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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
अपीलाथ� ओर से /Appellant by : Shri Vartik Chokshi, A.R. Shri Deelip Kumar, Sr.D.R. ��यथ� क� ओर से / Respondent by : सुनवाई क� तार�ख / Date of 20/01/2020 Hearing घोषणा क� तार�ख /Date of 11/03/2020 Pronouncement आदेश/O R D E R PER WASEEM AHMED - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax(Appeals) - 6, Ahmedabad (CIT(A) in short) dated 30/03/2016 relevant to Assessment Year (AY) 2010-11.
The Assessee has raised following grounds of appeal:
1. On the facts and in the circumstances of the case, Learned. CIT(A) has erred in confirming disallowance of Rs.44,76,2087- under section 80IB of the Act. The Learned CIT (Appeals) ought to have appreciated that the Appellant is engaged in business of manufacturing of mills machinery parts and chemicals has satisfied all the conditions relating to allowably of deduction u/s 80IB(3) of the Act.
1.2 On the facts and in the circumstances of the case, Hon'ble CIT(A) ought to have appreciated the fact that the Assessing officer has while making disallowance of section 80IB of the Act erred in relying on the provisional certificate of approval for SSI (Small Scale Industries) particularly when all the conditions stipulated in section 80IB(3) are duly fulfilled by the Appellant and claim of Appellant u/s 80IB(3) is duly supported by the certificate of chartered accountant in Form 10CCB.”
The only issue raised by the assessee is that the learned CIT (A) erred in disallowing the deduction claimed under section 80-IB (3) of the Act.
The briefly stated fact is that the assessee is an individual engaged in business of Manufacturing of Mills Machinery parts & chemical through proprietorship in the name and style of M/s Embee Corporation. During the year under consideration the assessee being Small Scale Industrial (for short SSI ) Undertaking claimed deduction @ 25% of the profit under section 80IB(3) of the Act. However the AO observed that the assessee has not fulfilled the precondition as required for claiming deduction under the provision of section 80IB(3) of the Act. Accordingly the AO disallowed the deduction of Rs. 44,76,308/- as claimed and added to the total income of the assessee.
Aggrieved assessee preferred an appeal before learned CIT (A) who confirmed the order of the AO by observing as under:
“5.2 I have carefully considered the Assessment Order and submission of the Appellant. The Appellant has claimed deduction under Section 8016(3) for profit earned in industrial undertaking being Embee Corporation. The provision of the Act clearly stipulates Appellant to satisfy following four conditions:
(i) Undertaking should not be formed by splitting or reconstruction of business already in existence; (ii) Undertaking is not formed by transfer of plant & machinery previously used for any other purpose. (iii) The industrial undertaking should employ 10 or more workers when its process is with aid of power; (iv) The SSI undertaking should commence manufacturing or production of article during period 1-4-1995 to 31-3-2002.
5.3 The Appellant has relied upon Form No. 10CCB certified by Chartered Accountant for its claim that industrial undertaking has commenced operation on 16th
April, 2001. It is pertinent to note that Appellant has submitted provisional registration Certificate of small scale industries dated 25th June, 2001 wherein it is stated that date of commencement of production is 1st August, 2001. When provisional certificate is issued on 25th June, 2001 and on that day production has not been commenced, date of commencement of operation of undertaking as mentioned in Form 10CCB as 16th April, 2001 cannot be accepted. 5.4 During the course of Assessment Proceedings, as well as Appellate Proceedings, Appellant was asked to produce copy of Audited Annual accounts for A.Y. 2002-03 or stock register or other evidences which can justify commencement of production in A.Y. 2002-03. However, no such evidences were submitted by Appellant which can prove that Appellant has satisfied the basic condition of Section 80IB(3) that undertaking should commence production or article before A.Y. 2002-03. In absence of above details, Appellant is not entitled to deduction as claimed in Return of Income. Thus, disallowance under Section 80IB(10) for Rs. 44,76,208 is confirmed. This ground of appeal is dismissed.”
Being aggrieved by the order of the ld. CIT-A, the assessee in appeal before us.
The learned AR for the assessee filed a paper book running from pages 1 to 153 and submitted that the assessee has been allowed the deduction under section 80IB of the Act in the earlier years which were subject to the assessment under section 143(3) of the Act.
On the contrary learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the assessee has claimed deduction for Rs. 44,76,208/- being 25% of the profit under section 80IB of the Act. But the same was denied by the AO for the reasons as discussed under: i. In the certificate namely small scale industries issued by the Directorate of Industries, Government of Gujarat it was mentioned that the assessee is mainly engaged in the production of photo emulsion for textile. But the assessee in the year under consideration has shown its activity as manufacturing of mills machinery parts and chemicals. Thus there was the change in the activity of the assessee. As per the AO such change in the activity of the assessee represents the splitting up or the reconstruction of a business already in existence. Thus the assessee has not complied the condition as specified in clause (i) of subsection 2 of section 80IB of the Act.
ii. In the provisional certificate for registration as SSI unit, the assessee has shown 9 workers though in the year under consideration there are more than 10 workers. As such the condition of employing the numbers of workers have not been complied with. iii. The assessee failed to furnish the documentary evidence suggesting that the assessee has commenced his production in the assessment year 2002-03.
In view of the above, the AO denied the claim of the assessee under section 80IB of the Act. The learned CIT (A) subsequently confirmed the order of the AO.
From the preceding discussion we find certain undisputed fact that the assessee has been claiming deduction under section 80IB of the Act for the last several years and the same was accepted by the Revenue in the assessment framed under section 143(3) of the Act. The details of such assessment years stand as under:
S.No. A.Y. Record placed at Note 1 2006-07 Page 90 to 93 of Though no specific question paper book asked regarding the claim under section 80IB(3) 2 2007-08 Page 99 to112 of Specific question was asked paper book and thereafter allowed by the AO 3 2008-09 Page 118 to 130 Specific question was asked of paper book and thereafter allowed by the AO 4. 2009-10 Page 136 to 148 Specific question was asked of paper book and thereafter allowed by the AO
From the above it is transpired that the activity of the assessee has already been accepted by the Revenue as eligible for the deduction under section 80IB of the Act. Since there is no change in the facts and circumstances for the year under consideration viz a viz the earlier assessment years, we are of the view that the principles of consistency need to be applied. In holding so we also draw support and guidance from the order of Mumbai tribunal in the case of Sonata software Ltd versus a CIT reported in 56 Taxmann.com 290 wherein it was held as under:
“5.2 Thus, it can be seen that the claim of deduction in respect of each unit where section 10A deduction has been claimed as per chart mentioned herein above. The assessee was allowed the deduction in the initial assessment year which make fact of the case squarely covered by the decision of the Hon'ble Gujarat High Court in the case of Saurashtra Cement & Chemicals Industries Ltd. (supra), wherein Hon'ble Court has made the following observations :
"The next question to which the Tribunal addressed itself, and in our opinion rightly, was whether the ITO was justified in refusing to continue the relief of tax holiday granted to the assessee company for the assessment year 1968-69, in the assessment year under reference, that is, 1969-70, without disturbing the relief granted for the initial year. It should be stated that there is no provision in the scheme of s. 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under s. 80J can be withheld or discontinued provided the relief granted in the in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the ITO cannot examine the question against and decide to withhold or withdraw the relief which has been already once granted."
5.3 Similarly in the case of Paul Bros. (supra), Hon'ble Bombay High Court has held as under : "Held, that (i) since the assessment order for the year 1981-82 had merged in the appellate order, revisional jurisdiction could not be exercised; (ii) the Assessing Officer's order based on a binding decision of the High Court, could not be interfered with in revisional jurisdiction; (iii) unless deductions allowed for the assessment year 1980-81 on the same ground were withdrawn, they could not be denied for the subsequent years. Either in section 80 HH or in section 80J there is no provision for withdrawal of special deduction for breach of certain conditions."
5.4 Considering the facts of the case in the light of the judicial decision cited herein above, in our considered opinion the claim of deduction cannot be denied unless claim is withdrawn right from the initial assessment year. Respectfully following the decisions of the Hon'ble Bombay High Court and Hon'ble Gujarat High Court, we set aside the findings of Ld. CIT(A) and direct the AO to allow the claim of deduction as made by the assessee
We also note that in the similar facts and circumstances the jurisdictional High Court in the case of Saurashtra Cement & Chemical [Ashwin Babulal Shah vs. JCIT] A.Y. 2010-11 - 6 - Industries Ltd. v. Commissioner of Income-tax reported in 2 Taxman 22 has held that “The tax holiday under section 80J cannot be discontinued in the subsequent year without disturbing the relief granted in the earlier year. “
In view of the above, we hold that the claim of the assessee for the deduction under section 80IB of the Act cannot be denied for the year under consideration as the claim has been accepted by the revenue in the earlier assessment years which was not withdrawn. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him.
In the result the appeal of the assessee is allowed for the assessee purposes.
This Order pronounced in Open Court 11/03/2020
Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) ACCOUNTANT MEMBER VICE PRESIDENT Ahmedabad: Dated 11/03/2020 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।