C.I.T. PATIALA vs. M/S SWASTKA OILS & FERTILZIERS

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Date of Decision: July 5, 2010 The Commissioner of Income-tax, Patiala --- Applicant Versus M/s. Swastika Oils and Fertilizers, Bahadurgarh --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL *** PRESENT: Ms. Urvashi Dhugga, Advocate for the applicant-Revenue.

--- Ajay Kumar Mittal, J. The Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (in short “the Tribunal”), at the instance of the Revenue, pursuant to the directions of this Court, issued vide order dated 22.11.1995, in petition filed under Section 256(2) of the Income-tax Act, 1961 (for short “the Act”), has referred the following question of law for the opinion of this Court: “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the CIT (A) allowing deduction u/s. 80HHA, when the ITAT vide its order dated 21.7.1987 passed in appeal No. 889/Chandi/1984 in the case for assessment year 1981-82 confirmed the action of the Assessing Officer on the same facts?” The controversy between the parties relates to the assessment years 1979-80, 1980-81 and 1982-83. The facts are, however, being taken from the case relevant for the assessment year 1980-81. The Assessing Officer, Patiala framed assessment on total income of Rs. 3,03,454/- on 31.8.1981 and subsequently the said order was rectified twice under Section 154 of the Act, and finally, the income was assessed at Rs.3,88,340/- vide order dated 2.9.1983 in which deduction under Section 80HHA amounting to Rs. 90,385/- was withdrawn. The assessing officer disallowed the benefit of deduction under Section 80HHA of the Act to the assessee on the ground that correct value of machinery and plant on the last day of the previous year exceeded Rs. ten lacs and the industrial undertaking of the assessee was not covered under the definition of ‘small scale industrial undertaking’. The assessee carried appeal against the aforesaid order before the Commissioner of Income-tax (Appeals) (in short “CIT(A)”. The appeal was allowed on 6.3.1984 holding that the total value of the machinery installed as on the last date of the previous year, did not exceed Rs. ten lacs. The income was, thus, computed at Rs. 2,98,155/-. Subsequently, action was initiated by the assessing officer under Section 148 of the Act for disallowing deduction earlier allowed under Section 80HHA, on the ground that the same was not admissible as the factory of the assessee was situated within 8 Kms from the municipal limits of Patiala City. The assessing officer, vide order dated 23.2.1985 added the disallowance of the benefit of deduction under section 80HHA on the premise that the factory of the assessee was situated within 8 Kms from the Municipal limits of Patiala City. The CIT(A) however, accepted the plea of the assessee that the factory was situated at a distance of 8.3 Kms. and not 7.3 Kms from the Municipal limits and accordingly allowed the appeal of the assessee. The Tribunal dismissed the appeal preferred by the Revenue. The Tribunal, while adjudicating the issue, had recorded the following finding: “The issue that permeates to all these appeals depends upon the fact whether the location of the appellant’s factory from the Municipal limit by nearest approach is more than 8 Kms or not. In this regard the CIT(A) has given a finding of fact on the basis of material produced before him that distance was 8.3 Kms from the Municipal limit as against 7.3 Kms. determined by the Assessing Officer. There is no evidence to controvert this. As such on facts, the appeals of the Revenue fail. These are dismissed.” Learned counsel for the Revenue submitted that the finding recorded by the Tribunal that the factory of the assessee was beyond 8 Kms from the municipal limits of Patiala City and thus, the assessee was entitled to deduction under Section 80HHA of the Act, is perverse and against its own order passed in the case of the assessee relating to the assessment year 1981-82. A perusal of the order of the Tribunal shows that the distance of the factory of the assessee from the Municipal limits of Patiala City was 8.3 Kms and not 7.3 Kms. as determined by the Assessing Officer. This is a finding of fact based on appreciation of evidence and once it stands established on record that the factory of the assessee was beyond 8 Kms. from the Patiala City, there was no reason to disallow the relief of deduction under Section 80HHA of the Act. Further, the order passed by the Tribunal does not show that the Revenue had ever relied upon or had argued before it with regard to the order in respect of assessment year 1981-82. Moreover, neither the order of the Tribunal in the case of the assessee for the assessment year 1981-82 has been produced before this Court nor it has been shown as to on what basis the Tribunal had recorded that the factory of the assessee was situated within 8 Kms of the municipal limits in that year. In the absence thereof, the findings which have been recorded in the present case relating to the assessment years 1979-80, 1980-81 and 1982-83 cannot be said to be perverse merely on the ground that the Tribunal for the assessment year 1981-82 had decided the issue in favour of the Revenue. In view of the above, we answer the question referred, against the Revenue and in favour of the assessee. (AJAY KUMAR MITTAL)

JUDGE (ADARSH KUMAR GOEL) July 5, 2010 JUDGE *rkmalik*