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9.3. In the light of aforesaid provisions, we have to determine the status of taxpayer's industrial undertaking. In the case under consideration is that of manufacturing bottling plants. Therefore, it has to be seen which are the plant and machinery installed for the purpose of manufacturing bottling plants. Only the actual cost of such machinery, as on the last day of the previous year has to be taken into account for determining as to whether the I.T.A Nos. 2948/Ahd/2010 & Ors. A.Y. 2006-07 & Ors. Page No 6 K H S Machinery Pvt. Ltd. vs. ACIT industrial undertaking owned by the taxpayer is an SSI. The A.O. and the Ld. CIT(A) are of the opinion that the value of such plant and machinery exceeds Rs. One crore. The A.O. has included value of the entire plant and machinery including vehicles computer and computer software as also moulds, dies, jigs consumables etc. while the Ld. CIT(A) has recorded the findings only on inclusion of vehicles computer and computer software. However, the arguments of both the sides with reference to these items of plant and machinery are considered as under:

9.3.2. As regards computer hardware and software the Ld. A.R. on behalf of the taxpayer argued that computers are installed in office and therefore have to be excluded in terms of decision of the ITAT in the case of Samir Diamond Mfg. P. Ltd.

I.T.A Nos. 2948/Ahd/2010 & Ors. A.Y. 2006-07 & Ors. Page No 7 K H S Machinery Pvt. Ltd. vs. ACIT 67 ITD 25 (Ahd.) There is no finding in the order of either A.O. or Ld. CIT(A) as to whether or not all the computers are installed in office Ld. CIT(A) observed that since computers have not been excluded in the note 2(b) of aforesaid notification 10.12.1999 accordingly these have to be plant and machinery. Hon'ble Jurisdictional High Court in the case of CIT vs. Prabhusdas kishordas Tobecco products P. Ltd. 282 ITR 568 (Guj.) held that for determining the ascertaining the status of industrial undertaking SSI, the actual cost of plant and machinery which is installed in the industrial undertaking and used for the purpose of business of the undertaking has to be adopted. The provision does not stipulate taking the aggregate value of plant and machinery of the business as a whole but which the same to the plant and machinery relatable to the industrial undertaking since there is no finding either in the order of the A.O. or of the Ld. CIT(A) as to whether or not all the computers, including software valuing Rs. 98.14 lacs are installed in the office or are used in the process of manufacturing bottlings plants. In the light of aforesaid decision of Hon'ble Jurisdictional High Court and in the interest of justice, we vacate the findings of the CIT(A) on this aspect and restore the matter to the file of the A.O. with the directions to ascertain as to whether or not all the computers are installed in office or as to whether some of these are installed for the purpose of manufacturing bottling plants in the industrial undertaking and thereafter determine the status of industrial undertaking as an SSI and consequently entitlement to deduction u/s. 80IB of the Act, in accordance with law after alongwith sufficient opportunity to the taxpayer.

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:

21. Regarding the IMMS /ERP software the AO vide his letter dated 07-07- 2010 has vehemently made out a case for treating it as Plant and Machinery stating that these softwares are utilized for the purpose of handling all activities of the assessee enterprise including manufacturing, inventory management, time scheduling, ordering of items, vendor management, financial solutions, salary payment and attendance logging. He has stated that they are not stand alone systems but are integrated by their very nature with all other systems of the enterprise. That in an ERP implemented environment each production/consumption/ sale/inventory detail needed to be accounted for on a real time basis and the software generated requisite reports including production and inventory forecasting ,production/sales forecasting ,inventory ordering and scheduling etc. That without this system the plant of the assessee cannot be run and therefore these software alongwith hardwares constitute Plant and Machinery. The AO detailed the extensive coverage of these software in the operations of the assessee company noting them to be installed in all areas of operation. He noted integrated manufacturing applications installed in the computers at shop floor which were found to be integrated with all other computers of the company by installing modems as well as Oracle and Lotus Notes softwares. He also noted the fact of huge repair and maintenance charges being paid for maintaining the systems amounting to Rs.2.8 lacs which he noted was charged only on specialzed computer systems. The assessee has I.T.A Nos. 2948/Ahd/2010 & Ors. A.Y. 2006-07 & Ors. Page No 15 K H S Machinery Pvt. Ltd. vs. ACIT countered by merely contending that only cost of software of IMMS /ERP be considered as Plant and Machinery and that the software was only for handling stores. The DRP /AO, we hold, has rightly held the cost of ERP software alongwith hardware to be included in the value of Plant and Machinery in the aforestated backdrop of the case since the finding of fact of the computers being used in manufacturing process is based on physical verification by the AO who supported his report with snapshots of the software shown to being used in the manufacturing process. The usage of the IMMS software in the entire production process involving allocation of materials ,production requisition and planning has been established as a fact by the AO's inspection and snapshots taken during the inspection and even the assessee admitted to it being used as a continuous inventory management software. The DRP, we hold, has rightly held that that the specialized inventory management software enabled manufacturing process which was dependent on it and thus plant and machinery. Further the DRP has rightly included the investments in hardware alongwith the softwares being used as held by us above in respect of Auto Cad software. Thus we hold that the inclusion in Plant and Machinery of investments in computers to the tune of Rs.1,24,84,568/- was rightly made by the AO/DRP. The investment in computers exceeding Rs. 1 Cr this inclusion in the Plant and Machinery of the assessee itself makes the assessee ineligible to claim the status of SSI . However we shall proceed to deal with the exclusion of other items also from Plant and Machinery by the assessee of Mould, dyes ,Jigs and Tools etc .in accordance with the IDRA notification. The DRP has completely rejected the bifurcation of the assessee regarding its Plant and Machinery amounting to only Rs.46,47,971 out of that shown under the head Plant and Machinery in the Books of Rs.3,74,00,831/- and based it on the following reasoning: