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15. That the A.O. after verification upheld the SSI status of the assessee. It was pointed out that this fact was taken note of the DRP also in the proceedings for the impugned year before it.

16. The Ld. D.R. on the other hand contended that these contentions had been made by the assessee before the DRP also wherein the comments of the A.O. was invited to the same who contended that the assessee had actually stripped his main machine into different components and thereafter only accounted for the main body as its Plant and Machinery and rest of the items as Mould, Dies, Tools, Jigs and Fixtures, which was contrary to the intention of the language in the definition of the SSI unit as per IDR Act, to include a machine as a whole and not exclude moulds and jigs which were integral part of the machinery, and further that the verification of computers as per the direction of the ITAT in A.Y. 2003-04 was carried out by an Inspector who was illiterate in computer skill. Ld.DR pointed out that on the AO stating so, the assessee itself requested before the DRP for fresh verification to be carried out by a literate team, which was carried out and the report submitted did not help I.T.A Nos. 2948/Ahd/2010 & Ors. A.Y. 2006-07 & Ors. Page No 8 K H S Machinery Pvt. Ltd. vs. ACIT the cause of the assessee at all, since the computers and its software were found to be in the nature of customized software/operating systems like ERP, AutoCAD being used in the entire process of the assessee right from allocation of material to requisition of production, issue of inventory and even quality control function which clearly showed that the software's were being used in manufacturing process and the related hardware accordingly was attributable to the production process undertaken by the assessee and that further the assessee was unable to verify the inclusion and exclusion to Plant and Machinery stating that considerable time had elapsed since March 2006 and due to change in location some obsolete machinery had been discarded while some had been redesigned and further that 1700 components were manufactured for the purposes of machines manufactured by the assessee and most of these components were manufactured by various vendors and suppliers ,where the Moulds and Dyes were kept at their premises and hence not verifiable. That the DRP taking note of the same had held that the computers software and hardware needed to be included in the value of plant and machinery and the same itself exceeding 1 crore since it amounted to 1,24,84,568/- that alone disqualified the assessee from the SSI status. Our attention was drawn to the relevant findings of the DRP in this regard at para 5.6 & 5.12(v) is as under:

5.6. Various submissions of the assessee have been considered carefully, but the same are found not acceptable. During the course of proceedings before us, as requested by the assessee, the AO was directed to make physical verification and report regarding the Plant & machinery used in manufacturing activities in the relevant financial year. As detailed above, after making physical verification the AO has reported that the list of computer hardware and software owned by the assessee upto 31 .03.2006 was procured and major items were subjected to detailed verification. Upon verification, if was revealed that the assessee is utilizing various customized softwares/operating system like ERP, AutoCAD etc. in the manufacturing process. The ERP all the computers except in the Finance & Account Department. A snap shot of AutoCAD software used for lay out design, filing machines, bottle washing machines, labelling machines etc. was taken and was enclosed with the report. This amply shows that the AutoCAD software is being used for manufacturing of machines. The various inventory management functions such as allocation of material, requisition for production, issue of inventory, production planning, and so on are done with the help of ERP software.

19. Even otherwise taking up each exclusion we find that with respect to computers sought to be excluded valuing Rs.1,24,84,568/-, the only contention of the Ld.Counsel for the assessee was that in A.Y 2003-04,the computers were physically verified by the AO as to whether they could be said to be integral to the manufacturing process ,on the directions of the ITAT, and were not so found. This contention, we find merits no consideration since we find much water has flown since the verification done in AY 2003-04. We have noted from the DRP order that this argument was taken before it also to which the Revenue had countered saying that the Inspector deputed then was not competent to make the said verification of computers. And the assessee therefore had requested fresh verification to be done in the impugned year. The Ld.Counsel for the assessee does not dispute these facts. We have noted that the report of the AO ,submitted after due verification, stated the fact that the assessee was using various customized softwares/operating systems like ERP, Autocad in the manufacturing process. Snapshots of Auto CAD software being used for layout design, fitting machines, labeling machines was enclosed in the report. Similarly the AO reported use of software for inventory management functions right from allocation of materials, production requisition, planning and also quality control function. Snapshots of these functions were also submitted along with the report. The assessee had nothing much to say to counter the AO's report, merely stating that the total cost of the softwares both Autocad and Inventory Management Software(IMMS) was miniscule being Rs.5,91,675/- and Rs.6,51,000/-, and denied having any ERP system ,contending that it was only an IMMS software used only for purposes of day to day store accounting, was a I.T.A Nos. 2948/Ahd/2010 & Ors. A.Y. 2006-07 & Ors. Page No 14 K H S Machinery Pvt. Ltd. vs. ACIT perpetual inventory software and had nothing to do with manufacturing process.

20. As far as the AutoCad software is concerned, we find, even the assessee does not deny its usage in the manufacturing process. Therefore, the cost of the software alongwith the hardware in which it is used is to be treated as Plant and Machinery for the purposes of SSI status determination. The argument of the assessee that only cost of software be considered as Plant and Machinery ,is highly illogical and merits no consideration. It is common knowledge that software alone is of no use and has utility only when run on the hardware. Therefore both the cost of software and hardware, we hold, used for running Auto Cad software is to be treated as Plant and Machinery.