Income Tax Appellate Tribunal - Mumbai
Zylog Plast Alloys P. Ltd, Mumbai vs Assessee on 16 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER
AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
I.T.A. No.7892/M/2011
(Assessment Year: 2005-2006)
Mrs. Zylog Plast Alloys Pvt फनाभ/ DCIT - 7(3),
Ltd., Aayakar Bhavan,
Vs.
C/o. Jitedra Shah, 14 Divya 6 t h Floor, Mumbai-400020.
Mahal, Gyan Mandir Road,
Dadar (w), Mumbai - 400020.
स्थामी रेखा सं ./ PAN : AAACZ0342B
(अऩीराथी /Appellant) .. (प्रत्मथी / Respondent)
अऩीराथी की ओय से / Appellant by : Shri Rajesh V. Parekh
प्रत्मथी की ओय से/ Respondent by : Shri Asghar Zain, VP , DR
सुनवाई की तायीख / Date of Hearing : 16.02.2016
घोषणा की तायीख /Date of Pronouncement : 16.02.2016
आदे श / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 22.11.2011 is against the order of the CIT (A)-13, Mumbai dated 30.6.2011 for the assessment year 2005-06. In this appeal, assessee raised the following grounds which read as under:
"1. As per the facts of the case and as per law whether the Ld CIT (A) was right in confirming the addition of Rs. 66,68,579/- on account of disallowance of deduction u/s 80IB of the Act.
2. As per the facts of the case and as per law whether the Ld CIT (A) was right in confirming the stand of the AO for opening the matter u/s 148 of the Act."
2. The legal issue raised in Ground no.2 relates to if the reopening of the assessment is justified in this case on the ground that the assessee is no longer a small scale industry in view of the investment restrictions provided to the small scale industries. Briefly stated relevant facts of the case are that the assessee, who is a manufacturer in „Termoplastic, elastomer / ployolefin‟, filed the return of income 2 declaring the total income of Rs. 2,07,14,030/-. Original assessment was completed u/s 143(3) of the Acton 30.11.2007, wherein assessee was allowed deduction of Rs. 66,68,579/- claimed u/s 80IB being a small scale manufacturer. In the assessment AO made ad-hoc disallowance of Rs. 1 lakh on account of conveyance and vehicle expenses. Thereafter, the case was reopened u/s 143(3) r.w.s 147 of the Act by issuing a notice u/s 148 of the Act dated 8.3.2010. The reason recorded for reopening of the case is that since the assessee‟s quantum of business exceeds the eligibility to be reckoned as „small scale unit‟, and therefore, assessee is not entitled for the benefit of deduction u/s 80IB of the Act. Subsequently, Assessing Officer passed assessment order u/s 143(3) r.w.s. 147 of the Act disallowing the deduction of Rs. 66,68,579/- u/s 80IB of the Act vide his order dated 15.11.2010. Aggrieved with the said order of AO, assessee carried the matter in appeal before the first appellate authority.
3. During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) dismissed the appeal. Again aggrieved and dissatisfied with the CIT (A)‟s order, assessee is in further appeal before the Tribunal by raising mainly the legal issue vide ground no.2 extracted above.
4. During the proceedings before us, Ld Counsel for the assessee briefly narrated the facts of the case and submitted that during the year, assessee‟s investment is below Rs. 4 Crs (ie Rs. 3.94 Crs) only. On this issue, Ld Counsel for the assessee filed a judgment of the Hon‟ble Karnataka High Court in the case of Ace Multi Axes Systems Ltd vs. DCIT [2014] 367 ITR 266 (Karn), dated 28.7.2014, which is relevant for the proposition that "if a small scale industry stabilises early, makes profits, makes future investments in its business, and goes out of the definition of small scale industry, the benefit of deduction u/s 80IB could not be denied. Therefore, if a small scale industry, in the course of 10 years, stabilises early, makes farther investments in the business and it results in its going outside the purview of the definition of a small scale industry, that should not come in the way of its claiming benefit under section 80IB for ten consecutive years, from the initial assessment year". He submitted that in the present case, the AO reopened the case merely for the reason that the assessee goes out of the definition of a small scale industry.
3Thus, the decision of the AO / CIT (A) is legally unsustainable in law. Therefore, the re-opening should be quashed as unsustainable considering the above legal proposition.
5. On the other hand, ld DR for the Revenue heavily relied on the orders of the Revenue Authorities.
6. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited judgment of the Hon‟ble Karnataka High Court in the case of Ace Multi Axes Systems Ltd (supra) as well as the relevant material placed before us. After hearing both the parties and on perusal of the said judgment of the Hon‟ble Karnataka High Court (supra), we are of the opinion, the argument of the Ld Counsel for the assessee should be accepted and Ground no.2 raised by the assessee should be allowed in its favour. We order accordingly.
7. Considering the above decision on the legal issue raised in Ground no.2, the adjudication of Ground no.1 relating to the merits becomes academic. Accordingly, Ground no.1 is dismissed as academic.
8. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 16th February, 2016.
Sd/- Sd/- (PAWAN SINGH) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 16.2.2016 व.नन.स./ OKK , Sr. PS
आदे श की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to :
1. अऩीराथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमुक्त(अऩीर) / The CIT(A)-
4. आमकय आमक् ु त / CIT
5. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 4
6. गार्ड पाईर / Guard file.
सत्मावऩत प्रनत //True Copy// आदे शानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीऱीय अधिकरण, भुंफई / ITAT, Mumbai