e nt a l s e a r n e d f ro m l e t t i n g o ut t h e f a c i l i t y of c o l d s t o r a g e.
19. H a v i n g h e a rd t h e a r g u m e n t s o f t he L d . c o u n s e l f or t h e a s s e s se e a nd o n g o i n g t h rou g h t h e a g r ee m en t e n t e r e d i n t o b y t h e a s se s s e e w i t h PI H , o n a c c o u n t o f w h i c h t he e n t i r e i n co m e wa s e a r n e d b y the a s s e s s e e, w e f i n d t h a t w e a r e i n a g r ee m e n t w i t h t h e c o n t ent i o n o f t h e L d . co u n s e l f o r t h e a s s e s se e t h at i t h a d p r o vi d ed c o l d c h a i n f a c i l i t y t o PI H a n d h a d n o t m e re l y l e t o u t i t s p re m i s e s t o PI H . As pointed o u t b y t h e L d. c o u n s e l f or t he a s s e s s e e t h e a g r e e m e n t provided f or t he assessee to assume all re sp o n s i b i l i t y p e r t a i n i ng t o s to r i n g t h e a g r i c ul t u r a l p r o d uc e se n t b y PI H to its cold c ha i n facility. Th e assessee as per th e a g r e e m e n t w a s re s p o n s i b l e f o r m a i n t a i n i ng a n d k e e p i n g t he g o o d s i n p r o p er c o n d i t i o n a n d w a s r e q u i r ed t o r e n d e r a l l 17 s e r v i c e s fo r t h e s a m e . A l l f unc t i o n s a n d re s po n s i b i l i t i e s v i s - a - v i s t h e g o od s s e n t f o r st o r ag e b y PI H , b eg i nn i n g f r om r e c e i p t o f go o d s , t h e i r s t o r ag e a nd p r e s e r v a ti o n , co n d u c t i n g p h y s i c a l v e r i f i c at i o n a nd t r an s p or t i n g go o d s b a c k t o PI H a l l r e s t e d w i th t h e a s s e s s e e . Th e a ss e s s e e w a s r e s po n s i b l e f or s t o r i n g th e g o od s w i t h r ea s o na b l e c a r e a n d w a s i n t h e position of a bailee in r e s pec t of t ho s e g oo d s . Th e r e s p o n s i bi l i t y o f t r a n s p o r ti n g t h e g o o d s b a c k t o PI H i n g o o d c o n d i t i o n al s o re s t e d w i t h th e as s e s s e e . Th e a s se s s e e w a s a l s o l i a b l e f o r an y l o s s , o r d a ma g e b y r e a s o n o f a n y a c t o f o m i s s i o n o r c o mm i s s i o n o n i t s p a r t o r o n t h e p a r t o f i ts e m p l o y e e s. M e a ni n g t h e r e b y th a t t h e r i g h t f ro m t he m o m e n t t h e g o od s we r e r e c e i v e d b y t h e a s s e s s e e t h e r e sp o n s i b i l i t y f o r t h ei r u p ke e p l a y wi t h th e a ss e s s e e ti l l i t w as d e l i ve r ed b a c k t o PI H . Th e R e v e n ue h a s n o t b r o ug h t t o o u r n o t i ce a n y c l a u s e i n th e a g r e e m e n t wh i c h g a v e r i g h t s t o P I H t o m a n a g e th e g ood s o n c e d e l i ve r ed i n t he c o l d s to r a g e . PI H h a s n o t b e en s ho w n t o u s t o h av e b e e n i n c o n tr o l o f t he c o l d s t o r a g e f a ci l i t y , w h i c h w o u l d h a v e b e e n t h e c a s e i f t h e p r e m i s e s h a d b ee n l e t o u t t o P I H . I n f a c t w h at e m e r g es f r o m t h e a g r e eme n t i s th a t t he co l d c h a i n f a c i l i t y w a s i n t h e o w n e r s h i p a n d co n t r o l of t h e a ss e s s e e an d i t w as r e q u i re d t o r e n d e r a l l s er v i c e s f o r s t o r i ng t h e a g r i c u l t u ra l p r o d u c e s e n t t o i t . W h a t e m e r g e s t h e r e fo re f r o m t h e v ar i ou s c l a u se s p o i n t e d o u t b y th e L d . co u n s e l fo r t h e a s s e s s ee i s t h a t t h e a s s e s s e e h a d d ef i n i t e l y n o t m e rel y l e t o u t i t s c o l d s t o r a g e p r e m i s e s to PI H , b u t h a d i n f a ct gi v e n c o l d s to r a g e f a c i l i t y to PIH. Th e r e f o r e , t h e r e i s n o i o t a o f d o u b t i n o u r m i n d s i n 18 h o l d i n g t h at t h e a s s e s s e e w as i nd u l g i n g i n th e bu s i n e s s o f o p e r a t i n g c ol d ch a i n f a c i l i t y a n d w a s n o t m e r e l y l e t t i n g o u t i t s c o l d c h ai n f ac i l i t y t o PI H . Th e c a s e l a w s r el i ed u p o n b y t h e L d . c o u ns e l f o r t h e a s se s s e e i n th i s r e g a r d a r e a p t. I n t h e c a s e o f C om m i s s i o n er o f I n c o m e Ta x v s D i s t r i c t C o - o p e r a t i v e F e d e rat i o n ( 2 0 04 ) 2 7 1 I TR 2 2 ( A l l ) , th e d e f i n i t i o n o f c o l d s t o r a g e b u s i n e s s w a s b o r r o w e d f r om W o r d s a nd P h r a s e s ,P e r m a ne n t E d i t i o n V o l um e 7 A a s u n d e r :
"Cold storage business'--'doing a cold storage business' means carrying on the business of storing commodities in a cool place for hire or reward, and a packing house which used cold storage for preserving its own commodities alone, but did not receive and store for the public or any part thereof, is not 'doing a cold-storage business' within General Tax Act, 26th Dec., 1890, 22, imposing a tax 'on all packing houses doing a cold storage business.' [Stwart vs. Atlanta Beef Co. 18 S.E. 981, 985, 93 Ga. 12, 44, Am. St. Representation 119]."
20. Th e assessee in the p r e s e nt case has c l ea r l y d e m o n s t r at e d th a t it was c a rr y i n g on th e bu s i n e s s of s t o r i n g c o mm o d i t i e s i n a c o o l p l ac e f o r r e w a r d and t h e r e f o r e a s p e r t h e a b o v e d e f i n i t i o n c a n be s a f e l y s a i d t o b e c a r r y i n g o n c o l d st o r a g e bu s i n e s s .
21. Th e Hon'ble Apex C o ur t in the ca s e of C o m m i s s i o n e r o f I n co m e Ta x v s N a t i o n a l St o r a g e P v t . L t d. ( 1 9 6 7 ) 6 6 I TR 5 96 ( S C ) w hi l e d ea l i n g w i t h t h e i ss ue w h e t h e r letting o ut of vaults for st o r i n g films t a nt am o u n t e d to i n c o m e de r i v e d fr o m e x e rc i s e o f p r o p e r t y r i g h ts o r w a s a n a d v e n t u r e i n t he n a t u r e o f t r ad e, h e l d af t e r e x am i n i n g th e f a c t s o f t h e c a se t h a t t h e s u b j e ct h i r e d wa s a c om p l e x o n e since the a s s es s e e had c o n s tr u c t e d s p e c i al l y designed v a u l t s a n d r e n de r e d o t h e r s e r v i c e s t o t h e v a u l t h o l d e r s f or 19 s a f e k e e p i n g of t h e i t e m s a n d f o r d i s p a t c h i n g an d r e c e i v i ng t h e i t em s . Th e H o n ' b l e a p e x c ou r t t h er e f o r e h el d t h a t t h e income d e r i ve d was not merely from the exercise of p r o p r i e t ar y r i ght s but was in the n a t u re of business i n c o m e . Th e r e l ev a n t f i n di n g s ar e a s u n d e r:
"The assessee was carrying on an adventure or concern in the nature of trade. The assessee not only constructed vaults of special design and special doors and electric fittings, but also rendered other services to the vault- holders. It installed fire alarm and was incurring expenditure for the maintenance of fire alarm by paying charges to the municipality. Two railway booking offices were opened in the premises for the despatch and receipt of film parcels. This is a valuable service. It also maintained a regular staff consisting of a secretary, a peon, a watchman and a sweeper, and apart from that it paid for the entire staff of the Indian Motion Picture Distributors' Association an amount of Rs. 800 per month for services rendered to the licensees. These vaults could only be used for the specific purpose of storing of films and other activities connected with the examination, repairs, cleaning, waxing and rewinding of the films. The agreements are licences and not leases. The assessee kept the key of the entrance which permitted access to the vaults in its own exclusive possession. The assessee was thus in occupation of all the premises for the purpose of its own concern, the concern being the hiring out of specially built vaults and providing special services to the licensees. "The subject which is hired out is a complex one" and the return received by the assessee is not the income derived from the exercise of property rights only but is derived from carrying on an adventure or concern in the nature of trade."
22. I n t he p r e s e nt c a s e u n d i s p u ted l y t h e a s s e ss ee w a s t h e o w n er o f t h e co l d st o r a g es w h i c h a g a i n a re s p e c i al l y d e s i g n e d s tr u c t ur e s a n d b e s i d es b e i n g t h e o w n er h a s a l s o r e n d e r e d s er v i c es o f c o l d s t o ra ge t a k i n g a l l re sp o n s i b i l i t y f o r t h e p r o p e r m a i n t e n a nc e o f t h e g o od s s ent t o i t f o r s t o r a g e . Th e a s se s s e e a s p e r th e a b o v e j u d g em e nt w a s t h u s i n o c c u p a t i on o f t h e p r e m i s e s fo r t h e p u r p o s e o f i t s o w n c o n c e r n b ei n g hi r i n g o u t t h e s pe c i a l l y co n s t r uc te d s t o r a ge 20 facility and pr o v i d i n g s e r vi ce s to the l i ce n s e e s . Th e a g r e e m e n ts i n th e p r e s e n t c a s e w e r e c l e a rl y l i ce n s e s a nd n o t l e a s es .
23. M o r e o v e r , we f i n d n o m e r i t i n t h e c o n t e n ti o n of the Revenue t ha t since the as s e s s e e had n ot c l a i m ed d e d u c t i o n un d e r t h e s a i d s e c ti o n i n e a r l i e r ye a r s , i t w a s n o t e n t i t l e d t o cl a i m t h e s ai d d ed u c ti o n i n t h e i m p ug n e d y e ar . A perusal of th e c o n d i t i o ns stipulated u nd e r the said s e c t i o n t o b e f u l f i l l e d b y t h e a s se s s e e r e v e a l s t h a t n o s u c h condition has been specifically s t i p u l a te d in the said section. Th e r e is no requirement specified in s e c t i on s t a t i n g t ha t t h e a s s e s s e e h as t o n e c e s s a r i l y c l a i m d e d u c t i o n f r o m t h e i n i t i al a s s e s s m e nt y e ar i t s e l f , i n t h e a b s e n c e o f w h i c h i t w o u l d no t b e e n t i t l e d t o c l a i m s o i n t h e su b s e q u e n t years. Th e s e ct i o n s of t he A ct h a v e t o b e i n t e r p r e t ed s t r i c t l y a n d l i t e ra l l y a n d n o w o r ds o r m e a n i n g c an b e a d d e d t o w h a t h a s b e e n s t a t e d i n t h e s ec t i o n . Th i s i s a b a s i c ru l e o f i n t e r pr e t a t i o n o f S t a t u te . I n th e a b s e n c e o f an y s p e c i fi c s t i p u l a t i o n i n t he s e c t i o n , we h o l d t h a t t h e L d . CI T ( A p p e a l s) h a d e r r e d i n s t at i n g t h a t th e a ss e s s e e w a s n o t e n t i t l e d to c l a i m d e d u c ti o n u n d e r s e c t i on 8 0 I B ( 1 1 ) o f t h e Ac t s i n c e i t h a d n o t c l a i m e d t h e s a i d d e d u ct i o n i n t h e e a r l i e r y e a r s. Th e decisions relied upon by the L d . c o u n s el for t he assessee a re a pt . In th e case of CIT vs E x ce l Softech L t d . ( 2 0 0 8) 2 1 9 C TR 4 0 5 ( P & H ) t he j u r i s d i ct i o n a l H i g h C o u r t h a s i n t he c o n t e x t o f e x em p t i o n g r a n t e d u/ s 1 0 B h e l d t h at i n t h e a b s e n c e of a n y s u c h s t i p ul a t i o n i n t h e s t at u t e t h e re 21 i s n o b a r i n c l a i m i n g e x e m pt i o n f r o m a n y o f t h e a s s e s s m e nt y e a r s f r om t h e el i g i b l e bl o c k of ye a r s . Th e r e l e van t f i n d i ng s a t p a r a 7 o f t he o r d e r a r e a s u nde r :
"In our opinion, the contention raised by the Revenue is liable to be rejected. Sec. 10B of the Act reads as under :
"10B. Special provisions in respect of newly established hundred per cent export-oriented undertakings--(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee."
The aforesaid provision provides that subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee. Sub-s. (2) provides that this section applies to any undertaking which fulfils certain conditions, mentioned in this sub-section itself. The exemption under this section is available for 10 years. The initial year is the year in which the eligible undertaking begins to manufacture or produce articles or things or computer software. It is not disputed that the assessee unit fulfills all the conditions, as mentioned in sub-s. (2). In the present case, the assessee had started the development of computer software in the asst. yr. 1998-99 and was registered with the Software Technology Park w.e.f. 24th March, 2000, therefore, the 10 years period has to be reckoned from the asst. yr. 1998-99. The assessee has claimed exemption for the first time in the asst. yr. 2001-02, which is well within 10 years. Therefore, the unit of the assessee cannot be denied the said exemption on the ground that it is not the newly established undertaking in the assessment year in question. In our view, the words "newly established undertaking" are only to identify the initial year of the period of 10 years for which the assessee is eligible for claim of exemption under s. 10B of the Act. Sec. 10B(1) of the Act does not use the words "newly established undertaking". Only in the heading, the words "newly established hundred per cent export-oriented undertakings" have been mentioned. It is well-settled law that headings or titles prefixed to 22 sections or group of sections can be referred to in construing an Act of the legislation, only when the enacting words are ambiguous, but when the language of the section is clear, then the heading cannot be used to give a different effect to clear words in the section. In our view, there is no ambiguity in s. 10B of the Act, which provides exemption to certain newly established hundred per cent export oriented undertakings, on fulfilling certain conditions, for a period of ten consecutive assessment years. The initial year is the year in which the eligible undertaking begins to manufacture or produce articles or things or computer software. Sec. 10B of the Act does not provide any restriction that in each of the years of claim, the export-oriented undertaking should be newly established. Indeed, relevance of "newly established undertaking" is only to identify the initial year of the period of ten years for which the assessee is eligible for claim of exemption under s. 10B of the Act. Since in the present case, undisputedly, the initial year is the asst. yr. 1998-99, therefore, the assessee was rightly held to be fully eligible for exemption under s. 10B of the Act for the assessment year under consideration i.e., 2001-02, as it was the fourth year, out of ten years beginning with the initial assessment year, in which it began to develop and export the computer software."
24. Th e Hon'ble D el h i High Court in the ca s e of P r a v e e n S o n i v s C I T ( 2 0 1 1 ) 3 3 3 I TR 3 2 4 in the context of d e d u c t i o n c l a i me d u / s 8 0 I B ( 3 ) a l s o u ph e l d th i s v i e w at p a r a 6 o f i t s o r de r a s u n de r :
"If the assessee fulfils the requirement of small-scale industrial undertaking (which aspect shall be dealt while answering other question of law), it is not in dispute that the assessee would have qualified for this deduction from the asst. yr. 1998-99. Had the assessee claimed this benefit in that year, he would have been allowed this benefit for 10 consecutive years, i.e., till asst. yr. 2007-08. The assessee, thus, becomes entitled to claim the benefit in the asst. yr. 1998-99. However, merely because of the reason that though the assessee was eligible to claim this benefit, but did not claim in that year would not mean that he would be deprived from claiming this benefit till the asst. yr. 2007-08, which is the period for which his entitlement would accrue. The provisions contained in s. 80-IB of the IT Act nowhere stipulate any condition that such a claim has to be made in the first year failing which there would be forfeiture of such claim in the remaining years. It is not the case of the assessee that he should be allowed to avail this claim for 10 years from the asst. yr. 2004-05. The assessee has realized his mistake in not claiming the benefit from the first asst. yr. 1998-99. At the same time, the assessee foregoes the claim upto the asst. yr. 2003-04 and is making the same only for the remaining 23 period. There is no reason not to give the benefit of this claim to the assessee if the conditions stipulated under s. 80-IB of the IT Act are fulfilled."
25. I n v i e w o f t h e a b o v e , w e h o l d t h at t h e a s s e s s e e i s e n t i t l e d to d e d uc t i o n u n d er s e c ti o n 8 0I B ( 11 ) o f th e A c t a nd d i r e c t t h e A s s e ssi n g O f f i c e r t o g r an t t h e s a m e i n a c c o r d a n c e w i t h l a w.
26. W e m a y a l s o p o i n t o u t t h a t w e fi n d n o m e r i t i n t h e a r g u m e n t o f t h e L d . D . R . t ha t t h e i s s u e o f al l o w a b i l i t y o f c l a i m u n d e r se c t i o n 8 0I B( 1 1 ) o f t h e A c t b e r e st o r e d b a c k t o t h e A s s e ss i ng O f f i c e r f or t he p u r p o s e o f de t e r m i n i ng w h e t h e r t h e a sse s s e e h ad a c t ua l l y c o m m en c e d i t o p e r a t i o n before 1. 4 . 2 0 04, which is an essential c ond i t i o n for c l a i m i n g t h e s ai d d e d u c t i o n . As p o i n t e d o u t by t h e L d . counsel for the assessee, all relevant facts had been placed before t he A ss e s s i n g Of f i c e r during t he a s s e s s m e nt p r o c e e d i ng s a n d t h e d a t e o f c o mm e n c e m e n t b ei ng 2 7 . 3 . 2 0 0 4 w a s v e r y m u c h c e r t i f i ed b y t he C h a r t e r e d A c c o un t a n t a n d m e n t i o n e d i n h i s c e r t i f i c a t e pr o v i d e d i n F or m N o.1 0 C C B . I n s u c h c i r c u m s t anc e s i t i s r e a s o na b l e t o p r e su m e t h a t t h e A s s e s s i n g O f fi c e r h a d a pp l i e d h i s m i n d t o t h e s a i d f a c t s a nd arrived at c o nc l u s i o n that th e assessee f ul f i l l e d t he c o n d i t i o ns o f c om m e n c i n g t h e o pe r a t i o n be f o r e 1.4 . 2 0 0 4 . I n a n y c a s e , s i n c e t h i s a d m i t t e d l y w a s n o t t h e r e a s o n f or d e n y i n g d e d uc t i on u n d e r s e c t i o n 8 0 I B ( 1 1 ) o f t h e A c t b y t h e A s s e s s i n g O ff i c er , w e c a n n o t e nh a n c e s c o p e o f a s s e s s m e nt b y r e s t o r i n g t h e s a i d i s s u e t o t h e A s s e s s i n g O f fi c e r . Th e c o n t e n t i on r a i sed b y t h e L d . D .R . i s , t h er e f o r e, d is m i s s e d . 24
27. I n v i e w o f t h e ab o v e g r o un d N o .1 r a i s e d b y t he a s s e s s e e i s a l l o we d .
28. Ground No.2 r ai s e d by the assessee reads as under:
"2. That in the facts and circumstances of the case the Ld CIT(A) is not justified in upholding the addition of Rs 410145/- as unexplained cash credits under section 68 of the Income Tax Act, 1961."
29. In the af o r e s ai d g r o u n d, the assessee h as c h a l l e n g ed the d i s a l l o w a nc e of i n t e r e st u nd e r section 3 6 ( 1 ) ( i i i ) o f t h e Ac t .
30. Brief f ac t s r el ev a n t to the i ssu e are t ha t t he A s s e s s i n g O ff i c er m a d e d i s a l l o wa n c e o f i n t e r e s t p e r t a i n i ng t o i n t e r es t f re e ad v a n c e s ma d e t o t w o p a r ti e s a s un d e r :
1) M / s M e g a F o o d Pa r k L t d . = R s . 1 0 , 00 , 0 0 0 /-
2) M / s Z e n i th F o o d &
N u t r i e n t s P v t . Lt d. = R s . 3 4 , 75 , 3 6 3 /-
f o r t h e r e a so n t h a t t h e b u si n es s e x p e d i en c y of t h e s a i d a d v a n c e h a d n ot b e e n e s t a bl i s he d a n d t h e a s se s s e e wa s found to h a ve diverted i n t e re s t b e a r i ng f u nd s for the p u r p o s e of m a k i n g s u c h ad v a n c es .
31. Th e matter wa s c a r r i ed in a pp e a l b ef o r e the L d . CI T ( A p p e a l s ) w h o u p h e l d t he o r d e r o f t h e A s s e s s i n g Officer.
32. Before us, the Ld. counsel for the a s s e s s ee primarily r a i s ed only one c o n te n t i o n t ha t the aforesaid a d v a n c e ha d b ee n m a d e ou t o f o w n i n t e re s t f ree f u n d s of t h e a s se s s e e a nd n o i n t e r es t bea r i n g fu n d s h a s b e e n u s e d 25 f o r t h e s a i d p u rp o s e . S u b s ta n t i a t i n g i t s c on t e n ti o n t h e L d. c o u n s e l f o r t h e a s s e s s e e d r e w ou r a t t en t i o n t o th e b a l an c e s h e e t o f th e a s ses s e e f o r th e i m pu g n e d y e a r p l a c ed a t P a p e r B o o k p a g e N o s .11 t o p o i n t o u t th a t i t cl e a r l y r e fl e c t e d th a t o w n f u n d s o f th e a s s e s s e e i n t h e f o r m o f s h a r e h o l d er s funds, being sh a r e capital an d reserves & s u r p l u s, a m o u n t e d t o R s.1 5 . 9 8 c ro r e s , w hi c h i n c l u d e d Rs .2 . 8 c r o re s s h a r e ca p i t a l an d R s . 13 . 1 8 c r or e s r e se r v e s a nd s u r p l u s . Th e L d . c o u n s e l f o r t h e a s s e s s ee f u r t h e r dr e w o ur a t t e n t i o n to Schedule 2 of the balance sheet, b e i n g S ch e d u l e of reserves an d su r p l u s , to po i nt out t h e r ef r o m that the r e v e n u e re s e r v es o f t h e a s s e s se e i n t h e f o r m of b a l a n c e i n t h e P r o fi t an d Lo s s A c c ou n t amo u n t e d to R s .1 .5 3 c r o r es . Th e r e a f t e r t h e Ld . c o u n s e l f o r th e a s s e s s e e s ta te d t h a t t h e total a dv a n c e s on which i n t e re s t had been d i s a l l o we d amounted to Rs . 4 4 . 7 5 lacs. Th e Ld. c o u n s el for the a s s e s s e e , t h e r efo r e , s t at e d t ha t i t w a s e v i d en t t h a t t he a s s e s s e e h a d en o u g h o w n f u nd s t o m a k e t h e i m p u g n e d advances. Th e Ld. counsel f or the a s s e s s ee t h e r e a f t er s t a t e d th a t i t h ad u t i l i z e d i t s i nte r e s t b ea r i n g f un d s c l e ar l y f o r t h e b u s i n e ss p u r p o s e o f t h e a s s e s s e e w h i c h i s e v i d e n t f r o m t h e f a c t tha t t h e i n t e r es t be a r i n g f u n ds , c om p r i s i n g o f o n l y s e cu r e d l o an s , w h i c h i n cl u de d l o a n s t a k en fr o m SI DBI and HDFC truck loan. Th e L d . c o u n s e l f o r t h e a s s e s s ee drew our a t t e nt i o n to Schedule-3 of se c u r e d loans for pointing out this fact. Th e L d . c o u n s e l f o r t h e a s s e s s ee t h e r e a f t er s t a t ed t h a t t h e l oa n f ro m SI D BI w as a t e r m l o a n t a k e n f o r c o ns t ru c t i o n o f l a nd a nd b u i l d i n g a nd wa s u t i l i z e d 26 f o r t h e s a i d p u rp o s e . So also HDFC truck loan was for the p u r p o s e o f f i n a nc i n g t h e p u r c h as e o f t r u c k a n d h a d b e e n u t i l i z e d f o r th e s a m e . Th e L d . c o u n s e l f o r the a s s e s s ee s t a t e d t h a t t h e a s s e s s e e h a d o nl y c u r r e n t a c c oun t i n t h e b a n k r e f l e c t e d i n t h e S c h ed u l e o f c u r r e nt a s s e t l o a n s a n d advances, S c h ed u l e - 7 , a nd o n w h i c h n o i n t e r e st h a d b e en paid and funds from which ha d been u t i l i z ed for the p u r p o s e of m a k i n g t h e s ai d a d v an c e s . Th e L d . co u n s e l f or t h e a s se s s e e a l so p o i n te d o ut an d s t a te d a t B ar t h a t t he u n s e c u r e d l oa n s t a k e n b y t h e a ss e s s e e c a r ri e d no i n t e r e s t . Th u s t h e L d . cou n s e l f or t h e a s se s s e e p oi n t e d o ut t h a t i t i s e v i d e n t t h a t t h e i n t e r e s t b e a r i ng l o a n s i n a n y c a s e c o u l d n o t a n d h a d n o t b e e n u s e d f o r th e p u r p o s e o f ma k i n g t he s a i d a d v an c e s an d , t h e r ef o r e , a l s o t h e r e w a s no r e a s o n f o r m a k i n g a n y d i s al l o w a n c e o f i nt e re s t u n d e r s e c ti on 3 6 ( 1 ) ( i i i ) o f t h e A c t. Th e L d . c o u n se l f o r t h e a s s e ss e e i n s u p p o r t of i t s c o n t e nt i o n st a t e d t h a t wh er e e n o u g h o wn f u n d s a r e a v a i l a b l e th e p r es u m p t i o n i s t ha t t h e s a i d f u n d s h a v e b e e n utilized f or t he purpose of making the i nte r e s t free a d v a n c e s a n d r el i e d u p o n t h e f ol l o w i n g c a se l a w s:
1) H e r o C y cl e s P vt . L t d v s CI T, L u dhi a n a
3 7 9 I TR 3 4 7 ( S C )
2) B r i g h t E nt e r p r i se s P v t . Lt d . v s CI T, J a l a n d h a r
3 8 1 I TR 1 0 7 ( P & H)
33. Th e L d . D . R . , o n t h e o t h e r h a n d , r e l i e d u p o n t h e o r d e r o f t h e L d. CI T ( A p p e al s ) .
27
34. We have heard the c o n t e n t i on s of both the parties. W e f i n d m e r i t i n t h e con t e n t i o n o f t h e Ld . c o u n s el f o r t h e a s s e ss ee t h a t w h e r e th e n e x u s b e t w ee n i n t e re s t b e a r i n g f un d s an d i n t e r e st f r e e a d v a n c e s i s r u l ed o u t a nd w h e r e t he a s s ess e e h a s d e m o n st r a t e d th e a v ai l a b i l i t y o f e n o u g h o w n f u nd s f o r t h e p u r po s e o f m a k i n g th e i n t e r e st f r e e a d va n c e s , n o d i s a l l o w a n ce u n d e r s e c t i on 3 6 ( 1 ) ( i i i ) o f the Act could be made. Th e L d . c o u n s e l f o r th e a s s e s s e e h a s r i g h t l y r e l i ed u p o n c a s e l a ws a s c i t e d b e fo r e u s . But at the same time, we find that all facts and figures leading to t h e s a i d c o n c l us i o n h a v e no w f o r t h e f i r st t i m e b ee n p o i n t ed out to us. S i nc e t h e s a i d fi g ur e s n e e d t o be v e r i f i e d w e r e s t o r e t h e i s s u e b a c k t o t h e f i l e o f t h e A s s es s i n g O f f i c e r t o verify the c on te n t i o n of the assessee t ha t no interest b e a r i n g f u n d s hav e b e e n u s e d fo r t h e p u r p os e o f ma k i n g t h e said a dv a n c e s and a l so the av a i l a b i l i t y of en o u g h ow n s u r p l u s f u n ds f or m a k i n g t h e s a i d a d v a n c e s . Th e A s s e s s i n g Officer is t h ere a f t e r d i r e ct e d to decide t he issue in a c c o r d a n ce w i t h l a w . N e e d l e s s to s a y t h a t t h e as s e s s e e be g r a n t e d du e o p po r t u n i t y o f h e ar i n g b y t h e A O .
Th i s g r o u n d o f a p p e a l o f t h e a s s e s s e e i s t he r e f o r e a l l o w e d f o r s ta t i s t i c a l p ur p o s e s.
35. Th e appeal of the assessee is allowed fo r s t a t i s t i c a l p u rp os e s .
I T A N o . 7 03 / C h d/ 2 0 1 5 ( A s se s s e e 's A p p e a l ) :
36. Th e a s s e s s e e i n t h i s a p p e a l h a s r a i s e d f o l l o w in g 28 g r o u n d s of a p p eal :
"1. That on the facts, circumstances of the case and in law, the Worthy C1T(A), through his order dated 03.06.2015, has erred in passing that order in contravention of the provisions of Section 250(6) of the Income Tax Act, 1961.
2. That on law, facts and circumstances of the case, Worthy CIT (A) has erred in confirming the disallowance of deduction claimed by the appellant u/s 80-IB(11) of the Act amounting to Rs.1,21,36,078/- by erroneously holding that the appellant is not eligible for said deduction as the same was not claimed in prior years since the "initial assessment year". Both the lower authorities have grossly erred in holding that non-claim of eligible deduction u/s 80IB from the initial assessment year would be fatal to said claim in subsequent years.
3. That on law, facts and circumstances of the case, Worthy CIT (A), vide para 2.3.4 of his order for AY 2010-11, has erred in confirming the disallowance of deduction claimed by the appellant u/s 80-IB(11) of the Act amounting to Rs.1,21,36,078/-, wherein without making any decision on adverse inference drawn by the Ld. AO and seriously objected to by the appellant, he confirmed the disallowance since the issue had been decided against the appellant on other objections vide para 2.3.3 of his order for AY 2010-11. The Worthy CIT(A) has erred in not passing the order in regard to this issue and therefore the same deserves to be set-aside.
4. That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the action of Ld. AO. in making addition of Rs.6,00,000/- u/s 36(l)(iii) of the Act on estimated, arbitrary, presumptive and prejudiced basis without assigning any logical reasons and has erroneously disallowed the proportionate interest on advance given for business purpose to M/s Temptation Foods as interest free advance. Both the lower authorities have erred in appreciating the facts of the case and law applicable thereon.
5. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same."
37. It is relevant to observe here that it was submitted by both the parties that the facts and circumstances of this appeal are similar to the facts and 29 circumstances in ITA No.311/Chd/2015.The findings given in ITA No.311/Chd/2015 shall therefore apply mutatis mutandis to this appeal also. This appeal of the assessee is also allowed for statistical purposes. I T A N o . 7 54 / C h d/ 2 0 1 5 ( R e ve n u e 's A p p e a l ) :
38. Th e o n l y g r ou n d r a i s e d b y t h e Re v e n u e i n t he p re s e n t a p p e a l p e rt a i n s t o d e l e t i on o f a d d i t i o n of R s. 2 , 4 1 , 3 6 0/ - m a d e u / s 1 4 A o f t h e I n c om e Ta x A c t , 1 9 6 1 .
I t i s s t at e d t h a t i n t h e p r e s e n t ap p e a l t h e t a x e f fe c t i s l e s s t h a n t h e p re s c r i b e d l i m i t p ro v i d e d b y t h e r ec e n t C B D T C i r c u l a r.
39. According to Circular No . 2 1 / 2 0 1 5 d a te d 1 0 . 1 2 . 2 0 15 , t he CBDT in s u p e r c e s si o n of earlier i n s t r u c t i o n s h as d i r e c t ed t h a t de p a r t m e n t' s a p pe a l s b e fo r e I TA T s h a l l n o t be f i l e d i n c a s e s wh e r e t h e t a x e ff ec t d o e s no t e x c e e d t h e m on et a r y l i m i t of R s .1 0 l a c s . Th e t a x w i l l n o t i n c l u d e a n y i n t er e s t t h e r eo n . I t i s f u r t h e r cl a r i fi e d t h a t i f i n t h e c as e o f an a s s e s s ee , d i s pu t e d i s s ue s a r i se i n m o re t h a n o ne a ss e s sm e n t y ea r , a p p ea l c a n b e f i l e d i n r e s p ec t of s u c h a s s es s m e nt y e a r or y e a rs i n w h i c h t h e ta x e f f e c t i n r e s p e c t o f d i sp ut e d i s s ue s e x ce ed s t h e mo n e t a r y l i m i t s o s p e c i f i e d. Th i s instruction will apply r e tr o s p ec t i v e l y to p e n d i n g a p p e al s a n d a p p e a l s t o b e f i l e d h e n c e fo r t h b e f o r e t h e Tr i b u n a l . Th e p e n d i n g a p pe al s b e l o w t h e sp ec i f i e d t a x l i m i t m a y b e wi th d r a w n / n ot p r e ss e d .
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40. A d m i t t e d l y , i n th e d e p a r t m e nt a l a p p e a l , t h e t a x effect is less th a n Rs.10 l a c s, t h e r e f o re , d ep a r t m e n t al a p p e a l i s n o t m a i n t a i n ab l e . Th e l e a r n e d CI T ( A p p e a l s ) d e c i d e d th e i s s ue i n d e p ar t m e n ta l a p p e a l o n f a ct s a n d t he case of the r ev e n u e would no t fall in th e e x c e p t i o ns p r o v i d e d i n t h e ab o v e c i r cu l a r .
41. I n vi e w o f th e a b o v e , l e ar n e d D . R . s t a t ed t h at since d e p ar t m en t a l a p p e al is filed against the CBDT instructions, th e r e f o r e , he would not be pressing d e p a r t m e nt a l a pp e a l . Th e r e f o re, t h e a b ov e d e pa r t m e n t a l a p p e a l i s d i s m i ss e d b e i n g n o t pre s s e d .
42. Th e a p p e a l o f the R e v e n u e i s d i sm i s s e d .
43. I n t h e r e s ul t , bot h t h e a p p e al s of t h e a s s e s s ee a re allowed for s t at i s t i c a l p u rp o s es and the appeal of the R e v e n u e i s d i s mi s s e d .
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(DIVA SINGH) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 27 t h July, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh