COMMISSIONER OF INCOME TAX vs. BHAVANI FORGE P. LTD.

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TAXAP/1326/2006HC GujaratGJHC24038296200601 December 2014Bench: HONOURABLE MR. JUSTICE KS JHAVERI,HONOURABLE MR. JUSTICE K.J.THAKER6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal had provided cogent and convincing reasons for its conclusion and agreed with the Tribunal's view. The Tribunal, after considering the material on record, had rightly held that the assessee satisfied all the conditions to avail the benefit of Section 80IA of the Income Tax Act. The revenue was unable to demonstrate how the Tribunal's findings were bad in law or on facts. The Tribunal had relied on the decisions of the Kerala High Court in CIT v. Seeyon Plywood (56 Taxation 296) and the Gujarat High Court in CIT Vs. Satellite Engineering Ltd. (113 ITR 208) and CIT v. Suessin Textile Bearing Ltd. (135 ITR 443), and also CIT Vs. Nars Minerals Export Pvt. Ltd. (231 ITR 863). The core reasoning was that if the conditions for deduction under Section 80IA are not met in the initial year but are satisfied in subsequent years, the benefit can be claimed from the year the conditions are fulfilled, provided the deduction is within the 10-year limit. The condition that the value of old machinery should not exceed 20% of the total value of machinery was satisfied by the assessee in the years under consideration. The appeals filed by the revenue were dismissed.

What were the facts?

The assessee, Bhavani Forge P. Ltd., engaged in forging and manufacturing auto parts, filed its return for Assessment Year 2001-02, declaring a total income of Rs. 47,66,167. The assessee claimed deduction under Section 80I of the Income Tax Act, 1961, stating it became entitled to the deduction after purchasing new machinery, though the business started on September 25, 1991. The Assessing Officer rejected this claim. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the assessee's appeal. The revenue appealed to the Income Tax Appellate Tribunal (ITAT), which dismissed the revenue's appeals, confirming the CIT(A)'s order. The revenue then filed these appeals before the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law and on facts in holding that the deduction under Section 80IA of the Income Tax Act, 1961, if not claimed in the initial year, can be claimed in subsequent years when the conditions therein are fulfilled? Assessee's contention: The assessee supported the impugned judgment and order of the Tribunal, arguing that the order does not warrant interference due to the concurrent findings of the CIT(A) and the Tribunal. Therefore, the appeals deserve to be dismissed. Revenue's contention: The revenue submitted that the Tribunal committed an error in allowing the assessee's claim. It further argued that the Tribunal and the CIT(A) did not properly consider the material on record, and therefore, the appeals deserve to be allowed.

Which sections of the Income-tax Act were involved?

Section 80I,Section 80IA

AI-generated summary — verify with the full judgment below

O/TAXAP/1321/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1321 of 2006 With TAX APPEAL NO. 1326 of 2006 With TAX APPEAL NO. 1328 of 2006

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ COMMISSIONER OF INCOME TAX....Appellant(s) Versus BHAVANI FORGE P. LTD.....Opponent(s) ================================================================ Appearance: MR. P.G. DESAI, ADVOCATE for the Appellant(s) No. 1 MR SUNIL B PARIKH, ADVOCATE for the Opponent(s) No. 1 ================================================================ Page 1 of 6

O/TAXAP/1321/2006 JUDGMENT CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 01/12/2014 COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Since   all   these   appeals   arise   from   the common   order   of   the   Income   Tax   Appellate   Tribunal, they are being disposed of by this common judgment. 2. By   way   of   these   appeals,   the   appellant­ revenue   has   challenged   the   common   order   dated 28.02.2006 passed by the Income Tax Appeal Tribunal [for   short   “the   Tribunal”]   in   ITA   Nos.278/RJT/05, 574/RJT/03 & 279/RJT/05, whereby the appeals filed by the revenue were dismissed by the Tribunal. 3. In all these appeals the facts as well as the   question   of   law   are   same,   therefore,   we   are discussing only the facts of Tax Appeal No.1321 of 2006 for our convenience. 4. The   facts   in   brief   are   that   respondent­ assessee is engaged in the business of forging and manufacturing   of   various   types   of   auto   parts.   The assess had filed its return for the Assessment Year 2001­02   on   29.10.2001   and   declared   total   income   of Rs.47,66,167/­.   The   respondent­assessee   had   claimed deduction under Section 80I of the Income Tax Act, Page 2 of 6

O/TAXAP/1321/2006 JUDGMENT 1961 in the relevant year whereas the business was started on 25.09.1991. It was the contention of the assessee that it became entitled to deduction after purchasing the new machinery. However, the Assessing Officer rejected the claim of the assessee. 4.1. Against the order of the Assessing Officer, the assessee filed an appeals before the Commissioner of Income Tax. The CIT(A) allowed the appeal of the assessee.  Being aggrieved and dissatisfied with the order of the CIT(A), the revenue has filed appeals before   the     Income   Tax   Appellate   Tribunal.   The Tribunal   after   hearing   the   parties   dismissed   the appeals of the revenue and confirmed the order of the CIT(A). Hence, these appeals are filed at the instance of the revenue. 5. In   all   these   appeals,   the   Court   had formulated the following substantial question of law:­ “Whether   on   the   facts   and   in   the circumstances   of   the   case   the   Income   Tax Appellate Tribunal was right in law and on facts   in   holding   that   the   deduction   under Section 80 1A of the Income Tax Act, 1961 if not   claimed   in   the   initial   year,   can   be claimed   in   the   subsequent   years   when   the conditions therein are fulfilled ?” 6. Learned   counsel   for   the   appellant­revenue has submitted that the Tribunal has committed error in allowing   the   claim   of   the   assessee.   He   further Page 3 of 6

O/TAXAP/1321/2006 JUDGMENT submitted that the Tribunal as well as the CIT(A) have not   properly   considered   the   material   on   record. Therefore, he urged that the present appeals deserve to be allowed. 7. On the other hand, learned advocate for the respondent­assessee   has   supported   the   impugned judgment and order of the Tribunal and submitted that the impugned order does not warrant any interference by this Court in view of the concurrent findings of both the authorities namely the CIT(A) as well as the Tribunal. Therefore, he urged that the present appeals deserve to be dismissed. 8. We   have   heard   learned   advocates   appearing for   both   the   parties   and   perused   the   material   on record. While dismissing the appeals of the revenue, the Tribunal in paragraph No.5 has observed as under:­ “5. We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the CIT(A)   has   calculated   the   value   of   old machinery and new machinery from Assessment Year 1991­92 to 1995­96 as under:­ Year Value Old Machinery Value of New Machinery Total (%) age of Old Machinery (%) age of New Machiner y Total 91-92 334672 194352 529024 63.27% 36.74% 100.00 % 92-93 345072 278688 623760 55.32% 44.68% 100.00 % 93-94 366472 690613 105708 5 34.67% 65.33% 100.00 % 94-95 461782 865912 132769 4 34.78% 65.22% 100.00 % Page 4 of 6

O/TAXAP/1321/2006 JUDGMENT 95-96 586687 3391767 397845 4 14.75% 85.25% 100.00 % The CIT(A)  has considered the decision of Kerala High Court in CIT V Seeyon Plywood (56   Taxation   296),   wherein   the   Court   has held that if the assessee does not satisfy the conditions in the initial year and if he satisfies   the   conditions   in   subsequent years, then the benefit must be given from the   year   in   which   it   satisfies   the conditions   and   as   per   section   80I   the assessee is entitled for deduction only for 10 years and not more than that. The CIT(A) has also relied upon the decision of Hon’ble High Court in the case of CIT Vs. Satellite Engineering Ltd. (113 ITR 208) and in CIT v. Suessin Textile Bearing Ltd. (135 ITR 443). It is not disputed by the Revenue that the condition   that   the   value   of   old   machinery should not exceed 20% of the total value of the machinery, was not fulfilled in the year A   ys   but   the   assessee   has   satisfied   this condition

during

the

years

under consideration and therefore, the assessee is entitled for claiming deduction u/s. 80IA in the year it fulfills the condition in view of   the   judicial   pronouncement   referred   to above. Moreover, the assessee purchasing new machinery of sister concerns and hiring of machinery   from   sister   concern   is   also entitled for deduction u/s. 80IA as held in CIT Vs. Nars Minerals Export Pvt. Ltd. (231 ITR   863).   Considering   the   facts   and circumstances   of   the   case   in   hand,   more particularly   the   assessee   having   satisfied all the conditions in order to avail benefit of Section 80IA, the CIT(A) in our view is justified   in   allowing   the   claim   of   the assessee and as such, we find no reason to disturb the same. The appeals of the Revenue thus fail. 9. In   view   of   the   aforesaid,   we   are   of   the opinion   that   the   Tribunal   has   given   cogent   and Page 5 of 6

O/TAXAP/1321/2006 JUDGMENT convincing reasons in arriving at the conclusion and we are in complete agreement with the view taken by the   Tribunal.  The   Tribunal   after   considering   the material on record has rightly held that the assessee has satisfied all the conditions in order to avail benefit of Section 80IA of the Income Tax Act. Apart from that, learned advocate for the appellant­revenue is not in a position to show how the findings of the Tribunal are bad in law and on facts. 10. In that view of the matter, we do not find any error in the order of the Tribunal. Hence, the present   appeals   are   dismissed.   Accordingly,   the question of law posed in these appeals is answered in favour of the assessee and against the revenue. (K.S.JHAVERI, J.) (K.J.THAKER, J)

Pawan Page 6 of 6

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