Income Tax Appellate Tribunal - Chandigarh
Acit, Ludhiana vs M/S Cremica Agro Foods Pvt. Ltd., ... on 8 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA Nos.39 & 40/Chd/2017
(Assessment Years : 2006-07 & 2007-08)
The A.C.I.T, Vs. M/s Cremica Agro Foods Pvt. Ltd.,
Circle-3, B-XXXIII-324, G.T. Road (West),
Ludhiana. Ludhiana.
PAN: AAACC6717H
(Appellant) (Respondent)
Appellant by : Smt.Chander Kanta, CIT, DR
Respondent by : Shri Subhash Aggarwal
Date of hearing : 12.09.2017
Date of Pronouncement : 08.12.2017
O RDE R
PER ANNAPURNA GUPTA, A.M.:
B o t h t h e a p p e a l s f i l e d by t h e R e v e n u e re l a t e t o t he s a m e a s se s s e e a n d h a v e b e e n p r e f e r r e d a g a i n st s e p a r at e orders p as s e d by the Ld . C o m m i s si o n e r of I n c om e Ta x ( A p p e a l s ) - 1 , Ludhiana da te d 2 6 . 1 0 . 20 1 6 relating to a s s e s s m e nt y e a rs 2 0 0 6 - 0 7 a n d 20 0 7 - 0 8 .
2. Th e p r e s e n t a p pe a l s h a v e c o m e u p b e f o re u s i n t he s e c o n d ro u n d aft e r c e r ta i n gr o un d s w e r e s e t a s i d e to the C I T( A ) f o r a d j u di c a t i n g a fr e s h , v i d e o r d e r of th e I . T. A . T. dated 1 4 . 1 0 .2 01 5 in I TA No . 7 1 4 / C h d/ 2 0 1 1 & C.O N o . 6 1 / C h d/ 2 0 1 1 r e l a t i n g t o A .Y 2 0 0 6 - 0 7 an d I TA N o . 3 4 4 & 4 5 9 / C h d / 20 1 3 re l a t i n g t o A . Y 2 00 7 - 0 8 .
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3. I t w a s c o mm o n g r o u n d b e t w e en t h e p a r t i e s t h at t h e issues i n v o l v ed in b ot h t he appeals w e re identical, t h e r e f o r e, b o t h t h e a p p e al s w e re h e a r d to g e t h er a n d a r e b e i n g d i sp o s e d of f b y a c o m m o n or d e r .
F o r t h e s a k e o f c o n v e n i e nc e , we s h a l l b e d e al i ng w i t h t h e f a c t s i n I TA N o . 3 9 / C h d/ 2 0 1 7 r e l a t i ng t o A. Y 20 0 6 - 0 7 . I T A N o . 3 9/ C h d /2 0 1 7 ( A . Y. 2 0 0 6- 0 7 ) :
4. Briefly s t a te d , the assessee is in the b u s i n es s of m a n u f a c t ur i n g a n d t r a d i n g o f bi s c u i t s , na m k e e n a n d b u n s , e t c . a n d t r a di n g o f c o nf e c t i on a r y b i s c u i ts , r us k an d b r e a d. Th e a s s e s s e e i s r u n n i n g f o u r s ep a r a t e i n d u s tr i a l u n i t s i . e . o n e a t No i d a , o ne a t Ta h l i w a l , an d t w o at P h i l l au r . D u r i ng t h e i m p u gn e d A .Y t h e a ss e s s e e cl a i m e d de d u c t i on o f p r of i ts e a r n e d f r o m N OI D A U n i t u / s 8 0I B & Ta h l i w al U n i t u / s 8 0I C o f t h e A ct .
5. G r o u n d N os . 1 , 2 a n d 3 r ai s e d by t h e R e v en u e r el a t e t o t h e i s s u e o f e l i gi b i l i t y o f t h e a ss e s s e e t o c l a i m d e d u c t i o n u / s 8 0I B o f t h e I n c o me Ta x A c t , 1 9 6 1 ( i n s h o r t ' t h e A c t ' ) a m o u n t i n g t o Rs . 3 9 , 1 4 , 38 0 / - wi t h r e s p e ct t o th e p r o f i t s e a r n e d b y i t s N oi d a u n i t . Th e A s s e s s i n g O f f i c e r de n i e d t h e s a m e t o t h e a s se s s e e s i n c e he fo u n d t h at t h e NO I D A U ni t d i d n o t f u l f i l l t he b a s i c c r i t e ri a fo r c l a i mi n g t he sa m e , b e i ng a n S SI u n i t n o t m a n u f ac t u r i ng a n y i t em p ro h i b i t e d b y t he s e c t i o n a s l i s t e d i n s c h e d u l e XI o f t h e A c t . Th e A s s e s s i n g O f f i c e r h el d t h a t t h e N o i d a u n de rt a k i n g w a s no t an S S I U n i t 3 a s p e r i t s d e f i n i t i o n i n t h e s e c t i o n , s i n c e i t s i nv e s t m e n ts a n d a l s o c o m b i ne d i n v e s t m en t s o f a l l t h e u n d e rt a k i n g s o f the a s s e s s ee exceeded the limit specified under the I n du s t r i es ( D e ve l o p m e n t an d R e g u l a t i on )Act, 1 9 5 1 a nd further that it was m a n u f a c tu r i n g Buns w hi c h was a c o n f e c t i on a r y i tem a n d w h i c h was p r o h i b i te d f o r m a n f a c t u re b y S SI u n i t s i n S c h e d u l e XI o f th e A c t f o r t he pu r p o s e of c l a i m i n g d e d u c ti o n u / s 8 0 I B .
6. B e f o r e t h e L d . CI T( A p p e a l s ) t h e as s e s s e e f i l e d d e ta i l ed s u b m i s s i on s c o nt e s t i n g t he d i s al l o w a n c e ma d e a n d w h i ch a r e r e p r o d u ce d at p a r a 2 . 1 o f t h e C I T( A p p e a l s) o rd e r o n t h e ground:
a ) Th a t i t h ad b ee n c o n s i s t e n t l y al l o w e d th e s a i d cl a i m i n t h e p r e c e d i n g y e a r s f r o m a s s es s m e n t y e a r 2 0 03 - 0 4 t o a s s e s s m en t y ea r 2 0 0 5 - 0 6 a nd th e r e b e i n g n o cha n g e i n t h e f a c ts , th er e w a s n o r e a s on t o d i s a l l o w th e s a m e in the impugned year;
b) Th a t i t h a d b e en i s s u e d a c e r t i fi c a t e o f b e i n g a n S S I u n i t u n de r th e I n d u st r i e s D ev e l o p m e n t R e g ul a t i o n A c t , 1 9 51 ( he r e i n a f t e r r e f e r re d to a s 'I D R Ac t ' ) , w h i c h w a s v a l i d f o r t h e i m p u g n e d y e a r al s o ;
c) Th a t w i t h o u t p r e j u d i c e to t h e a bo v e , t h e a s s es s ee q u a l i f i e d a s a n SS I u n d e r t ak i n g as p e r t h e I D R A ct a nd C i r c u l a rs a n d Not i f i c a t i o n s i s su ed t h e r e u nd e r s i nc e i t s i n v e s t m e nt s i n pl a n t a nd m a ch i ne r y d i d n o t e x c eed t h e s p e c i f i e d l i m i t of R s . 1 c r o r e und e r t h e s a i d A ct a n d 4 neither was clubbing all i n v e s t m e nt s of all u n d e r t a k i n g s o f t h e c o m p a n y r e qu i r e d f o r t h e p ur p o s e o f d e t e rm i n i n g w h e t h e r t h e i nve s t m e n t i n p l ant a n d m a c h i n e r y e x c e ed e d t h e sp e c i f i e d l i m i t . I t w a s p oi n t e d o u t t h a t t h e c i r cu l a r s / n o ti f i c a ti on s r e l i e d u p o n by t h e Assessing O f f i c er for s ta t i n g th a t the clubbing of i n v e s t m e nt s m a de b y a l l u n d e r tak i n g s o f t h e c omp a n y w a s r e q u i r e d t o b e c o n s i d e r ed , wa s i r r e l e v a nt s i nc e t h e A s s e s s i n g O f f i ce r h a d r e f er r e d to th e w r o n g c i r c u l ar ;
d) Th a t the buns manufactured by the Noida undertaking of the as s e s s ee did not qualify as a c o n f e c t i on a r y i tem a n d , t h e re f o r e, w e r e n o t pr o h i b i t e d i t e m s a s p e r t h e 1 1 t h S c h e d ul e of t h e I n co m e Ta x A c t, 1961 f or u n de r t a k i n g s w h i ch were eligible for d e d u c t i o n o f t he i r p r o f i ts u / s 80I B o f t h e A c t .
7. Th e L d . C I T( A p pe a l s ) a ft e r c on s i d e r i n g a s s e ss e e 's s u b m i s s i on s ag re e d w i th t he s ame h o l d i n g at p ar a 2 . 2 o f hi s order as under:
"2.2 I have carefully considered the facts of the case, the basis of the disallowance made and the arguments of the AR. The deduction has been allowed in the past and the AR has contended that there is no justification to refuse the same in the subsequent years. In this regard reliance has been placed on the judgment in the case of Ace Multi Axis Systems Ltd vs DCIT 367 ITR 266 (KAR) at (Bang) in support of his contention that deduction under section 80IB is allowable for 10 years and if the conditions are satisfied initially, the benefit is to be allowed for 10 years even if the investment in machinery exceeds Rs.1 crore due to the growth in the industry. The AR contended that since the deduction u/s 80IB has been allowed right from the beginning, there is no justification to disallow it during the year under consideration. Reliance in this regard was also placed on the case of Glaxo Smithkline consumers Health Care Ltd. Vs. CIT 2007 112 TTJ 94 (CHD) and Micro Instruments Co. vs. ITO 5 (2008) 112 TTJ 94 (Chd) besides other case-laws. Further, the appellant filed SSI certificate issued by the appropriate authority which the AR stressed, is the final authority, regarding the same. The AR clarified that the said certificate was valid during the year under consideration. As regards the circulars ofT997 and 1999; it was explained that the appellant's case is of a limited company and sub clause (iii) of the circular dated 10.12.1997 is applicable wherein as per clause (v) sub clause (iii) stands omitted. Further, items six of the 11th schedule mentions 'confectionery and chocolates'. The word 'confectionery' as per Webster dictionary means "candy, sweets and other confections collectively 'while a 'bun' is a purely bakery item. Schedule 11 is not applicable.
The AR further drew attention to the fact that Bread and Buns which fall in product no. 20-21 are the items reserved for exclusive manufacture by micro ajjd-"small enterprise sector and the SSI certificate issued mentions the same. Still, further, the AO has wrongly considered the items such as Crates, Moulds, generator, miscellaneous fixed assets, and transformer as part of the plant and machinery. The AR clarified that the value of the items leased is negligible. The AR has further clarified that the circular issued by the Ministry of industry vide order dated 10.12.97 clearly excludes the said items for the purpose of calculating the value of plant and machinery Thus the value of the plant and machinery is below rupees 1.00 Crore. Further, a perusal of S.0.2(E) dated 01.01.1993 states that a corporate entity having different units would not be treated as one, for deciding the eligibility as a small-scale unit. Each separate under the same management of the company is to be evaluated for its eligibility as a small-scale undertaking. In this regard the Hon'ble Madras High Court in the case of Madras Machine Tools Manufacturers Limited vs CIT, 98 ITR 119 has clearly brought out the distinction between the company and its undertaking. The view of various judicial decisions has been that the grant of an incentive deduction is linked to the eligible undertaking. The concept of the taxpayer and that of an undertaking is different and the taxpayer can have more than one undertakings/enterprises, some of which may not quantify for tax deduction. The Hon'ble Supreme Court in the case of Textile Machinery Corp. Ltd. Vs. CIT (1977) 107 ITR 195 and in the case or CIT vs Canara workshop Private Limited (1986) 161 ITR 320 have explained and recognized the identity of each individual undertaking for the purpose of giving effect to incentive provisions. The tax incentives provided under section 80IB and section 80IC of the Act have nowhere been linked in the Act with the ownership of the undertaking. In view of the same the disallowance made by the Assessing Officer is not justified and the same is hereby ordered to be deleted. This ground of appeal is allowed."
8. A g g r i e v e d b y t h e s a m e t h e R e v e n u e h a s r a i s e d g ro u n d N o . 1 , 2 &3 b e f o re u s , w h i c h r e a d a s u n d e r :
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1. "Whether upon facts and circumstances of the case, the Ld.CIT(A) was justified in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit by simply relying solely on the submissions of the assessee and not by giving any independent findings?"
2. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit and by not giving any finding as to why some machineries have been excluded from the total plant id machinery for making it eligible for a Small Scale Industry?"
3. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit and by not giving any finding that whether the value of machinery is to be considered as on the last day of the previous year or in the year in which the assessee was registered as a Small Scale Industrial Unit although it is clearly provided in clause (g) of sub-section 14 of section 80IB that the value of plant and machinery has to be considered on the last day of previous year?"
9. B e f o r e u s , d e t a i l e d a r g um e n t s we r e m a de b ot h by t he L d . D R a n d L d . c o u n s e l fo r a s s es s e e p l a ci n g r el i a n c e o n a number of c a se laws and also drawing a t te n t i o n to d o c u m e n t s p l a c ed i n t h e P a p e r Bo o k .
10. W e h a v e h e a r d t h e c o n t e n ti o n s o f b o t h t h e p ar t i e s, perused the ord e r s of the a ut h o r i t i e s below and g on e t h r o u g h th e d o cum e n t s a n d c a s e l a w s r e l i e d u p o n b e f o r e u s.
11. We find that on e o f th e r e as o ns f o r ho l d i n g t ha t t h e N o i d a u nd e r t a ki n g o f th e a ss e ss e e w a s i n e l i g i bl e t o c l a i m d e d u c t i o n u /s 80 I B o f t h e A c t i s t h a t i t d i d n o t q u a l i f y a s a n S SI u n d e r t aki n g a s r e q u i re d u n d e r t h e s e ct i on . At this j u n c t u r e , i t i s p er t i n e n t t o r e p ro du c e t h e r e l e v a n t d e f i n i t i o n 7 o f s m a l l s c a l e i n d u s t r i a l u n de rt a k i n g a s p r o v i d e d u n d e r s u b - s e c t i o n ( 1 4) , s u b - c l a us e ( g ) wh i c h r e a ds a s und e r :
" ( g ) " S mal l - s c al e i n d u s tr i al u n d e r tak i n g " me an s an in d u s tr i al u n d e r tak i n g wh i c h i s , as o n th e l as t d ay o f th e p r e v i o u s ye ar , r e g ar d e d as a s mal l - s c al e in d u s tr i al u n d e r tak in g u n d e r s e c ti o n 1 1 B o f th e In d u s tr i e s ( D e v e l o p me n t & R e g u l at i o n ) A c t, , 1 9 5 1 ( 6 5 of 1 9 51) . "
C l e a r l y , t o q u al i f y a s a n S S I u nd e r t a k i n g i t s h ou l d b e r e g a r d e d a s s u ch u / s 1 1 B o f t h e I D R A c t , 19 5 1 .
12. Th e c o n t e n t i o n of t h e R ev e n u e i s t h a t a s p e r th e s a i d Act the i n v e s tm e n t in plant and m a c h i n er y of an u n d e r t a k i n g s h ou l d n o t exceed Rs.1 crore and for this purpose even leased a ss e t s a re to be i n c l u de d in th e i n v e s t m e nt s . Th e L d . D R r e f e rr e d t o t h e d e c i si o n o f t he H o n ' b l e D e l hi H i g h C o u r t in the case of Praveen Soni Vs. C I T i n I TA N o . 1 14 5 o f 2 0 0 9 d a t e d 2 9 . 3 . 2 0 1 1 a n d re f e r r e d to p a r a 1 2 o f t he o r d e r w h e re i n he H o n ' b l e Hi g h C o u r t h e l d t h a t t h e o w n e rs hi p i n t e r m s o f o n l e a s e o r o n h i r e p u r c h a s e i s a l s o t o t a k en i n t o c o n s i d e ra t i o n f o r d e t e rm i n i n g t he quantum of i nv e s t m e n t s made in fixed as s et s by an u n d e r t a k i n g . The r e l e v a nt p a r a of t h e o r de r r e ad s a s u n d e r:
"12. At the end of this notification, it is provided that every industrial undertaking which has been issued a certificate of registration under Section10 of the said Act or a license under Sections, 11, 11A and 13 of the I.D.R. Act by the Central government and are covered by the provisions of paragraphs (l) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered at the discretion of the owner as such within a period of 180 days from the date of publication of this notification. Two things follow from the reading of the aforesaid notification:
(a) To be regarded as a small scale industrial undertaking -
such an undertaking should be given which has invested in 8 fixed assets in plant and machinery either on ownership terms of on lease or on hire purchase."
13. L d . D R c o n t en d ed t h a t a s p e r t he A O t h e v a l u e o f t h e a s s e t s b o t h o w ne d a n d l e a s e d b y t h e a s s e s s e e w ou l d e x c e ed R s . 1 c r or e , t he l i m i t s pe c i f i ed a s p e r t h e I D R A ct .
14. B e s i d e s , t h e L d. D R f u r t h e r s t at e d t h a t i n t e rm s o f c e r t i f i ca t e N o . S. O . 1 2 8 8 ( E) d a t ed 2 4 . 1 2 . 1 99 9 read w i th S . O . 8 5 7 ( E) d a t ed 10.12.1997 issued by the Ministry of Commerce & Industry, t he investment in plant and m a c h i n e r y i s t o b e c o n s i d e re d o f a l l t h e u n d e r ta k i n g s r u n o r c o n t r o l l ed by the a s s e s s ee an d since the combined i n v e s t m e nt o f a l l t h e u n d e rt a k i ng s e x c e e d s Rs . 1 c r o r e , t h e a s s e s s e e d o e s no t q u a l i f y a s a n S SI un d e r t ak i ng a s r i g h t l y p o i n t e d ou t b y th e A s s e s si n g O ff i c e r .
15. To t h i s , t h e L d. c o u n s e l f o r as s e s s e e co u n t e re d by s t a t i n g t h at f i r s tl y e v e n i f a g r e ei n g w i t h t h e c ont e n t i o n of t h e L d . D R t h a t e v e n l e a s e d a ss et s a r e t o b e c o ns i d e r e d f o r t h e p u r po s e of de t e r m i n i ng q u an tu m o f i n v e s tm e nt s m a d e i n p l a n t an d m ac h i n e r y , th e i nv e s tm e n t s do n o t e xc e e d R s. 1 crore since as per these very notifications, plant and machinery would not i n c l u d e c r a t e s , m o u l d s, g e n e r a to r , m i s c e l l a ne o u s f i x e d a s s et s , an d t r a n s f o r me r , wa te r c h i l l i n g plant, p l an t an d machinery (lettuce pl a n t ) and water c h i l l i n g p l a n t ( l et t u c e p l an t ) . The L d . c o un s e l for a s s e s s ee d r e w o u r a t t en t i o n t o S. O . 8 5 7( E ) i s s u e d b y t he M i n i s t r y o f C o m m e r c e & I n du s t r y d a te d 1 0 .12 . 1 9 9 7 w hi c h s ta t e d s o at N o t e - 2 a s u n d e r:
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"a. In calculating the value of plant and machinery for the purposes of paragraphs (1) and (2) of this notification, the original price thereof, irrespective of whether the plant and machinery are new or second hand, shall be taken into account.
b. In calculating the value of plant and machinery, the following shall be excluded, namely:-
i. the cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores;
ii. the cost of installation of plant and machinery;
iii. the cost of research and development equipment and pollution control equipment;
iv. the cost of generation sets and extra transformer installed by the undertaking as per the regulations of the State Electricity Board;
v. the bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;
vi. the cost involved in procurement or installation of cables, wiring, bus bars, electrical control panels (not those mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures;
vii. the cost of gas producer plants;
viii. transportation charges (excluding of sales-tax and excise) for indigenous machinery from the place of manufacturing to the site of the factory;
ix. charges paid for technical know-how for erection of plant and machinery;
x. cost of such storage tanks which store raw materials, finished products only and are not linked with the manufacturing process; and x i. cost of fire fighting equipments."
16. Th e L d . c o u n s e l f o r a s s e s s e e t he re a f t e r r e f e rr e d to t h e d e t a i l re f l e c ti n g t h e f i x e d a s s e ts b o t h o w n ed a n d l e a s e d b y t h e a s s e s s e e a nd t h e a s s e t s w h i c h a r e t o b e c o n s i d e r e d a s p l a n t a n d m ac h i n e r y a s p e r t he af o r e s a i d no t i f i ca ti o n p l a c e d 10 b e f o r e t h e CI T( A ) a n d b ef o r e u s at P a p e r B o o k p a ge N o . 3 7 a s under:
PARTICULARS Gross Block To be Not to be
OF ASSETS Balance as on Considered For considered
31.03.2008 Purposes of SSI For the
purpose
SSI
Land & Land 11903847 11903847
Development(Noida)
Air Conditioner 143000 143000
Bicycles 2940 2940
Building 13649941 13649941
Car & Pickup van 243521 243521
Computer 134855 134855
Crates and Moulds 3938644 3938644
Electric Fitting 449383 449383
Fan & Coolers 98384 98384
Fire Extinguishers 22810 22810
Furniture & Fixture 304730 304730
Generator 186916 186916
Lab Equipment's 81176 81176
Misc Fixed Assets 1865078 1865078
Office Equipment 64190 64190
Plant & Machinery 5596008 5596008
Rickshaw 3479 3479
Scooters 37201 37201
Transformer 147859 147859
Trolleys 130776 130776
Tubewell 35048 35048
Water Chilling Plant 362554 362554
Weighing scales 46117 46117
Plant & Machinery
(Lettuce Plant) 104611 104611
Water Chilling Plant
(Lettuce Plant) 329200 329200
Weighing scales
(Lettuce Plant) 31000 31000
SUB TOTAL 39913267 5596008 34317259
Work in Progress
Building under Con.NOIDA 3243640 3243640
Flat(DLF Under construction 811750 811750
Machinery Under Inst 3023895 3023895
SUB TOTAL 7079285 0 7079285
TOTAL 46992552 46992552
11
17. F r o m t h e a b o v e t h e L d . c o u n sel f o r a ss e s s e e po i n t e d o u t t h at e ve n af t e r ta k i n g i n t o c o n s i de r a t i on th e a s s ets t a k e n o n l e a s e by t h e a s s es s e e , th e i n v e s tm e n t i n p l a n t a n d machinery was well w i th i n th e limit of R s .1 crore as r e q u i r e d u n d e r th e I D R A ct , 1 9 51 t o q u a l i f y a s a n S S I u n i t .
18. Th e L d . c o u n s e l f o r a s s e s s e e t he r e a f t e r c o un t e re d t h e a r g u m e n t s o f t he L d . D R t h a t t h e i n v e s t m e nt i n p l a n t a nd m a c h i n e r y i s t o b e c o n s i d e re d o f a l l t h e u n d e r ta k i n g s r u n o r c o n t r o l l ed b y t he a s s e s s e e f or th e p u r p o s e o f de t e r m i n i ng w h e t h e r t h e y w e re w i t h i n t h e l i m i t o f R s . 1 c r o r e as s p e c i f i e d b y t h e I D R A c t, 1 9 5 1 . Th e L d . c o u n s e l f o r a s s e ss e e s t a t ed t h a t t h e A s s e s s i n g O f f i c e r h a d re l i e d u p o n S . O . 12 8 8 d a t ed 2 4 . 1 2 . 1 9 99 r e a d w i t h S . O . 8 5 7 ( E) d a t e d 1 0. 1 2 . 1 9 97 b u t h ad r e p r o d u c ed c i r cu l a r N o . S . O .2 ( E ) d a t e d 1 . 1 . 1 9 9 3 t o d e f i n e t h e e x p r e s si o n "c o n t r o l l ed " f o r cl u b b i n g o f t h e i n v e s t m e n ts i n f i x e d a ss e t s . Th e L d . c o u n s e l f o r a s se s s e e d r e w o ur a t t e n t i o n t o c l au s e ( v ) o f S . O .2( E ) d a te d 1. 1 . 19 9 3 w h i c h reads as under:
"Where on industrial undertaking is a subsidiary of, or is owned or controlled by any other industrial undertaking or undertakings in terms of sub clause(i), sub clause (ii) or sub clause (iii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertakings and the other industrial undertaking or undertaking clubbed together exceeds the limit of investment specified in Paragraph I or II of this table, as the case may be, none of these industrial shall be considered to be a small scale or ancillary industrial undertaking."
19. Th e L d . c o u n s e l f o r a s s e s s e e th e r e a f t e r p oi n t ed o u t t h a t i n t h e ca s e o f t h e a s s e s s ee b e i n g a l i m i te d co m p a n y i t 12 w a s c o v e re d u n de r s u b - c l a u s e ( i i i ) f o r de c i d i n g th e i s s u e o f clubbing of i n ve s t m e n t . Th e Ld. c o un s e l for a s s e s se e t h e r e a f t er d re w our a t t e n ti o n to ci r c u l ar No . S . O . 8 5 7( E ) d a t e d 1 0 . 1 2. 1 9 97 a n d p o i n t e d o u t t h e r e f ro m th a t i n t h e said circular in clause (v) su b - c l a u s e (iii) was stood omitted. Th e r e l e v a n t p o r t i on o f t h e c i r c u l a r S . O.8 5 7 ( E ) i s placed at P a p er Book page No.47 and is r e p r o d u c ed h e r e u n d e r:
"v. where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other industrial undertaking or undertakings in terms of sub-clauses(i);
(ii)_and if the total investment in fixed assets m plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraphs (1) or (2) of this notification as the case may be. none of these industrial undertakings shall be considered to be a small scale or ancillary industrial undertaking."
20. Th u s t h e L d . co u n s e l f o r as s es s e e p oi n t e d o ut t h a t c l u b b i n g o f i n v es t m e n t s o f a l l un d e r t a k i ng s o w ne d b y t h e a s s e s s e e a s re q ui r e d i n t h e e a rl i e r c i r c u l a r da t e d 1 . 1 . 1 9 9 3 h a d b e e n d o n e a w a y wi t h by c i r c u l ar 8 5 7( E ) , w h i c h w a s applicable for the i m p u g ne d year and, t h e re f o r e , t he c o n t e n t i on o f t he R e v e n u e t h a t th e a s s e s s ee d i d n o t q u a l i f y a s a n SSI u nd e rt a k i n g si n c e t h e i n v e s tm e n t s i n p l a n t a nd machinery of all the undertakings owned by it exceeded the s p e c i f i e d l i m i t f el l f l a t .
21. F i n a l l y , t h e L d . c o u n s e l f o r as s es s e e p o i n t e d ou t t h a t i t h a d b e e n i s su e d c e r t i f i ca t e o f b e i n g a n S SI unit by D i r e c t o r at e o f I nd u s t r i e s wh i c h w a s v a l i d fo r t he i m p u g n e d y e a r a n d h a d bee n i s s u e d b y t he c o n c e r n e d a u th o r i t i e s by e x a m i n i n g i t s el i g i b i l i t y u n d e r I D R A c t , 1 95 1 . Th e r e f o r e 13 a l s o , th e r e w a s n o r e a s on t o q u es t i o n th e c or r e c tn e s s o f t he c e r t i f i ca t e a d g o b e h i n d t h e c e r ti f i c a t e t o f i n d ou t w h e t h e r t h e a s s e ss e e q ual i f i e s as a n S SI un i t a s p er I D R A ct , 1 9 5 1 .
22. W e h a v e h ea r d bo t h t h e p ar t i e s . W e f i n d me r i t i n t h e c o n t e n t i on o f t he L d . c o u n s el f or a s s e s s e e. As pointed out a b o v e , t he e l i gi b i l i t y cr i t e r i a f or c l a i m i n g d e d uc t i o n u / s 8 0 I B a s a n S SI u n i t i s t h a t i t s ho u l d b e r e g a r d e d a s a n S SI u n d e r t a k i n g u /s 1 1 B of t he I D R A c t , 1 95 1 . Admittedly, the assessee h as been issued su c h a c e r t i fi c at e by t he D i r e c t o r at e of I n du s t r i es and which is valid for the impugned ye a r also. Th e said fact ha s not been c o n t r o v e rt e d b y th e R e v e n u e. Th e r e f o r e , ha v i n g bee n i s s u e d s u c h a c e r t i fi c at e b y th e c o nc er n e d M i ni s t r y i ts e l f , i t i s o b v i o u s t h a t t h e a s s e s s e e f u l fi l l s a l l t h e c o n di t i o ns r e q u i r ed u n d e r t h e s a i d A c t t o qu a l i f y a s a n S SI u n d e r tak i n g . Th e Revenue, t h e r e fo r e , c o ul d not have b ru s h e d aside the c e r t i f i ca t e i s s u ed b y t h e c o n c e rn e d M i n i s t r y a nd e x a m i n ed w h e t h e r t h e a s se s s e e a c t u a l l y q u a l i f i e d a s s u c h u n d e r t he I D R A ct , 1 9 5 1 . E v e n o t h e r w i s e, w e f i n d t h a t i t h a s b e e n e s t a b l i s he d b e yo n d doubt that the a s s es s e e fu l f i l l s t he e l i g i b i l i t y c r i t er i a o f i n v e s t m e n ts i n p l a n t a n d m a c h i n e r y b e i n g be l o w t h e s p e c i fi e d l i m i t o f R s . 1 c r o re as r e q u i r e d u n d e r t he I D R Ac t , 1 9 5 1. A s r i gh t l y p o i n t e d ou t b y t h e Ld . c o u n s e l fo r a s s es s e e , n o t a l l a ss e t s q u a l i f y a s p l a n t a nd m a c h i n e r y, t h er e f o r e , af t e r excluding t h o se a s s e ts s p e c i f i c al l y p o i nt e d o u t b y t h e c i r c u l a r o f t h e M i n i s t r y of I n du s t r i es in S. O . 8 5 7 ( E ) , the i n v e s t m e nt in plant and 14 m a c h i n e r y a m o un t e d t o o n l y R s .5 5 , 9 6 , 0 0 8/ - . Th e R e v e n ue h a s n e i t h er c o n tr o v e r t e d th e c o nt e n t i o n o f t h e Ld . c o u n s e l f o r a s s e s s e e t ha t n o t a l l a s s et s q u a l i f i e d a s p l a n t a n d m a c h i n e r y, n o r h a s d i s p u t ed t h e d e t a i l o f q u a l i f yi n g a s s e t s f i l e d b e f o r e u s . Th e r e f o r e , f o r a l l p u r p o s e s , t h e i nv e s t m e n t s i n p l a n t a n d ma c h i n e r y o f t h e N o i d a u n d e r ta ki n g i s w e l l w i t h i n t he s p e ci fi e d l i m i t o f R s. 1 c r o r e t o q u a l i f y a s a n S SI u n d e r t a k i n g . F ur t h e r , t he L d . c ou n s e l f o r a s s e s see h a s a l s o d e m o n s t r at e d t ha t a s p e r t h e a p p l i c a b l e c i r c ul a r o f t h e Ministry of Co m m e r c e c l u b bi n g of i n v e s tm e n t s of u n d e r t a k i n g s o f t h e a s s e s se e i s n o t r e q u i re d . Th i s f a c t h as a l s o n o t b e e n c o n t r o v e r te d b y t h e R e v e n u e . Th e r e f o r e , we f i n d n o me r i t i n t h e c o n t en t i o n of t h e R e ve n u e tha t f o r th e p u r p o s e o f d e t er m i n i n g q ua n t um o f i n v e st m e n ts i n p l a n t a n d m a c h i ne r y by t h e a s s e ss e e un d e r t a k i ng , i n v es t m e n t s b y all u n d e r t a ki n gs owned by the assessee ar e to be c o n s i d e r ed . Fo r t h e a f or e s a i d re a s o n s , w e h o l d t h a t t he L d . CI T( A p p e a l s ) h a s r i g h t l y he l d t h e a s s e s s e e to q u a l i f y a s a n S SI u nd e r t a ki n g a s p e r s e c t i o n 1 1 B o f t h e I DR A c t , 1 9 5 1.
23. Th e next c o n t en t i o n of the Revenue f or d en y i n g d e d u c t i o n u / s 8 0 I B o f t h e A c t i s t h a t m a n u fa c t u r i n g o f b u n s u n d e rt a k e n b y t h e N o i da un i t i s p a r t o f c on f e c t i o n er y i t e m w hi c h i s a p r o h i bi t e d i t em f o r m a n u fa c tu r e b y S SI u n i t s c l a i mi n g de d u c t i o n u / s 8 0I B, a s p e r S c h ed u l e XI o f I n co m e Ta x A c t , 1 9 6 1 .
24. O n t h i s i s s u e, t h e L d . c o u n s e l fo r a s s e s s e e r ei t er a t ed t h e c o n t en t i o n ma d e b e f or e t he L d . CI T( A p p e a l s ) t h a t t h e 15 w o r d " c o n fe c t i o ne r y " a s p e r th e W e b s t e r ' s d i c t i on a r y m e a n s " a c a n d y " s we e ts a n d o t h e r c onf e c t i o n s co l l e c ti ve l y , w h i l e t h e w o r d " bu n " w h i c h i s p ur e l y a b a k e r y i te m i s d e f i n e d a s " a s m a l l , s o f t , s l i g h t l y s we e t e n ed r o l l , o ft e n w i t h r a i s i n s , a s o f t b r e ad r o l l . Th e L d . c o u n s el f o r a ss e s s e e st a t e d t h at i n t e r p r e ta t i o n o f t h e A s s e s s i n g O f f i c e r , t h er e f o re , i s m i s - c o n c e i v e d. I t wa s f u r t h e r br o ug h t t o o u r n o ti ce t h a t t h e b r e a d an d b un s f a l l i n p r o d u ct c o d e N o. 2 0 - 2 1 wh i c h w er e i t e m s r e s e rv e d fo r e x c l u s i ve m an u f a c t u r ed b y m i c r o a n d small en t e r p ri s e s e c t o r. It wa s p o i nt e d ou t that S SI c e r t i f i ca t e i ss u ed to t he a s s ess e e c l e ar l y men t i o n t he m a n u f a c t ur e o f br e a d , b u ns , e t c.
25. W e h a v e h e a r d b o t h t h e p a r t i e s. W e c on c u r wi t h t h e Ld. counsel f or assessee t h at the assessee is not m a n u f a c t ur i n g a c o n f e c t i o n er y i te m w h i c h i s p r oh i b i t e d a s p e r 1 1 t h S c h e d ul e o f t h e I n c o me Ta x A c t . Th e m e a n i n g o f w o r d " c o n f e ct i o ne r y " a n d " b u n s " a s p e r W e b s t e r ' s d i c t i o n a r y c o u p l e d w i t h t h e f a c t a s po i n t e d o u t b y t h e L d . co u n s e l f o r a s s e s s e e t h a t th e b r e a d s a n d b u n s f a l l u n d e r t h e i t e m s w h i c h a r e r e s e rv e d e x c l u s i v el y f o r m a n u f a c t ur e b y m i c r o and small en t er p r i s e and which fact h a ve not been c o n t r o v e rt e d by the R ev e n u e a d e q u a te l y pr o v e s t he a s s e s s e e 's c a s e a s r i g h t l y h e l d by t h e L d . CI T( A p pe a l s ) . W e, t h e r e f o r e, h o l d th a t t h e b r ea d s an d b u n s d o no t q u a l i f y a s c o n f e c t i on e r y i te m s a n d a r e t hu s n o t p r o h i bi te d t o b e 16 m a n u f a c t ur e d b y S S I u n i ts a s p er t h e 1 1 t h S c h e du l e o f t h e Act.
26. I n v i e w o f t h e a b o v e , w e u n h e s i t a t i n g l y h o l d t ha t t h e a s s e s s e e i s a n SS I u n i t a s d ef i n ed u / s 8 0I B ( 1 4 ( g ) o f t h e A c t a n d i s n o t m a n uf a c t u r i n g a p ro h i b i t e d i t e m s p ec i fi e d i n t h e 1 1 t h S c h e d u l e o f t h e A c t an d t h us q u a l i f i e s f o r d ed u c t i o n of its profits u/s 80IB of t he A ct a s r i g h tl y h e l d b y t he L d . CI T( A p p e a l s ) .
27. I n v i e w o f t h e ab o v e , th e o rd e r o f t h e L d . CI T( A pp e a l s) i n d e l et i n g t h e d i s a l l o w an c e o f d e d u c t i o n u / s 80 I B o f t he A c t c l a i m e d b y t h e a s s e s s ee o f R s . 3 9 , 1 4 ,1 8 0 / - i s u p h e l d. G r o u n d o f ap p e al N o s . 1 , 2 a n d 3 r a i s e d b y t h e R ev e n u e a r e , t h e r e f o r e, d i s mi ss e d .
28. G r o u n d N o. 4 r a i se d b y t h e R e v e nue r e a d s as u n d er:
"4.Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the disallowance Rs.12,16,332/- made by the A.O. on deduction u/s 80IC claimed by the assessee on Tahliwal Unit without giving any reasons and by simply stating that the A.O. is highly unjustified in denying deduction u/s 80IC to the assessee on the basis of some notional expenses such as knowhow, goodwill, trade name etc. where the A.O. has very clearly held that the provisions of the section 80IA (8) and (10) read with section 80IC are applicable to the assessee's Tahliwal Unit only?"
29. Th e a b o v e g r o un d i s w i t h r e s pe c t t o t h e d e d uc t i o n c l a i m e d u / s 8 0IC a m o u n ti n g t o R s . 1 , 2 1 , 63 , 3 2 0 /- i n r e s pe c t o f Ta h l i w a l u ni t w h i c h ha s b e en r e d u c e d b y t he A s s e s s i n g O f f i c e r b y 1 0 % o f t h e a m o u n t of n e t p r o f i t s f or t h e r e a s on 17 t h a t t h e as s e s se e i s m a n uf a c tu r i n g b i s cu i t s o n i t s o w n account as well as do i n g job work f or I TC Li m i t e d at Ta h l i w a l , H . P . an d f u r t h er i t i s a l s o m a n uf a c t u ri n g b i s c u i t s a t P h i l l a u r u ni t , w h i c h i s n o t e l i g i b l e f o r a n y d ed u c t i o n of i t s p r o fi t s . Th e A s s e s s i n g O f f i cer h a s h e l d t h a t s i n c e s a me b u s i n e s s i s b e i ng d o n e a t P h i l l au r u n i t, Ta h l i w al u n i t h as d e r i v e d b e n ef i t s b y w a y o f k n o wh o w , g o o d w i l l , t ra d e n a m e , e t c . o f P hi l l a u r U n i t a n d he l d t ha t 1 0 % o f th e p ro f i t s e a rn ed b y t h e Ta h l i w a l u n i t w e r e i n d i r ec t b e n e f i ts d e r i ve d f r o m t h e P h i l l a u r U n i t a s p e r t h e p r o v i si o ns o f s e ct i o n 80I A( 8 ) & ( 1 0 ) o f t h e A c t. Th e A s s e s s i n g O f f i c er r e d u c e d th e s am e f r o m t he deduction c l a i me d u/s 80IC of the Act amounting to R s . 1 2 , 1 6 ,3 3 2 / -
30. B e f o r e t h e L d. CI T( A p p e a l s ) t h e a ss e s s e e co n t e n ded t h a t i t h a d s p e c i f i e d a l l c o n d i t i o ns l a i d d o w n u / s 8 0 I C( 2 ) ( a ) ( i i ) o f the Act and had rightly claimed the deduction, while the A s s e s s i n g O f f i cer h a d w r o n gl y i nt e r p r e t e d t h e p ro v i s i o n s of s u b - s e c t i o n ( 8 ) & ( 1 0 ) o f s e c t i o n 8 0 I A of t h e A c t s i n c e t h e s e s u b - s e c t i o n s r efe r r e d t o t r a n sf er o f g o od s a n d s e r v i c e s t o a n y o t h e r b u si n es s o r t o a n y o t h er p e r s o n w h i l e i n t h e c a s e o f t h e a ss e s s e e th e r e w a s n o t r ans f e r o f go o d s or s e r v i c e to a n y o t h e r bu s i ne s s o r t o a ny o th e r p e r s o n. I t w a s p o i n t ed o u t t h a t th e a ss e s s e e h a d a l r ea d y a l l o c at e d t he c o m m on e x p e n s e s i n c u r red t o v a ri o u s u ni ts o n t h e b a s i s o f t u r n o v e r a n d , t h e r ef o r e , th e d e n i a l of d e du c t i o n t o th e e x te n t o f 1 0% o f t h e p r o f i t s o n t h e ba s i s o f som e n o t i o n a l e x pe n s e s s uc h 18 as knowhow, goodwill, trade name, e tc . was highly unjustified.
31. Th e L d . C I T( A p pe a l s ) a ft e r c on s i d e r i n g a s s e ss e e 's s u b m i s s i on s h el d t h e de d u c t i o n o f e l i g i b l e p r o fi t s b y t h e Assessing Of f i c er as u n w a r r a n te d deleting t he same by h o l d i n g th a t t he e n t i r e e xe r c i s e of t h e A s se s s i n g O f f i c e r w a s d o n e o n es t i m a te b a s i s wi t h o u t b r i n g i n g a n y ev i d e n c e on r e c o r d t o s h o w w h e t h e r t h e r e wa s a n y t r a n s a c t i o n b e t w e en t h e t w o u n i t s. Th e L d . CI T( A p p ea l s ) h e l d t h at t he a s s e s se e h a v i n g a l l o c a t e d a l l c o m m on e xp e n s e s o n tu r no v e r b a s i s a n d t h e A s s es s i ng O f f i ce r h av e no t p o i nt e d ou t as t o wh i ch expenses had not been considered, th i s allocation of n o t i o n a l e x pe n s es b y t h e A s s e s s i n g O f f i c e r w a s un j u s t i f i e d a n d u n w a r r an t ed . R e l e v a n t f i n di n g s o f t h e Ld . CI T( A p p e a l s ) a t p a r a 3. 2 a r e as u n d e r :
"3.2 I have considered the facts of the case, the basis of the additions made by the Assessing Officer and the arguments of the AR. The AO has reworked the claim under section 80IC between the Tahliwal unit and the Phillaur unit on estimated basis without bringing any evidence on record to show whether there has been any transaction between the two units. The appellant has made the allocation of all common expenses on turnover basis and the AO has failed to mention any expense which has not been considered in the said exercise. Thus, the reducing of the eligible profits to the extent of 10% by the AO without any sound basis is unwarranted and is hereby ordered to be deleted.
32. B e f o r e u s , t h e L d . D R r e l i e d up o n t h e o r d e r of t h e Assessing O f f i ce r while the Ld. c o u ns e l for a s s e s se e r e i t e r a t ed t h e co n t e n t i o n m a d e b e f o r e t he L d . CI T( A p p e a l s) a n d r e l i ed u p o n t h e o r d e r o f t he L d . CI T( A p p e a l s ) . 19
33. We find no infirmity in the order of the L d . CI T( A p p e a l s ) . U n d e n i a b l y , t h e r e d u c t i o n o f p r of i t s t o t he e x t e n t o f 10 % ha s b e e n d o n e by t h e A s s e s si n g O f f i c e r o n e s t i m a t e b a s i s w i t h o u t d e m o n str a t i n g by w a y of e v i d e nc e w h e t h e r a n y e xp e n s e s o n a c c ou n t o f k n o w h o w, g o o d w i l l , t r a d e n a me , e t c. h a d b e en i n c ur r e d b y th e P h i l l a u r u n it w i t h r es p e c t t o Ta h l i w a l u ni t . Th e s a m e h as n o t b e e n d e m o n s t r at e d e ve n b e f o r e u s . F ur t h e r a s r i g h t l y h e l d b y th e L d . CI T( A ) , t h e pr o v i s i o n s o f s e c ti o n 8 0I A ( 8) a n d 8 0 I A ( 1 0) c a n n o t b e i n v o k ed i n t h e p r es e n t c a s e i n t h e a b s en c e o f a ny t r a n s a c t i o n b e t w e e n t h e t w o un i t s . Th e L d . D R h a s n o t pointed out any infirmity in the o r de r of the L d . CI T( A p p e a l s ) . W e , th e r e f or e, u p h o l d t h e ord e r o f th e L d . CI T( A p p e a l s ) i n d e l e t i n g th e r e d u c t i o n of p r of i t s o f t h e Ta h l i w a l unit by 10% of t he profits a mou n t i n g to R s . 1 6 , 1 6 ,3 3 2 / - . Th e g r o u n d o f a p p e a l N o . 4 r a i se d b y t h e R e v e n u e i s , t h ere f o r e , di s m i s s ed .
34. G r o u n d of a p p e al N . 5 r ai s e d b y t h e R e v e nu e r e ad s as under:
"5. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the disallowance of Rs.16,36,199/- made by the A.O. on deduction u/s 80IC on job work charges by simply relying on the submissions of the assessee and not by giving any independent findings?"
35. Th e a b o v e g r o u n d o f a p p e a l i s re g a r d i n g d i sa l l ow a n c e o f d e d u ct i o n o f p r o p o r t i on a t e p ro f i t s of R s .1 6 , 3 6, 1 9 9 / - on t h e j o b c h a r ge s e a r n e d b y t h e a ss e s s e e f r o m I TC L i m i t e d at 20 t h e Ta h l i w a l U ni t . Th e a s s e s s ee h a d r e c e i v e d j ob c h a r g e s of R s . 6 , 2 1 , 91 , 3 9 6 /- f r o m I TC L i mi te d f o r th e m an uf a c t u r e o f biscuits. Th e As s e s s i n g Of f i c e r h e l d t h a t th e as s e s s e e i s n o t e n t i t l e d t o de d u c t i o n u / s 8 0I C o f t h e A c t o n t h e p r o f i t s derived from the same which was c o m pu t e d on p r o p o r t i on a t e bas i s a t R s. 1 6 , 3 6, 19 9 / - .
36. B e f o r e t h e Ld . CI T( A p p e a l s ) , t h e a s s e s s ee r el i e d u p o n o n a n u m b e r o f c a s e l a w s i n s u pp o r t o f i t s c o n t en t i o n t h a t e v e n v i s - à - v i s pr o f i t s d e r i v ed f ro m j o b w o r k c ha r g e s the assessee is en t i t l e d u/s 80 I C of the Act. The L d . CI T( A p p e a l s ) r e l y i n g u p o n the d e c i s i o n o f t he H o n ' b l e j u r i s d i c ti o n a l H i g h C o u r t i n t h e c a s e o f CI T V s . I m p e l F o r ge & A l l i e d I n d u st r i e s L t d . , 3 2 6 I TR 2 7 a n d t h e d e c i si o n o f t h e H o n ' b l e D e l h i H i g h C o u r t i n t he c a s e o f CI T V s . N o r t h e rn A r o m a t i c s L t d . ( 2 0 0 5 ) 1 9 6 C TR 4 7 9 h e l d t ha t t he a s s e s s e e was e n t i tl e d to claim d e du c t i o n on p r o fi t s earned on a c c o u n t of j o b wo r k u n d e rt a k e n b y i t ho l d i n g a s u n d e r :
Further, the basic process is carried out by the appellant is the same whether the production is done for itself or job work. The Hon'ble Punjab and Haryana High Court in the case of CIT vs Impel Forge and Allied industries Ltd 326 ITR 27 has held that the assessee is at liberty to manufacture for itself or others which makes no difference for the purpose of deduction under section 80IB of the act. Similar view was taken by the Hon'ble Delhi High Court in the case of CIT vs Northern Aromatics Ltd (2005) 196 CTR (Delhi) 479. In view of the same, the reduction in the claim made by the appellant under section 80IC on this account deserves to be deleted. These grounds of appeal are allowed."
37. B e f o r e u s , th e Ld . D R d i d no t po i n t o ut a n y i n f i r m i t y i n t h e o rd e r o f th e L d . CI T( A p p e al s ) , n o r di d h e b ri n g t o o ur notice any c on t r a r y d e c i s i o n o f th e ju r i s d i ct i o n a l H i g h 21 C o u r t as o p po s ed t o th a t r e l i e d u p o n b y t h e L d .C I T( A p p e al s ) while adjudicating the issue. I n v i e w o f t h e s a m e , we u p h o l d th e or de r o f t h e Ld . CI T( A p p e a l s ) i n de l e t i n g t h e r e d u c t i o n i n t h e c l a i m m a d e b y t h e a s s es s e e o n a c c o u n t o f j o b w o r k c h a r ge s a m o u n t i n g t o Rs . 1 6 , 3 6 , 19 9 / - Th e g r o u n d of a p p e al No.5 raised by t he Revenue is, t h e r e f or e, d i s m i s s e d.
38. G r o u n d N o. 6 r a i se d b y t h e R e v e nue r e a d s as u n d er:
"6. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.15 Lakh made on account of disallowance out of claim of interest u/s 36(l)(iii) of the Income-tax Act, 1961 simply relying on the submissions of the assessee ignoring the facts that the assessee could not provide the copies of accounts of various persons covered u/s 40A(2)(b) of the Income-tax Act, 1961 despite being given ample opportunity to do so?"
39. Th i s g r o u n d i s a g a i n s t t h e d i s al l o w a n c e o f R s . 1 5 l a c s u / s 3 6 ( 1 ) ( i i i ) o f t h e A c t o u t o f c l a i m o f i n t e r e st o n a l l e ge d interest f r ee advances w h i ch have been made by the a s s e s s e e b y a p p l y i n g j ud g m e n t o f t h e H o n ' b l e j ur i s d i c t i o n al H i g h C ou r t i n t h e c a se o f A bh i s h e k I n d u s t ri es V s . CI T r e p o r t e d i n 2 8 6 I TR 1 . Th e L d . CI T( A p p e a l s ) de l e t e d t he d i s a l l o w an c e ma d e by ho l d i n g that t he a s se s s e e h as d e m o n s t r at e d t he a v a i l ab i l i t y o f e n o u g h s u r p l u s f u n d s for t h e p u r p o s e of m a k i n g t h e i m p ug n e d i n t e r es t f r ee a d v a n c es a n d f o l l o w i n g t he d e c i s i o n o f t h e H o n ' b l e j u r i s d i ct i o n a l H i gh C o u r t i n a n u m be r o f c a se s .
40. B e f o r e u s , th e Ld . D R d i d n o t c on t r o v e r t t he f a c t t h a t t h e a s s e s se e h a d s u f f i c i en t i n t er es t f r e e f u nd s a va i l a b l e fo r 22 the purpose of making a d v a nc e . Th e finding of the L d . CI T( A p p e a l s ) t h a t t h e a s s e s se e c o m p a n y h ad d e c l a r ed income of R s .1 , 5 4 , 7 0 , 60 5 / - besides share capital of R s . 1 , 4 9 , 85 , 0 0 0 /- and r e s e rv e s & s u rp l u s of R s . 1 2 , 3 2 ,7 5 , 8 0 0/ - w h i ch w er e su f f i c i e nt f or t h e p u r p o s e of m a k i n g t h e i m pu g n e d i n t e r e st f r e e a d v a n c e s , ha s n o t b e e n c o n t r o v e rt e d b y t h e R e v e n u e . Th e L d . D R h a s a l s o n o t b r o u g h t t o o ur n o t i c e an y j ud gm e n t o f e i t h er ju r i s d i c t i o n a l High Court or the Hon'ble Ape x Court c o nt ra r y to the p r o p o s i t i o n l a i d d o w n b y th e H o n ' b l e ju r i s d i ct i o n a l H i g h C o u r t i n t h e c as e o f B r i g h t E nt e r p r i s e s Pv t . L td . i n I TA No.224 of 2 0 13 dated 2 4 . 7 . 20 1 5 relied u p on by the L d . CI T( A p p e a l s ) h o l d i n g t ha t n o d i s a l l o w an c e u /s 3 6 ( 1 ) ( i i i ) o f t h e A c t i s w a r r a n t e d w h er e s u f f i c i e nc y o f i nt e r e s t f r ee o w n f u n d s f o r t he p u r p o s e o f m ak i n g i n t er e s t fr ee a d v a n c e s i s d e m o ns t r a t ed . I n vi e w of t h e a b o v e , we f i nd no r e a s o n t o d i s t u r b t h e or d er o f t he L d .CI T( A p p e a l s ) o n th e i s s u e a nd , t h e r e f o r e, u ph o l d t h e d e l e ti o n o f d i s al l o w a nc e o f i n t er e st a m o u n t i n g t o R s. 1 5 l a c s m a d e by t h e L d. CI T( A p pe a l s ) . Th e g r o u n d N o. 6 r a i se d b y t h e R e v e nue i s , t he r e f o re , di s m i s s e d .
41. G r o u n d N o. 7 r a i se d b y t h e R e v e nue r e a d s as u n d er:
"7. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.25 Lakh being common expenses of head office against the income of Tahliwal Unit while computing deduction u/s 80IB of the Income-tax Act, 1961 without giving any reasons?"
42. Th e a b o v e gr o un d i s a g a i ns t th e a l l oc a t i o n o f R s . 25 l a c s b e i n g co m mo n e x p e n s e s of th e h e a d o f f i c e ag a i n s t t h e 23 i n c o m e o f Ta h l i w a l u n i t w h i l e c om p u t i n g t h e d e du c t i o n u /s 80IC of the A ct . Th e Assessing Officer h el d that the t r a n s p o r ta t i o n e x p e n s e s i n c u r r ed f o r e xp o r t i ng b i s c u i t s t o A f g a n i s t an h a ve been i n c u rr ed by Ph i l l a ur unit the e x p e n s e s o n t r an s p o r t a t i o n s h ou l d b e a pp o r t i on e d o n t he r a t i o o f s a l e s t o A f g a n i s t an . F u rt h e r i n t h e a b s en c e o f a n y d e t a i l o f s a l e s ma d e t o A f g a n i s t an a n a m o u n t o f R s . 2 5 l a c s w a s a d d e d o n a c c o u n t o f w r on g d i s t r i b u ti o n o f c o m m on expenses by the head office.
43. Before the L d . CI T( A p p e a l s ) , the a s s e s se e co n t en d e d t h a t a l l e x p e n se s b o t h d i re c t a nd i n d i r e c t h a d b een p r o p e r l y a p p o r t i o ne d b et w e e n d i f f e r e nt u n i t s r un b y i t. Th e L d . c o u n s e l f o r a ss es s e e s t at e d t ha t s e p a r a t e b o o k s o f a c c o u nt w e r e m a i n ta i n e d f o r e a c h u ni t an d a l l e x p en s e s r e l a t i n g to p a r t i c u l ar u ni t were d eb i t e d to that unit. As far t he c o m m o n e x p e n s es i n c u rr e d , s a me w e r e a p p or t i on e d i n t he r a t i o o f t u r n o ve r. Th e L d . c o u n s e l f o r a s s e s s ee s u b m i t t e d t h a t c o m p l e te l i st o f a l l o c a t i o n o f e x p e n s e s w a s f il e d t o t h e A s s e s s i n g O ff i c er a n d w i t h o u t p o i n t i n g a n y e rr o r i n t h e s a m e t h e A s s ess i n g O f f i ce r h ad d i s t u r b e d th e a l l o c a t i o n m a k i n g a n a d d i t i o n o f R s . 2 5 l a c s o n e s t i m a te b a s i s b y a l l o c a t i ng e x p ens e s t o Ta h l i w a l un i t .
44. Th e L d . C I T( A p pe a l s ) a ft e r c on s i d e r i n g a s s e ss e e 's s u b m i s s i on s h el d t h a t t h e b a s i s o f al l o c a ti o n o f c o m mo n expenses by t h e a s s e s s e e ha d b ee n a c c e p t ed i n su b s e q u e n t y e a r s a n d th e As s e s s i n g Of f i c e r c o u l d n o t ha v e d i s t u r b e d t h e s a me a n d m a d e a l l o c a t i o n o n e st i m a t e ba s i s i n t h e 24 i m p u g n e d y e a r . R e l y i n g up o n t h e j u d g m e n t o f t h e B a n g a l o re Tr i b u n a l i n th e c a s e o f W i p r o L i m i t e d V s. J CI T, 5 S O T 8 0 5 a n d t h e j u d g m en t o f t h e H o n ' b l e D e l h i H i g h C ou r t i n t h e c a s e o f D CI T V s . D e l h i P r e s s Sm a c h a r P a t ra L td . , 1 0 1 I TD 2 5 3 , t h e Ld . CI T( A) d e l e t e d t h e ad di t i o n m a de .
45. B e f o r e u s , t h e Ld . D R f a i l ed t o po i n t o u t a n y i n f i r m i t y i n t h e o r d e r o f t h e L d . CI T( A p pe a l s ) . Th e f a c t t h a t t h e a l l o c a t i on o f e xpe n s e s m a d e b y th e A s s e s s i n g O f fi c e r w a s o n e s t i m a t e b a s i s , w a s n o t c on t r o v er t e d , n o r w a s t he f a c t t h at t h e b a s i s o f a l l oc a t i o n o f c o m m on e x p e n s e s b y t he a s s e s s ee o n t h e b a s i s o f t u r n o v e r h ad b ee n a c c e p t e d i n su b s e q u e n t years. W e , t h e re f o r e , a g r e e wi th t h e L d . CI T( A p p e a l s ) t h a t t h e a s s e s s e e h a vi n g a d o p t e d r e a so n a b l e b a s i s f or a l l o c a t i on o f c o m m on e x p en s e s , t he A s s es si n g O f f i c e r co u l d n o t h av e d i s t u r b e d t he s am e w i t h o u t g i v i n g a n y c o g e n t re a s o n a n d m e r e l y by r e s or t i n g t o e st i m a t es . W e , t he r e f o re , up h o l d t he o r d e r o f t h e L d .C I T( A p p e al s ) i n d e l e t i n g t h e d i sa l l o w a n c e m a d e b y t h e A ss e s s i n g O f fi c e r a m o u n t i n g t o R s. 2 5 l a c s i n t h i s r e g ar d . Th e g r o u n d o f ap p e a l N o .7 r a i se d b y t he R e v e n u e i s , t h ere f o r e , di s m i s s ed .
46. Th e a p p e a l o f the R e v e n u e i s d i sm i s s e d .
I T A N o . 4 0/ C h d /2 0 1 7 ( A . Y. 2 0 0 6- 0 7 ) :
47. Ground No.1 raised by the Revenue reads as under:
"1. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing deduction u/s 80IB by holding the assessee unit to be Small Scale Industrial Unit by simply relying solely on the submissions of the assessee and 25 not by giving any independent findings?"
48. It was common ground between the parties that the issue in this ground is similar to the issue in ground No.1 raised by the assessee in its appeal in ITA No. 39/Chd/2017 dealt with by us above. The findings given therein at paras 22 to 27 of our order above shall apply to this ground also mutatis mutandis. Ground No.1 raised by the Revenue, therefore, stands dismissed.
49. Ground No.2 raised by the Revenue reads as under:
"2. "Whether upon facts and circumstances of the case, the Ld.CIT(A) was justified in deleting the disallowance Rs.17,41,964/- made by the A.O. on deduction u/s 80IC between the Tahliwal Unit and Phillaur Unit without appreciating the detailed facts mentioned in the assessment order where the A.O. has very clearly held that the provisions of the section 80IA (8) and (10) read with section 80IC are applicable to the assessee's Tahliwal Unit only?"
50. It was common ground between the parties that the issue in this ground is similar to the issue in ground No.4 raised by the assessee in its appeal in ITA No. 39/Chd/2017 dealt with by us above. The findings given therein at para 33 of our order above shall apply to this ground also mutatis mutandis. Ground No.2 raised by the Revenue, therefore, stands dismissed.
51. Ground No.3 raised by the Revenue reads as under:
"3. "Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the disallowance of Rs.34,31,320/-made by the A.O. on deduction u/s 80IC on job work charges by simply relying on the 26 submissions of the assessee and not by giving any independent findings?"
52. It was common ground between the parties that the issue in this ground is similar to the issue in ground No.5 raised by the assessee in its appeal in ITA No. 39/Chd/2017 dealt with by us above. The findings given therein at para 37 of our order above shall apply to this ground also mutatis mutandis. Ground No.3 raised by the Revenue, therefore, stands dismissed.
53. The appeal of the Revenue is dismissed.
54. I n t h e r e s ul t , bo t h t h e a p pe a l s o f t h e R e ve n ue a r e d i s m i s s e d.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 8 t h December, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)s
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh
27