Income Tax Appellate Tribunal - Chandigarh
Lakshmi Energy & Foods Ltd., Chandigarh vs Assessee on 29 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIG ARH BENCH 'B', CHANDIG ARH
BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND
Ms. SUSHMA CHOWLA, JUDICI AL MEMBER
ITA No. 250 & 251/Chd/2013
Assessment Year : 2008-09 & 2009-10
Lakshmi Energy & Foods Vs. A.C.I.T.
Ltd. SCO 18-19 Central Circle I
Sector 9D Chandigarh
Chandigarh
AAACL 3147 J
ITA No. 372/Chd/2013
Assessment Year : 2009-10
D.C.I.T Vs. Lakshmi Energy & Foods
Central Circle I Ltd. SCO 18-19
Chandigarh Sector 9D
Chandigarh
(Appellant) (Respondent)
Assessee by S/Shri Ajay W adhawa, Aditya Grover & Ms.
Meenakshi Gupta
Respondent by: Shri Amarveer Singh
Date of hearing 9.1.2014
Date of Pronouncement 26.2.2014
O R D E R
PER T.R.SOOD, A.M
These are cross appeals and are directed against the orders dated 29.1.2013 of the Ld CIT(A), Gurgaon. Some of the issues are common in these appeals which were heard together and are being disposed off by this consolidated order.
I T A N o . 2 5 0 / C h d / 2 0 1 3 - As s e s s e e ' s a p p e a l
2. In this appeal the assessee has raised the following grounds:
"1 That the order of the Ld. CIT(A)(Central), Gurgaon dated 29.1.2013 is bad in law and on facts.2
2 That the LD. CIT(A) has ered in summarily ignoring the judgment of the Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court regarding jurisdiction/place of assessment. The LD. CIT(A) inspite of the detailed discuss on the subject and a ground having been specifically taken by the appellant has by passed the issue by not even making whisper on the same.
3 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in not admitting the crucial additional evidence filed under Rule 46A of the Income -tax Rules on the ground that the appellant was allowed sufficient opportunities to adduce evidence during the course of assessment proceedings and it has failed to substantiate its claim for admission of additional evidence under the said rule.
4 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in summarily rejecting the additional ground of appeal raised u/s 250(5) of Income -tax Act, 1961.
4.1 That the Ld. CIT(A) has wrongly stated that he has considered ground No. 4 while deciding the request for admission of additional evidence at para 5.5. The same is incorrect as no such consideration has taken place at para 5.5.
4.2 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in rejecting the additional ground of appeal No. 2 raised u/s 250(5) contending that the order u/s 127 transferring jurisdiction of the case from DCIT (Central) Chandigarh was passed by the CIT on 1.12.2010 i.e. just before less than two months for passing the assessment order and hence the assessment order dated 30.12.2010 was apparently passed hurriedly without allowing adequate opportunity of being heard to the appellant to substantiate its claim regarding deduction u/s 80IB(11A)therefore the assessment order passing without adequate opportunity is bad in law and deserves to be quashed.
4.3 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in rejecting the additional ground of appeal NO. 1 raised u/s 250(5) of Income -tax Act, 1961 contending that the assessment made on 30.12.2010 u/s 153A(1)(b) r.w.s. 143(3) is bad in law as no incriminating material suggesting of any suppression of income was found during the course of search and seizure operation u/s 132(1) on 12.2.2009 and therefore the entire assessment being bad in law, deserves to be quashed.
5 That on the facts and in the circumstances of the case, the LD. CIT(A) has erred in denying the claim of deduction u/s 80IB(11A) of the Act without prejudice,, the LD. CIT(A) has erred in rejecting the claim on the following technical grounds:
5.1 The return of income for Assessment Year 2008-09 was not filed within due date specified u/s 139(1) and hence in view of provisions of section 80AC deduction u/s 80IB cannot be allowed.
5.2 Audit report in Form No. 10CCB was not filed even during the course of assessment proceedings, thus violating the provisions of section 80IA(7) and 80IB(13) of the Act.
5.3 No separate books of accounts were maintained in respect of business activity for which deduction u/s 80IB(11A) was claimed. 6 The Ld. CIT(A) has rejected the claim of deduction u/s 80IB(11A) on purely technical considerations. However, inspite of stating that she is not deciding on merits she has held that the assessee is not entitled to the claim as no separate profit and loss account in respect of the activities relating to handling, storage and transport has been drawn out. 6.1 Without prejudice, even this allegation is incorrect inasmuch as, separate computation of profit from eligible business, duly certified by Chartered Accountant on the basis of separate books of accounts produced and filed.
7` The Ld. CIT(A) while disallowing the claim u/s 80IB(11A) on the ground that form 10CCB cannot be relied upon, has discussed and 3 applied the facts relating to Assessment Year 2009-10 while deciding the case for the impugned Assessment Year and has wrongly held that Audit report in Form No. 10CCB dated 20.2.2009 prepared by Chartered Accountant. CA Amit Gupta was an afterthought and no credence can be given to the said report.
8 That on the facts and in the circumstances of eth case the LD. CIT(A) has erred in not allowing the depreciation on plant and machinery amounting to Rs. 72,21,35,592/- despite the appellant furnishing all the necessary evidence regarding their purchase and use during the year for the purpose of applicant's business.
8.1 That the Ld. CIT(A) has grossly erred in upholding the disallowance of normal depreciation which was denied by the Assessing officer on the basis of statement obtained u/s 131 from Mr. R. Sandal, the erstwhile Tax Auditor, as who was not even allowed to be cross- examined by the appellant.
9 That the Ld. CIT(A) has further erred in not allowing the additional depreciation on plant & machinery allowable u/s 31(1)(iia) of the Income
-tax Act, 1961 a claim raised by way of additional ground of appeal No.
4.
3. Out of above, grounds No. 2, 4, 4.2, 4.3 and 9 were not pressed before us, therefore the same are dismissed as not pressed. 4 Ground No. 1 is general in nature and does not require any separate adjudication. Though various other grounds have been raised but principally there are three disputes namely:
(i) Admission of additional evidence (ii) Disallowance of deduction u/s 80IB(11A) (iii) Disallowance of depreciation on power plant 5 Before we discuss the facts in respect of first issue, it would be pertinent to consider the background of the case. In this group of cases a search was conducted in the office premises of the
assessee on 12.2.2009 and some relevant books and documents were found and seized. Thereafter a notice u/s 153A(1)(a) was issued by the Assessing officer, the DCIT (Central), Patiala to the assessee on 6..4.2009 requiring it to file its return of income in respect of Assessment Year 2008-09. A request was made by the assessee-company to transfer their cases from DCIT (Central) Patiala to Chandigarh because DDIT (Inv) who had carried out their search happened to be the Assessing officer. In fairness of things, the department accepted this request which lead to delay in assessment proceedings and even the assessee was not having 4 sufficient time to file appropriate reply. In fact the Assessing officer has himself noted at page 2 as under:
"The request of the group was accepted but in the whole process invaluable time was lost and hence any submission of the assessee that the process of assessment was delayed would have to account for this Act."
During search the assessee had stated that estimated profit for the period would be around Rs. 30 crores which was offered to tax because the assessee had not filed its return of income u/s 139(1) of the Act. The assessee filed return of income on 31.3.2009 declaring income of Rs.33,12,18,952/-.
First Issue
6. Facts in respect of first issue are that assessee sought to file certain document as additional evidence and the Ld. CIT(A) sent the same for comments of Assessing officer who in turn reported that assessee was given sufficient time during the assessment proceeding and therefore these documents should not be admitted. The Ld. CIT(A) referred to Rule 46 A of Income Tax Rule 1962 and rejected the request vide para 5.5 which is as under:
" I have carefully gone through the contents of the remand reports, the rejoinders and the impugned order. It is very evident from the assessment order that the assessee was afforded sufficient opportunities to explain its claim for deduction. However, it has failed to do so. It has also not put up a clear case for invoking Rule 46A(2). In other words, the assessee could not show how it can come within the ambit of the exceptional clause of Rule 46A(2). The impugned order and the copy of the order sheets Assessm ent year 2008-09 and Assessm ent year 2009- 10 supplied in the remand report dated 27.9.2012 clearly suggests that repeated opportunities was given to the assessee to explain its claim f or more than two months. However, the assessee did not avail of the opportunities. In fact, of the documents now sought to be admitted, as listed in the above para, relating to amongst others, the Director of Boilers; copies of major bills of addition of trucks, Power Plant for Assessm ent year 2007-08, 2008-09 and 2009-10 as well as the Exports out of India, can by no stretch of imagination, be said that these documents were not available for production during the course of assessment proceedings. The case laws cited do not come to the rescue of the assessee either keeping in mind the facts of the case in hand. It is not a case where the assessee was not in the know of the nature of the proceedings, so it was incumbent upon him to lead necessary evidence in the form of the documents which are now sought for admission as additional evidence. In fact, on no occasion has the assessee stated before the A.O the reason why the concerned documents/ certain documents could not be filed during the course of assessm ent proceedings. Needless to say, bef ore any additional evidence can be admitted, the assessee has to first prove that his case comes within the exceptional calsue as laid down in Rule 46A. I am afraid the assessee has been unable to substantiate his claim. Thus the 5 request of the assessee for admission of additional evidence under clauses (b), (c) and (d) of Rule- 46A of the Income-tax Rules, 1962 cannot be acceded to.
7. Before us it was mainly submitted that cases were finally transferred to Central Circle Chandigarh on 28-10-2010 and therefore assessment proceeding started from November 2010 and practically time of only 55 days was available with the assessee and assessing officer in which group of assessment of 105 cases of the group had to be completed. In addition assessee was having serious problem with the Chartered Accountant Shri. Rajinder Sandal and some documents were lying with him. The CIT(A) had conducted the hearing for almost 9 months and additional evidence were sent to the Assessing officer for verifications till he did not examine the same and opted to give a logic that assesse had already been given sufficient time. The additional evidence sought to be admitted mainly consist of documents which were already in existence and there is no allegation that this evidence was procured later on. Therefore keeping the principle of natural justice the additional evidence should have been admitted.
8 On the other hand Ld. D.R. for the Revenue strongly supported the order of CIT(A) 9 We have gone through the rival submissions carefully. Following documents were sought to be admitted as additional evidence -
" i) Ex por t doc u m en ts t o s ho w th at p a ddy c r o p s s tor e d in e ar l ie r y e ar w er e l at er s o l d. T h is es t a b li s hes t h e f ac t u m of l on g p er io d o f s t or a g e o f pa d dy by t h e c om p any .
i i) Tet r a pac k on ly t o s ho w t ha t p a ddy is s t or e d f or ma tu r i n g f or lo n g dur a ti o n.
i i i) Ch a ng e o f ac c ou n ti n g y ear an d ex t ens i o n of AG M t o s h ow t h at C o mp a ny was s e ek in g to pr e pa r e of s e par a te b a la nc e s h ee t f or RO C an d In c om e Tax f or ac c o u nt i ng y ear as we l l as f in a nc ia l y e ar .
iv ) G at e i n / o ut r e por ts t o es t ab l is h tr a ns p or ta t i on ac t iv i ty b e i ng u n de r tak e n by th e c o m pa ny .
v) Cer t if ic at e fr o m C har t er e d E n g in e er r e g ar d i n g Old Mac h i ner y ab a nd o n me nt s inc e F. Y. 20 0 5.
6v i) Cer t if ic at e an d c l ar if ic at i on fr om D ir ec t or of B o i ler , G ov er n m en t of P un j a b f or c o m m enc e me n t of Bo i l er o n 3 1. 1 0. 2 00 7 f or P ow er P l a n t. v i i) Th e c o p ies o f m a jo r b i l ls o f a d d it i on of Tr uc k s , P o wer P l an t & Ex p ans i o n of i nt e gr a t ed R ic e u n it , c o py of bu i l d in g ac c o u nt to es ta b l is h s t or ag e / war e ho us i ng .
v i i i) Th e c o pi es o f b i l ls of c o ns tr uc t i n g of war eh o us e S il o . C op i es of ph o to gr ap hs a ls o e nc l os e d .
ix ) Th e c o pi es of ins ur an c e p o lic i es o f s t or a g e , tr a ns it , w ar eh o us e , po w er p la nt f or t he per i o d A p r i l 2 00 6 t o Ma r c h 20 0 7 , A pr il 20 0 7 to Mar c h 20 0 8.
x) For m 1 0 CC B f or A . Y. 20 0 8- 09
x i) Th e c op i es of as s es s me n t or d er s p as s e d b y d if fe r e nt t ax au t hor i ti es to
pr ov e t ha t Mr . Ra j i n de r S a n da l , Ch ar ter e d A c c ou n ta nt , w as ex lus i v e ly ha n d li n g tax m a tt er s o f M/s La k s hm i En er gy & F oo d s Ltd ., its pr o m ot er s , d ir ec to r s an d gr o u p c o mp a n ies .
x i i) Th e c o py of ac c o u nt s ta te m en t of Mr . S a nd a l 's f u l l & f in a l pay m en t in t he bo ok s o f Co . H e was wi t h th e c o m pa ny f or t he per i o d 22 . 03 .2 0 06 t o 3 1. 03 . 20 1 0. x i i i) Th e p ho t ogr a ph a nd CD of s t or ag e c ap ac i ty / g o do wns y e ar w i s e a n d ne w p l an t i ns t a l le d a ft er Ma r c h 20 0 9.
x iv ) Th e c opy o f th e l et t er 27 / 10 /2 0 1 0 al o ng wi t h its a n nex ur es i. e. t he j ud g me n ts pas s e d by th e H on 'b l e Su pr e me Co ur t of I n di a & P un j ab & H ar y a n a Hi g h C o ur t ev id e nc i n g th at th e ab ov e m e nt i on e d or d er s w er e d u ly s er v e d up o n DC IT- C e ntr a l C ir c l e- I. Ch a nd i g ar h A d d it i on a l C o mm is s i on er of I nc o m e T ax - Ch a nd i ga r h a n d Co m m is s io n er o f I nc o me T ax . ( C) . L u dh i a na . " 10 For admission of additional evidence Rule 46A of Income -tax Rules, 1962 is relevant which is as under:
46A. (1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely :--
(a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted ; or
(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer] ; or
(c) where the appellant was prevented by sufficient cause from producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal ; or
(d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission.
(3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity--" 7
Normally the assessee has no right to produce any additional evidence except for the circumstances mentioned in Rule itself. Clause (b) above show that wherever the assessee is prevented by a sufficient cause from producing the evidence then such additional evidence should be admitted. The reason for the same is very simple in the light of the settled position of law that appeal proceedings are continuation of the assessment proceedings. In this regard reliance was placed by the Ld. Counsel for the assessee on the decision of Hon'ble Supreme Court in case of CIT Vs. Kanpur Coal Syndicate, 53 ITR 125 is totally correct. In that case the Hon'ble Apex Court observed as under:
"The Appellant Assistant Ld. Commissioner has plenary powers in disposing of an appeal. The scope of his powers is conterminous with that of the Income -tax Officer. He can do what the ITO can do and can also direct him to do what he has failed to do."
11 Now in the case before us, the assessee had sufficient reason which prevented it from producing various documents before the Assessing officer. A search was conducted in the premises of the assessee and ultimately a request was made by the assessee- company that since the DCIT, Central circle, Patiala happens to be the officer as DDIT (Invg) who carried the search and therefore the cases should be transferred to the Central circle, Chandigarh. Lot of litigation happened in this regard and ultimately the Revenue agreed to the request and the cases were transferred to the Central circle, Chandigarh on 28.10.2010. In fact the Assessing officer himself has observed in this regard as under:
"The request of the group was accepted but in the whole process invaluable time was lost and hence any submission of the assesse that the process of assessment was delayed would have to account for this fact.
The above clearly show that the assessee did not have sufficient time to represent in about 105 assessments in the Central Circle, Chandigarh.
W hen a period of less than two months was available and certain documents were not easily traceable then the same would constitute a reasonable cause for not producing the documents sought to be admitted 8 as additional evidence. This has to be further considered in the light of the fact that the assessee had serious disputes with its auditor, Shri Rajinder Sandal whose services were ultimately terminated. Keeping these two constraints, we are of the opinion that the Ld. CIT(A) should have admitted the additional evidence. This has to be particularly seen in the light of the nature of documents sought to be admitted which we have already produced above. It cannot be said that these documents could have been generated as an after-thought. Therefore in our opinion, these documents should have been admitted. In any case we further find that the Ld. Counsel for the assessee was able to show us the various letters through which it was ascertained that various bills etc. are being enclosed with those letters and no comments have been given by the authorities in their respective orders. These bills etc. wherever found necessary, were produced even before us for our clarification. Therefore this ground is allowed (in fact during the hearing certain bills and other documents were produced before us which we examined to avoid further controversy).
Second Issue
12 Now let us discuss the facts in respect of second issue i.e. disallowance of deduction u/s 80IB(11A). The assessee has claimed deduction u/s 80IB(11A) amounting to Rs. 17,83,48,667/-. During assessment proceedings the Assessing officer issued various show cause notices that why this deduction should not be allowed on the following points:
(i) The assessee has filed return late and therefore why deduction should not be denied in view of the provisions of section 80AC of Income -tax Act, 1961 (in short 'Act');
(ii) Since the audit report in form No. 3CB and 3CD and in Form No 10CCB has not been filed and therefore why deduction should not be denied.9
13 In addition to above points, the Assessing officer raised another query that the assessee was already in business of manufacturing of rice then how the assessee had started new business. Further if the assessee has dismantled earlier machinery and used the same for starting new business then why it should not be considered as reconstructed business because more than 20% of old machinery has been used and accordingly why deduction should not be denied. Initially the assessee could not file much information. Ultimately on 16.12.2010 the assessee submitted some information through letter dated 12.12.2010. It was mainly stated in that letter that mega project for installation of new machinery for manufacturing of rice, solvent oil and generation of power were sanctioned by the Govt of Punjab and relevant documents were filed with that letter. It was stated that old machinery was discarded and new machinery was installed and even land and building for new venture were purchased afresh which have been shown in the schedule of fixed assets. It was pointed out that in case of CIT Vs. Hindustan General Industries Ltd, 137 ITR 851 it was held by the H o n ' b l e D e l h i H i g h C o u r t t h a t the word "splitting up " of the business already in existence indicate a case where the integrity of a business earlier in existence is broken up and different sections of the activities previously conducted are carried on independently. In this case there is no such case as the entire machinery was reinstalled by discarding the one already in existence. Similarly, on the facts of the case it cannot be a case of "reconstruction" as the earlier business was killed and in place a new business was started. Further no part of the old machinery was transferred to the new project. It was also contended that the assessee has complied with all other conditions therefore deduction should be allowed. The Assessing officer observed that no documentary evidence has been filed in this regard and merely 10 stating that old machinery was discarded and replaced with the new machinery was not acceptable. In another letter dated 19.12.2010 it was submitted that circumstances in which the return was late have already been explained and Form No. 3CD and 3CB were being filed now. It was again emphasized that the assessee has started a new unit. Through letter dated 21.12.2010 it was pointed out that earlier reply was not complete as part relating to integrated process carried out by the assessee, was not answered. The assessee after referring to the provisions of section 80IB(11A) pointed out that deduction was available if a person handles, stores and transports the paddy which is a food grain. It was further pointed out that the a s s e s s e e buys paddy from different places which is transported to the factory premises by trucks, meeting the requirement of transportation, and then the same is stored as such before putting into manufacturing process and thus is engaged in the integrated process of handling, storage and transportation. Paddy being agricultural produce is a food grain. The expression Agricultural Produce' has not been defined in the Income-ta x Act, 1961. The expression of agricultural produce has been defined in Ministry of Food Processing Industries. As per clause 2 of Allocation of Business in Ministry of Food Processing Industries (Goals and Objectives) covers food grain milling industry. The main goals and objectives stimulating demand for appropriate processed food, achieving maximum value addition and by product utilization, creating increased job opportunity particularly in rural area, enabling farmers to reap the benefit of modern technology, creating surpluses for exports. All these ingredients are fulfilled by the company. For this reason, the benefit u/s 80IB(11A) is admissible to the assessee. Following documents were also stated to be enclosed:
1 Form 10 CCB is enclosed.11
2 The bills for the machinery purchased are being produced for examination.
3 Photo copy of bills of fixed asset additions are enclosed.
However, the Assessing officer noted that though it was stated by the assessee that Form 10CCB and bills for the project machinery were enclosed but same were not found as enclosures. Ultimately it was accepted by the assessee that Form 10CCB was not readily available. In this background the Assessing officer denied deduction u/s 80IB by giving various reasons which can be summarized as under:
(i) He referred to the provisions of section 80IB(11A) and explanatory notes on the provisions and observed that deduction was brought on the statute to encourage building of infrastructure to handle food grains to ensure better storage conditions and minimization of wastage. The intention behind Sec 80IB (11A) was to address the basic concern relating to enhanced food security and agricultural development by upgradation and modernization of infrastructure facilities and therefore this aspect of "storage and handling and transport of food grains" were central concerns. According to him the main business of the assessee as per Form 3CD itself was "Manufacturer of rice, cattle feed, crushing of oil, solvent extraction and refinery and generation of power. Thus the assessee was mainly engaged in the manufacture of rice, cattle feed etc. which cannot be equated with integral business of handling, storage and transportation of food items. He referred to the following written submissions of the assessee:
" th at th e as s es s ee bu y s pa ddy f r o m d i ff er en t p lac es w h ic h is tr ans por t ed t o t h e fac tor y pr e m is es by tr uc k s , m e et i ng t h e r e q u ir e m en t o f t r a ns por t a ti o n a nd t h en th e s am e is s to r e d as s uc h b e for e pu tt i n g i nt o ma n uf ac t ur i ng pr o c es s an d th us is e ng a ge d i n t he i nt e gr a t ed p r oc es s o f ha n d li n g, s t or ag e a n d tr a n s por t at i on . " 12
According to him above clearly shows that the primary business of the assessee was manufacturing /milling of rice and not handling, storage and transportation of the goods. He then referred to Sec 80AB which provides that whatever deduction is required to be allowed under this chapter which includes Sec 80IB only the income of the nature specified in such sub-sec which has been included in the gross total income, can be allowed deduction. Since no integrated business of handling, storage and transportation of food grains was conducted, therefore same was not included in the gross profit and hence the assessee was not entitled to deduction. He referred to various incomes declared by the assessee in the year ending on Mar 31, 2008 which are as under:
P ar t ic u lar s For t he ye ar e n d ed o n 3 1. 0 3. 2 00 8 AN N EX U R E- 13 S al es
- O ils 71 2 76 1 18 6 .5 7
- R ic e 83 3 13 6 34 2 0. 3 6
- W heat Sa l e 80 7 41 9 03 . 00
- O t h er S a les 41 9 98 0 55 0 .0 0 T ota l 95 4 48 4 70 5 9. 9 3 A nn ex ur e - 14 O th er I nc om e Ins ur anc e C l aim r ec e i v ed 24 4 51 8 9. 7 9 Ro u nd of f inc om e 0. 0 0 Re b at e a nd D is c o un t 52 2 36 7 3. 7 9 M is c . I nc om e 14 2 26 8 .0 0 Di v i d en d R ec e i v e d 17 0 40 . 00 In ter es t Rec e i v ed 33 1 96 3 6. 0 0 T r uc k da la r ec e i v e d 23 0 98 4 7 T r uc k Inc om e 57 6 32 8 5. 0 0 Dif f er enc e in ex c h an g e r at es 65 3 61 8 .0 0 Ex por t i nc en t i ves 19 1 10 1 6. 0 3 Lo n g / S ho r t t er m c ap i ta l g a in 26 9 53 4 0. 0 0 T ota l 24 4 80 9 13 . 32 From above he noted that no income or receipt were shown in respect of integrated business of handling, storage and transportation of goods.
(ii) The assessee has not filed Form 10CCB within the prescribed period.13
(iii) He further referred to provisions of section 80AC which provides that no deduction shall be allowed u/s 80IB unless the return of income has been filed on or before due dates specified in sub-sec (1) of Sec 139. Since the assessee has not filed the return before due date specified u/s 139(1) the deduction was not available.
(iv) Finally he referred to the provisions of section 80IB(2)(i) which provides that deduction is available to industrial undertaking which fulfils the conditions given in that Section. According to him there was no addition of plant & Machinery during the year. This fact was taken from a chart given by Shri Rajinder Sandal, C.A. in response to Sec 131:
S l. No P ar t ic u lar s W .D.V as on A dd i ti o ns A dd i ti o ns S al e T ota l c os t as 01 . 04 .0 7 bef or e af ter 30 .0 9 .0 7 on 31 .0 3 .0 8 30 . 09 .0 7 1 La n d 94 8 92 0 46 . 00 0. 0 0 20 3 87 5 1. 0 0 0. 0 0 96 9 30 7 97 . 00 2 B ui l d i ng 12 4 50 6 16 5 .6 6 20 2 50 5 62 . 65 18 0 88 9 79 . 00 0. 0 0 16 2 84 5 70 7 .3 1 3 Ro a ds 28 9 44 7 1. 6 9 0. 0 0 0. 0 0 0. 0 0 28 9 44 7 1. 6 9 4 O f f ic e 63 2 50 5 7. 4 1 0. 0 0 0. 0 0 0. 0 0 63 2 50 5 7. 4 1 B ui l d i ng 5 W ooden 0. 0 0 0. 0 0 0. 0 0 0. 0 0 0. 0 0 Str uc tur e 6 W ater 10 0 16 2 95 4 .7 7 27 4 67 1 78 0 .3 0 13 8 48 1 53 4 .9 6 0. 0 0 51 3 31 6 27 0 .0 3 T r eatm en t P la n t / P ol l ut i o n Co ntr o l de v ic es 7 P la n t & 18 8 62 7 54 3 .9 6 0. 0 0 0. 0 0 0. 0 0 18 8 62 7 54 3 .9 6 Mac h i ner y 8 Fur n it ur e 47 3 29 1 8. 5 2 13 4 44 7 4. 0 0 28 2 89 3 7. 0 0 0. 0 0 89 0 63 2 9. 5 2 Fix tur e 9 V eh ic l e 51 3 34 8 04 . 41 76 1 30 . 00 87 9 32 1 9. 0 0 0. 0 0 60 2 04 1 53 . 41 10 Im por t e d 65 0 00 0 .0 0 0. 0 0 0. 0 0 0. 0 0 65 0 00 0 .0 0 Car 11 Mo t or 12 6 23 . 77 0. 0 0 0. 0 0 0. 0 0 12 6 23 . 77 c yc l es / s c oo t er 12 O f f ic e 31 9 76 6 9. 1 0 13 0 26 0 4. 0 0 18 3 79 8 3. 8 7 0. 0 0 63 3 82 5 6. 9 7 eq u i pm ents 13 Com pu te r s 14 0 47 0 2. 9 7 24 1 34 8 .0 0 11 3 96 3 1. 0 0 0. 0 0 27 8 56 8 1. 9 7 He made following observations in this regard:
" As pe r ab ov e de pr ec i at i on c h ar t, w h ic h is a s p er th e pr ov is i o ns of I nc o m e T ax Ac t , 1 96 1 i t is t o be m ar k ed t h at t her e is a bs o l ut e ly n o ad d i ti on in p l a nt & mac h i ner y d ur i ng t he y ear . T h er e is c le ar e v i de nc e t h at t her e is no 'k i l l i ng ' of an e ar l ier b us i nes s a nd a n ew b us in es s i n it i at e d. A ls o no p l an t or mac h i ner y was s o ld by t he as s es s ee d ur in g t h e y e ar . A ls o fr om th e ab ov e c h ar t it is c le ar th at n o m ac h in er y w as s o l d of f/ d is c a r d e d by th e as s es s e e d ur in g t he y e ar . It is th us a pp ar en t th a t no ne w u ni t w as s et u p b y t he as s es s ee d ur i ng th e y e ar . Th e mac h i ner y or p la nt a n d o th er as s e ts pr ev i o us ly us ed h ad b ee n t r ans f er r e d to 14 th e n ew b us in es s ; he nc e t h e in t egr i ty of b us in es s e ar li er i n ex i s te nc e is no t br ok e n u p.
In this background the Assessing officer did not allow the deduction u/s 80IB(11A).
14. O n a p p e a l b e f o r e t h e L d . C I T ( A ) , i t w a s p o i n t e d o u t t h a t the concern under the name and style of Lakshmi Grain Processor Ltd. was formed in the year 1995 with the object of dealing in food grains and other by products obtained in the course of manufacturing. The name of the company was changed to Lakshmi Overseas Industries Ltd. w.e.f 01.08.1995 and then to Lakshmi Energy & Foods Ltd. Since the concern started business in the year 1995 and the machinery and building were very old, a Mega Project was undertaken with the sanction of Government of Punjab and for that purpose a memorandum of understanding was entered into. The project cost of the venture was around 800 crores. A copy of the MOU was filed before the Ld. A.O. which is an admitted fact on record. I t w a s f u r t h e r p o i n t e d o u t t h a t t h e m a i n a c t i v i t y o f t h e assessee-company comprises the procurement of paddy from market then transport the same to the godown which were specifically designed to provide maximum security and safety for the food grains from withering, spillage, loss by pests and other natural calamities. Thereafter the husk on the paddy is first removed to prevent the loss by inborn pests and then the product is consigned to stores. Food grains are kept in high class stores and in case of paddy same is kept for a period ranging from one year to two years where regular fumigation activities are carried out. The age of the rice is shown in the wrappers in which such rice is packed and the same is checked by the food authorities. These processes would definitely fulfill all the three ingredients for exemption i.e. transportation and handling and storage. It was contended that the Assessing officer has taken a narrow view of the matter. According to the Assessing officer the 15 person would be entitled to exemption if these three activities were in the nature of individual business. Further if the interpretation given by the Assessing officer is accepted then the moment food grains are transported, handled and stored and then converted into rice the assessee will not be entitled to exemption. In other words, according to the Assessing officer the exemption will be available to only the W arehouses which are also transporting such food grains. That cannot be the intention of the legislature. It was contended that if the interpretation given by the Assessing officer was to be accepted and the exemption was to be restricted only to the activities of the transportation, handling and storage and nothing else then how the assessee would get the income because if the activities stops at the stage of storage, no income would ever accrue to the assessee and for generating the income the goods have to leave the hands of the assessee as such or in the shape of extended product. In this regard certain case laws were also quoted. Therefore the activities performed by the assessee were eligible for deduction u/s 80IB(11A).
15 W ith regard to the issue regarding new plant & Machinery it was submitted that deduction u/s 80IB(11A) relates to services in connection with preservation of food grains promoted by the Govt of India under TFC/99-Vol. III dated 4.7.2000 following the national policy in respect of handling, storage and transportation of food grains. It was pointed out that in case of the assessee the Govt of Punjab had sanctioned mega project for installation of new machinery for handling, storage of paddy and processing of paddy and its bi-products such as rice bran etc. during the period relevant to Assessment Year 2007-08. Upon sanction of this project the entire plant was replaced and new industrial undertaking was set up which carried out operation with new machinery installed which 16 becomes clear from the reply filed before the Assessing officer vide reply dated 19.12.2010.
16 In reply to the issue of late filing of return and denial of deduction in view of Sec 80AC it was pointed out that the assessee has changed the accounting period from 1.4.2007 to 30.9.2008 for the purpose of Companies Act and the accounts were maintained for this period and balance sheet etc. were filed with the Registrar of Companies accordingly. However, for income-tax purpose accounts had to be prepared upto 31.3.2008 which took long time. It was contended that provisions of section 80AC are only of directory nature and not mandatory. In this regard reliance was placed on the decision of Delhi Bench of the Tribunal in case of Dhir Global Industrial (P) Ltd. 133 TTJ 580. In respect of the issue regarding non fulfillment of conditions of sub-sec (2)(i) of Sec 80IB, it was contended that the statement of Shri Rajinder Sandal could not have been relied by the Assessing officer which was taken at the back of the assessee without affording a cross-examination. The detail of plant & Machinery were filed during assessment proceedings and therefore it is not correct on the part of the Assessing officer to say that no addition in plant & Machinery was installed during the year. Argument of the Assessing officer that new plant was set up and old plant & Machinery was transferred to the new business, is not correct and in this regard reliance was placed on the decision of Hon'ble Delhi High Court in case of CIT Vs. Hindustan General Industries Ltd. (supra). Some arguments were made in respect of filing of form 10CCB also.
17. The Ld. CIT(A) examined the submissions and observed that due date for filing of the return was 30.9.2008 whereas same has been filed on 31.3.2009. He referred to the decision of Hon'ble Supreme Court in case of Parkash Nath Khanna Vs. CIT, 266 ITR 1 17 and observed that due date has to be reckoned with what is provided u/s 139(1). Since the assessee has not filed return within the due date, therefore no deduction can be allowed. In respect of filing of Form 10CCB he observed that initially the Form was signed by Shri Amit Gupta which was not in order because tax auditor of the company was Shri Deepak Garg. It was also noted by him that though Shri Amit Gupta had admitted to issuance of form 10CCB but the same was signed on 26.9.2009 which means the same was prepared after filing of return. It was also illogical that why the tax auditor, Deepak Garg has not filed the form. It was also observed that since the assessee was not maintaining separate books of accounts and had claimed 35% deduction before the Assessing officer which was later on raised to 100%, the onus was on the assessee to prove the correctness of its claim by leading some evidences. In this back ground the Ld. CIT(A) rejected the claim for deduction vide para 8.3.6 which is as under:
" In t h e a for es a id par a s , I h av e h e ld th at th e as s es s ee has v i o la t ed th e b as ic r eq u ir e me nt f or c l a i mi ng d e d uc t i on u /s 8 0I B . Th es e s ta t ut or y d ef au lts c a n n ot b e ov er l o ok e d . N o d ou b t a l i b er a l i nt er pr e ta t io n is r e q u ir e d t o b e ma de i n r es p ec t of inc e nt iv e pr ov is i o ns al l ow i ng t ax ex e m pt i o ns , it is a ls o v it a l t ha t we a b id e by th e i nt en t of t he le g is l at ur e . In t h is c as e , t he as s es s ee h as fi l e d th e r e tur n of i nc o m e b ey on d th e du e da t e as s t ip u la t ed u /s 1 3 9( 1) . T he For m 1 0 CC B r eq u ir ed t o b e f i l ed a lo n gw it h t he t ax au d it r e po r t to s u p p or t th e c l a i m of de d uc t i on u/s 8 0I B is a ls o no t c r ed i b le . T hu s as t he as s es s e e h a s v io l at e d t he pr ov is i o ns o f S ec 8 0 AC a n d 8 0 I A( 7) , th e c l a im o f t h e as s es s ee c a n no t be c ons i d er e d f or s uc h de d uc t i on u /s 8 0I B . I n t h is b ac k dr o p , I d e em i t m er e ly ac a d em ic to go i nt o t h e a l lo w ab i l ity of de d uc ti o n / m er its of th e c a s e, as I h av e he l d t ha t th e as s es s e e is n ot el i g ib l e f or d ed uc ti o n u/s 80 I B f or t he t ec hn ic a l de f au l ts as a lr e a dy e l uc id at e d. Co ns eq u e nt l y th e as s es s e e f ai ls o n t h is gr o un d of a p pe a l. "
18 The Ld. Counsel for the assessee made detailed submissions in respect of deduction u/s 80IB (11A). He mainly reiterated the submissions made before the Ld. CIT(A) and further elaborated the contentions which can be summarized as under:
(a) Contention in respect of late filing of return In this year the assessee has adopted the accounting year of 18 months from 1..4.2007 to 30.9.2008 and therefore the books were maintained for 18 months and balance sheet was 18 prepared accordingly and filed with the Registrar of Companies. However, for the purpose of income-tax the accounts have to be maintained only for a period of 12 months ending on 31.3.2008. This process was cumbersome and difficult which consumed lot of time leading to late filing of return. In this regard he referred the submissions made before the Ld. CIT(A) (copy of which is placed at page 788 to 890 of the paper book) and invited our attention to page 823 to 827 where the reasons for late filing of the return were elaborated. He also referred to the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. MS. Jagriti Aggarwal, 339 ITR
610. In this case it was clearly held that Sec 139(1) has to be read along with Sec 139(4) while interpreting provisions of section 54. Since Sec 80AC and 54 are of same nature, therefore this judgment is squarely applicable. He also referred to the decision of Hon'ble Delhi High Court in case of Podder Pigments Vs. CIT, 222 CTR 309 (copy of the judgment filed at page 25 to 28 of the synopsis). In this case it was clearly held that even if time for filing of return had expired the deduction can still be claimed even in the petition filed u/s 264 after seven months. He also relied on the following decisions:
(i) ACIT Vs. Dhir Global Industrial (P) Ltd. (supra)
(ii) ITO Vs. S. Venkaktaiah, ITA No. 984/Hyd/2011 (copy filed)
(iii) Vansheer Builders & Developers P. Ltd Vs. ITO, ITA No. 386/Bang/2012 (copy filed) The Ld. Counsel for the assessee also distinguished the decision of Special Bench in case of Saffire Garments Vs. ITO, 151 TTJ 114. According to him in view of above decision of Courts, the deduction u/s 80IB(11A) cannot be denied merely because the return has been filed late.
(b) Non filing of a certificate of C.A in form No. 10 CCB The assessee had a serious problem with the auditor and tax consultant Shri Rajinder Sandal. The assessee-company was entirely dependent on Shri Sandal's advice relating to tax matters for the last six years. He was having various details and information relating to accounts and tax matters in his custody which were not handed over to the assessee-company. These facts become clear from the face of assessment order itself as Shri Sandal has deposed against the assessee. Shri 19 Sandal had gone to the extent of stating that some observations in his audit were made due to clerical mistake of junior staff. In this regard reference was made to page 39 of the assessment order. Form 10CCB was signed by another C.A which was filed before the Assessing officer. Copy of Form 10CCB was also filed before the Ld. CIT(A). It was contended that filing of Form 10CCB is merely a technical requirement and this form can be filed at any time during assessment proceedings before the Assessing officer or before the Ld. CIT(A) or even before the Tribunal. In this regard reliance was placed on the following decisions:
(i) CIT Vs. Trehan Enterprises, 248 ITR 333 (J&K)
(ii) CIT Vs. ACE Multitaxes Systems Pvt Ltd, 317 ITR 207
(Karn)
(iii) CIT Vs. Jayant Patel, 248 ITR 199(Mad)
(iv) CIT Vs. Magnum Export (P) Ltd. 262 ITR 10 (Cal)
(v) CIT Vs. Shahzedanand Charity Trust 228 ITR 292 (PH)
(vi) N a t i o n a l H o r t i c u l t u r a l B o a r d V s . C C I T , CW P N o . 9 3 3 9
of 2008 (copy filed)
It was also contended that appeal proceedings before the first appellate authority is mere continuation of assessment proceedings and therefore he can also accept form 10CCB. In this regard reliance was placed on the decision of Hon'ble Supreme Court in case of Kanpur Coal Syndicate (supra).
(c) Nature or business and how the same is eligible for d e d u c t i o n u / s 8 0 I B ( 1 1 A) It was contended that the Assessing officer has himself referred to explanatory notes to the Finance Act, 2001 in respect of Sec 80IB(11A) where the Board itself has clarified that the deduction is allowable under this Section to a person engaged in the business of integrated bulk handling, storage and transportation. Deduction will be available even if a person is carrying out any part of this activity. In any case the Assessing officer has no doubts that the assessee was carrying out these activities. It was submitted that the assessee company was engaged in the business of processing of paddy in integrated fashion. The Ld. Counsel referred to the Flow- 20 Chart (filed during the course of hearing showing various processes carried out by the assessee through pictorial chart) and pointed out that the assessee-company was procuring paddy from the Mandi. Initial cleaning was done in the Mandi itself and then such paddy was transported to the godowns of the assessee-company which was specifically designed to provide maximum security and safety for the food grains from withering, spoilage, loss because of pests and other natural calamities. He emphasized that the assessee has purchased more than 150 trucks for transportation of paddy etc. from Mandi to its godowns which will fulfill the conditions regarding transportation. Once the paddy is brought to the godown which have been specifically designed to safeguard the food grains through installation of various machinery for controlling of temperature and provide fumigation facilities to protect the food grain from pests and other natural calamities. Before putting the paddy in the stores, husk is removed to prevent the loss from inborn pests. This part would fulfill the conditions of storage. It was contended that milling is part of the handling because though handling is not defined in the Act but he made reference to various Acts where the word "handling" has been defined which clearly show that handling would include processing, manufacture, sale of a particular good.
It was emphasized that the Ministry of Food which is a nodal Ministry for designing the policy for processing and storage of food etc. in their circular has categorically stated that deduction u/s 80IB(11A) will be available to the entities which manufacture, process or are engaged in the milling of rice. In this regard reference was made to the scope of Food processing in India given by the Ministry of Food Processing & Industries. (copy of which is available at pages 198 to 210 of the synopsis.
It was contended that it seems the Assessing officer was doubtful that if the assessee was consuming paddy for its own processing unit then if the activities of handling, storage, transportation would not be entitled to deduction but this is wrong approach because even if such services are used for assessee's own consumption the deduction has to be allowed and in this regard reliance was placed on the decision of 21 Mumbai Bench of the Tribunal in case of Sanchita Marine Production Pvt Ltd Vs. DCIT, 15 SOT 280. It was also submitted that packaging of goods would be part of the process of manufacture because this activity form part of the manufacture and in this regard reference was made to the ruling of Advance Authority which has been referred in the written submissions filed before the Ld. CIT(A) (relevant portion is at page 476 of the paper book). It was further contended that even if the processing is not part of the handling, storage and transportation even then the proportionate deduction has to be allowed on proportionate basis and in this regard various decisions were quoted in respect of Sec 80IB(10).Reliance was placed on the decision of:
(i) Nagpur Bench of the Tribunal in case of ITO Vs. Air Developers (copy available at page 543 to 550).
(ii) G.V. Corporation Vs. ITO, 38 SOT 174 (mum)
(iii) Viswas Promoters (P) Ltd. Vs. ACIT, T.C (Appeals) Nos.
1014 of 2009, 857 of 2010 and 190 to 192 of 2012, W .A No. 471 of 2010, MP Nos. 1,1,1,2 and 2 of 2012 ` It was contended that in the identical facts deduction has been given in case of LT Overseas Pvt Ltd @ 100% under the same provisions and in this regard reference was made to the assessment orders placed at page 901 to 919 of paper book.
Further the department has allowed deduction to the assessee in Assessment Year 2010-11 @ 70%. Reference was made to the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. Sardari Lal Mehra, 87 ITR 47. It was also submitted that if the deduction has been allowed in the latter year then the deduction cannot be disallowed in the earlier year and in this regard reference was made to the decision of Amritsar Bench of the Tribunal in case of DCIT Vs. Chaman Lal & Sons. 93 TTJ 132 (copy placed at page 57 of the synopsis) and the decision of Hon'ble Delhi High Court in case of Parveen Son (copy placed at page 62 of the synopsis).
(d) It was contended that there is no force in the observations of the Assessing officer that deduction was not 22 claimed in the return of income. In this regard he referred to page 2 of the paper book which is computation of income which clearly show that deduction has been claimed. It was pointed out that some how while processing the return deduction was shown at nil but even that processing was got rectified through a rectification application filed by Shri Rajinder Sandal.
(e) Compliance with the requirements of Sec 80IB(2)(i) First of all it was submitted that the condition of splitting of and reconstruction of a undertaking was applicable to the industrial undertaking only. The same is not applicable to eligible business. In this regard our attention was invited to the provisions of section 80IB which provides for deduction in case of industrial undertaking, operation of theatre, hotels and various other fields like multiplex theatres. W herever the condition of usage of old machinery of less than 20% was required, has been mentioned and no such mention is made of this condition u/s 80IB(11A). It was further pointed that the value of old machinery which was claimed to be discarded was Rs. 60531624/- as on 31.3.2005 whereas new machinery added was at Rs. 33.35 Crore. Keeping the amount of new machinery it becomes clear that old machinery was less than 20%, in fact it would be about 18.14%. In this regard it was emphasized that old machinery has to be reckoned on W DV and in this regard reliance was placed on the following decisions:
(i) Hindustan General Industries Ltd. 67 Taxman 360 (Delhi)
(ii) Harin Khola Ice & Cold Storage, 6 Taxman 362 (Kol)
(iii) Rajiv Bhatnagar, 34 CCH 432 However, when it was pointed by the Bench that depreciation has been claimed in respect of plant & Machinery stated to be discarded and mega project was sanctioned in Sept 2005 after which assessee started implementing the same then it was admitted that first year of new project and deduction should be for Assessment year 2006-07.23
(f) It was also submitted that Revenue has raised the issue on the basis of claiming deduction initially at 35%. This was done mainly on the advice of Rajinder Sandal and as pointed out earlier that the assessee-company had differences and disputes with him and he may have given wrong advice. The Directors are not well versed with the income-tax provisions but once the mistake came to the knowledge of the assessee-
company the claim for deduction was revised to 100%. In fact in next year the deduction has been claimed at 100% which shows that the assessee is eligible for 100% deduction. 19 On the other hand Ld. D.R. for the Revenue pointed out that the assessee-company was originally incorporated under the name of "Lakshmi Food Grain Processor Pvt Ltd" in the year 1990. Later on this Pvt Ltd company was converted into a Limited company and the name of the company was changed on few occasions. In the Assessment Year 1995-96 to 1999-2000 the assessee has already availed deduction u/s 80IA through various orders including the order of the Settlement Commission. Originally the assessee- company was engaged in the business of paddy processing and even after sanction of mega project, the assessee's main business was manufacture of rice, cattle feed, crushing of oil seeds, solvent extraction and refinery. This fact becomes absolutely clear from the following chart which shows the receipts of the assessee-company during various years from different activities:
S l. N o. P ar t ic u lar s S al es ( Rs . In Mi l l i ons ) *
20 0 3- 20 0 4- 20 0 5- 20 0 6- 20 0 7- 20 0 8-
04 05 06 07 08 09
1 O i l D i v is i o n 66 . 28 13 6 .0 1 45 8 .4 2 37 4 .5 1 71 2 .7 6 55 8 .9 0
2 Ric e 21 5 7. 1 7 25 7 1. 6 7 48 7 5. 0 8 61 2 6. 9 0 83 3 1. 3 6 76 1 9. 4 2
Di v is i on
3 W heat / 0. 0 0 12 6 1. 5 4 20 3 .4 2 29 5 .6 7 80 . 74 3. 6 0
Dam ag e d
wh e at
4 O th er s a l es 27 . 57 10 7 .9 2 46 . 97 16 5 .5 8 41 9 .9 8 41 9 .8 3
24
5 P o wer 51 4 .9 1
T ota l 22 5 1. 0 2 40 7 7. 1 4 55 8 3. 8 9 69 6 2. 6 6 95 4 4. 8 4 91 1 6. 6 6 Above clearly show that there was no change in the business. This becomes further clears from the fact that in Assessment Year 2005- 06, 2006-07 and 2007-08 the assessee returned income of Rs. 23.33 crores, 24.61 crores and Rs. 42.79 crores but no deduction has been claimed u/s 80IA and 80IB which means that the assessee was aware that it was not eligible for any deduction. He referred to the sanction letter placed in the assessee's paper book at page 283 and pointed out that mega project was sanctioned for paddy processing units at five locations with a capacity of 110 MT on the date along w i t h a p o w e r p l a n t o f 1 5 MW . T h i s m a k e s i t a b s o l u t e l y c l e a r t h a t t h e business of the assessee remains the same except for power plant which is eligible for deduction separately u/s 80IA(4)(iv). Therefore expansion of paddy processing cannot be equated with integrated business of handling, storage and transportation of food grains as contemplated u/s 80IB(11A) of the Act.
20 The Ld. D.R. for the Revenue referred to the provisions of section 80IB(11A) and pointed out that the same was introduced by Finance Act, 2001 and initially benefit was given to the business of handling, storage and transportation of food grains. Later on the benefit was extended to the business of processing, preservation and packaging of fruits and vegetables by Finance Act, 2004 w.e.f. 1.4.2005 and thereafter by Finance Act, 2009 w.e.f. 1.4.2010 the benefit was further extended to the Meat products and Poultry or Merine or diary products. He referred to the Memorandum explaining the clauses as well as the speech of Finance Minister while introducing provisions of section 80IB(11A) in 2001 and submitted that prior to insertion of section 80IB (11A) a National Policy on Handling, storage and transportation of Foodgrains was 25 notified in the Gazetted of India dated 15th July 2000 and para 5.45 of which elaborated that post harvest losses of food grains are a serious problem. Five per cent loss would imply loss of 10 million tones of food grains annually. In order to reduce storage and transit losses at farm and commercial level, and to modernize the system of handling, storage and transportation of food grains in India, private sector participation was sought to be encouraged for development of infrastructure for the integrated bulk handling, storage and transportation of food grains. Therefore sec 80IB(11A) was inserted in the Income-tax Act with the legislative intention for the development of infrastructure for integrated bulk handling, storage and transportation of food grains keeping in background the storage and transit loss of food grains. The legislative intentions behind section 80IB(11A) was not to extend the benefit of deduction to existing or new industrial undertaking engaged in manufacturing or production of food grains as the same was available under sub-sec (3) to (5) of section 80IB to such undertaking depending upon the period of commencement of business and the location of industrial undertaking for the period as specified therein. The Memorandum explaining the provisions of section 80IB(11A) makes it explicitly clear that the sole emphasis was to encourage building of storage capacities by undertaking upgradation and modernization of infrastructure for storage, handling and transportation of food grains.
21 The Ld. D.R. for the Revenue referred to the contention raised by the Ld. Counsel for the assessee with respect to the meaning of handling given in various Acts and pointed out that the word "Handling" is polymarphous word and is used in different senses in different contexts. He contended that definition in other Acts or technical meaning of a word or expression in the statute may be 26 relevant but not sacrosanct. In this regard he referred to the decision of Hon'ble Supreme Court in case of CGT Vs. NS Getty Chettiar, 82 ITR 599 wherein it was observed as under:
"Words in the section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purposes that they are intended to serve."
He contended that it is well settled that the Courts should not hesitate to depart the meaning if the text and settings in which the word or expression is used demands so. In this regard he referred to the following decisions:
(i) Sole Trustee, Loka Shikshana Trust Vs. CIT, 101 ITR 234
(ii) Smt. Tarulata Shyam and Others Vs. CIT, 108 ITR 345 Therefore while interpreting a particular word or expression the intention of the legislature behind insertion of the particular provisions has to be kept in mind. According to him when Sec 80IB(11A) is read along with Memorandum of explaining the provisions, it would emerge that the word "handling" in its ordinary sense and in the context of food grains would cover within it ambit the process and activities relating to creation of facilities for cleaning and removing of foreign material from the food grain so as to prevent damage from such material, Facilities for drying of food grains to prevent loss during storage due to excessive moisture, Pre storage bulk grain dumping and drying facilities, Creation of facilities for mechanized sampling, weighing and detection of live infectants, Mechanized receiving and handling by storing in Silos equipped with facilities of aeration and fumigation, Loading and unloading facilities and traffic management and Dumping pits, chain conveyors, elevators and faculties for mechanized shipment so as to integrate storage with quick transportation. Keeping the overall 27 intent of this particular provision it is clear that the word "handling"
can not include the manufacture or transportation of food grains by any stretch of imagination. The provisions of the Act have to be interpreted in a way that absurdity and mischief is avoided. In this regard he referred to the decision of Hon'ble Supreme Court in case of KP Varghese Vs. ITO, 131 ITR 597. In fact a particular word and expression has to be given purposive construction and in this regard he referred to the decision of Hon'ble Supreme Court in case of R&B Falcon Pvt Ltd, 301 ITR 309. He also referred to various other decisions where principles of interpretation of statutes have been given. He referred to the contention of the Ld. Counsel for the assessee with regard to the circular and clarification given by the Ministry of Food Processing wherein various incentive provisions are reproduced. Detail of various benefits in form of duty and tax benefits are disclosed and various sections of processing sectors have been defined and classified on the basis of a data for the purpose of clarity and compilation of data. However, there is nothing in these documents to suggest that the Ministry of Food Processing has classified rice milling as integrated business to handling, storage and transportation of the food grains. Though this is applicable in case of preservation and packing of fruits and vegetables.
22 The Ld. D.R. for the Revenue submitted that reliance placed by the Ld. Counsel for the assessee on the assessment order for Assessment Year 2010-11 is not relevant because the assessment orders are not binding on the Tribunal and the order passed by the Assessing officer is not inconformity with the law. Reference to the decision of Bajaj Tempo Ltd. Vs. CIT, 196 ITR 188 (S.C) is also mis-construed because it has been held in various decisions that when there is no ambiguity in the provision then there is no 28 question of interpreting such provision in this fashion. In this regard he relied on the decision of Hon'ble Supreme Court in case of Petron Engineering Construction P. Ltd and another Vs. Central Board of Direct Taxes and Others, 175 ITR 523 and CIT Vs. N.C. Budharaja and Co. and another, 204 ITR 412. (S.C). He also submitted that the assessee had also not produced the bills and details of investments made in the development of search facilities and Silos and the same were not produced before the Tribunal on its directions (This is not correct as bills have been produced before us and even the copies have been filed on record in response to the query by the Bench). The Ld. D.R. for the Revenue referred to various annual reports which clearly indicate that the assessee was engaged in the business of rice processing and also was in the business of wheat flour processing etc. The documents available even show that the loans were obtained from the bankers by stating that the loans were required for the purpose of expanding rice mill and power project. He submitted that various documents show that additional storage capacity has accrued in Financial year 2010-11. The company never declared in its annual report that it was also engaged in the handling, storage and transportation of food grains. The Ld. D.R. for the Revenue also distinguished various judgments cited on behalf of the assessee.
23 The Ld. D.R. for the Revenue also referred to the provisions of section 80AC and the circular No. 14/06 21ted 28.12.2006 wherein it is clarified that deduction u/s 80IB is not admissible from Assessment Year 2006-07 if the return is not filed within the due date specified u/s 139(1). In this regard he relied on the following decisions:
( i) Dec is i on of Ho n ' bl e S upr em e C o ur t in t h e c as e of K um ar J ag d is h C ha n dr a S in g h ( 2 20 IT R 6 7) 29 ( i i) Dec is i on of H on ' b le S upr em e C o ur t in t h e c as e of Pr ak as h N at h K ha n na ( s up r a) ( i i i) Dec is i on of Hon ' b l e H i gh C o ur t of K ar n at ak a i n t he c as e of N. S an n am m a ( 20 4 T ax m an 3 56) ( i v) Dec is i on of Hon ' b l e I T AT Raj k ot ( S B) i n t h e c as e of S af f ir e G ar m ents ( 1 51 TT J 11 4) ( v) Dec is i on of Ho n 'b l e IT AT Am r its ar i n t h e c a s e of B a l Ki s h a n D ha wa n ( H UF) ( 50 SO T 4 9) ( v i) Dec is i on of H o n 'b l e Raj as t h an H i gh C o ur t in th e c as e of Ch h ogm a l Ch ir a nj i l a l vs . CIT ( 2 57 IT R 5 1) He contended that reliance on the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. MS. Jagriti Aggarwal (supra) was misplaced because in that case the Court was concerned with the interpretation of Sec 54. W hen a specific provision is there then same cannot be interpreted so as to make the provision redundant.
24. Referring to the objection of the Assessing officer in non filing of form 10CCB he submitted that there is a specific requirement u/s 80IA(7) r.w.s. 80IB(13). Initially this report was not filed and the report which was filed has been signed by Shri Narinder Gulati, C.A. wherein deduction has been worked out at Rs. 50.95 crores whereas the assessee has claimed the deduction at Rs. 17.32 crores which is self contradictory.
25 The Ld. D.R. for the Revenue also referred to non fulfilling of the requirements of Sec 80IB(2)(i) and pointed out that the assessee had not filed any copy of the bills of various plant & Machinery which was purchased by the assessee. (as noted earlier this is not correct). He contended that there is no force in the submissions that the conditions is not applicable in the case of eligible business. Reading of Sec 80IB as a whole would make it clear that specific conditions has been prescribed in all the sections depending upon the nature of undertaking/enterprises/business except in Sub-sec (3)(4)(5)(9) and (11A) of Sec 80IB. Therefore these sub-sections are applicable to the industrial undertaking for which the conditions 30 are prescribed under sub-sec (2)(i) of Sec 80IB. Therefore the contention of the Ld. Counsel for the assessee is not correct that the conditions of sub-sec (2)(i) is not applicable to sub-section Sec 11A because it is not a case of the assessee that it had started new undertaking of handling, storage and transportation of food grains. He submitted that the conditions specified in Sec 80IB(2)(i) has to be complied in the initial year i.e. the year of formation of the undertaking and in this regard he relied on the decision of Chandigarh Bench of the Tribunal in case of Jain Udhay Hosiery (P) Ltd Vs. ACIT, 1 SOT 193 and decision of Agra Bench of the Tribunal in case of Aqua Plumbing Pvt Ltd. Vs. ACIT, 46 SOT 366: 140 TTJ
496. He submitted that the assessee had made investments of Rs. 2.75 crores in plant & Machinery in the Financial year 2001-02 against the investments of Rs. 38,43 Lakhs in Financial year 1999- 2000 and Rs. 13.12 lakhs in Financial year 2000-01 with opening balance of Rs. 47.84 crores as on 1.4.1999. Therefore the W DV of old plant & Machinery as on 1.4.2001 would be far in excess limit of 20% prescribed in the Sec 80IB(2). The Ld. Counsel for the assessee has already admitted before the Bench that Assessment year 2008-09 is the third year of claim of deduction u/s 80IB(11A) though before the Assessing officer, Assessment year 2008-09 was claimed to be the first year. As per assessee's own record, the W DV of the plant & Machinery was Rs. 6,05,31,624/- and the investment in plant & Machinery in that year was Rs. 9.85 crores leading to the inference that the value of old plant & Machinery was 61.42%. This is so because the investment of Rs. 23.50 crores was made in machineries relating to water treatment and pollution control devices on which depreciation @ 100% has been claimed during the year. Once 100% depreciation was claimed the same would result in nil W DV and same cannot be counted. In any case the machineries in 31 the field of water treatment and pollution control would have no connection with handling, storage and transportation of the food grains and the assessee has not given any evidence to show that these machineries were also for the purpose of integrated business of handling, storage and transportation of food grains. The decisions relied for the proposition that it is W DV which has to be considered in respect of old Plant & Machinery are not relevant because the same were rendered in the context of block of Plant & Machinery where uniform rate of depreciation was provided whereas different rate of 15, 60, 80, and 100%, is provided now and therefore likes have to be compared with likes. If this proposition is accepted and if investment of Rs. 23.50 crores is ignored then new investment of Rs. 9.85 crores is considered then old investment of Rs. 6.05 crores would constitute more than 60% of the machinery. Further as far as contention that the old machinery was discarded for which reliance was placed on the certificate of Chartered Engineer filed at page 394 and certificate of the C.A filed at page 420 are only self serving documents. There are contradictions in these certificates as the Chartered Engineer has certified that the plant & Machinery under reference was closed since 2002 leading to inference that this machinery was acquired prior to the year 2002 whereas, the certificate of C.A states that entire plant & Machinery having opening W DV of Rs. 4.37 crores as on 1.4.2007 was discarded. The Assessing officer has also denied the deduction because the assessee has not claimed the deduction as provided u/s 80A(6). 26 In the rejoinder Ld. Counsel for the assessee gave detailed replies to the new points raised by the Department and also tried to distinguish the decisions relied on by him.
3227 W e have gone through the rival submissions carefully in the light of material and records, Paper books, judgments cited by the parties. First of all let us consider the relevant provisions which are important for adjudicating this issue:
80 AB . W her e any de duc t io n is r eq u ir ed t o b e ma d e or a l lo w e d u n der a ny s ec t i on [ * * *] i nc lu d e d in t h is C h ap te r u n d er t h e he a d in g " C. --D ed uc ti o ns in r es p ec t o f c er ta i n i nc om es " in r es pec t o f a ny i nc om e of t h e n at u r e s p ec if i ed i n th at s ec ti o n w h ic h is i nc lu d ed i n t h e gr os s t ot a l inc o me o f t he as s es s e e , t he n , no tw i ths t an d in g a ny t h in g c o nt a i ne d i n t ha t s ec ti o n, f or t h e pur pos e o f c om p ut i n g t he d e duc t i on u nd er th a t s ec t io n, th e a mo u nt o f i nc om e of t ha t na t ur e as c o mp ut e d i n ac c or da nc e w i th t he pr ov is io ns of t his Ac t ( b e for e mak i n g a ny d e duc t io n un d er t his Ch a pt er ) s ha l l al o ne b e d ee m e d t o b e t he am o un t of i nc o me o f t ha t na t ur e w h ic h is d er iv e d or r ec eiv e d by th e as s es s e e an d w h ic h is i nc l u d ed i n h is gr os s t o ta l inc o me .] 80AC- Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC [or section 80-ID or section 80-IE], no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.] 80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to [(11), (11A) and (11B)] (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section.
(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :--
(i) it is not formed by splitting up, or the reconstruction, of a business already in existence :
Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;
(ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose;
(iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India :
Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section (4) shall apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted.
Explanation 1.--For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :--
(a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India;
(b) such machinery or plant is imported into India from any country outside India; and 33
(c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee.
Explanation 2.--Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with;
(iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power.
(3) The amount of deduction in the case of an industrial undertaking shall be twenty-five per cent (or thirty per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) beginning with the initial assessment year subject to the fulfillment of the following conditions, namely :--
(i) it begins to manufacture or produce, articles or things or to operate such plant or plants at any time during the period beginning from the 1st day of April, 1991 and ending on the 31st day of March, 1995 or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular undertaking;
(ii) where it is an industrial undertaking being a small scale industrial undertaking, it begins to manufacture or produce articles or things or to operate its cold storage plant [not specified in sub-
section (4) or sub-section (5)] at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, [2002].
(4) The amount of deduction in the case of an industrial undertaking in an industrially backward State specified in the Eighth Schedule 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 such industrial undertaking :
Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) subject to fulfillment of the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or plants during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, [2004] :
Provided further that in the case of such industries in the North-Eastern Region, as may be notified by the Central Government, the amount of deduction shall be hundred per cent of profits and gains for a period of ten assessment years, and the total period of deduction shall in such a case not exceed ten assessment years :
[Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise referred to in sub-section (2) of section 80-IC:] [Provided also that in the case of an industrial undertaking in the State of Jammu and Kashmir, the provisions of the first proviso shall have effect as if for the figures, letters and words "31st day of March, 2004", the figures, letters and words "31st day of March, [2012]" had been substituted : Provided also that no deduction under this sub-section shall be allowed to an industrial undertaking in the State of Jammu and Kashmir which is engaged in the manufacture or production of any article or thing specified in Part C of the Thirteenth Schedule.] (5) The amount of deduction in the case of an industrial undertaking located in such industrially backward districts as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf as industrially backward district of category 'A' or an industrially backward district of category 'B' shall be,--
(i) hundred per cent of the profits and gains derived from an industrial undertaking located in a backward district of category 'A' for five assessment years beginning with the initial assessment 34 year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains of an industrial undertaking :
Provided that the total period of deduction shall not exceed ten consecutive assessment years or where the assessee is a co-operative society, twelve consecutive assessment years :
Provided further that the industrial undertaking begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 31st day of March, [2004];
(ii) hundred per cent of the profits and gains derived from an industrial undertaking located in a backward district of category 'B' for three 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 of an industrial undertaking :
Provided that the total period of deduction does not exceed eight consecutive assessment years (or where the assessee is a co-operative society, twelve consecutive assessment years) :
Provided further that the industrial undertaking begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 31st day of March, [2004]. (6) The amount of deduction in the case of the business of a ship shall be thirty per cent of the profits and gains derived from such ship for a period of ten consecutive assessment years including the initial assessment year provided that the ship--
(i) is owned by an Indian company and is wholly used for the purposes of the business carried on by it;
(ii) was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India; and
(iii) is brought into use by the Indian company at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995. (7) The amount of deduction in the case of any hotel shall be--
(a) fifty per cent of the profits and gains derived from the business of such hotel for a period of ten consecutive years beginning from the initial assessment year as is located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations, specify by notification in the Official Gazette and such hotel starts functioning at any time during the period beginning on the 1st day of April, 1990 and ending on the 31st day of March, 1994 or beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001:
Provided that nothing contained in this clause shall apply to a hotel located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai, which has started or starts functioning on or after the 1st day of April, 1997 and before the 31st day of March, 2001:
Provided further that the said hotel is approved by the prescribed authority for the purpose of this clause in accordance with the rules made under this Act and where the said hotel is approved by the prescribed authority before the 31st day of March, 1992, shall be deemed to have been approved by the prescribed authority for the purpose of this section in relation to the assessment year commencing on the 1st day of April, 1991;
(b) thirty per cent of the profits and gains derived from the business of such hotel as is located in any place other than those mentioned in sub-clause (a) for a period of ten consecutive years beginning from the initial assessment year if such hotel has started or starts functioning at any time during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 1995 or beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001:
Provided that nothing contained in this clause shall apply to a hotel located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai, which has started or starts functioning on or after the 1st day of April, 1997 and before the 31st day of March, 2001;35
(c) the deduction under clause (a) or clause (b) shall be available only if--
(i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose;
(ii) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees;
(iii) the hotel is for the time being approved by the prescribed authority:
Provided that any hotel approved by the prescribed authority before the 1st day of April, 1999 shall be deemed to have been approved under this sub-section. [(7A) The amount of deduction in the case of any multiplex theatre shall be--
(a) fifty per cent of the profits and gains derived, from the business of building, owning and operating a multiplex theatre, for a period of five consecutive years beginning from the initial assessment year in any place :
Provided that nothing contained in this clause shall apply to a multiplex theatre located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) of Chennai, Delhi, Mumbai or Kolkata;
(b) the deduction under clause (a) shall be allowable only if--
(i) such multiplex theatre is constructed at any time during the period beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2005;
(ii) the business of the multiplex theatre is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of any building or of any machinery or of plant previously used for any purpose;
(iii) the assessee furnishes alongwith the return of income, the report of an audit in such form and containing such particulars as may be prescribed and duly signed and verified by an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed.
(7B) The amount of deduction in the case of any convention centre shall be--
(a) fifty per cent of the profits and gains derived, by the assessee from the business of building, owning and operating a convention centre, for a period of five consecutive years beginning from the initial assessment year;
(b) the deduction under clause (a) shall be allowable only if--
(i) such convention centre is constructed at any time during the period beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2005;
(ii) the business of the convention centre is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of any building or of any machinery or plant previously used for any purpose;
(iii) the assessee furnishes alongwith the return of income, the report of an audit in such form and containing such particulars as may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed.] (8) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of five assessment years beginning from the initial assessment year if such company--
(a) is registered in India;
(b) has the main object of scientific and industrial research and development;36
(c) is for the time being approved by the prescribed authority at any time before the 1st day of April, 1999.
[(8A) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of ten consecutive assessment years, beginning from the initial assessment year, if such company--
(i) is registered in India;
(ii) has its main object the scientific and industrial research and development;
(iii) is for the time being approved by the prescribed authority at any time after the 31st day of March, 2000 but before the 1st day of April, [2007];
(iv) fulfils such other conditions as may be prescribed.] 1 [(9) The amount of deduction to an undertaking shall be hundred per cent of the profits for a period of seven consecutive assessment years, including the initial assessment year, if such undertaking fulfils any of the following, namely:--
(i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before the 1st day of April, 1997;
(ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997 :2
[Provided that the provisions of this clause shall not apply to blocks licensed under a contract awarded after the 31st day of March, 2011 under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated the 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or a State Government in any other manner;]
(iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998 [but not later than the 31st day of March, 2012];
[(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (hereafter referred to as "NELP-VIII") under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O- 19018/22/95-ONG.DO.VL, dated 10th February, 1999 and begins commercial production of natural gas on or after the 1st day of April, 2009;
(v) is engaged in commercial production of natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts for Coal Bed Methane blocks and begins commercial production of natural gas on or after the 1st day of April, 2009.] Explanation.--For the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by the Central or a State Government in any other manner, shall be treated as a single "undertaking".] [(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,--
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,--
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 [but not later than the 31st day of March, 2005], within four years from the end of the financial year in which the housing project is approved by the local authority;
37[(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.] Explanation.--For the purposes of this clause,--
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; [***]
(d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed [three] per cent of the aggregate built-up area of the housing project or [five thousand square feet, whichever is higher];] [(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and
(f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:--
(i) the individual or the spouse or the minor children of such individual,
(ii) the Hindu undivided family in which such individual is the karta,
(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.] [Explanation.--For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government).] (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 assessment years where the assessee is a co-
operative society) and subject to fulfillment 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]. [(11A) The amount of deduction in a case of [an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or [meat and meat products or poultry or marine or dairy products or] from] the integrated business of handling, storage and transportation of food grains, shall be hundred per cent of the profits and gains derived from such 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 business in a manner that the total period of deduction does not exceed ten consecutive assessment years and subject to fulfillment of the condition that it begins to operate such business on or after the 1st day of April, 2001 :] 38 ` [Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009.] [(11B) The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital in a rural area shall be hundred per cent of the profits and gains of such business for a period of five consecutive assessment years, beginning with the initial assessment year, if--
(i) such hospital is constructed at any time during the period beginning on the 1st day of October, 2004 and ending on the 31st day of March, 2008;
(ii) the hospital has at least one hundred beds for patients;
(iii) the construction of the hospital is in accordance with the regulations, for the time being in force, of the local authority; and
(iv) the assessee furnishes along with the return of income, the report of audit in such form and containing such particulars as may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed.
Explanation.--For the purposes of this sub-section, a hospital shall be deemed to have been constructed on the date on which a completion certificate in respect of such construction is issued by the concerned local authority.] [(11C) The amount of deduction in the case of an undertaking deriving profits from the business of operating and maintaining a hospital located anywhere in India, other than the excluded area, shall be hundred per cent of the profits and gains derived from such business for a period of five consecutive assessment years, beginning with the initial assessment year, if--
(i) the hospital is constructed and has started or starts functioning at any time during the period beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2013;
(ii) the hospital has at least one hundred beds for patients;
(iii) the construction of the hospital is in accordance with the regulations or bye-laws of the local authority; and
(iv) the assessee furnishes along with the return of income, a report of audit in such form and containing such particulars, as may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation to sub-section (2) of section 288, certifying that the deduction has been correctly claimed.
Explanation.--For the purposes of this sub-section--
(a) a hospital shall be deemed to have been constructed on the date on which a completion certificate in respect of such construction is issued by the local authority concerned;
(b) "initial assessment year" means the assessment year relevant to the previous year in which the business of the hospital starts functioning;
(c) "excluded area" shall mean an area comprising--
(i) Greater Mumbai urban agglomeration;
(ii) Delhi urban agglomeration;
(iii) Kolkata urban agglomeration;
(iv) Chennai urban agglomeration;
(v) Hyderabad urban agglomeration;
(vi) Bangalore urban agglomeration;
(vii) Ahmedabad urban agglomeration;
(viii) District of Faridabad;
(ix) District of Gurgaon;
(x) District of Gautam Budh Nagar;
(xi) District of Ghaziabad;
(xii) District of Gandhinagar; and
(xiii) City of Secunderabad;
39
(d) the area comprising an urban agglomeration shall be the area included in such urban agglomeration on the basis of the 2001 census.] (12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger--
(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.
(13) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible business under this section. ( 14 ) - - - - - - No t r e l ev a nt 28 In the assessment order itself the Assessing officer has observed that with reference to Sec 80AB that unless income of a particular nature as mentioned in Sec 80AB is included in the gross total income the deduction under Chapter VI A under the head "C" cannot be allowed. According to him since no income in the nature of integrated business of handling, storage and transportation of food grains was included in the gross total income therefore no deduction was allowed. Since this issue is closely connected with the issue of meaning and nature of the activities mentioned in Sec 80IB (11A) we shall discuss this issue while dealing with the nature of the activities of the assessee.
29 The Assessing officer has also denied the deduction because according to him the assessee has not filed return within due date and therefore as per the provisions of section 80AC, no deduction u/s 80IB(11 A) can be allowed. The main contention of the assessee in this regard was that the assessee had adopted a period of 18 months ending on 30.9.2008 for preparing its accounts and balance sheet was prepared accordingly which was filed with the Registrar of Companies and for carving out the accounts for 12 months ending on 31.3.2008 which was cumbersome procedure and which led to late filing of return. Reliance was placed on various case laws. 40 Sec 80AC has been introduced in the statute w.e.f. 1.4.2006. Similar provision was introduced by way of a proviso u/s 10A(1A) and reads as under:
" 1 0 A [(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,--
(i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter;
(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Allowance Reserve Account") to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) :
[Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section
139.]"
This provision came for interpretation by the Special Bench in case of Saffire Garments Vs. ITO (supra). After detailed discussion the Special Bench held that this proviso is of mandatory nature and if the return is not filed within due date then the assessee would not be entitled to deduction. The Special Bench in this regard mainly relied on the decision of Hon'ble Apex Court in case of Prakash Nath Khanna Vs. CIT (supra) which has been relied before us by the Ld. D.R. for the Revenue. In that case the assessee was a partnership firm and for Assessment year 1988-89 the return of income was to be filed on or before 31st July 1988 but was filed on 20th Mar 1991. Proceedings for late submission of the return were initiated against the appellants u/s 271(1)(a) of the Income -tax Act, 1961 and penalty was imposed. Proceedings in turn u/s 276 CC of the Act were also initiated and a complaint was filed before the concerned Court. Cognizance was taken and process was issued. Three writ petitions were filed by three partners out of the total five partners challenging these processes which were dismissed by the Hon'ble 41 High Court. Thereafter the appellants filed appeal before the Hon'ble Supreme Court and contended that expression "to furnish in due time" in Sec 276 CC means "to furnish within the time permissible under the Act" which in turn would be that the returns furnished u/s 139(4) at any time before the assessment is made has to be reckoned as return furnished u/s 139(1). These contentions were considered by the Hon'ble Supreme Court and it was observed as under:
" O n e of t h e s i gn i f ic a nt t er ms us e d i n s ec ti o n 2 76 CC ( of f enc e of f a i lu r e t o fur n is h r et ur n o f i nc o me ) o f th e I nc o m e- t a x Ac t, 1 9 61 , is " i n d ue t i me ". Th e ti m e wi t h in w h ic h t he r e tur n o f inc o m e is t o be f ur n is h e d is i nd i c at e d on ly i n s ub- s ec ti o n ( 1) of s ec ti o n 1 39 an d no t i n s ub- s ec ti o n ( 4) . Ev e n i f a r e tu r n is fi l e d un d er s ec ti o n 1 3 9( 4 ) th at w o u ld no t d i l ut e th e i n fr ac t io n i n no t f ur n is h in g th e r e tur n w it h i n th e t i me as pr es c r ib e d un d e r s u b- s ec t i on ( 1) of s e c ti o n 1 39 . "
Thus above clearly shows that expression "in due time" has to be reckoned with reference to sub-sec (1) of Sec 139. Sec 80AC very clearly refers to sub-sec (1) of Sec 139. Therefore unless and until return is filed within the due date as provided u/s 139(1), the deduction cannot be allowed. The Ld. Counsel for the assessee placed very strong reliance on the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. MS. Jagriti Aggarwal (Supra) it was vehemently contended that once the Hon'ble Jurisdictional High Court has clearly held that due date has to be reckoned from Sec 139(4) then this Tribunal cannot take a different view. We do not find any force in this contention.
30 In case of CIT Vs. MS. Jagriti Aggarwal (Supra) the assessee has sold her house property for Rs. 45 lakhs and had claimed deduction u/s 54 of the Act. This was not allowed because the assessee had failed to deposit the amount in the capital gain account scheme and also failed to purchase the house property before due date of filing of return. It was contended that the assessee had deposited the amount in capital gain deposit scheme 42 before due date of filing of return as prescribed u/s 139(4). The Tribunal allowed the claim.
31 On appeal by the Revenue it was held as under by the Hon'ble High Court -
" He l d, d is m is s in g t h e ap pe a l, th a t th e s a l e o f th e as s e t h ad ta k en p lac e o n J an u ar y 13 , 2 0 0 6, fa l l i ng i n t h e pr ev i o us y e a r 2 00 6- 07 , t h e r et ur n c ou l d be f i le d be f or e t he e n d of t he r e lev a nt as s es s me nt y ear 2 0 07 - 0 8, i. e. , Ma r c h 31 , 20 0 7. Th us , s u b- s ec t i on ( 4) of s ec ti o n 13 9 pr ov id e s th e ex te n de d p er i o d of li m it a ti o n as an ex c e pt i on t o s u b- s ec t io n ( 1) o f s ec t i on 1 3 9 of t he Ac t. Su b- s ec t io n ( 4) was i n r e la t io n t o t h e ti m e a ll o we d to a n as s es s e e u nd er s u b- s ec t i on ( 1) t o f i l e th e r et ur n. T h er e f or e , s uc h pr ov is i o n w as no t an i nd e pe n de n t p r ov is i o n, b ut r e la tes t o t h e t i me c on t em p l at ed u nd er s ub- s ec ti o n ( 1) o f s ec t i on 1 39 . Th er e f or e , s u b- s ec t i on ( 4) h ad t o be r ea d a l on g w i th s ub- s ec ti o n( 1) . T h er e fo r e , th e du e da t ed fo r f ur ni s h in g t h e r et ur n o f inc om e ac c or d i n g t o s ec t i on 1 39( 1) of th e Ac t was s u b jec t t o t h e ex te n de d p er i o d pr ov i d ed u nd er s u b- s ec t i on ( 4) of s ec t i on 13 9 o f th e Ac t. "
No doubt the Hon'ble High Court extended the meaning of due date and held that time provided u/s 139(4) shall also be taken as due date. This decision was rendered u/s 54. However, Hon'ble Supreme Court in case of Prem Nath Khanna (supra) held - that "due date"
would mean due date as provided u/s 139(1). Therefore we are of the opinion that the decision of CIT Vs. MS Jagriti Aggarwal (supra) is not applicable particularly because there is a specific provision u/s 80AC which prohibits deduction under Part "C" of Chapter VI A unless the returns are filed within time prescribed u/s 139(1). W hen a specific provision is there in the statute same cannot be interpreted in a way to make the provision redundant. Therefore in our opinion, principle laid down by the Hon'ble High Court in case of CIT Vs. MS. Jagriti Aggarwal (Supra) cannot be applied while interpreting the provision of Sec 80AC.
32 The Ld. Counsel for the assessee has also relied on the decision of ACIT Vs. Dhir Global Industrial Pvt Ltd (supra) wherein it was observed that though the proviso to Sec 10B for filing of return u/s 139(1) for claiming deduction but the same was of directory nature and not mandatory. In our opinion, this judgment of Division Bench is no more valid after pronouncement of the decision of 43 Special Bench in case of Saffire Garments Vs. ITO (supra). Similarly in ITO Vs. S. Venktaya(supra), Hyderabad Bench of the Tribunal held that if return was filed late then despite the provisions of section 80AC the deduction was held to be allowable if such delay is beyond the control of the assessee. This position also stands reversed after the decision of Special Bench in case of Saffire Garments Vs. ITO (supra) wherein it is clearly held that the provisions of section 80AC are of mandatory nature. As far as decision of Hon'ble Delhi High Court is concerned, the same is distinguishable on facts because in that case the assessee did not have positive gross total income in the initial year, therefore could not claim the deduction for such initial year. There after for Assessment year 2001-02 the assessee did not claim deduction despite of the positive profits. This omission was noticed somewhere in 2004 by which time filing of revised return has elapsed and the assessee moved a petition u/s 264 which was held to be maintainable because the deduction was not claimed because of bonafide mistake. Therefore clearly on these facts the applicability of provisions of section 80AC was not there for consideration because this provision was introduced only from Assessment year 2006-07 and therefore this case is distinguishable. 33 The Ld. D.R. for the Revenue has rightly pointed out to the decision of Amritsar Bench of the Tribunal in case of Balkishan Dhawan Vs. ITO (supra) wherein it was clearly observed that provisions of section 80AC are mandatory. Head note reads as under:
"Sec 80IB r.w.s. 80AC of the Income -tax Act, 1961 deduction - profits and gains from industrial undertaking other than infrastructure development undertakings - Assessment year 2006-07 and 2007-08 - where an assessee wants to avail deduction u/s 80IB, he has to necessarily furnish his return of income containing such claim before due date specified in Sec 139(1) - held Yes"44
Therefore in view of the above legal position and discussion it is clear that once the return is filed late beyond due date provided u/s 139(1) in Section 80AC then deduction u/s 80IB cannot be allowed. 34 Next reason for disallowing the deduction u/s 80IB is that according to lower authorities activities of the assessee are not covered by the provisions of section 80IB(11A).
35 The Revenue in its paper book has referred to National Policy of Storage, Handing and transportation of food grains which was notified in the gazette of India in 2001. It was noted that the post harvest losses of food grains was serious problem. Even 5% losses would imply loss of 10 million tones of food grains annually. In order to reduce storage and transit losses at farm and commercial level and to modernize the system of handling, storage and transportation of food grains in India. National Policy of handling and storage of food grains has been announced. The main thrust of the policy is -
(i) declaration of food grains storage as infrastructure
(ii) encouragement of mechanical harvesting, cleaning and drying at farm and market level
(iii) transportation of grains from farm to silos by specially designed trucks.
(iv) construction of chain silos at receipt as well as distribution points.
(v) encouraging private sector for building storage capacities in which grains procured by Govt agencies would be stored on payment of storage charges;
(vi) encouraging private sector for development of infrastructure for the integrated bulk handling, storage and transportation of foodgrains.
Therefore for encouraging the private sector, participation in the activities of integrated business of handling, storage and 45 transportation of food grains, Sec 80IB(11A) was inserted in the Act. While introducing this provision the Finance Minister in his speech stated as under:
"The storage of food grains and their transportation are our major concern. Sir, I propose to provide a tax holiday for five years and 30% deduction of profits for the next five years to the enterprises engaged in the integrated business of handling, transportation and storage of food grains."
Memorandum explaining this provision reads as under:
"TAX HOLIDAY FOR UNDERTAKING ENGAGED IN THE INTEGRATED HANDLING, STORAGTE AND TRANSPORTTION OF FOODGRAINS Under the existing provisions of section 80IB of the Income -tax Act, 1961 a deduction is allowed, in computing the taxable income, in respect of profits derived from a new industrial undertaking or a ship or the business of a hotel. To address the country's basic concerns relating to enhanced f ood security and agricultural development, upgradation and modernization of infrastructure for storage, handling and transportation of food grains is a central concern in which introduction of modern technology would bring greater efficiency in the grain management system and minimize post harvest food grain losses."
In this regard circular NO. 14/2001 was also issued on 9.11.2001 which reads as under:
"Tax holiday for undertakings engaged in the integrated handling, storage and transportation of foodgrains.
51.1 Under the existing provisions of section 80IB of Income -tax Act, 1961 a deduction is allowed in computing the taxable income in respect of profits derived from a new industrial undertaking or a ship, or the business of a hotel.
51.2 To address the country's basic concerns relating to enhanced f ood security and agricultural development, upgradation and modernization of infrastructure for storage, handling and transportation of foodgrains is a central concern. The introduction of modern technology would bring greater efficiency in the grain m anagem ent s ystem and m inim ize post harvest foodgrain losses.
51.3 To encourage building of storage capacities, section 80IB has been amended to provide that any undertaking engaged in integrated bulk handling, storage and transportation shall be allowed hundred per cent deduction for the f irst five years and a deduction of 25% of prof its (30% in case of com panies) f or the next five yea rs.
51.4 The amendment will come into effect from Ist April 2002, and will, accordingly, apply in relation to the Assessm ent year 2002-03 and subsequent years."
36 A plain reading of National Policy on storage, handling and transportation of foodgrains, Sec 80IB(11A) and Memorandum 46 explaining the provisions would show that to deal with the problem of wastage of food grains it was decided to encourage setting up of modern infrastructure in storage, handling and transportation of foodgrains. It was further decided to give incentives and encourage the participation of the private sector. However the term "handling, storage and transportation" has not been defined anywhere in the Act. Therefore to understand the meaning of this term first of all we need to understand the definitions of these terms. The Ld. Counsel for the assessee has referred to definition of the term "handling in various Acts which is as under:
"According to Section 2(e) of the National Environment Tribunal Act, 1995 (27 of 1995), handling in relation to any hazardous substance, means the manufacture, processing, treatment, package, storage transportation by vehicle, use collection, destruction, conversion, offering for sale, transfer or the like of such hazardous substance.
As per section 2(c) of the Public Liability Insurance Act, 1991, (6 of 1991), handling means the manufacture, processing, treatment, package, storage, transportation by vehicle, use collection, destruction, conversion, offering for sale, transfer or the like of such hazardous substance.
According to section 2(d) of the Environment (Protection) Act, 1986, handling means the manufacture, processing, treatment, package, storage, transportation, use, collection, destruction, conversion, offering for sale, transfer or the like of such substance. Environment (Protection) Act, 1986(29of 1986), 2(d)."
37 The Ld. Counsel for the assessee has further referred to decision in case of Central Hindustan Orange and Cold Storage Co. Ltd. Vs.Prafulla Chandra Ramachandra Oza, AIR 1967 Bom 126, and Bijoya Kumar Agaruala V. State of Orissa, AIR 1996 Hon'ble Supreme Court 2531, wherein the word "storage" was interpreted. However, the copies of these judgments have not been enclosed, and therefore it is difficult to refer to these decisions. However, it is not difficult to understand the meaning of storage. Storage would imply when an article or a thing kept in some safe custody for a period of time which may vary from one day to many years depending upon the shelf life of the article or thing. For example fresh vegetable can be stored for a few days only but the vegetable 47 like potato can be stored in a cold storage for many months. Similarly it is not difficult to understand the meaning of transportation which would imply movement of goods from one place to another by any mode of transport. Therefore main difficulty is in understanding the meaning of "handling". We have already extracted definition given in various Acts against which the Ld. D.R. for the Revenue has raised serious objections and submitted that definition has to be seen in the context of the particular Act. He has vehemently urged us to ignore the definition given in various Acts quoted by the Ld. Counsel for the assessee. W e partly agree with him. For example the definition in National Environment Tribunal Act, 1995 is given with reference to hazardous substances. However, Public Liability Insurance Act, 1991 as well as the Environment Act, 1996 defines handling to include the processing treatment. packaging and storage. Therefore first question is whether the processing would be included in handling. In our opinion, processing cannot be part of the handling particularly in the context of section 80IB (11A). This becomes clear from reading of Sec 80IB(11A) itself. In the provision itself activity of processing preservation and packaging has been included with reference to fruits and vegetables only as well as meat and meat products. If the legislature wanted the food processing to be included in this provision then Section could have been worded as "from the integrated business of processing, packaging, handling, storage and transportation of food grains". W ith reference to activities in respect of food grains what is described as "from the integrated business of storage and handling and transportation of food grains." In our opinion, the processing and packaging cannot be part of the business of handling, storage and transportation of food grains. 48 38 The Ld. Counsel for the assessee has very strongly referred to the various observations of the Ministry of Food processing and handling particularly the extracts filed in paper book at page 198 to
210. The careful perusal of these observations show that the Ministry of Food processing has firstly described the tax benefits which are allowable under Income -tax Act, 1961, Central Excise Act, Service Tax and in this respect respective provisions have been reproduced. For example Sec 80IB (11A) has been reproduced in respect of business of handling, storage and transportation of food grains. At page 202 to 204 certain observations have been made under the head "Data bank of examining parameters of foodgrains"
and ultimately it has been observed that it is important to define the word "food processing". There after it has been noted as under:
" The ne e d f or d ef i n i ng wh at s ho u l d b e c ons tr ue d as F o od Pr oc es s i n g was nec es s ar y b ec a us e of d i ff er en t c l as s if ic at i ons by v ar i ous d ep ar tm e nts / or g a n i za t io ns ( Mi n is tr y of St at is tic s a nd Pr ogr a m me Im p l em e nt at i on , DG CI & S, DI P P etc . ) o n w h at Fo od Pr oc es s i n g inc l ud es . S i nc e t h is m i n is tr y h as t o c om p i l e t he d at a fr o m a ll s uc h s o ur c es t he r e is a n ee d f or c onc e pt ua l c l ar ity on fo o d pr oc es s i n g. An i nt er m i n is t er i al s t ak e h o ld er m e et i ng was he l d r ec en t ly i n th is Mi n i s tr y , w h er e a c o ns e ns us was r eac h ed o n t he d e fi n it i o n of f oo d pr oc es s i ng i n dus tr ies . H enc e for t h t h is Mi n is tr y w i l l i nc l u de un d er fo o d pr oc es s i ng i nd us tr i es , it e ms p er ta i n in g t o t hes e t wo pr oc es s es v i z. ( a) Ma n uf ac t ur e d Pr oc es s es ; i f any r aw pr od uc t of a gr ic u l tu r e , an i m a l hus b an dr y or fis h er ies is tr a ns f or me d thr o ug h a pr oc es s [ i nv o lv i ng e mp l o y ees , p o wer , mac h i nes or mo n ey ] i n s uc h a way th a t i ts or ig i n al p hy s ic a l pr o p er t i es u n der g o a c ha n ge an d i t th e tr ans f or m e d pr od uc e is e d ib l e a nd h as c o m me r c i a l v a l ue , th e n i t c o mes w it h in t he d o ma i n of F o od Pr oc es s i n g I n dus tr ies a nd ( b) O t he r V al u e- A dd e d Pr oc es s i ng ; H enc e , if th er e is s i gn i fic a nt v al u e a dd i t i on ( i nc r e as ed s he l f l if e, s h e l le d a nd r e ady f or c o ns u m pt i on e tc .) s uc h pr od uc e a ls o c o m es un d er fo o d pr oc es s i n g , ev e n i f i t d oes n o t un der g o m an u fac tu r i n g p r oc es s es . 39 The above definition of food processing is clearly related to activity of food processing but as observed above this cannot be related with the integrated business of handling, storage and transportation of food grains. We have already explained the reasons for this by analyzing Sec 80IB(11A) which itself has made reference in respect of fruits and vegetables as well as meat and meat products, the activities of processing and packaging has been included whereas in case of food grains only the activity of handling, storage and transportation has been included. But at the same time 49 there has to be some meaning of the activity of handling of food grains. It cannot be said that legislature has used the expression handling without any intention. Therefore to find out the intention of the legislature let us understand the process of handling required to be carried on in respect of the food grains. In this regard it will be relevant to refer to the process carried out by the assessee which has been described through pictorial chart (in the paper book filed on 30.9.2013 at page 58 to 82), the process has been described as:
(1) paddy harvested in the farm - (2) Paddy is loaded in the trollys automatically through a combine - (3) Trollys comes to the mandi - (4) Paddy is unloaded and mounds are created - (5) Paddy is purchased in terms of mounds through auction - (6) Paddy is cleaned by the labour and filled in the gunny bags which are stitched manually - (7 Bags are loaded in company trucks and transported to the factory -
(8) At factory the weight is recorded at the factory gates - (9) The bags are opened and paddy is poured in the open godowns where driers and fans are installed to reduce the moisture for proper storage -
(10) After demoisturisation is completed paddy is repacked and loaded into the trucks -
(11) These loaded trucks of the company transport the paddy to covered godowns -
(12) Paddy is unloaded in the godown and put in stacks -
(13) Paddy is stored in such godown for a period of one year to two years depending on the quality and time required for maturing the same -
(14) Godowns are fitted with climatic control and fumigation facilities so as to preserve the paddy from withering out - from insets and other natural calamities -
(15) Paddy is also kept at a particular moisture level - (16) After maturing of paddy from one year to two years the same is de-husked and sent to modernized Silos -50
(17) Paddy is kept in the Silos from 15 to 60 days depending upon the climatic conditions and moisture level and sent for processing i.e. milling unit.
40 According to the assessee the above process is directly related to integrated business of handling, storage and transportation. It has been pointed with reference to schedule of fixed assts that the assessee has purchased more than 150 trucks during the implementation of mega project. It was also pointed out that new land was purchased during Financial year 2006-07, 2007-08 and 2008-09 and fresh addition were also made and majority of the expansion was carried out in building of stores. Even the addition to machinery was mainly on account of machinery installed in the stores for keeping the climate under control, creating of drying facilities and fumigation facilities etc. Even the Ld. D.R. for the Revenue has clearly stated that the word "handling" in its original sense and in the context of food grains would encompass within its ambit, processes and activities relating to Creation of facilities for cleaning and removing of foreign material from the food grain so as to prevent damage from such material, Facilities for drying of food grains to prevent loss during storage due to excessive moisture, Pre storage bulk grain dumping and drying facilities, Creation of facilities for mechanized sampling, weighing and detection of live infectants, Mechanized receiving and handling by storing in Silos equipped with facilities of aeration and fumigation, Loading and unloading facilities and traffic management and Dumping pits, chain conveyors, elevators and faculties for mechanized shipment so as to integrate storage with quick transportation.
41 In our opinion, when the activities shown by the assessee through process flow chart are compared with the activities which admittedly constitute 'handling' as per the Revenue then it emerges 51 that the assessee has definitely created certain facilities which can be said to be related to handling, storage and transportation of food grains. The assessee is carrying the paddy from the market in its own trucks which are weighed at the gate wherein drying process and initial cleaning takes place. After opening the bags and putting the paddy through these processes particularly the process of defusing so as to remove the inborn pests. After this the process it is again packed and carried to the stores where the same is kept for maturing for a period of one year to two years. All facilities for securing maximum security to the foodgrains i.e; paddy have been installed to safeguard the paddy from withering, spillage and other natural calamities. Regular fumigation is done to preserve the food grains from natural calamities and to save it from various pests.
After keeping the paddy for a period of 12 to 24 months the same is transferred to the Silos where the same is again stored for a period of 15 to 60 days and then sent to milling machine. Therefore it is clear that before process of milling of paddy begins it has to be stored in a proper storage so as to prevent the losses of such food grains. This has been definitely done by the assessee. Therefore it is clear that the assessee has definitely done handling and storage of food grains as well as the transportation because the assessee has employed its own trucks. At this stage we posed a question to ourselves that if the facilities created by the assessee are not in the nature of handling and storage then which activities would fall in that category ? The obvious answer which we can think of that these activities have to be classified as handling and storage etc. because if the meaning was restricted only to creating of stores then legislature would have made the deduction available in case of warehousing facilities then instead of using the expression 'the integrated business of handling, storage and transportation of food 52 grains' the deduction would have been provided 'for the business of modern warehouses' which has not been done. This clearly shows that perhaps the facilities which have been created by the assessee were the kind of facilities which were made eligible for the deduction under Sec 80IB(11A).
42 The Ld. D.R. for the Revenue has also pointed out that the assessee was basically engaged in the business of milling of paddy in earlier years which has continued even after the installation of mega project. It was further pointed out that in form 3CD for Assessment year 2005-06 the assessee has shown main business activities as "manufacturing of rice, cattle feed, crushing of oil seeds, solvent extractions etc. Similarly in the annual report also the main activity shown as manufacturing of rice. Even the bank loans were obtained for the purpose of manufacturing of rice. No doubt the company under the name of "Lakshmi Grain Processor Pvt Ltd" was incorporated in the year 1990 and was converted into a Public Ltd company in the year 1993 and the name was changed to "Lakshmi Grain Processor India Ltd". In 1994 the name was again changed to "Lakshmi Overseas Industries Ltd." and later on in 2006 the name was finally changed to "Lakshmi Energy and Foods Ltd". It is also admitted by the assessee that the deduction u/s 80IA has been claimed upto Assessment year 2001-02. But in our opinion, it cannot be said that the assessee has carried on the same business. This is particularly so because the mega project has been sanctioned by the Govt of Punjab vide their letter dated 6.9.2005 (copy of which is available at page 282 to 283 of the paper book). The assessee started implementing this project from Financial year 2005-06 itself and sum of Rs. 40 crores was invested in the new project itself on which about Rs. 3 crores was spent on the building for stores and another Rs. 33 crores for installation of water 53 treatment, stream channel and drier, cleaners etc. was spent which is said to be towards handling of such food grains. Rs. 2.88 crores was spent for acquisition of trucks and about Rs. 80 lakhs was spent towards acquisition of computer and office building etc. The assessee has further spent substantial amount amounting to Rs. 123 crores in Financial year 2006-07 and Rs. 191 crores in Financial year 2007-08 and Rs. 52 crores in Financial year 2008-09. Out of this substantial amount have been spent towards acquisition of trucks, creation of storing facility and various handling equipments. Only a sum of Rs. 12.99 crores is said to have been spent for purchase of paddy milling machine. These facts clearly shows that new project came up over a period of time starting with the financial year 2005-06. In our opinion, it is not necessary to start new handling unit separately for claiming benefit of Sec 80IB(11A) even the upgradation of old unit would also entitle a businessman to this benefit. Memorandum explaining the provisions of section 80IB(11A) itself provides so. W e have already reproduced relevant paras above but at the cost of repetition we would like to reproduce particular para again as under:
' Un der th e ex is t in g pr o v is i o ns of s ec t i on 80- I B of th e I nc om e- t ax Ac t , a de d uc t i on is a ll o we d , in c om pu ti n g t h e t a x ab l e inc om e, in r es pec t of p r of its der i v e d f r om a ne w i n dus tr ia l u n der t ak in g, o r a s h ip or t he b us i ne s s of a h ot e l. T o ad dr es s t h e c o un tr y' s b as ic c o nc er ns r e l at i ng t o e n ha nc ed f o o d s ec ur it y a n d agr ic u lt ur a l d e v el o pm en t, u p g ra dat ion an d mod e rniz at i on of i nf r as t r uct ur e f or st o r ag e, h an dli ng and t r an spo rt at i on of f oodg r ai ns is a c e ntr a l c onc er n i n wh ic h in tr od uc t i o n o f m oder n t ec h n o lo g y w ou l d br in g gr e at er ef f i c i enc y i n th e gr a i n m a na g em ent s ys tem a nd m in im i ze pos t h ar v es t f oo d gr ai n l os s es . ' The above clearly shows that deduction was provided for upgradation and modernization of infrastructure for storage, handling and transportation of food grains.
43 We do not find any force in the submissions that merely because business of the assessee has described its business as manufacturing or rice etc. in form 3CD as well as annual report and 54 therefore such business cannot be regarded as integrated business of handling, storage and transportation of food grains. W e find force in the submissions of the Ld. Counsel for the assessee in this regard that in the business world "Business of handling, storage and transportation" may not be recognized as such because same does not connote revenue generation and therefore same was shown as business of manufacturing of rice etc. Further the Ld. Counsel for the assessee has rightly referred to the decision of Hon'ble Supreme Court in case of Satluj Cotton Mills Ltd. Vs. CIT, 116 ITR 1 (S.C) where it has been observed that the treatment of a particular entry has to be done according to the nature of transaction and not according to the description given in the books of accounts. In the commercial world "business of handling and storage" may not be recognized and the assessee may have deliberately or inadvertently referred to the business as business of manufacturing of rice but we need to take into consideration the actual nature of the business. As discussed above, the business of the assessee seems to be composite one were the activity of handling, storage and transportation have been carried out but further activity of processing of paddy has also been undertaken.
44 From the above a question would arise whether the assessee is required to carry out only activity of handling, storage and transportation of food grains for claiming deduction u/s 80IB(11A). In our opinion, the answer has to be "no" because in the commercial word an entrepreneur would engage in any business only when the same is commercially profitable. Therefore in case of integrated business of handling, storage and transportation of food grains may not itself be very profitable and if the same is combined with the activity of processing of paddy into rice by spending smaller amount of money for milling mills then such entrepreneur would definitely 55 extend the activity and get into the composite business of handling, storage and transportation and processing of the rice. Let us imagine the situation where the businessman is engaged in the business of procuring, handling, storage and transportation of paddy separately and then selling the same to another businessman who is engaged in the business of only processing of paddy into rice then same would involve unnecessary further cost in terms of carrying the paddy from handling and storage unit to processing unit because the paddy bags have to be loaded into the trucks carried to the processing unit and then again unloaded and put in to the milling machines for processing of the paddy. This will make both the businesses unviable. Even the legislature intention cannot be that deduction is allowable only if the activity of handling, storage and transportation is undertaken separately because in that case legislature would have provided for deduction in case of warehouses which is not there. In this regard the Ld. D.R. for the Revenue had strongly placed reliance on the decision of Mumbai Bench of the Tribunal in case of ITO Vs. Shankar K. Bhanage, ITA No. 3216 & 3217/2010. In that case the assessee was a contractor appointed by F.C.I. for handling the food grains at Turbhe/ Kalyan/ Bhivandi shed and stored food grains at Bhiwandi Depot and transported foodgrains from above goods sheds to Bhiwandi Depot. For these activities the assessee claimed deduction u/s 80IB (11A) and the same was allowed by the CIT(A). On appeal to the Tribunal the deduction was denied by observing that the assessee was not eligible for deduction because the assessee has not created any infrastructure for carrying out these activities. Thus it is clear that in this case the assessee was merely carrying on the activities without any infrastructure whereas in case before us the assessee has purchased trucks, created facilities for storage and installed 56 various machines like dryers, climatic control equipment and fumigation facilities. Thus the assessee before us has not only carried out handling and storage activities but has also created infrastructure for handling, storage and transportation of the food grains.
45 The Assessing officer also denied the deduction by observing that the main business of the assessee was manufacturing of the rice and not of handling, storage and transportation as observed earlier neither it is possible commercially or nor it is intention of the legislature that for claiming this deduction a businessman should have independently engaged in the business of handling, storage and transportation of the foodgrains. The Ld. Counsel for the assessee in this regard has rightly referred to the decision of Sanchita Marine Products (P) Ltd. Vs. DCIT (supra). In that case the assessee was engaged in the business of marine products and sale of Ice. The assessee claimed deduction u/s 80IB. The deduction was denied by the Revenue because the assessee was not running a cold storage independently. On appeal the Tribunal held as under:
S ec t i on 8 0- I B pr ov i d e s th at wh er e gr os s to t a l i nc om e of a n as s es s ee i nc lu d es any pr o fi ts a nd g a in s der iv e d f r o m a ny of t he e l i g ib l e bus i n es s es , a d e duc t i on eq u a l t o s p ec i f ie d p er c en t ag e of s uc h pr of it s w il l b e gr an te d i n c om p ut at i o n of to ta l i nc o m e, an d t h at th is d e duc t io n w i l l b e giv e n o n ly f or s uc h p er io d as m ay be s p ec if i ed . T h is s ec ti o n a p p li es on ly to a n in d us tr i a l u n der t ak i ng a nd o ne o f th e e li g i b le b us in es s e s is th a t s uc h a n in d us tr i a l un d er t ak in g o p er a t es on e or mo r e c o l d s t or ag e p l a nt o r p la nts i n a ny p ar t of t h e In d i a. T he w or ds i n s ec ti o n 80- I B( 1) ar e 'p r o f its a nd g a ins d er iv e d f r o m any o f t he e l ig i b l e b u s i nes s ' an d it is o n ly s p ec if i ed p er c e nt a ge of s uc h pr o f its wh ic h is e li g i b le f or de duc t io n u n d er s ec t i on 8 0- I B. Th er ef or e , t he q u es t i on t h at ar os e for c o ns i de r at i on in t h e i ns t an t c as e was as t o w he th er or n o t th e pr of i ts ear n ed by t h e as s es s e e c o u ld be s a i d t o be d er iv ed fr o m th e bus i n es s o f op er at i n g c o l d s t or a ge p la nt , an d i f s o, t o w h at ex te n t t h e pr o f its e ar ne d by t he as s es s ee c o u l d b e s ai d t o be der iv e d fr o m t h e bus i n es s of c ol d s t or a g e.
T he as s es s e e bo u gh t r a w m ater i a l ( i .e . s qu i ds , pr a wns a n d f is h, etc .) , was h e d an d c le a ne d t h e s am e, we i g ht ed th em an d s tor e d t he m at er i a l in t he c h il l r oom bef or e d es k in n in g, gr a d in g, f u r t her wa s h i ng , c le a n in g an d g l a zi n g th e s am e. In th e n ex t s t e p, t h e m ater ia l s o pr o d uc e d was f r o ze n, p ac k ed , l a be l e d a nd k ep t i n s tor a ge t i l l i t was s hi pp e d o ut . T he e nt ir e pr of its f r om pr oc es s i n g f r o ze n s e a f oo d c o u ld n ot b e s a i d t o be d er i ve d f r om th e bus i nes s of o p e r at i ng a c o ld s tor a ge p l a nt . Bu t, t h e c o ld s t or ag e of t h e as s es s e e ha d a v i ta l an d im por t an t r o le to p la y s o f ar as pr oc es s i ng of f r o ze n s ea f o o d was c o nc er ne d. At d if f er e nt 57 s ta g es bef o r e , dur i n g a nd af t er pr oc es s i n g of m ate r i a l, c o l d s to r ag e f ac il i t ies wer e to b e us e d in t he bus i n es s . T h er ef or e, a s ig n if ic a nt pa r t of t h e as s es s e e's pr of it m us t h a v e b e en he l d t o b e d er i ve d f r om the b us i nes s of o per a ti n g c o l d s tor a ge p l a nt . T h er e w as n o f or c e i n t he s t a n d of t h e r e v en u e th at t he as s es s e e was e l ig i b le f or d e d uc ti o n u n de r s ec t io n 80 - IB o n l y wh en i t r ec e i v ed t he m on e y f or us e of c o l d s t or a g e b y a n o uts i d er a n d no t wh en i t us e d t h e c o ld s tor a ge its e lf . T he s c h em e of s ec t i on 8 0- I B is t h at t he d ed uc ti o n is a v a i la b le i n r es p ec t of pr of its a nd g a ins d e r i v ed f r om the b us i n es s of o per at i n g a c o l d s tor a ge p l an t, an d no t t h e b us in es s of of f er i n g c o l d s t or ag e s er v ic es t o ou ts id er s . As l on g as pr of it c ou l d be r eas o na b l y h e l d t o b e f r o m the b us i n es s of o per a ti n g c o l d s tor a ge p l a nt , th e as s es s e e wa s e l ig i b le f or d ed uc t i o n un d er s ec t i on 80- I B ir r es p ec ti v e of wh et he r or n ot t he s er v ic es wer e us ed b y t he as s es s e e i ts e lf or b y o uts i der s on p a ym en t of c ons i d er a t io n . I de a l l y, it s h o u ld b e t h e am ou nt t h at th e as s es s e e wo ul d h a ve p a id t o a n ou ts id e c o nc er n, if i t was t o us e th es e f ac i l it i es f r om s uc h a c onc er n. H o we v er , s i nc e s uc h an am ou nt c ou l d n ot be c om put e d at t he ins ta nt s t ag e a nd ha v i ng r eg ar d to t h e f l o w c har t f i l ed b y t h e as s es s e e whic h d em o ns tr at e d v ar i ous s ta g es of pr oc es s i ng an d us e of c o l d s tor a ge f ac i l it i es i n s u c h pr oc es s i n g, i t was ap pr o pr i a te t o h o ld t h at 3 0 p er c e nt of th e pr of i ts of t h e a s s es s e e c ou l d b e tr e a te d as d er i v e d f r om th e b us in es s of op er at i n g th e c o l d s t o r ag e pl a nt . T her ef or e, th e As s es s in g O f f ic e r was d ir ec t e d to c om pu te d ed uc ti o n i n r es p ec t of 3 0 p er c en t of th e pr of i ts e ar n e d b y t h e as s es s e e f r om t h e bus i nes s of pr oc es s i n g f r o ze n s e a f oo d. "
Thus it is clear that it is not necessary to carry out a particular activity independently for which the deduction is eligible. Even if such activity is part of overall activity even then the deduction is allowable but of course such deduction is to be allowed on a proportionate basis. Similar view was taken by Mumbai Bench of the Tribunal in case of Samraj Seafoods Pvt Ltd Vs. ITO, ITA No. 2875/Mum/2005. In the case before us the Assessing officer has observed that the assessee has not received any independent income from handling, storage and transportation of the food grains. We have already discussed this aspect earlier and further in view of the decision in case of Sanchita Marine Products (P) Ltd. Vs. DCIT (supra) and Samraj Seafoods Pvt Ltd Vs. ITO (supra). it is clear that it is not necessary for a businessman to receive income from each of the activity separately in case of a composite business.
This can be further understood from a simple example of a car manufacturer. Let us say for example a deduction is available for manufacture and sale of engine of the car. Now a car manufacturer could be producing its own engines and using the same in final assembly of the Car then it cannot be said that the assessee has not 58 received separate income from sale of engine, therefore deduction is not allowable.
46 Another contention given by the Ld. Counsel for the assessee is that similar deduction was allowed in case of L.T. Overseas Pvt Ltd (copy filed at page 901 to 919 of paper book for Assessment year 2004-05 & 2005-06). Perusal of these assessment orders clearly show that deduction u/s 80IBB(11A) amounting to Rs. 2,75,27,680 and Rs. 3,01,78,411 was claimed u/s 80IB(11A) which was allowed by the Assessing officer himself. Perusal of the assessment order further show that the assessee is engaged in the business of processing of rice. Since activities of the assessee before us are same to the activities of L.T. Overseas Pvt Ltd (supra) the deduction has to be allowed. In this regard the Ld. Counsel for the assessee rightly referred to the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. Sardari Lal Mehra (supra). In that case the assessee became a Member of two lucky schemes in August and Sept in 1967. According to the schemes each Member was required to pay a sum of Rs. 100 towards each scheme for a month for a period of six months. At the end of each month a draw was made and the person who won such draw was paid, a sum of Rs. 6000 and was further entitled to stop the contribution in future. All the members except those in whose favour draw had gone, were to get Rs. 6000 each at the end of six months and in addition to receive Rs. 500 as interest. The assessee had contributed Rs. 400 in the first scheme when the draw was declared and he received Rs. 6000. In the second scheme he contributed Rs. 700 when the draw was again drawn in his favour. The Assessing officer included a sum of Rs. 10,900 in assessee's income. The AAC agreed with the action of Assessing officer. On appeal, the Tribunal held that the assessee is simply lucky and the amount received by him could not 59 be termed as income. The Tribunal further noted that in similar circumstances the addition was deleted by the Appellate Assistant Commissioner of Amritsar where different assesses were involved. In this background it was observed that same assessees placed in similar circumstances must be dealt with similar manner to lessen the multiplicity of the proceedings and avoidable litigation. This finding was confirmed by the Hon'ble High Court. Our constitution under article 14 ensures equal treatment of law to every citizen. Therefore if a particular assessee has been granted exemption similar deduction cannot be denied to another person in similar circumstances. The Revenue has not shown that the order in case of L.T. Overseas Pvt Ltd (supra) was reversed later on in any proceedings. Therefore on this principle also we are of the opinion that the assessee is entitled to deduction u/s 80IB(11A). It is also worthwhile to note that the assessee has been allowed deduction in Assessment year 2010-11 and copy of the assessment order has been filed at page 151-197 in the synopsis paper book. After detailed analysis in Assessment year 2010-11 deduction u/s 80IB(11A) was allowed at 70% of the overall profits. It has not been shown before us that this order has been reversed in any legal proceedings. Further the Ld. Counsel for the assessee had relied on the decision of Amritsar Bench of the Tribunal in case of DCIT Vs. Chaman Lal & Sons (supra). In that case the deduction u/s 80IA was denied because there was an issue whether the assessee was manufacturing rice or not. One of the contention before the Tribunal was that in similar facts deduction was allowed in subsequent years. The Tribunal held that the deduction to be allowable and also observed at para 9 as under:
" An o th er i m p or t an t as pec t w hic h c a n no t b e los t s i gh t of is t ha t t he as s es s e e has c l a i me d be f or e us th at i n th e s ubs e qu e n t y e ar s a ls o d ed uc ti o n was c l a im e d on id e nt ic a l p at ter n a nd w as a l l ow e d ac c o r d in g ly . T h e l ear n ed De p ar t m en ta l 60 Re pr es e n ta t iv e was r eq u ir ed to v er ify th e fac tu a l p os it i o n i n t h i s r eg ar d. O n nex t he ar i ng , it w as r ep or te d by hi m t ha t th e de d uc t i on w as a l l ow e d, i n t h e c our s e o f pr oc e ed i n g s u nd er s ec ti o n 1 43 ( 3) , as s t at e d on b eh a lf o f th e as s es s e e a n d fu r t her no ac t i on un d er s ec ti o n 2 63 was tak e n. K ee p i ng in t o c ons i d er a t io n t h is fac t th at t h e as s es s ee w as a l lo w ed d e d uc t i on in t h e s a me fas h io n ev e n af ter th e pas s i n g o f t he i ns t a nt as s es s m e nt or d er , w e ar e a t a l os s to ap pr ec ia te any l og i c in pur s u i ng t h e m at t er i n a p pe a l. A l be i t th e pr i nc ip l e o f r es j ud ic at a is n ot s tr i c tly a p p lic a b le t o th e pr oc e e di n gs un d er th e Ac t, y e t, t he doc tr in e of c o ns is t e nc y do es n ot p er m i t t h e De p ar t m en ta l A u th or it i es t o c ha n g e its s t a nd w h en t h er e i s n o c h an g e i n th e f a c ts of l a ws i n o ne y e a r v is - à- v is t he ot h er , wa r r a n ti n g de p ar t ur e. O ur v i ews g e t s s u pp or t fr o m a r ec en t dec is i on r en d er ed in th e c as e of D IT v . Lov e ly B a l S h ik s h a Par is ha d [ 2 00 4 ] 2 66 I TR 34 9 ( De l h i) . I n v ie w o f t he af or en ot e d f ac t u a l a n d l eg a l p os it i on , it b ec om es ap p ar en t th a t th e l e ar ne d C IT( A) w as j us t i fi ed in d ir ec t in g t he As s es s in g O f fic er to al l o w d ed uc ti o n i n r es p ec t o f pr of i t fr om t he tr a d i ng op er at i o ns i n K ar n al u ni t. W e u ph o ld t h e i m pu g n ed or d er o n t his s c or e .
Thus it is clear that if a deduction is held to be allowable in subsequent years then same has to be allowed in the earlier year if the facts are identical.
47 The Ld. Counsel for the assessee has also relied on the decision of Hon'ble Supreme Court in case of Bajaj Tempo Ltd (supra). W e are not discussing the facts of the case because the decision has been relied on for the proposition that the incentive provision should be construed liberally. It was observed as under:
" A pr ov is i o n i n a tax i ng s t at u te g r a nt i n g i n c en t iv es f or pr o mo t in g gr ow th a n d dev e l op m en t s h ou l d b e c o ns tr u ed li b er al ly ; an d s i nc e a pr ov is io n for p r o m ot i ng ec o n om ic gr ow t h h as to b e in ter pr et e d l ib er a lly , t h e r es tr ic ti o n on it t oo h as t o be c o ns tr u e d s o as to a dv a nc e th e o bj e c tiv e of t h e pr ov is i o n an d n ot t o fr us tr at e i t.
48 The Ld. D.R. for the Revenue had tried to distinguish the decision by referring to many other decisions where it is observed that if the provisions of the Act are clear and if there is no ambiguity then there is no need to resort to the principle of liberal construction. W e find that the way Sec 80IB(11A) has been worded there is definitely some ambiguity in the sense that it is not clarified anywhere in the provision whether the activity or integrated business of handling, storage and transportation of food grains has to be carried out independently. Even the term handling and storage has not been defined. W e have already observed that economically it was not possible to independently carry on the business of handling, 61 storage and transportation of food grains because normally a person engaged in this activity would also carry next logical steps by processing of the paddy into rice. Otherwise the person who is in the business of handling, storage and transportation of food grains will have to sell such paddy to a businessman who is engaged in the business of processing of paddy into rice which would un-necessary lead to further handling, storage and transportation of the paddy and rather nullify the object of avoiding wastage of food. Therefore in our opinion, the principle given by the Hon'ble SC in case of Bajaj Tempo Ltd have to be applied in this case and this provision has to be interpreted liberally. In view of this ratio and detailed discussion above, we are of the opinion that the assessee is entitled to proportionate deduction on the part of business which dealt with the integrated activity of handling, storage and transportation of the foodgrains.
49 The next reason for denying of deduction was non furnishing of a certificate from C.A in form 10CCB. Admittedly a certificate has been filed before the Ld. CIT(A). Now it is almost settled that audit report can be filed before completion of assessment proceedings and in some of the decisions it has been further held that such report filed even before the first appellate authority as well as before the Tribunal would be valid. The Hon'ble Punjab and Haryana High Court in case of CIT Vs. Mahalaxmi Rice Factory(supra) has held as under:
" 2 Hel d, t h at th e pr ov is io ns of s ec t i on 8 0J ( 6 A) h a d t o b e h e l d d ir ec t or y on ly t o th e ex t en t t h at i n c as e t he a ud i t r e p or t w as no t f i l ed a lo n g w i th r et ur n, it c o u ld be f i le d any t i me b ef o r e t h e as s es s m en t t ak es p l ac e, as it is at t h at t im e wh e n th e As s es s i ng O ff ic er ap pl i es h is m i n d o n the c as e . Th e as s es s ee f i l e d th e au d it r e p or t a ft er th e as s es s m e nt h a d a lr e ady b e en fr a me d by t he As s es s i ng O ff ic er . T her e for e , t h e Tr ib u na l w as n ot r ig ht i n gr a nt i ng r el i ef t o t he as s es s e e. "62
50 Similarly in earlier decision in case of CIT Vs. Shahzedanand Charity Trust, (supra) it was held that the provision u/s 12A for furnishing of audit report is not of mandatory nature. Hon'ble J & K High Court in case of CIT Vs. Trehan Enterprises, (supra) held as under:
" He l d, th a t ev e n i f it b e ac c e pt e d th at t h os e c er t if ic at es h ad no t be e n fi l e d dur i n g t he c o ur s e o f a s s es s m e nt pr oc e e d in g s be fo r e th e I nc om e- ta x O ff ic er , th e Co m m is s i o ne r o f I nc o me - t ax ( Ap p ea ls ) s ho u l d h av e tr ea te d t h e r e qu ir e me n ts t o hav e b ee n m et a nd t h en fr a me d th e as s es s me n t o r r em i tt ed t h e c as e b ac k to th e I nc o m e- t ax O f fic e r t o pr oc e e d i n ac c or da nc e w it h l aw in t h e f ac e of s uc h c er t i fic a tes .
51 Similar view was taken by Hon'ble Madras High Court in case of CIT Vs. Jayant Patel (supra). Hon'ble Karnataka High Court in case of CIT Vs. Ace Multi Taxes System Pvt Ltd (supra) even went to the extent that if report is filed even before the tribunal the same is valid. The Ld. D.R. for the Revenue has also relied on various judgments but in our opinion, they stand distinguished in the light of the above noted judgments and particularly the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. Shahzedanand Charity Trust (supra) and CIT Vs. Mahalaxmi Rice Factory (supra). 52 The Ld. Counsel for the assessee had also referred to decision of Hon'ble Punjab and Haryana High Court in case of National H o r t i c u l t u r e B o a r d V s . C C I T , CW P N o . 9 3 3 9 o f 2 0 0 8 . I n t h i s c a s e a n application for exemption u/s 10(23C)(iv) was rejected because audit report in form No. 10BB were not filed with the return and same was not dated even. Hon'ble High Court made the following observations:
" The v i ew tak e n in th e im p ug n ed or de r is h i g hly t ec h n ic a l . Th e pr ov is io n hav i n g b ee n s u bs t a nt i al ly c om p l ie d w i th , t he au d it r e por t s h ou l d h av e be e n tak e n i n to ac c ou n t ev en i f, s tr ic t ly s p eak i n g , i t was n ot f il e d w i th t he r e tur n a nd no t in F or m 1 0 B B b u t i n For m 10 B as s t at e d in th e im p u gn e d or d e r . Th is ma d e no d if fer e nc e to th e s p ir i t o f t h e r e qu ir e m e nt la i d d o wn . Ac c or d i ng ly , w e a l l ow th is pe t it i on a nd q u as h t h e i m p ug n ed or der A nn ex ur e P- 1 an d d ir e c t r es p on d en t No . 1 to tak e a fr es h dec is i on i n ac c or da n c e w it h l aw , w it h i n o n e m o nt h fr o m th e r ec e ip t of a c o py o f t h is or d er . "63
Above clearly shows that the requirement of filing various audit reports is only of technical nature.
53 Other objection of the Ld. D.R. for the Revenue was that the report which is available at page 413 to 419 shows that same has been signed by one Shri Narinder Gulati who was not tax auditor and this report shows that deduction at Rs. 50.95 crores whereas actual deduction claimed was only Rs. 17.32 crores.
54 We have carefully perused sec 80IB(13) refers to the requirement u/s 80!A (7) to be complied which is regarding auditing the accounts and furnishing of audit report. Careful perusal of this provision would show that nowhere it is mandated that such report has to be given by the same Chartered Accountant who is auditor / tax auditor of the company. As far as difference in the figures is concerned, we find merit in the contention of the Ld. Counsel for the assessee that the assessee-company was having serious disputes with the earlier C.A and that is why proper guidance was not available and deduction was claimed at Rs. 17.35 crores. We have already referred to the disputes with the C.A in earlier paras whose services were also terminated. In our opinion, the report in form 10CCB, filed before the Ld. CIT(A) should have been considered by the Ld. CIT(A) particularly in view of the fact that appeal proceedings are extension of assessment proceedings as held by the Hon'ble Supreme Court in case of Kanpur Coal Syndicate (supra). 55 Next objection for disallowing the deduction was that the assessee has not complied with the provisions of section 80IB(2)(i). In this regard the Assessing officer has relied on the statement of Shri Rajinder Sandal, C.A as well as the schedule of fixed assets for the year ending 31 s t Mar 2008 and observed that there was no addition to the plant & Machinery because the same was shown as nil. Further there was no evidence regarding discarding of old machinery. Therefore even if new unit was 64 there it was formed by splitting old unit. It is also alleged that no bills for purchase of machinery were produced. First contention of the Ld. Counsel for the assessee is that Sec 80IB(11A) does not incorporate the requirement of Sec 80IB (2)(i) because the deduction is allowable under sub-sec 3 to 11, 11A, 11B and requirement of sub-sec (2(i)) were specifically made applicable to industrial undertakings only. 56 W hat the Ld. Counsel for the assessee is trying to emphasize is that the restriction contained in Sec 80IB(2)(i) refers to only industrial undertaking whereas the deduction itself is allowable under various sub- sections for different kinds of businesses and some of them are industrial undertakings and some of them are not industrial undertaking for example deduction is allowable in case of hotels or operation of ship or for development of housing project, multiplex theatres etc. which cannot be called industrial undertaking. Similarly deduction u/s 80IB(11A) is for the eligible business and specifically for the "integrated business" of handling, storage and transportation of food grains which cannot be called industrial undertaking. W ithout going into this controversy let us first examine whether the assessee has violated the restrictions provided u/s 80IB(2)(i). 57 Before we consider the addition of new plant & Machinery, let us consider the contention regarding discarding of machines for which a certificate has been filed from an Engineer and C.A. at pages 400-401 and 413-420. However, during the course of hearing it was noticed from the schedule of fixed assets that it does not show any discarding of machines because the assessee has claimed depreciation on all the plant & Machinery. Therefore we have to proceed further with the assumption that no machinery was discarded. W hen this was confronted to the Ld. Counsel for the assessee, he admitted that actual new purchase of machinery was started in Financial year 2005-06 itself, therefore Assessment year 2006-07 may be taken to be the first year of the new project.
6558 Reasoning for deduction in Assessment year 2006-07 as the first year is that mega project has been sanctioned by the Govt of Punjab on 6.9.2005 and admittedly the project was implemented over a period of time. Therefore in our opinion, Assessment year 2006-07 should have been reckoned as the first year for the purpose of eligibility of deduction u/s 80IB(11A). However, no such deduction has been claimed but that itself will not hinder the claim of deduction in the later years. 59 As on 1.4.2005 the brought forward W DV of plant & Machinery was Rs. 6,05,31,624 (this figure can be verified from the schedule of fixed assets filed in the paper book at page 225 to 229D). During this year the assessee has added two types of machinery and the details are as under:
Addition made before Addition made after 30.09.2005 30.09.2005 Control Devices Rs. 215010567/- Rs. 20022590/-
Plant & Machinery Rs. 65125655/- Rs. 33409022/-
Thus total value of new plant & Machinery installed comes to Rs.
33,35,67,934.
60 The Ld. D.R. for the Revenue had raised the objection that the assessee had made contradictory statement in the sense that before the Assessing officer and the Ld. CIT(A) it was claimed that industrial undertaking was started in Assessment year 2008-09 whereas before the Bench he has conceded that the industrial undertaking was started in A.Y. 2006-07. W e find no force in this objection because it was clear that the mega project was sanctioned in 2005 thereafter the assessee started acquiring new land, building and machinery in the financial year 2005-06 onwards. Moreover Ld. Counsel for the assessee conceded that the project was started in A.Y. 2006-07 then the assessee is likely to loose the deduction for first two years, therefore it is rather against the assessee then in favour of the assessee. Otherwise also as pointed out by the Ld. Counsel for the assessee that there cannot be any estoppel against the law. The Ld. D.R. for the Revenue has referred to the decision 66 of Agra Bench of the Tribunal in case of Aqua Plumbing Pvt Ltd Vs. ACIT (supra) and Jain Udai Hotel (P) Ltd Vs. ACIT (Chandigarh Bench) (supra) wherein it was observed that the applicability of the conditions contained in Sec 80IB(2)(i) has to be examined in the first year. W e have alread y concluded that in this case first year has to be reckoned as Assessment year 2006-07. The Ld. D.R. for the Revenue had referred to certain figures and objected that the figure of Rs. 6,05,31,624/- cannot be taken for old machinery because figure is on higher side. The difference is mainly because the Revenue is trying to take up the gross figures and not the W DV. W hen the question whether the project is formed by splitting old machinery is to be considered then obviously the W DV of the old machinery is to be considered. This is so because in some cases old machinery may be very old and may not have any value and if the gross value was to be taken the distorted results may be obtained. In any case the Ld. Counsel for the assessee relied on the decision of CIT Vs. Rajiv Bhatnagar (supra) (Delhi Tribunal) wherein it has been specifically observed at para 7.(ii) as under:
" W hil e wor k i n g o ut th e to ta l v a lu e o f t h e p l a nt & Mac h i ner y e ar l i er us e d f or any ot h er p ur pos es , W D V a lo n e n ee d t o be tak e n r a th er th a n t he or ig i na l pur c h as e pr ic e o f t he s a i d o ld mac h i ner y . "
Similar view was taken by the Hon'ble Calcutta High Court in case of CIT V. Harine Khola Ice Cold Storage (supra), therefore it is clear that for calculating the figure of 20% only the W DV i.e; book value of the old machinery has to be taken.
61 There was one more objection that control devices should not be reckoned into new plant & Machinery because the assessee has claimed 100% depreciation on these items and therefore new plant & Machinery would be only Rs. 9.85 crores. Even this objection cannot be upheld because the idea in Sec 80IB(2)(i) is to compare the purchase of new machinery with the value of old machinery, therefore value of the control devices can not be ignored simply because the assessee has claimed 67 100% depreciation on the control devices which have been installed before 30.9.2005. In this regard we further find force in the submissions and the decision relied on by the Ld. Counsel for the assessee in case of CIT V. Hindustan General Industries Ltd (supra) that for considering the meaning of reconstruction the value of old machinery may not be considered at all. Hon'ble Delhi High Court observed in this connection as under:
" W e, h ow ev er , a gr e e wi t h th e le ar n ed c ou n s e l th a t i t is d if f ic u l t t o s ay t h at i n th e pr es e nt c as e t he r e h as be e n a r ec o n s tr uc t io n of a b us i ne s s a lr e a dy i n ex is t enc e . Th e ex pr es s i on " r ec ons tr uc t i on " was d is c us s e d by th e B om b ay H i gh Co ur t i n a d if f er e n t c o nt ex t al t og e th er . In t h at c as e t h er e w as a tr ans f er of t h e as s e ts o f a p ar t n er s h i p t o a l i mi t ed l ia b i l ity c om p any by w ay o f s a le i nc l u d in g th e g o o dw i l l. Ho wev e r , t he a gr e e m en t o f t r ans f er d i d no t c ov er th e s t oc k - i n- tr a d e an d c er t ai n c r e d its an d o ut- g o in gs as we l l as d e bts a n d l ia b i l it i es of t h e par t ner s h i p w er e als o n ot tak e n up by th e ne w c om p a ny . It was he l d th at t he agr e e me nt in s ub- s t a nc e as we l l as i n f or m was on e o f ou t a n d o ut s a l e a nd th at i t c o u l d n ot b e d es c r ib e d as a r ec o ns t r uc t i on o f a n ex is t in g bus i n es s . In ot h er w or ds , t h e ex pr es s io n " r ec o ns t r uc t io n " in t ha t c as e w as lo ok e d at f r o m th e po i nt o f v ie w of th e o w ner s h i p o f th e bu s i nes s a nd t he d ec is i o n o f th e Co ur t was t ha t wh er e t h er e was a r e a l an d ef fec t i v e c ha n ge i n th e o wn er s h i p of t he bus i n es s th a t c ou l d no t b e r ec o ns tr uc t i o n . In t h e c o ur s e of t h e d is c us s i o n, ho w ev er , c er t ai n obs er v a t io ns hav e be e n ma d e by th e Bo m b ay Hi g h C our t ( wh ic h h av e b e e n un d er li n e d* e ar li er ) t o i n di c at e th e c i r c u ms t a nc e s i n w hic h a r eo r g a ni za t i o n o f a b u s i nes s c an be t ak en t o i nv olv e a r ec o ns tr uc ti o n. Bu t i t is no t ev er y a l ter a ti o n i n th e m o de , m et h od or s c op e o f t he ac t iv it i es of a bus i n es s an d i t is n ot ev er y tr a ns f er of as s e ts fr o m o ne u n it t o a no t her t h a t w i l l i nv o lv e r ec o ns tr uc t io n . T he e x pr es s i o n is n o do u bt v er y w i d e b ut i t do es no t t ak e in a c as e o f a c o mp a ny s e tt i ng u p or es ta b l is h i n g a to ta l ly i n de p en d e nt a n d v ia b l e i nd us tr i a l u n it f or c ar r y i ng o n t he s a m e or s i m il ar b us i nes s ev e n th ou g h i t m ig ht be s o s et up by w ay o f ex p a n di n g t he alr e a dy ex is t i n g b us i n es s . Th e e mp h as is i n s . 84 i s no t o n bus i nes s b u t on un d er t ak i ng . Th e ex em p ti o n is gr a n te d t o ne w un d er t ak i ngs a nd th e es s e nc e o f t h e ex e mp t i on is t h at i t is a ne w i nd us tr i a l un i t th at is es t ab l is he d a n d t h at i t is n ot m er e l y a r e has h of a n a lr ea dy ex is t i n g un i t. "
62. Similar observations have been made in the case of Textile Machinery Corporation Ltd Vs. CIT 107 ITR 195 and the relevant portion reads as under:
" A n ew ac t iv ity la u n c he d by th e as s es s e e by es t ab l is hi n g n e w p la n ts a nd mac h i ner y by i nv es t i n g s u bs ta n ti a l f u n ds m a y pr od uc e t h e s a m e c om m o di t ies o f th e ol d b us i n es s o r i t may pr o duc e s om e ot h er d is t inc t m ar k et a b le pr od uc ts , ev e n c om m o di t ies w hi c h m ay fe e d t he o l d bus i n es s . T h es e pr od uc ts m ay b e c ons u me d by th e as s es s e e i n his o l d bus i nes s or m ay be s o l d i n t h e o p e n ma r k e t. O n e t h in g is c er t a in t h at t he ne w un d er t ak i ng m us t be an in te gr at e d un i t by i ts e l f w h er ei n ar ti c l es ar e pr od uc e d an d a t l eas t a m i n i mu m o f t e n per s o ns w it h t h e a i d o f p ow er a n d a m i n i mu m o f tw e nty per s o ns w it h ou t t he a id of p ow er h av e be e n e mp l oy ed . Suc h a n e w i nd us tr i a l ly r ec o g ni za b le u ni t of an as s es s e e c an n ot be s a id to b e r ec o ns tr uc t io n o f h is o l d bus i nes s s i nc e th er e is no tr a ns fer of any as s ets of t h e o l d b us in es s t o t he ne w u n der tak i ng wh ic h tak es p l ac e w h en th er e is r ec o ns tr uc ti o n o f t he ol d b us i nes s . For t he pur p os e of s ec t i on 1 5C th e in d u s tr i a l un i ts s e t u p m us t be n ew i n t h e s e ns e th a t n ew p la nts a nd m ac h i n er y ar e er ec t e d f or pr o duc i ng e it he r t he s a me c o m mo d it i es or s om e d is t i nc t c o m mo d it i es . I n or d er t o d eny th e be n ef i t o f s ec t i on 15 C th e ne w un d er t ak i ng m us t be f or me d by r ec o ns tr uc t i on of t he ol d b us in es s . "68
63 Now when the value of old machinery at Rs. 60531624/- is compared to the value of new machinery in Assessment year 2006-07 amounting to Rs. 33,35,67,934/-, it becomes clear that the value of old machinery is about 18.14% and therefore same is within the limit given in Sec 80IB(2)(i). Therefore in our opinion, the assessee has not violated the conditions laid down in Sec 80IB((2)(i).
64 The Assessing officer has raised one more objection that no deduction has been claimed in the return filed by the assessee and therefore no deduction can be allowed. Perusal of the statement of income at page 2 of the paper book clearly show that deduction was claimed in the return of income perhaps some mistake was committed during the processing of return and that is why the assessee had applied for rectification of mistake and this mistake was rectified in the order u/s 154 on 25.11.2009 (copy available at page 27 of the paper book), therefore this allegation of the Assessing officer is totally incorrect. 65 The next objection which has been raised by the Ld. CIT(A) is that the deduction was claimed initially at 35% and later on claim was made for 100% and same has not basis. W e find force in the submissions of the Ld. Counsel for the assessee that because of the dispute with Shri Rajinder Sandal, C.A the assessee may have wrongly been advised to claim the deduction at 35% but when the company came to know about the actual deduction allowable then same was claimed at 100% and even in the next year the deduction has been claimed @ 100%. Otherwise also as pointed out by the Ld. Counsel for the assessee it was held in case of Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi & Others, 118 ITR 507 (S.C), that mistake committed by the Counsel for the assessee cannot be used for denying a benefit to the appellant. 66 In respect of the rate of deduction both the parties made elaborate submissions. The Ld. Counsel for the assessee mainly contended that in view of the definition of food processing given by the Ministry of Food 69 Processing Industries, milling activity should be included in the integrated business of handling, storage and transportation of food grains, therefore 100% deduction should be allowed. Alternatively he submitted that processing involved only a small effort and plant for this purpose was costing only Rs. 12 crores therefore deduction should be allowed at reasonably higher rate of 90 to 95 %. Further Food Corporation of India was giving Rs. 15 per Qtl as processing charges and considering all these facts, deduction may be restricted to a reasonable percentage. 67 On the other hand, Ld. D.R. for the Revenue had mainly contended that processing is most important of the activity and therefore in case the Tribunal holds that deduction is allowable the same has to be given at the lowest possible level.
68 After considering the rival submissions we are of the opinion that 100% deduction cannot be allowed to the assessee because we have already held while discussing the activities of the assessee that processing of paddy cannot be said to be covered by the activities given in Sec 80IB(11A). Therefore to find out the quantum of deduction we refer to the assessment order for Assessment year 2010-11 wherein it was observed that milling expenses vary from Rs. 15 to 25 per Qtl depending upon the nature of paddy to be milled. It is also to be noted that some of the bi-products are also obtained in the milling process which also generate some profits. It has to be noted that major profit would accrue to the assessee from storage activity because storing one quintal of basmati costing between Rs. 2500 to 3500 per Qtl which would involve lot of interest element as well as storage charges. This makes it clear that maximum profit would accrue to the assessee from the activity of storage itself. Therefore considering the overall facts and circumstances as well as the observations made in the assessment order for Assessment year 2010-11 we are of the opinion that the assessee 70 should be granted deduction @ 70% of the total profits of the composite unit i.e; profits from the whole business except the profits of power plant. 69 In conclusion it can be said that the assessee is definitely eligible for deduction u/s 80IB(11A) because the assessee started integrated business of handling, storage and transportation of food grains in Financial year 2005-06 i.e. Assessment year 2006-07 on proportionate basis @ 70%. However, the assessee is not entitled to deduction in Assessment year 2008-09 because the return of income was filed late and therefore deduction cannot be allowed in view of the restrictions contained in Sec 80AC. Therefore we confirm the action of Assessing officer and Ld. CIT(A) in denying the deduction because return has been filed late in violation of Section 80AC.
70. Third Issue The third issue in this appeal is regarding disallowance of depreciation amounting to Rs. 72,21,35,592/-. This depreciation was claimed at the rate of 50% (1/2 of 100%) for the power plant installed during the second half of financial year. It was claimed before the Assessing Officer that this power plant was commissioned and a certificate from the fabricator M/s Shriram epc was filed for this purpose. The Assessing Officer noticed that no depreciation on this power plant has been claimed under the Companies Act. Even the director's report stated that power plant was commissioned in August 2008. Shri Rajinder Sandal, Chartered Accountant of the assessee company was summoned and his statement was recorded in which he clearly stated that power plant was commissioned in somewhere in July / August 2008. The assessee was confronted with these questions and in response the assessee mainly relied on the repot given by the Shriram epc contractor and fabricator of the power plant which clearly states that since power plant has been commissioned on 25 t h March 2008, therefore, depreciation should be allowed. The Assessing Officer did not agree with the same. 71 He referred to the Statement of Shri Rajinder Sandal recorded u/s 131 and the relevant portion has been reproduced in the assessment order which reads as under:-
"Q. P le as e ex p la i n th e n at ur e of bus i nes s M/ s Lux m i E ner gy a n d Fo ods L t d. ?
A ns . In t he F. Y . 20 0 7- 0 8 , t he n at ur e of b us i nes s of t h e a b ov e c o nc er n was m a nu f ac t ur in g o f r ic e, c a tt l e fe e d, c r us h i n g of o i l s e e d , s o lv e nt , ex tr ac t io n a n d r ef i n er y a nd g e n er a t i on o f p ow er .
Q. P le as e ex p la i n wh e n t he po we r p la nt s t ar te d ?
A ns . Th e po w er p la n t was s tar te d i n J u ly or A ug us t, 2 0 08 .
Q. In c o l um n N o. 8 o f F o r m 3 CD , y ou h av e m en t io n ed g e ne r a t io n o f po w er as o ne o f t h e bus i n es s . P l eas e s t a t e w h en th is b us in es s was s t ar t e d.
A ns . I h av e c om p l et e d my a ud i t in F eb , 20 0 9. E ar l i er I h a d t o l d y o u t ha t th e b us in es s o f p ow er p la nt s t ar te d i n t he mo nt h o f J u ly or A u gus t, 20 0 8. C l er ic a l ly my ju n ior s t af f h as m en t io n ed po wer pl a nt as on e of t h e bus i n es s i n F or m No . 3 C D. "
He noted that Shri Rajinder Sandal had also furnished a copy of depreciation chart as admissible under the Income Tax Rules which clearly depicted that according to the auditor, no depreciation was allowable on the power plant. Since the assessee has not claimed depreciation in the Accounts maintained under the Company's Act and moreover in the Directors report, it is clearly stated that power plant was commissioned in August 2008 and further no certificate was filed from any statutory authority and the certificate filed from M/s Shriram epc was of no use because, boiler was manufactured by M/s Tharmex Ltd, Pune. Further, assessee had not produced the bills. In this background the claim of depreciation was rejected.
71 On appeal before the Ld. CIT(A), it was mainly submitted that Assessing Officer had rejected the certificate of an expert that too from reputed company like M/s Shriram epc without any reason. Further, complete bills and vouchers were produced before him and, therefore, it is wrong to state that no bills were produced. Further, a certificate from the Director of Boilers, Punjab was also submitted showing that power plant was in fact started w.e.f. 25.3.2008 was not considered by him. The 72 power generated in the power plant in the period starting from 25.3.2008 till middle of August 2008 was used for internal consumption of the assessee. It was strongly contended that statement of Shri Rajinder Sandal was recorded at the back of the assessee and, therefore, has no evidentiary value. Moreover, the statement of Mr. Sandal was not correct because earlier he was auditor of the company as well as tax consultant and annexure attached to the balance sheet including depreciation were actually initialed by him. The depreciation schedule given during the statement was fully signed which shows that it was different. It was pointed out that Mr. Sandal has given a false statement perhaps under the duress. Mr. Sandal was involved in the processing of the return filed for the said assessment year wherein depreciation on the Power Plant, had been claimed. In fact, in response to the return filed claiming depreciation on the power plant the assessing office had issued intimation under section 143(1)(a) wherein the claim for 80IB was not given. Mr. Sandal carrying the power of attorney of the assessee company appeared before the AO from time to time and got the intimation rectified on 25.11.2009, whereby the deduction as claimed in the return of income was allowed. In fact, Shri Sandal made oral and written representation before the AO for getting the rectification order in favour of the company. His letter duly signed and addressed to the ACIT, Patiala is available on record and is enclosed herewith (also obtained through RTI). Hence, Shri Sandal could not have carried out the rectification without being aware of the return filed by the assessee claiming depreciation on power plant as per the depreciation schedule already filed and signed by him. This evidence is itself conclusive and sufficient to demolish all the purported statements against the assessee. Further, Mr. Sandal was not a qualified engineer to state categorically when the power plant was commissioned and in any case the assessee had disputes with him so his statement should not have been relied.
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72. The Ld. CIT(A) after considering the submissions observed that since director's report has clearly mentioned that the power plant was commissioned in August 2008, the same shows that plant was not commissioned before March 2008. He also dealt with the various objections in this regard and the statement of Sandal and ultimately observed that the same is to be accepted. In this background, he confirmed the disallowance of depreciation.
73. Before us, Ld. Counsel for the assessee submitted that power plant was constructed during the financial year 2007-08 and the total cost was Rs. 1,44,72,71,183/- and since plant was commissioned on 25.3.2008, 50% depreciation was claimed. He contended that full details of the account of construction of the power plant were filed before the Assessing Officer, (copy of which is available at pages 196 to 271 of the paper book). The bills were also produced before him and Assessing Officer has clearly mentioned in the order that photocopies of some of the bills were furnished. Such copies have been filed in the paper book at pages 318 to 319 of the paper book. It was also pointed out that 19 boxes containing bills and vouchers showing purchases of power point were filed before CIT(A) vide letter dated 8.5.2012, (copy of which is placed at pages 337 & 338 of the paper book). Since the bills were voluminous, the CIT(A) directed that the same may be produced before Assessing Officer for his verification. Therefore, bills were produced before Assessing Officer and copy of the letter requesting him to see these bills were filed on 8.5.2012, (copy of which is available at page 450 of the paper book). However, the Assessing Officer declined to go through these bills. In these circumstances, a request was made before us to go through the bills as the same were brought to the Court and we have test checked these bills.
74
74. The Ld. Counsel further submitted that a confirmation from M/s Shriram epc has been filed, (copy of which is available at page 323 of the paper book). It was submitted that M/s Shriram epc was contractor and fabricator of the power plant and, therefore, this certificate should not have been rejected lightly. It is also pointed out that Assessing Officer misunderstood this certificate by stating that boilers were produced by M/s Thermax Ltd. No doubt the Boiler was manufactured by M/s Thermax Ltd but the same was procured by the assessee and the erection work was done by M/s Shriram epc and, therefore, right person to give the certificate was M/s Shriram epc only. He submitted that this certificate could not have been ignored as held by Hon'ble Punjab & Haryana High Court in the case of CIT v Shahbad Cooperative Sugar Mills Ltd. 10 Taxman.com page 84(copy of the decision filed at page 86(v) of the synopsis paper book.). He also referred to the certificate issued by Director of Boilers, (copy of which is available at pages 328 of the paper book) which shows that permission was given for use of the boiler between the period 31 s t Oct 2007 and 30 t h April 2008. A letter from District & Town Planner was also filed which gave environment clearance on 12 t h April 2007. Another letter from the office of Chief Engineer, Commercial Tariff Regulation Board dated 23.5.2006 is also filed through which the Directorate has invited the assessee for a meeting in connection with the supply of the power from captive power plant. This clearly shows that power plant was being fabricated as early as in May 2006. He also ref erred to the various documents in the paper book like agreement with M/s Shriram epc, evidence for purchase of turbine etc. He referred to pages 992 and 993 of the paper book which is copy of the ledger of power plant from 1.4.2008 to 31.8.2008 which clearly shows that purchase of Rs. 19,28,949/- were made after 31.3.2008 which is only towards smaller items of repairs etc which clearly shows that no further equipment was purchased and plant was completed before 25.3.2008. 75
75. As far as mention in the Director's report regarding commissioning of the plant in August 2008 is concerned, it is pointed out that supply of a power to Govt. of Punjab began in August 2008 and therefore, in the Director's report mentioning about the commissioning of the power plant was stated with relation to accrual of revenue and therefore, no adverse inference can be taken. Regarding the statement of Shri Sandal, he contended that it was already pointed out that assessee was having dispute with Shri Rajinder Sandal and ultimately the company has to part relation with him in a bad taste and that is why he played mischievous role. His statement is totally contradictory because in the tax audit report, copy of which is available at pages 4 to 11 of the paper book, it is clearly stated that generation of power is one of the business of the assessee company and this report has been signed by Shri Rajinder Sandal. He pointed out that depreciation chart provided by Shri Rajinder Sandal to the Assessing Officer is same except the last line is missing. He has initialed on all the annexures whereas on the chart he has put full signatures which creates a suspicion. In any case, Shri Rajinder Sandal had himself prepared the return of income for the said assessment year in which this depreciation was claimed. However, there was some mistake in the processing and therefore, an application for rectification u/s 154 was filed which was ultimately allowed by the Department and relevant papers in this regard are filed at pages 25 to 27 of the paper book. No cross examination of Mr. Sandal was allowed which was pointed out to the Assessing Officer in a letter (copy of which is placed at pages 312 to 314 of the paper book) and, therefore, this statement could not have been relied. He also contended that a disallowance cannot be made merely on the basis of statement of an expert or a counsel and in this regard he relied on the decision of Hon'ble Delhi High Court in the case of CIT Vs Naresh Khattar(HUF) 261 ITR 664 (Delhi) and Sona Electric Company v 76 CIT 152 ITR 507, Parkash Chand Natha v CIT 301 ITR 134 (M.P.) and page 183 of paper book various other judgments.
76. He further submitted that in respect of this issue that even if a plant is kept in a store or is ready for use, even then depreciation has to be allowed and in this regard he relied on the following decisions:-
CIT Vs. Pepsu Road Transport Corporation [2002] 121 Taxman 232 (P&H) CIT Vs. Shahbad Co-op Sugar Mills Ltd., Shahbad [2011] 12 Taxmann.com 421 (P&H), CIT Vs. Oswal W oolen Mills Ltd (2007) 289 ITR 261 (P&H) and various other judgments to the same effect.
He also contended that depreciation has to be allowed on the basis of provisions of Income Tax Act and Income Tax Rules and it is not necessary to provide the depreciation under Company's Act if no such requirement is there. The plant was used for captive consumption from 25.3.2008 till the month of August 2008 and, therefore, depreciation should have been allowed. However, on a query by the Bench that how the rate of 100% is applicable; he admitted that depreciation would be admissible under the head 'Plant & Machinery' by column 8(ix). The rate mentioned in this column is 80% and he conceded that if depreciation has to be considered the same should be allowed @ 80%.
77. On the other hand, the Ld. DR submitted that assessee had claimed depreciation as per the books of account under the Companies Act amounting to Rs. 20,14,91,803/- whereas depreciation for the purpose of Income tax was claimed at Rs. 1,22,20,71,921/-. In fact no depreciation has been claimed in respect of power plant which makes it abundantly clear that power plant was not used by the assessee company. The assessee was bound by the provisions of Companies Act to claim depreciation, if the asset was acquired during the year and was used for 77 business purposes. Since the accounts are required to be prepared u/s 115JB in accordance with the part II & III of Schedule VI of the Company's Act, the obvious reference would be that power plant was not started during the year. He contended that statement of Shri Rajinder Sandal had to be recorded because the assessee company has not filed any depreciation chart as per income Tax Act with the return and the chart given by Shri Rajinder Sandal clearly shows that total claim of the depreciation was Rs. 49.99 crores which did not include any depreciation on the power plant. A statement of Shri Rajinder Sandal given by the assessee alongwith questionnaire in this respect was confronted to the assessee. In response, the assessee filed a letter stating that opinion of a professional would not affect the claim which is otherwise statutorily allowable. The Assessing Officer correctly observed that the assessee has failed to produce any certificate form any statutory authority regarding commissioning of the plant. It was further contended that the statement of Shri Rajinder Sandal as well as report of the Director, clearly shows that power plant was commissioned in August 2008, therefore, it cannot be said that power plant was commissioned in March 2008. In this regard he referred to the decision of Allahabad Bench of the Tribunal in the case of India Polyfibres Ltd v ACIT 60 ITD 433 wherein it was held that directors report shall be given a statutory recognition. It was pointed out that certificate issued by the Directors of Boilers only refers to the inspection and passing of the boilers which does not amount commissioning of the plant. The certificate form Shriram epc is from a private company and is of self serving nature. He also pointed out that in the annual report for financial year 2008-09, it bas been mentioned that second phase of 15MW Biomass Power plant came into production making the total capacity of 30 MW . This report relates to the period 1.10.2008 to 30.09.2009, therefore, it clearly shows that second unit of the power plant was started after 30.09.2008. As per Appendix, the rate of depreciation is 78 80% and the same is in respect of energy saving device like boiler and furnace etc. There would be some other assets like building etc. which would be part of power plant and the same may not be eligible for full depreciation.
78 The Ld. DR pointed out that various decisions relied on by the Ld. counsel wherein it has been held that depreciation is allowable even if the asset is kept ready, then depreciation should be allowable but these decisions cannot be equated with the proposition that such depreciation is to be allowed even when the passive user is there and the Directors report states otherwise.
79. W e have heard the rival submissions carefully in the light of material available on record as well as judgments cited by the parties. Since there was some dispute whether bills were produced before the lower authorities and it was contended by Ld. Counsel for the assessee that during remand proceedings 19 boxes of the original bills and vouchers were produced before the Ld. CIT(A). In this regard a reference was made to the letter dated April 24, 2012 (copy of the same is available at pages 337 to 449 of the paper book) and the assessee was directed to produce the bills before the Assessing Officer and in this regard a reference was made to the letter written to Assessing Officer which was submitted in his office on 8.5.2012 (copy of the same is available at page 450 of the paper book), still the same were not gone through. Therefore, to avoid further controversy we had verified the major bills during the course of hearing and found that major bills were available. It was also noticed that most of the purchases have been made by September / October 2007 whereas the same has been entered in the books of account in the month of February / March 2008. In any case, copy of the details of the ledger account of power plant was f iled before the Assessing Officer, copy of which is available at pages 196 to 271 of the paper book. According to the 79 assessee, the plant has been commissioned on 25 t h March 2008 whereas on the basis of the director's report and statement of Shri Rajinder Sandal in which it was stated that plant was commissioned in August 2008, depreciation was denied. First of all we find that main turbines have been imported from Japan and the invoices have been issued (copy of the same is available from pages 994 & 995) in the name of M/s Shriram epc Ltd, Chennai, account of M/s Lakshi Overseas Industrial Ltd i.e. the assessee company. The turbines have been shown to have been given to ship in November 2006 and February 2007, therefore, the same must have been received by the assessee by March 2007. Once the turbines come as early March 2007 there is every likelihood that plant can be commissioned by March 2008. The perusal of the copy of agreement with Shriram epc ( placed at pages 971 to 979) shows that assessee had issued a letter of intent for erection of the power plant on 4.6.2005 and ultimately an agreement for this erection was entered on 29.6.2005. A letter was issued on 23.5.2006 from the office of Chief Engineer, Commercial Directorate of Tariff Regulation Board which was furnished before us during the hearing wherein the assessee company was invited for negotiation for supply of the power. It is also stated in the letter that office of the Chief Engineer has an understanding that the assessee company was about to start a power plant. This fact clearly shows that the firm's stand for installation of power plant was finalized before June 2006. A certificate has been issued by M/s Shriram epc (copy of which is available at page 323 of the paper book) which reads as under:-
"Ref No. SEPC/JIII Dated 25,3,2008 To Whom It May Concern Th is is to c er t if i ed t h at w e hav e i ns t a l le d 2 X 1 5 MW B io m as s B as e d Co g en er at i on p o wer P l an t for L ak s h i E ner gy & F oo ds L td a t K ha m ma n o. Th e P l an t w as c o m m i s s i on e d a l on g w it h au x i l iar i es i n Mar c h 2 0 0 8 a nd 80 g iv e n pr oc es s s te a m an d po w er t o in h ous e u n it o f R ic e p l an t of M/s Lak s h i E n er gy & Fo o d s L td .
For Shriram EPC Ltd Sd/-
(SANJAY KUMAR) Asstt. General Manager-Projects"
80 The Assessing Officer had two objections on this certificate. Firstly, the certificate is from private party and secondly the boiler has been manufactured by M/s Thermax and then how M/s Shriram epc could give such a certificate. W e find no force in these objection; firstly, M/s Shriram epc is a very large company in India engaged in the business of EPC contracts whereby they undertake the erection of various buildings and plants. This certificate should not have been rejected lightly particularly considering the fact that M/s Sriram epc was the fabricator of the Power Plant and not related to assessee. In fact the Hon'ble Punjab & Haryana High Court in the case of CIT v Shahbad Cooperative Sugar Mills Ltd (supra) confirmed the findings of the Tribunal wherein depreciation had been allowed on the basis of certificate issued by the Engineer. The sanctity of the certificate issued by M/s Shriram epc is much more than the certificate issued by an ordinary engineer. Secondly, it is to be appreciated that M/s Shriram epc were engaged in the erection of the plant as various equipments were being purchased or outsourced directly from the various manufactures and then were being erected and installed by M/s Shriram epc. W e have already noted that for examples the Turbines were imported from Japan and invoices for the same clearly mention the names of M/s Shriram epc on account of Lakshmi Energy & Foods Ltd. This shows that M/s Shriram epc was engaged in the business of erection of the plant, therefore, it is their duty that after erection is completed and the plant becomes functional. The individual suppliers of the particular machine cannot be held responsible for non functioning of 81 the plant, therefore, what ever coordination is required, was being done by M/s Shriram epc. After all in such large projects some specialized agency like Shriram epc is required to make it sure that after assembly of individual machines and parts the whole plant becomes functional. Therefore even if boiler was manufactured by M/s Thermax Ltd, it was only M/s Shriram epc. who could give a certificate for commissioning of the plant.
81 It was vehemently argued by Ld. DR that there is no certificate available from any statutory authority like Pollution Control Board, Central Excise Department or Customs Dept. or Central Ground W ater Board, District Town Planning office. W e do not find any force in these submissions. Firstly, a no objection certificate dated 12.4.2007 has been filed before us from the District Town Planner, District Administrative Complex, Fatehgarh Sahib. W e fail to understand how Customs and Excise Department have any role to play in giving any certificate to the assessee. Excise authorities are responsible mainly for collection of excise and where any equipment has been purchased, excise duty is charged. The Customs Department was concerned with clearance of goods mainly at the port but they cannot give any certificate that plant has been commissioned. It was not pointed out to us whether the assessee was required under any law to obtain certificate from any statutory authority, therefore, the general allegation that assessee has not produced any certificate from any statutory authority are of no use. Rather assessee has filed a certificate from Director of Boiler, Govt. of Punjab, copy of which is available at pages 328 of the paper book and through this provisional order the Director of Boiler had given permission to use boiler during a particular period from 31.10.2007 to 30.4.2008. Though there was no column in the Certificate to show the date of issue but obviously if the permission has been given w.e.f. 31.10.2007, the 82 certificate must have been issued earlier. The only difficulty in respect of the certificate is that it was not earlier available and was filed on 24.12.2010. therefore, clearly the relevant authority i.e. Director of Boilers (Punjab) which in our opinion has clearly given permission to start the boiler which could mean that boiler was ready for functioning. In fact, it was pointed out that such certificates are issued after every six months after inspection of the boiler and later certificate were also produced before us for our verification
82. Another major objection of the Department is that Director's Report shows that plant was commissioned only in August 2008. W e are satisfied with the explanation given by the assessee that the Director's Report is issued from a commercial angle and plant was shown to have been commissioned from the date when actual revenue started generating. A further doubt was raised by Ld. DR that in fact the power plant consisting of two turbines of 15 MW each and the first was to be shown in operation in August 2008 and second was shown to be operational later on in the annual report of financial year 2008-09 which comprise of a period from 1.10.2008 to 30.09.2009 and, therefore, the plant was commissioned obviously after 30.09.2008. As observed earlier, we are satisfied with the explanation that the Director's report could be for the purpose of share holders and could be on the basis of actual revenue generation from the government and will not have any bearing on the allowance of depreciation. In fact, as observed earlier, both the turbines have been purchased from Japan and the same were dispatched or loaded in the ship on November 30, 2006 & February 07, 2007, therefore, there cannot be a gap of starting the power plant and it is not possible that second turbine was started as late as after September 2009. In this regard, we further find force in the contention of Ld. Counsel for the assessee that no major purchases have been made after 31.3.2008 (copy 83 of the account of the power plant has been furnished at pages 992 to 993 of the paper book) which is running from the period 1.4.2008 to 31.3.2008 which clearly shows that only purchase to the tune of Rs. 19,28,949/- have been depicted in the power plant account which was stated to be on account of replacement of minor parts and some small repairs. This makes it clear that purchases in respect of power plant were completed before March 2008. Further revenue has already allowed the depreciation on the basis of W DV as on 1-4-2008 in the assessment year 2009-10, this means if the second turbine was started after September 2009 then such depreciation could not have been allowed and therefore the contention of the Ld. D.R. for the Revenue is totally incorrect.
83. One more important objection have been raised by the Revenue is that Shri Rajinder Sandal has clearly sated in his statement that power plant became operational only in the month of July 2008. Further, the depreciation chart submitted by Shri Rajinder Sandal as per Income Tax Rules, clearly shows that no depreciation was claimed and therefore, claim of depreciation was only an after thought. W e do not find any force in this objection also. First of all, it is to be appreciated that assessee company was having serious dispute with Shri Rajinder Sandal and ultimately his services were terminated. Secondly, Mr. Rajinder Sandal has prepared return in which clearly claim of depreciation has been made. In fact, there was some error in processing of the return and income was taken at Rs. 50,.96,67,625/- instead of Rs. 17,83,48,667/- and, therefore, a rectification application was made under his signatures and which was ultimately rectified vide order dated 25.11.2009, (copy of which is available at page 27 of the paper book). Thus, the claim of expenditure was clearly made in the return of income itself. Secondly, the assessee has sought cross examination of Shri Rajinder Sandal which was not granted and only copy of his statement was furnished to the assessee. Therefore, it can be said that statement of Shri Rajinder Sandal was 84 recorded at the back of the assessee and the same cannot be relied on. In this regard, we further find force in the submissions of the Ld. Counsel on the basis of decisions cited by him. In case of CIT v Naresh Khattar (HUF) (supra), the Hon'ble High Court confirmed the findings of the Tribunal wherein addition u/s 69B was deleted by holding that mere statement made by the assessee's counsel in the Civil Court would not be sufficient material to conclude that such figures represents assessee's income. Similarly, in the case of Parkash Chand Natha v CIT (supra), the Hon'ble Delhi High Court observed that if the statement was to be relied against which an affidavit was filed controverting the same, then it was obligatory on the part of the assessing authority to allow cross examination. Many other decisions were cited by the Ld. Counsel for the assessee but we are not discussing the same because it is settled that if statement is given by the third party the same cannot be relied without allowing cross examination particularly when the cross examination was sought by the assessee. In fact the Hon'ble Supreme Court in the case of Kishan Chand Chela Ram 125 ITR 713, (SC) has very clearly held that statement of third party cannot be used unless opportunity to controvert the same has been given to the assessee.
84 The Ld. DR has also contended that assessee has not provided any depreciation as per section 205 and 350 of the Companies Act and the Ld. Counsel for the assessee has pointed out that part I & II of the Schedule VI of the Companies Act provides that depreciation should be provided u/s 350 over the useful life of any specific asset which means depreciation is to be provided on the useful life of the asset. This clearly shows that no specific rate of depreciation has been provided under part I & II of Schedule VI of the Companies Act. In our opinion, in any case violation under Companies Act, if any, would not have any impact on allowance of depreciation under Income-tax Rules.
8585 The Ld. counsel has also relied on various decisions for the proposition that where a plant is ready and in such a case if the same is even kept in a store even then the depreciation is to be allowed. Now let us examine these decisions.
86 The first case relied upon was of CIT Vs Pepsu Road Transport Corporation (supra). In this decision the issue was whether engines kept as spare in the store were entitled to depreciation and the Hon'ble High Court observed at para 10 as under:-
" 10 . Ev er y t hi n g ag es w it h th e p as s ag e of ti m e, i nc l ud i n g en g i ne s wh ic h ga th er d us t i n t he s t or e r o o m. Th er e i s a nor m a l de pr ec ia t io n of v a l ue ev en w he n a mac h in e or e qu i p m en t is mer e ly k e pt i n a s tor e. Sec o nd ly , k ee p in g i n v ie w th e n at ur e o f th e as s es s e e 's bus i n es s , i t has t o ne c es s ar i ly k e pt c er ta i n s par e e ng i n es in s t or e to m ee t an e m er ge nt s it u at i o n. Th er e is n ot h in g on r ec or d t o i nd ic at e t h at a n e n gi n e, wh ic h w as pur c h as ed a y ear or tw o ear l i er , wi l l fe tc h t he s a m e pr ic e i n op e n mar k e t ev e n to d ay . In this s it u at i on , i t is c l e ar th at t h e au t hor i ti es h av e t ak e n a p os s i bl e v i e w . No th i n g has b e en p o i nt e d o u t t o s h ow t ha t th e op i n i on is p er v er s e of u nt en a b le . R es ul t an t ly , i t c a n no t b e s a id th a t a s u bs t an t i a l qu es ti o n o f l aw ar is e s for c o ns id er at i o n of th is C our t w it h i n t h e me a n in g o f s ec t i o n 26 0 A. "
Thus, it is clear that Hon'ble High Court held that depreciation is to be allowed on the consideration of ageing of the machines and it was observed that ageing took place even when the particular plant is kept in the store.
87 The next decision relied upon is in the case of CIT v Shahbad Co-op Sugar Mills Ltd (supra). In this case the plant and machinery was kept ready for use but was not put to use and the Hon'ble High Court held vide para 5 as under:-
" 5. L d. C o uns e l for t h e Rev e nu e s u bm i ts th at i n a bs e nc e of ac tu a l us e , th e c l a im f or d epr ec i at i on c o u l d no t b e al l ow e d. T h is pl e a c an no t b e ac c e p te d. T he Tr i bu na l h as c a te g or ic a l l y h e ld t h at t he pl a nt a n d mac h i ner y w as k e pt i n t he s t at e of r ea d i nes s f or pr o d uc t i o n. Mor eov er , i n th e c as e of t h e as s es s e e i ts el f w e h av e a pp r ov e d th e v ie w of t h e Tr i b un a l i n or der da t e d 1 7. 12 . 20 1 0 i n IT A p pe a l N o. 5 1 5 of 2 0 08 ( CIT v S ha h ba d C o- o p Su g ar Mi l ls L t d.) as f o l lo ws : -
" 10 . W e a ls o f i nd t ha t ex pr es s i on 'u s ed ' i n s ec t i on 3 2 o f t h e Ac t has b e en j u d ic i a l ly i nt er p r e te d to i nc l ud e m ac h i n er y k ep t f or us e, ev e n i f th e s a m e wa s n ot ac t iv e ly us e d. P as s iv e us er h as a ls o 86 be e n h el d t o b e us er wh er e it may be n ec e s s ar y fo r bus i n es s of th e as s es s ee to k ee p th e m ac h i n er y r e a dy for us e . Re fe r e nc e may be m ad e t o t he j ud g me n t of th e D e lh i Hi g h C our t i n t h e c as e of C IT v R efr i g er a t io n & A l l i ed I n d us tr i es L t d [ 20 0 1] 24 7 IT R 1 2 . Th er e i n r e l i anc e w as p l ac e d o n th e f o ll o w in g j ud g me n ts :- ( i) Mac h i ner y Ma n uf ac t ur er s Co r p or at i on Lt d v C IT [1 9 57 ] 3 1 ITR 2 0 3 ( B o m) .
( i i) CIT v V is hw a na th B ha s k ar S at h e [1 9 37 ] 5 IT R 62 ( B om .) ( i i i) CIT v Da l m i a Ce m en t Lt d [ 19 4 5] 1 3 IT R 4 15 ( P at n a) ( iv ) L iq u id a tor s of P ur s a L td v CIT [ 1 95 4 ] 25 I TR 2 6 5 ( S C)
(v) CIT v B o m bay S t at e Tr a ns p or t C or po r a t io n [1 9 79 ] 11 8 ITR 39 9 ( Bo m. ) ( v i) G .R . G ov i nd ar a ju l u Na i dy v C IT [1 9 73 ] 9 0 IT R 13 ( Ma d .) ( v i i) CIT v E l ec on E n g in e e r i ng C o. Lt d [1 9 74 ] 9 6 I TR 6 72 ( G u j .) an d ( v i i i) CIT v G e o T ec h C on s tr uc t io n C or p or a t io n [2 0 00 ] 2 4 4 IT R 45 2 ( Ker .) Re fer e nc e w as a ls o ma d e to t h e dic t io n ar y m ea n i ng o f th e w or d 'd e pr ec ia t io n ' as a ls o th e o bj ec t o f a l lo w in g de pr ec ia t io n. I n th e pr es e nt c as e, t h e m ac h i n er y i n qu es t i o n is v a p our c e l l, j uic e c l ar i f ie r a nd f ly as h a r r es t er pa i d p w ei t ie r wh ic h ac c or d in g t o t h e as s es s e e ha d t o b e k ep t r e ady f or u s e f or i ts b us i n es s ex p e d ie nc y . St a nd of th e as s es s e e is t h at i t r es u l te d i n i nc r e as e of c ap ac ity of p l a nt a nd t h at on ac c o u nt of tec h n ic a l j us t i fic a ti o n for t he s a i d m ac h i n e r y , it e ms of t he m ac h in es wer e i ns t a l l ed .
Ev en t ho u gh t he a u di t or s may n ot h av e ac c ep t ed t he s a i d s t a nd , th e as s es s e e w as e nt i tl e d t o fr e e pl ay i n j o i nts i n t ak in g a dec is i on t o i ns ta l l t h e m ac h in er y if i n its v ie w t h e s a m e w as nec es s ar y for i ts bus i nes s . If t he as s es s ee was t o ins t a ll s uc h a mac h i ner y o n its b o n af i de b us in es s c o ns i d er a t io n , mer e abs e nc e of pr oo f o f ac t ua l us e th er eo f w as no t e n ou g h t o d e ny t h e c l a i m o f de pr ec ia t io n . Ac c or d i ng ly , we d o n ot f i nd a ny gr ou n d t o i n ter fe r e wi t h th e f in d i ng of t h e Tr i b un a l, ho l d in g t h at t h e as s es s e e w as en t it l ed t o d e pr ec i at i o n o n th e m ac h i n er y , a s c l a i me d. "
Similar observations have been made in the case of CIT v Oswal W oolen Mills Ltd (supra). Even Hon'ble Delhi High Court in the case of Capital Bus Service (P) Ltd v CIT (supra) wherein the assessee had purchased four buses which were in working order but were not used on the roads because there were not enough contracts during the year to ply for more than 30 days. The Hon'ble Court discussed the issue in detail and ultimately held that as such buses were ready for use then depreciation is to be allowed. Various other decisions were cited which has given the same findings. W e have already observed that power plant was ready and no further major purchases have been made on account of power plant till August 2008, and the plant was commissioned, therefore, the same is entitled for depreciation. However, during the course of hearing when reference was made to the rules, we find that assessee is not entitled to 87 depreciation @ 100%. The new Appendix X which provides for depreciation under the head plant and machinery under the main Head III allows depreciation under clause 8(ix) which pertain to power plant items is allowable only at the rate 0f 80%. This position was admitted by Ld. Counsel for the assessee also. Therefore, we set aside the order of CIT(A) and direct the Assessing Officer to allow depreciation @ 40% (i.e. 50% of 80%) because plant has been made operational only in the second half only.)
88 In the result, appeal in ITA No. 250/Chd/2013 is partly allowed. I T A N o . 2 5 1 / C h d / 2 0 1 3 - As s e s s e e ' s a p p e a l 89 In this appeal the assessee has raised the following grounds:
"1 That the order of the Ld. CIT(A)(Central), Gurgaon dated 29.1.2013 is bad in law and on facts.
2 That the Ld. CIT(A) has erred in summarily ignoring the judgment of the Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court regarding jurisdiction/place of assessment. The Ld. CIT(A) inspite of the detailed discuss on the subject and a ground having been specifically taken by the appellant has by passed the issue by not even making whisper on the same.
3 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in not admitting the crucial additional evidence filed under Rule 46A of the Income -tax Rules on the ground that the appellant was allowed sufficient opportunities to adduce evidence during the course of assessment proceedings and it has failed to substantiate its claim for admission of additional evidence under the said rule.
4 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in rejecting the additional ground of appeal No. 1 raised u/s 250(5) contending that the assessment made on 30.12.2010 u/s 153A(1)(b) r.w.s. 143(3) is bad in law as no incriminating material suggesting of any suppression of income was found during the course of search and seizure operation u/s 132(1) on 12.2.2009 and therefore the entire assessment being bad in law, deserves to be quashed.
4.1 The Ld. CIT(A) has further erred in summarily dismissing the additional grounds of appeal raised u/s 250(5) of the Act.
5 That on the facts and in the circumstances of the case, the LD. CIT(A) has erred in holding that he appellant company is not entitled to the deduction u/s 80IB(11A) of Income -tax Act, 1961.
5.1 The Ld. CIT(A) has rejected the claim of deduction u/s 80IB(11A) merely on the ground that there is no evidence to show that the assessee has installed new plant and machinery and has discarded the old plant and machinery. The Ld. CIT(A) has not raised any other objection as to the allowability of the deduction u/s 80IB(11A) except the aforesaid which is incorrect as much as sufficient evidence was filed to show that the old plant and machinery has been discarded, even 88 otherwise the new plant and machinery acquired constitutes almost 98% of the total plant and machinery.
5.2 The Ld. CIT(A)has failed to consider the fact that on identical facts and issues, deduction u/s 80IB(11A) is being allowed by the Assessment Wing of the department to other assessee. A case in example was of LT Overseas Pvt Ltd. whose assessment orders allowing claim of deduction u/s 80IB(11A) were filed.
5.3 The LD. CIT(A) while disallowing the claim u/s 80IB(11A) on the ground that form 10CCB cannot be relied upon, has discussed and applied the facts relating to Assessment Year and has wrongly held that Audit report in Form No. 10CCB dated 20.2.2009 prepared by Chartered Accountant. CA Amit Gupta was an afterthought and no credence can be given to the said report.
5.4 That the Ld. CIT(A) has summarily rejected the judgment of the Hon Hon'ble Jurisdictional High Court which held that if the facts of the case of the assessee are similar to those of another assessee, a different treatment should not be made.
6 That on the facts and in the circumstances of the case the LD. CIT(A) has erred in not allowing the set off loss from power plant against other business income on the ground that income from power plant is exempt which cannot be set off against profits from difference source or income under different heads without considering the provisions of section 70 of the Income -tax Act, 1961 under which loss can be set off against other income."
90 Ground No.1 is of general nature and does not require any separate adjudication. Ground No.2, 4, & 4.1 were not pressed before us and, therefore, the same are dismissed.
91 Through ground No. 3, the issue raised is against rejection of request for admission of additional evidence. The facts and circumstances in this case are identical to the facts and circumstances as adjudicated by us in above noted para Nos. 9 to 11 in assessment year 2008-09 in ITA No. 250/Chd/2013, therefore, following that decision we are of the opinion that Ld. CIT(A) should have admitted the additional evidence.
92 Through ground Nos.5, 5.1, 5.2, 5.3 & 5.4, the issue regarding allowability of deduction u/s 80 IB(11A) has been raised. In this year, the deduction has been denied to the assessee mainly because the activities of the assessee are not in the nature of integrated business of handling, storage, transportation of food gains . Further the assessee has not submitted proper audit report. The assessee has violated the conditions 89 laid down in section 80IB(2)(i). However, admittedly the return has been filed in time. The facts and circumstances in respect of these issues are identical to the facts and contentions in assessee's own case for assessment year 2008-09 except late filing of return which we have already adjudicated vide para Nos. 34 to 69 in ITA No. 250/Chd/2013 and following that reasoning we hold that assessee is eligible for deduction u/s 80 IB (11A) of the Act @ 70% to the profits of the business. 93 Through ground No. 6, the issue regarding non allowance of the set off of loss from power plant against the business income has been raised. 94 After hearing both the parties we find that during assessment proceedings it was noticed by the Assessing Officer that assessee has claimed the loss of Rs. 16,08,70,635/- from power plant as set off against the business income from rice mill. The Assessing Officer issued a show cause notice that why this set off should not be disallowed in view of the provisions of section 80IA(5). In response it was submitted vide letter dated 24.12.2010 as under:-
" Th e l os s i nc ur r e d in th e p o wer p l an t a t Rs . 1 6, 0 8, 70 , 63 5 /- w as de d uc t e d a g a ins t th e i nc o m e f r o m th e r ic e ma n uf ac t ur i ng u n it s ho w n a t Rs . 9 3, 63 , 7 1, 2 67 /- w it h th e r es u l t th at th e n e t i nc om e r e ma i ne d at Rs . 7 7 ,5 5, 0 0, 63 2 /- . 1 00 % de d uc t i on u /s 80 I B w as c l ai m e d. In c as e t h e ad j us t m e nt of l os s of Rs . 16 , 08 ,7 0 ,6 3 5/- is no t a l l ow e d th e inc om e fr o m t he r ic e un ti l wi l l be Rs . 93 , 63 ,7 1 ,2 6 7/- a nd th e f i gur e of d ed uc t i o n of Rs . 77 , 55 ,0 0 ,6 3 2/- wi l l b e s u bs t it u te d by Rs . 9 3, 6 3, 7 1, 26 7 /- r es u l t in g i n n o d if fer e nc e in t h e r et ur ne d i nc o me . "
95 However, the Assessing Officer was not satisfied with the above and in view of the specific provision to section 80IA(5) of the Act, the loss from power project was not allowed to be set off against the projects from other business.
96 On appeal, the assessee made various submissions. The Ld. CIT(A) was not satisfied with the same and rejected these grounds vide para 9.3 of his order, which reads as under:-
" 9 .3 I h av e c o ns i d er ed t he s u bm is s i o n of t he as s es s e e a nd t h e i mp u gn e d or d er . T h e P o wer P l an t no do u bt is el i g ib l e f or de d uc t i on u /s 80 I A( 4) as s t a te d by t h e AO . Ho wev er , t h e as s es s e e has n ot c la i me d a ny de d uc t i on . Ho w ev er i t is n ot a q ues t io n of 90 thr us t i n g t he ex em p t i on on t he as s es s e e as c o nt e nd e d. T h e i nc o m e fr o m t h e P ow e r p l an t o th er wis e is f r om a s ou r c e w h ic h is ex e m pt t o t ax , s o l o s s ar is i n g fr o m t h er e i n c a nn ot be s et of f ag a i ns t pr of i ts fr o m a d if fer e nt s o ur c e or i nc om e u nd er a d if fer e nt he a d, wh ic h in th is c as e at h an d is inc o me fr om r ic e m il l i ng . Fur th er mor e , th e as s e s s ee is c l a i mi n g a dd i t i on a l d e pr ec i at i o n i. r . o its ad d it i o ns t o P & M, w h ic h i nc lu d es P ow er Pl a nt . W hi l e ad j u dic a ti n g t h e a p pe a l f or A Y 8 9- 09 , t h e P ow er P la nt h as b e en he l d t o b e c o m m is s io n ed o n A u gus t 2 0 08 , b as e d on t h e D ir ec t or 's Re p or t . I n o th er w or d s , t h e pr ev i o us y ear r e lev a nt t o t h is A Y is tr e at e d as t he i n it i al y ear a nd i t is w it h th is r eas o n t h at t h e ad d it i o na l d e pr ec i at i o n c l ai m e d on t h e P ow er P l an t [o n ly ] as i nt er a l i a r ais e d in th e ad d it i o na l gr ou n d o f a pp e a l is a l lo w ed to b e av a i l ed o ff . C ons e qu e nt ly , I up h ol d th e dis a l lo w anc e ma d e by th e AO i n no t per m i tt i ng t he s e t of f o f th e l os s . Th e as s es s e e f a i ls o n th is gr o un d .
97 Before us, Ld. Counsel for the assessee referred to section 70 of the Act and submitted that loss from one business is allowed to be set off against another business. Further, ultimately deduction under Chapter VI can be allowed only after computing the gross total income as per section 80B(5) and therefore, loss is mandated to be set off against the other income before allowing deduction. In this regard, he relied on the following decisions.
1. Sy nc o I n dus tr i es Lt d v As s es s i ng O ff ic er & Anr ( 20 0 8) 2 9 9 ITR 4 44 ( S C)
2. CIT v G a l ax y S ur f ac t a nts L t d 34 3 IT R 1 08 ( B om .)
3. B aj a j Mo t or s L t d v C IT 3 4 7 ITR 4 7 2 ( P & H) .98 On the other hand, the Ld. DR strongly supported the order of Assessing Officer and CIT(A).
99 W e have considered the rival submissions carefully. This issue came up for consideration of the Hon'ble Supreme Court it that case of Synco Industries Ltd v Assessing Officer (Income Tax) & Another 299 ITR
444. In that case the assessee was engaged in the business of oil and chemicals. It had a unit for oil division in Sirohi and a unit for chemical division in Jodhpur. For the assessment years 1990-91 and 1991-92 it had earned profits in both the units. But in the earlier years the assessee had suffered losses in the oil division. In relation to the deductions under 91 sections 80HH and 80-I of the Income-tax Act, 1961, it claimed that each unit should be treated separately and the losses suffered in the earlier years by the oil division were not adjustable against the profits of the chemical division. But since the gross total income was nil the Assessing Officer held that the assessee was not entitled to the benefit of deductions under Chapter VI-A. The Appellate Tribunal and the High Court affirmed the view of the Assessing Officer.
100 On appeal of the assessee, the Hon'ble Supreme Court held as under:-
" He l d, af f ir m in g th e d e c is io n of t he Hi g h C ou r t, t h at t h e H ig h C our t was j us t if i ed in h o l di ng t h at t he los s f r om t he o i l d i v is i on was r eq u ir ed t o b e adj us t e d b ef or e de t er m in in g t he gr os s t ot a l i nc om e an d as t h e gr os s to t a l i nc om e was " n il " t he as s es s e e was no t en t it l ed t o c l a im de d uc t i ons u n d er Ch a pt e r V I- A wh ic h i nc lu d e d s ec t i ons 80 HH a n d 8 0- I. Th e e ff ec t of c l aus e ( 5) o f s ec t io n 80 B of th e I nc o m e- t ax Ac t , 19 6 1, is t ha t " gr os s t ot a l i nc om e " w i l l b e a r r iv ed at af ter mak i n g th e c o m pu t at i on as f o ll o ws : ( i ) m ak in g de d uc t i ons u nd er t h e ap pr o pr i a te c o m pu t at i on pr ov is io ns ; ( i i) i nc l ud i ng t h e inc o mes , i f any , u nd er s ec t io ns 6 0 to 6 4 i n t he t ot a l i nc om e o f th e i n d iv i d ua l ; ( i i i) a dj us ti n g i ntr a- he ad a n d/ or i n ter - h ea d l os s es ; a n d ( iv ) s e tt i n g of f br o ug h t f or w ar d u n abs or b ed l os s es and u n abs or b e d de pr ec ia t io n , e tc . O n l y if t h e gr os s t o ta l in c om e s o d et er m in e d i s pos i t iv e th e qu es ti o n of a l lo w in g t h e d e d uc t i ons u nd er Ch a pt er VI - A w ou l d ar is e, n ot ot h er w is e.
It is we l l s et t le d th a t wh er e t h e p r e d om i n an t m a j or ity of t he H i gh Co ur ts hav e tak e n a c er t a in v ie w o n th e i n ter pr et at i o n of c er ta i n pr ov is i o ns , t he Su pr e me C o ur t s ho u ld le a n i n fav o ur of t h at v ie w.
Th e w or ds " i nc lu d es any pr of its " i n s ec t io n 80- I( 1 ) ar e i m po r t an t an d in d ic at e t h at t h e gr os s to ta l i nc o m e of an as s es s e e s h a l l i nc l u de pr o f its fr o m a pr i or ity u n de r t ak in g. W hi l e c om p ut i n g th e qu a nt u m of d e duc t io n un d er s ec t i o n 80- I( 6) t he As s es s i n g O ff ic er , no d o ub t, h as t o tr ea t t h e pr o f its d er iv ed fr om a n i nd us t r i a l un d er t ak i ng as t he o n l y s o ur c e o f i nc o m e in or d er t o ar r iv e a t t h e de d uc t i on u nd er C h ap ter VI - A . H ow ev er , th e n o n o bs t a nt e c l a us e i n s ec t i o n 8 0- I( 6) is a pp l ic ab l e o n ly t o t he qu a nt u m o f d ed uc t i o n, wh er eas , t he gr os s t ot a l i nc om e u n der s e c ti o n 8 0 B( 5) wh ic h is a ls o r ef er r ed to in s e c ti o n 8 0- I( 1) is r e q ui r ed to be c om p ut e d i n th e m an n er pr ov id e d un d er th e Ac t wh ic h pr es u p pos es th a t t h e gr os s t ot a l i nc o me s h a ll b e a r r iv e d a t af ter ad j us t i n g t he l os s es o f th e ot h er d iv is io n a g a ins t th e pr of i ts d er iv ed fr o m a n i nd us t r i a l un d er t ak i ng . T o s ay t ha t un d er s ec t i on 8 0- I ( 6) th e pr of its d er iv ed fr o m o n e i n d us tr i al u nd er tak i n g c a nn o t b e s et o ff a ga i ns t l os s s uf fer e d fr o m a n ot h e r a n d t h at t h e pr o f i t is r e qu ir e d t o b e c om p ut e d as if th e p r of i t mak i ng i n d us tr i al u nd er t ak i ng w as t h e on ly s o ur c e o f i nc o me w o ul d a l mos t r e nd er th e pr ov is io ns of s ec t i on 8 0 A( 2 ) o f t h e Ac t n ug a tor y . S ec t i o ns 8 0 A( 2) an d 80 B( 5) ar e d ec lar at or y an d a pp ly to a ll th e s ec t i on s fa l l in g in Ch a pt er VI - A. T hey im p os e a c ei l in g o n th e t ot a l am o un t of d e d uc t i on a n d th er ef or e th e n o n o bs t an t e c l aus e in s ec t i on 80- I( 6) c a nn o t r es tr ic t th e o p er a t io n o f s ec t i ons 80 A( 2) a n d 8 0 B ( 5) w h ic h op er at e i n d if fer e nt s p h er es . Th e gr os s t ot a l i nc o m e of th e as s es s e e h as f ir s t go t t o b e d e ter m i ne d af ter a d jus t in g l os s es etc ., a nd i f th e gr os s 92 to ta l i nc o me o f th e a s s es s e e is " n i l " t he a s s es s e e w ou l d n ot b e en t it l ed t o d e duc t io ns un d er C ha pt er VI- A o f th e Ac t.
101 In the above decision, the Hon'ble Apex Court has clearly explained the provisions of section 80-I(6) and 80B(5). Since section 80B(5) is starting with non-obstante clause, therefore full effect has to be given to the same. In any case, by reducing the loss of power plant from the other business the assessee is rather losing the deduction on the other business instead of getting any benefit. Therefore, in view of the decision of Hon'ble Apex Court, we decide this issue in favour of the assessee.
102 In the result, appeal of the assessee in ITA NO. 251/Chd/2013 is partly allowed.
ITA No. 372/Chd/2013 - Revenue's appeal 103 In this appeal the Revenue has raised the following grounds:
"1 Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in permitting the additional depreciation on the power plant while the ground of appeal before the Ld. CIT(A) was eligibility of set off claim of loss of power plant against the income of rice milling in view of section 80AI(5) of Income -tax Act, 1961.
2 Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in holding that the depreciation is allowed when in para 8.4 of the order Ld. CIT(A) has held that the purchase of new plant and machinery is unverified and not supported by documents.
3 Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in deleting the addition of Rs. 6,00,00,000/- on account of difference in s tock found during the course of search merely on the grounds that the business of the assessee is voluminous and it is not expected from the assessee to reconcile the alleged stock difference."
104 Ground No.1 & 2 - After hearing both the parties we find that while adjudicating the issue regarding claim of loss from power plant against the other income of the assessee, the Ld. CIT(A) observed at para 9.3 & 9.3.1 as under:-
" 9. 3 I h av e c ons i d er e d t h e s ub m is s i ons of t h e as s es s e e an d t he i mp u gn e d or d er . T h e P o wer P l an t no do u bt is el i g ib l e f or de d uc t i on u /s 8 0 I A ( 4) as s t at e d by t h e AO . H ow ev e r , th e as s es s e e h as n ot c l a im e d a ny d ed uc t i o n. Ho wev er i t is n ot a qu es ti o n of t hr us t i n g th e ex e mp t io n o n th e as s es s ee as c on t en d ed . T h e inc o m e f r o m th e P o wer p l a nt o th er wis e is fr o m a s our c e w hic h is ex e m pt t o t ax , s o los s ar is i ng fr o m t h er ei n c a nn o t be s e t o ff a ga i ns t pr of its fr om a d if fer e nt s o ur c e or i nc om e un d er 93 a di ff er e nt h ea d, w h ic h in t h is c as e a t h a n d is inc o m e fr o m r ic e m il l i n g. Fur th er m or e , th e as s es s e e is c l a im i n g ad d it i o na l de pr ec ia t io n i. r . o its ad d it i o ns t o P & M, wh ic h inc l u des P ow e r P la n t. W hi l e a d ju d ic a ti n g t he ap p ea l f or A Y 8 9- 09 , t he P ow er P la n t h as be e n h e l d t o be c o m mis s i o ne d i n A ug us t 2 0 08 , b as e d o n th e Di r ec tor 's R ep or t. In o th er w or ds , th e pr ev i o us y ear r e l ev an t to t his AY is tr e at ed as t h e in i t ia l y e ar an d i t is w i th t h is r e as o n th at t h e a dd i t io n al de pr ec i at i o n c l a im e d o n th e P o wer P la n t ( o nly ) as in te r - a l i a r ais e d in th e ad d it i o na l gr ou n d of a pp e a l i s a l l ow e d t o be av a i l ed o ff . Co ns e qu e nt ly , I up h ol d t he d is a l l ow anc e m a de by th e AO i n no t p er m it ti ng t h e s et - o ff o f t he lo s s . Th e as s es s e e f a ils on t h is gr o un d.
9. 3. 1 Co ns eq u en t ly , th e A O is d ir ec t ed to a l lo w t he c l a i m o f ad d it i o na l d epr ec i at i o n as c la i me d i n ad d it i o na l gr ou n d no . 4 ( r ef er p ar a 6 ) i.r . o th e P ow er P la nt on ly . As s es s e e t her e for e par t ly s uc c ee ds o n t hi s a d di t io n a l gr ou n d r a i s ed .
The above clearly shows that Ld. CIT(A) had not allowed the set off of losses of power plant against other income but had allowed the additional depreciation to the assessee.
105 Before us, the Ld. DR pointed out that provision for additional depreciation u/s 32(i)(iia) in case of power plant came only form assessment year 2013-14 and, therefore, the CIT(A) was not justified.
106 On the other hand, the Ld. Counsel for the assessee admitted this position 107 After considering the rival submissions, we find that section 32(i)(iia) reads as under:-
( i i a) in t h e c as e o f any ne w m ac h in er y or p l an t ( o th er t h an s h ips an d a ir c r a ft) , wh ic h h as b ee n ac q u ir ed a n d i ns ta l l ed af t er t h e 3 1s t day o f Ma r c h , 2 00 5, by a n as s es s e e e n ga g ed in t h e bus in es s o f m an u fac t ur e or 41 pr o d uc t i o n of a ny ar t ic l e or th i n g [ o r in t h e bu sin e ss of g en er at i on o r gen e rat ion an d di st r ibut ion of pow e r] , a fur th er s u m e q ua l t o tw en ty per c en t o f th e ac t ua l c os t o f s uc h m ac hi n er y or pl a nt s ha l l b e a l l o we d as de d uc t i on un d er c l aus e ( i i) :
P ro vid ed t h at n o d ed u c ti o n s h al l b e a l l ow e d i n r es p ec t of -- ( A ) to ( D) no t r e l ev a n t The plain reading of the above provision shows that in case of the business of generation and distribution of power, the provision for allowance of additional depreciation was inserted by Finance Ac, 2012 w.e.f. 1.4.2013, therefore, the additional depreciation can be considered in case of assessee engaged in the business of generation or distribution of power only form assessment year 2013-14. Therefore, we set aside the 94 order of Ld. CIT(A) and hold that additional deduction @ 20% is not allowable in the case of assessee against power plant. 108 Ground No.3 - After hearing both the parties we find that during the search it was noticed that stock as per books was Rs. 780.15 crores and stock pertain to different government agencies was Rs. 80 crores. The physical stock found during the search in eight godowns was valued at Rs. 786 crores excluding the stock belonging to different government agencies. In response to the query that why difference of Rs. 6 crores should not be added to the income of the assessee, it was stated that on stock taking the value of Bardana was taken on estimated basis at uniform rate whereas the same has to be valued at market rate. The bills of bardana were also produced before the Assessing Officer. However, Assessing Officer observed that since books of account were not produced, therefore, addition is required to be made and consequently he added the sum of Rs. 6 crores as unsecured investment u/s 69 of the Act. 109 On appeal before the CIT(A), submissions made before Assessing Officer were reiterated. It was further stated that assessee had attended the assessment proceedings from time to time along with books of account but the Assessing Officer has not taken the trouble to examine the books and, therefore, it cannot be said that assessee had not produced the books of account. In any case, the different was only Rs. 5.85 crores whereas the addition has been made at Rs. 6 cores. The Ld. CIT(A) after examining the submissions found that during the search, it was observed while asking a question from Chairman and Managing Director, stock had been valued on approximate basis, which shows that exact valuation has not been done and therefore, addition was not justified and accordingly he deleted the addition.
110 Before us, Ld. counsel for the assessee reiterated the submissions made before the Assessing Officer and CIT(A). He strongly supported the order of CIT(A).95
111 On the other hand, the Ld. DR supported the order of Assessing Officer.
112 After considering the rival submissions we find that Ld. CIT(A) has decided this issue vide para 10.2 which reads as under:-
" 10 . 2 I hav e p er us e d th e s ub m is s i ons o f th e as s es s e e a nd t h e i mp u gn e d or d er . It e me r g es fr o m p a ge 3 4- 3 5 of th e im p ug n e d or d er t h at on t h e d at e of s e ar c h th a t is 1 2- 02- 2 0 09 , th e s t oc k as per th e bo ok s o f t he as s es s e e was Rs . 7 80 . 15 Cr or es an d o n c om p ar in g wi t h p hy s ic a l i nv en t or y , an ex c es s of Rs . 6 Cr or es w as fo u nd w hic h wer e r e qu ir e d t o be ex p la i n ed by th e as s es s e e. Ho wev er as n o Bo ok s of Ac c o un ts wer e pr od uc e d ot h er th a n a f ew b il ls o f b ar da n a, it was h e ld t h at t h e di ff er enc e r e m a in e d r ec o nc i l ed . I r ef er t o th e s t at em e nt o f t he C MD r ec or d e d i n t he c our s e of s ea r c h , r e pr od uc ed at p ag e 35 of th e im p ug n ed or de r . I t is v er y ap p ar e n t fr o m t he q u es t i on i ts e l f t h at th e phy s ic a l t ak i ng o f th e s toc k h as be e n w or k e d o ut to a p pr ox . 78 6 c r or es as a g a ins t Rs . 7 8 0. 15 c r or es + 70 c r or es gov t. s t oc k . It e m er g es t h at t he C MD S hr i B al b ir S i ng h Up p al u /s 1 32( 4) d a te d 3 0. 02 . 20 0 9 s t a te d th at t h e di ff er e nc e w ou l d b e ex p l a in e d l at er , w h i le a ls o s ta t in g th at 7 c r or e G ov er nm en t St oc k as p er t h e bo ok s ha d no t b e en c ou n te d in phy s ic a l s toc k tak i n g w hic h w er e ly i n g as F er o ze p u r B ha a mr i e tc . Ho wev er dur i n g as s es s me n t pr o c ee d i ng it wa s s t at ed th at on s t oc k t ak in g t he v al u e o f ba r d a na was t ak en on es t i ma t e bas is at u n if or m r at e wh er eas t he s a m e ha d to b e v al u ed a t ma r k e t r a te . B e t h at a s it m ay , I f in d t h at t h e v a l ue of t h e p hy s ic a l i nv e nt or y h as be e n tak e n o n a ppr ox i ma t i on a n d t h er e is n o s pec i f ic d e ta i ls of t h e qu a nt ity / v a l ue o f wh ic h s toc k w as no t r ec o nc i l ed . T h e as s e s s ee b us i nes s is v o l um i n ous a n d i n t h e abs e nc e of s pec i fic f i nd i ngs , I d o n o t th i nk i t a ppr ox i ma t e to ex p ec t h i m t o r ec o nc i le t he a l le g ed s to c k d iff er e nc e es pec i a l ly wh e n t he b ook s / s toc k r e gis t er h av e no t b e en r e j ec t ed . Co ns eq u en t ly , I a m i nc li n ed to d e l et e t he ad di t i on ma d e by t h e AO . T h e as s es s e e s uc c ee ds o n t his gr o u nd of a p pe a l. "
113 The careful perusal of the above para shows that Ld. CIT(A) has correctly decided the issue with good reasoning. During the search, the following question was raised in respect of stock which has been reproduced in the assessment order at pages 35, which reads as under:-
" Q . 5 As t h e b ook s of ac c o un ts s t oc k as on 12 . 02 . 20 0 9 is Rs . 78 0 .1 5 c r or es + 7 0 Cr or es G ov t . St oc k w her eas o n p hy s ic a l t ak in g s toc k has wor k e d o ut to a p pr ox . 7 8 6 c r or e s . P l eas e ex p l a in t h e d if fer e nc e ( R e fer An n e x ur e A- 2) "
A. 5 It s h al l b e ex p l a in e d l at er . H ow ev er I w an t t o c lar i fy t h at 7 0 c r or es G ov t. s t oc k as per bo ok s h as n o t b e c o un t ed i n p hy s ic a l s toc k t ak in g. O ur G ov er n m e nt s t oc k is ly i ng a t F er o ze p ur B ha a mr i etc . W hic h h as n ot b ee n c o u nt e d i n p hy s ic a l s toc k tak i ng of Rs . 78 6 c r or es ".
114 The question itself depicts that stock has been valued on approximate basis. Further, the books of account were always taken by the assessee and it has not been denied before us that books were not 96 taken before the Assessing Officer. In any case the bills of bardana have been produced and, therefore, we find nothing wrong with the order of Ld. CIT(A) and confirm his order.
In the result, Revenue's appeal is partly allowed.
115 In the result, appeals of the assessee as well as the Revenue are partly allowed.
Order pronounced in the open court on 26.2.2014
Sd/- Sd/-
(SUSHMA CHOWLA) (T.R. SOOD)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated : 26.2.2014
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR