Gujarat High Court
Asiatic Colour Chemical Inds. Ltd vs Dy Cit (Osd) on 5 July, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
O/TAXAP/414/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 414 of 2017
With
TAX APPEAL NO. 415 of 2017
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ASIATIC COLOUR CHEMICAL INDS. LTD....Appellant(s)
Versus
DY CIT (OSD), RANGE- 1....Opponent(s)
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Appearance:
MR SN DIVATIA, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 05/07/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Facts are common in both the Tax Appeals. We may note the facts from Tax Appeal No.415/2017 which pertains to the assessment year 20072008.
2. The assessee is in appeal against the judgment of the Tribunal dated 6.9.2016. The assessee has raised the following questions for our consideration :
"A. Whether on the facts and in the circumstances of the case as well as in law, the Appellate Tribunal was justified in reversing the finding given by CIT(A) that appellant's own manufacturing had commenced from A.Y. 199899 so that the exemption u/s. 10B of Rs.5,41,14,329/ was Page 1 of 6 HC-NIC Page 1 of 6 Created On Sun Jul 23 13:31:29 IST 2017 O/TAXAP/414/2017 ORDER admissible for A.Y. 200708?
B. Whether on the facts and in the circumstances of the case as well as in law, the Appellate Tribunal was justified in rejecting, without any material and speaking/reasoned order, the clear findings given by CIT(A) on the basis of evidence on record that the appellant's own manufacturing had commenced in A.Y. 199899 so that the claim of exemption u/s. 10B of Rs.5,41,14,329/ was admissible for A.Y. 200708?
C. Whether on the facts and in the circumstances of the case as well as in law, the above conclusions reached by Income Tax Appellate Tribunal was perverse and based on irrelevant evidence or such as could be arrived at ?"
3. Though three questions are framed, issue is single, namely, availability of exemption under section 10B of the Income Tax Act for the assessment year 20072008. According to the assessee, the manufacturing activity had commenced during the period relevant to the assessment year 19981999 and since the exemption under section 10B would be available for 10 consecutive years from the beginning of the manufacturing activity, the assessee was entitled to such exemption for the assessment year 2007 2008 also. The Assessing Officer rejected such claim holding that the manufacturing activity had commenced during the financial year 19951996 i.e. relevant to the assessment year 19961997 and that therefore, such exemption under section 10B of the Act would not be available for the assessment year 20072008.
4. The Commissioner allowed the appeal of the assessee on this ground holding that there was insufficient Page 2 of 6 HC-NIC Page 2 of 6 Created On Sun Jul 23 13:31:29 IST 2017 O/TAXAP/414/2017 ORDER manufacturing activity set up of the assessee during the earlier years and that therefore, the assessee could claim the benefit of section 10B even during the present year. To a further appeal by the Revenue, the Tribunal reversed the findings of the CIT (Appeals) and allowed the Revenue's appeal. The Tribunal made the following observations :
"5 With the assistance of the ld. representatives, we have gone through the record carefully. As far as existence of the assessee as an EOU is concerned, there is no dispute between the parties. Similarly, it is not in dispute that the assessee fulfills conditions enumerated in section 10B of the Act for availing deduction. The dispute between the parties is very limited. According to the A0, the assessee was engaged in manufacturing of dyes and dyes intermediates. It has been exporting these products from the F.Y.199596. It has claimed deduction under section 80HHC and 80IA. The assessee has converted its DTA unit into EOU. It can claim deduction under section 10B as per subsection 1 for a consecutive period of ten years from the year in which it begins manufacture. Since it was manufacturing in the Asstt.Year 199697, ten consecutive assessment years have expired and it is not admissible in the Asstt.Year 200607 onwards. The assessee sought to submit that deduction claimed in the F.Y.l99596 and other years, were not admissible. These were wrongly claimed and wrongly been granted. For proving this fact, the assessee is harping upon certain entries in the books of accounts, and pointed out that it has very meager plant & machinery. It did not possess plant & machinery during the F.Y.199596. The 1d.CIT (A) has accepted this fact. In our Opinion, the assessee cannot be permitted to breath hot and cold simultaneously. When we confronted the ld.counsel for the assessee, as to how assessee can claim deduction in these assessment years, when deduction were claimed under section 80HHC and 801A in the Asstt. Year 199697, the reply of the Page 3 of 6 HC-NIC Page 3 of 6 Created On Sun Jul 23 13:31:29 IST 2017 O/TAXAP/414/2017 ORDER ld.counse1 for the assessee was that the Revenue might have committed an error in granting such deduction in those years. But the assessee cannot be denied from its right to claim in these years. In the light of the above situation, we are called upon to appreciate two sets of facts. On one hand, evidence in the shape of incometax return filed by the assessee, which has been verified by the authorized officer of the company deposing that all facts mentioned in the return are true and correct according to his best knowledge. Department has acted upon such a declaration and allowed the deduction under section 8OHHC of Rs.47,82.994/ and Rs.24,83,068/ under section 801A (30% of manufacturing profit restricted upto Rs.4,93,301). On the other hand, the evidence referred by the assesse is that factory building was constructed only in F.Y.l99798. Electric connection was taken on 27.4.1996, total value of the plant and machinery was not even of Rs.5,000/ till 31.3.1997. The scale of the ld.ClT (A) was weighed towards these set of evidences, but in our understanding these are not such a strong circumstances which can dispel own admission of the assessee while filing the return for the Asstt.Year 199697. It is not the quantum of deduction or quantum of electricity to the plant & machinery. it is to be seen that even for trial basis, the assessee has derived any profit from manufacturing activity and claimed deduction under section 8HHC and 801A. then, it would be construed that the assessee has exhausted one of these years out of future claim. The ld. counsel for the assessee also relied upon the decision of ITAT, Ahmedabad Bench in the case of Deepkiran Foods P. Ltd, Vs. ACIT, 141 ITD 0085. He placed on record copy of this decision. The facts of this case are quite distinguishable. In this case the issue was set aside to the A0 to find out whether the assessee has earned profit on sale of outsourced items and claimed deduction under section 10B of the Act. The profit derived by an assessee on selfmanufactured item was considered to be eligible for deduction under section 10B of the Act No such Page 4 of 6 HC-NIC Page 4 of 6 Created On Sun Jul 23 13:31:29 IST 2017 O/TAXAP/414/2017 ORDER circumstances are there in the present appeals. Therefore. in our opinion. The ld. CIT(A) has erred in allowing deduction to the assessee in both these years. We set aside order of the ld. CIT(A) and restore that of the A0 on this issue."
5. From the record, it emerges that for the assessment year 19961997, the assessee had claimed deduction under section 80HHC and 80IA of the Income Tax Act which would be available to an industrial undertaking manufacturing or producing an article or thing. Thus in plain terms, case of the assessee was that even during the said period, the assessee was engaged in the manufacturing activity. Faced with such a situation, the assessee took an unusual stand claiming that such deduction was wrongly claimed and wrongly granted.
6. In our opinion, the Tribunal correctly held that the assessee cannot be allowed to blow hot and cold. Having set up and established the claim of being engaged in the manufacturing activity during a particular period, which stand of the assessee was accepted by the department, the assessee cannot be allowed to shift the stand merely because in the later year the assessee finds that it would be more advantageous to shift the beginning of 10 consecutive years for the exemption under section 10B of the Act.
7. In the result, Tax Appeals are dismissed.
(AKIL KURESHI, J.)
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O/TAXAP/414/2017 ORDER
(BIREN VAISHNAV, J.)
raghu
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