Income Tax Appellate Tribunal - Kolkata
Guwahati Carbon Limited, Kolkata vs Department Of Income Tax on 4 June, 2012
आयकर अपीलीय अधीकरण, Ûयायपीठ - " C ", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- "C" CALCUTTA
(सम¢)Before ौी ूमोद कुमार, लेखा सदःय एवं/and
Shri Pramod Kumar, Accountant Member
ौी जॉज[ म1थान, Ûयायीक सदःय
Shri George Mathan, Judicial Member
आयकर अपील संÉया / ITA No. 951/Kol/2010
िनधॉरण वषॅ/Assessment Year: 2006-07
D.C.I.T,Circle-3, Kolkata -वनाम- M/s. Guwahati Carbon Ltd.
PAN:AABCB 4143R
-Versus-.
(अपीलाथȸ/APPELLANT ) (ू×यथȸ/RESPONDENT)
अपीलाथȸ के िलए /For the Appellant ौी/Shri L.K.S Dahiya, ld.CIT/DR
ू×यथȸ के िलए/For the Respondent: ौी/Shri Subash Agarwal, Advocate, ld.AR
सुनवाई कȧ तारȣख/Date of Hearing : 04-06-2012
घोषणा कȧ तारȣख/Date of Pronouncement:04-06-2012
आदे श/ORDER
ौी जॉज[ म1थान, Ûयायीक सदःय Shri George Mathan, Judicial Member This is an appeal filed by the revenue against order of the learned Commissioner of Income- tax (Appeals)-I, Kolkata in appeal no.322/CIT(A)-1/Cir-3/08-09 dated 05-02-2010 for the assessment year 2006-07.
2. In this revenue's appeal, the revenue has raised following ground of appeal :-
"1 That, on the facts and in the circumstances of the case, the CIT(A) was erred in deleting the addition of Rs.4,87,82,530/- considering the initial assessment year from which operation started is 1997-98.
2. That, on the facts and in the circumstances of the case, the order of the CIT(A) was perverse on the facts that new evidences accepted in course of appellate stage which is a clear violation of Rule 46A of the I.T Rules,, 1962.
3. The appellant craves leave to add, modify, rectify, alter, amend or revise any of the aforesaid grounds.
3. Shri L.K.S Dahiya, learned CIT/DR represented on behalf of the revenue and Shri Subash Agarwal, Advocate, learned AR represented on behalf of the assessee.
4. It was submitted by the learned CIT/DR that in regard to ground no. 2, which is against the action of the learned Commissioner of Income-tax (Appeals) in admitting the fresh evidences, the learned Commissioner of Income-tax (Appeals) has violated the Rule 46A of the I.T Rules, 1962. In so far as pages 84 to 88 of the assessee's paper book, the copy of the order of Govt. of India, O/o the Assistant Commissioner of Central Excise, Guwahati, Assam dated 25th June 2003 was a fresh evidence. It was the further submission that page 89 of the assessee's paper book, the copy of letter dated 23-03-96 of M/s. Bharat Calciners Limited addressed to the Regional Executive Engineer, Assam Pollution Control Board, Guwahati was also a fresh evidence. It was further submitted that the letter dated 29-12-95 issued by the Regional Executive Engineer, Pollution Control Board, Assam [at page 91] addressed to assessee was also a fresh evidence. It was the further submission that pages 92- 98 of the assessee's paper book, which is a copy of letter dated 14-10-96 along with Annexure-A was also fresh evidence. It was submitted that these evidences have been considered by the learned Commissioner of Income-tax (Appeals) for the purpose of granting of relief to the assessee. It was the submission that these evidences were not produced before the Assessing Officer for consideration. It was submitted that as these evidences were not produced before the Assessing Officer, the same cannot be considered. It was the further submission that the assessee had claimed deduction u/s. 80IC(2) of the Act. It was the submission that on the basis of these evidences, the learned Commissioner of Income-tax (Appeals) has given relief to the assessee.
5. In regard to ground no.1, it was submitted by the learned DR that the deduction claimed u/s. 80IC(2) of the Act was denied by the Assessing Officer on the ground that the assessee had commenced manufacturing of its goods being calcinated petroleum coke in Feb 1996 relevant to A.Y 1996-97 and consequently, the initial AY being 1996-97 the eligibility of deduction u/s. 80IC(2) ended with the AY 2005-06. It was the submission that the view of the Assessing Officer was supported by the letter of the assessee to the Supdt., Central Excise, wherein the assessee had itself categorically admitted that it had started trial production on 5-2-96. It was the submission that the paper book filed by the assessee also clearly shows that for the AY 1996-97 the assessee had made sales of nearly Rs.2,18,27,046/- and raw material consumption was of Rs. 1,91,83,079/-. It was the submission that the assessee having purchased raw materials and consumed the same and having sold its finished products and there being no sales return, it was the submission that the accounts of the assessee also clearly shows that the assessee had commenced its manufacturing operation in 1996-97. It was the submission that the learned Commissioner of Income-tax(Appeals) directed that initial assessment ITA No.951/Kol/10-C-GM 2 year was liable to be treated as AY 1997-98 on the ground that the assessee had confirmed its commercial production to have started in Sept 1996. It was the submission that the assessee having consumed the raw materials and having sold the finished goods during the Asstt. Year 1996-97, the initial AY was liable to be taken as AY 1996-97 and the order of the learned Commissioner of Income-tax (Appeals) be reversed.
6. In reply, the learned AR drew our attention to the assessment order. It was the submission that even before the Assessing Officer the letter of the assessee to the Department of Industrial Policy & Promotion, Ministry of Industries, New Delhi dated 14-11-1996 had been specifically brought to attention, wherein it has been mentioned that commercial production has been started only in Sept 1996. It was the submission that the auditors of the assessee have also specifically intimated in their report for the year ended on 31-3-96, which has shown at pages 34-35 of the assessee's paper book that work for construction of the plant of the company is still going. The trial run of various individual machineries are being tested during the course of its installation/erection for which necessary raw materials have been purchased from time to time and sale of finished goods coming out of such trial run was taken as part of construction/erection activities only. It was the further submission that for the year ended on 31/3/96 the total sales was only 2,18,27,046/- whereas sales from 19th Sept 2006 till 31-3-07 being 6 months was Rs. 20,36,67,764/-. It was the submission that the assessee had received a certificate from the Pollution Control Board, Assam on 19th Sept 1996 and from this date the commercial production had been started. It was the submission that as the commercial production had been started only in 1996, the initial AY for the purpose of claiming deduction u/s. 80IC(2) was liable to be taken as AY 1997-98. The assessee was entitled to claim deduction u/s. 80IC(2) for the AY 2006-07 under appeal. The learned DR relied on the decision of the Hon'ble Allahabad High Court in the case of CIT Vs. Himalayan Magnesite Ltd. reported in (2004) 276 ITR 56(All), wherein it has been held that there is a difference between trial production and production on regular basis. The learned DR further relied on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Nestor Pharmaceuticals Limited & Sidwal Refrigerations Ind. Ltd Vs. DCIT reported in (2009) 322 ITR 631 and submitted that after production, commercial sale has also taken place well before 31-3-96, the initial AY was liable to be taken as AY 1996-97.
7. We have considered the rival submissions. The perusal of the facts in the present case clearly show that the issue in debate on the issue of " Initial Assessment Year". The facts in the present case clearly show as follows:-
ITA No.951/Kol/10-C-GM 3The assessee was originally registered with the Central Excise Department under the name Universal Alloys & Steel Pvt. Ltd vide registration dated 8-8-94. The assessee company's name was changed to M/s. Bharat Calciners Ltd vide letter dated 16-12-96. The name was again changed to the present M/s. Guawahati Carbon Ltd vide order dated 1-8-02. The assessee's unit came into operation on 5-2-96 as per letter of the assessee addressed to Superintendent, Central Excise, Guwahati, wherein assessee has given notice of the manufacturing of calcinated petroleum coke. The assessee has informed that the unit has commenced its trial operation for the first time on 5-2-96. On the basis of said letter assessee has written letter dated 23-2-96 to the Regional Executive Engineer, Assam Pollution Control Board mentioning that earlier letter dated 22-12-95 had been filed praying for consent for starting of trial production and such trial production has been started and they have also installed equipment/machinery for minimising the pollution and has requested the Assam Pollution Control Board for monitoring of trial run/production and advise any more equipment etc are to be installed or the capacities of those already installed are to be enhanced. These letters are found at pages 89-91 of the assessee's paper book. At pages 95-98 is the order dated 19-9-96 from the Pollution Control Board, Assam giving consent order for the operation of the chimneys in the assessee's factory. On the basis of this consent order dated 19-9-96 the assessee has written letter dated 14-10-96 to the Department of Industrial Policy & Promotion intimating the commencement of regular commercial production on 19/9/96.
8. Now, coming to the accounts maintained by the assessee it shows that the auditors have specifically mentioned that commercial production is yet to commence and trial run is going on. Further, a perusal of the final accounts for the year ended on 31-3-97 shows that the assessee had consumed raw materials of Rs.1,91,83,079.81 and has sales of Rs.2,18,27,076/-. Further, a perusal of the accounts of the assessee for the year ended on 31-3-97 shows that the assessee has consumed raw materials to the extent of Rs.17,55,30,317.85 and has sales to the extent of Rs.20,36,67,764/-. It is noticed that this consumption of raw materials and sales was for the period from 19-9-96 to 31-3-97. For the period 1-4-96 to 18-9-96 being the period during which the assessee claims to be continuing trial production, the assessee has consumed raw materials of Rs.12,4,24,362.55 and has sales of Rs.15,20,44,972/-.
9. A perusal of the auditors' report dated 4-9-97 for the year ended on 31-3-97, the auditor in para 01 mentions that it has been explained to the auditors that the construction/erection of work of the ITA No.951/Kol/10-C-GM 4 company's new plant just has been completed a few days back. Thus, now, we are faced with 3 dates
i) date 5-2-96, when the assessee has written letter to Superintendent, Central Excise intimating the commencement of trial production for the first time, ii) 19-9-96 being the date on which the assessee has received the consent order from the Pollution Control Board, Assam and letter has been written by the assessee to the Department of Industrial Policy & Promotion dated 14-10-96 intimating the commencement of regular commercial production and iii) August/September 1997 being the date of completion of construction/erection work of company's new plant as per report of the auditors dated 4- 9-97. In any case the date 4-9-97 would not carry any implication, in so far as the commencement of operation of the assessee.
10. Now, we are concerned with 2 dates being 5-2-95 and 19-9-96. Admittedly, on 5-2-96 the assessee as per its own letter has confirmed start of the trial production. Date 19-9-96 is the date of obtaining the consent order from the Pollution Control Board, Assam and consequent claim starting of commercial production.
11. A perusal of the accounts of the assessee shows that for the period 5-2-96 to 31-3-96 the assessee consumed raw materials to the extent of Rs.1.91 crores and has sales of Rs. 2.18 crores. For the period 1-4-95 to 18-9-96, the assessee has consumed raw materials to the extent of Rs.12.04 crores and has sales of Rs. 15.20 crores. From 19-9-97 to 31-3-97 the assessee has consumed raw materials of Rs.17.55 crores and has sales of Rs.20.36 crores. Interestingly, there is also a letter dated 22-3-96 from the assessee addressed to the Regional Executive Engineer, Pollution Control Board, Assam confirming the installation of equipment/machinery for minimising the pollution and requesting the officer concerned to arrange for monitoring of trial production Admittedly, any factory can go into commercial operation only after obtaining necessary consent order from the Pollution Control Board. The assessee has received consent order on 19/9/97 and assessee has confirmed the commencement of regular commercial production. This is also evident from the confirmation of intimation for commencement of production of the licence/s registered unit, wherein in col.8 being the date of commencement of production of each item for licence/registration has been granted and details of production achieved so far is hand written as "19-9-96" whereas all other columns are typed. Further, as extracted earlier, in the course of trial production the assessee has been able to attain full production capacity and as early as 22-3-96 the assessee has also written to the Pollution Control Board, Assam to do their monitoring for the consent order. This clearly shows that much before 31-3-96 the assessee company was fully operational. In any case, the assessee has not placed before us the copy of the first ITA No.951/Kol/10-C-GM 5 sale bill. However, a perusal of the financial accounts for the year ended on 31-3-96 shows that the assessee has sales more than Rs.2 crores and there is no sales return. All these categorically showed that the assessee has started commercial production under the guise of trial production before 31-3- 96 itself. The assessee has taken the shelter under the guise of trial production only because it had not received the "consent order" from the Pollution Control Board. Here, we may specifically mention that the assessee had made the application for obtaining the "consent order" as early as 29-12-95. This is because on 29-12-95 Regional Office, Guwhati, Pollution Control Board had issued a letter confirming the receipt of application with the requisite fees and other documents. Without the necessary equipment being put in placed, the assessee could not file an application for obtaining the consent from the Pollution Control Board. Without having consent of Pollution Control Board assessee would not have started its initial production.
12. The fact that the assessee on 22-3-96 has requested for monitoring of the trial run/production by the pollution control board shows that the actual production has began. The volume of the raw materials consumed and the sales made by the assessee during the so-called trial production period is also substantially identical. The sales return are also not there. Here, we may mention, the provisions of section 80IC of the I.T.Act'61 in regard to initial AY. The same is defined in sub-section 8(v) to mean " the assessment year relevant to the previous year in which the undertakings/enterprises begin to manufacture or produce articles or things or commencement of operation or complete substantial expansion". Thus, for the purpose of (i) identifying the initial AY one has to look for the beginning of manufacture or production or (ii) commencement of operation or (iii) complete substantial expansion. Admittedly, the word in section take colour from its preceding words. Thus, the term 'begins' to manufacture or produce would have to take colour from the term 'commences operation'. The term initial assessment year is also defined in section 80IB(14) and 80ID(6) etc. The fact that the assessee has completed the setting up of its factory and has started production and has also requested the Pollution Control Board praying for its "consent order" much before 31-3-96 shows that the initial AY is the AY 1996-97 and not AY 1997-98 as claimed by the assessee.
13. We are live to the issue that commercial production and not trial production determines the beginning of manufacture or production of articles or things. However, when actual production has began and sales has also been effected of manufactured goods and there is no sales return, that such production is still a trial production just because the consent order from the Pollution Control Board, Assam has not been received to begin the manufacture or produce any articles or things or ITA No.951/Kol/10-C-GM 6 commences operation as required u/s. 80IC of the Act is unsustainable. The facts in the present case clearly show that the assessee has began to manufacture the calcinated petroleum coke using the raw material of petroleum coke before 31-3-06 and the sale of finished products would clearly establishes the commencement of operation. In the circumstances, we are of the view that 'initial assessment year' for the assessee to claim deduction u/s. 80IC(2) of the Act is the year 31-3-96 relevant to the AY 1996-97.
14. Coming to the claim of the assessee that it has capitalised the expenditure till 18-9-96 and the same has also been accepted by the revenue, we are not convinced by the said claim as nothing stopped the assessee from claiming expenditure thereto as a revenue expenditure. There is no assessment order for the AY 1996-97 or 1997-98 specifically accepting the claim of the assessee. Further, there is also no scrutiny assessment order accepting the claim of the assessee that the initial AY in the case of the assessee for claiming of deduction u/s. 80IC is the AY 1997-98. In the circumstances, on the basis of the facts as mentioned above, the initial assessment year for the assessee for claiming of deduction u/s. 80IC(2) is held as the assessment year 1996-97. Consequently, the assessee would not be entitled to claim of deduction u/s.80IC(2) for the impugned AY 2006-07. In the circumstances, the finding of learned Commissioner of Income-tax (Appeals) stands reversed and that of the AO restored. In the circumstances, the appeal of the revenue is allowed as mentioned above.
15. In the result, the appeal of the revenue stands allowed यह आदे श खुले Ûयायालय मɅ सुनाया गया है THIS ORDER IS PRONOUNCED IN OPEN COURT ON Dt 04-06-2012 Sd/- Sd/-
( ूमोद कुमार, लेखा सदःय ) ( जॉज[ म1थान, Ûयायीक सदःय )
(Pramod Kumar, Accountant Member) (George Mathan, Judicial Member)
(तारȣख)
तारȣख)Date 04-06-2012
*PP/SPSआदे श कȧ ूितिलǒप अमेǒषतः/ Copy of the order forwarded to:
1.. अपीलाथȸ / The Appellant : DCIT,Cir-3, 8/2 Esplanade East, Dwarth House, 2nd Fl., Kol-69.
2 ू×यथȸ / The Respondent- M/s.Guwahati Carbon Ltd 37A Bentick St., Kol-69.
3 आयकर किमशनर/The CIT,
4.. आयकर किमशनर (अपील)/The CIT(A)
ITA No.951/Kol/10-C-GM
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5. वभािगय ूितनीधी / DR, Kolkata Bench
6. Guard file.
स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt Registrar
ITA No.951/Kol/10-C-GM
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