COMMISSIONR OF INCOME TAX. vs. BORKAR PACKAGING PVT. LTD.,

In so far as Tax Appeal 13/2015 is concerned, the Appeal Memo makes reference to Assessment Year 2006-07. In fact, Tax Appeal No.62/2014 pertains to the Assessment Year 2006-07. Even the Memo of Appeal in Tax Appeal No.13/2015 is identical to the 2 Memo of Appeal in Tax Appeal No.62/2014. 3. Ms. Linhares, however, pointed out that there may be a mistake in stating the correct assessment year in the Memo of Appeal in Tax Appeal No.13/2015. She submits that the relevant assessment year, in so far as the said appeal, would be 2007-08. She, therefore, orally applied for leave to amend the Memo of Appeal.

We were inclined to grant the leave to amend the Memo of Appeal and we even indicated as such. However, later on Mr. S. R. Rivankar, the learned Senior Advocate appearing for the Respondent pointed out that vide Judgment and Order dated 13th January, 2015, this Court disposed of Tax Appeal No.64/2014 which pertained to the Assessment Year 2007-08. 5. Upon the aforesaid being pointed out, Ms. Linhares did not press for leave to amend the Memo of Appeal in Tax Appeal No.13/2015. It appears that by mistake two appeals have been filed in respect of Assessment Year 2006-07. Since, we propose to consider Tax Appeal No.62/2014, which was instituted prior in point of time, it is not necessary to consider Tax Appeal No. 13/2015. Tax Appeal No.13/2015 is, accordingly, disposed of as infructuous or, in any case, on the ground that the same was filed inadvertently and, therefore, requires no consideration.

We now proceed to consider Tax Appeal No.62/2014 which pertains to the Assessment Year 2006-07. 7. Tax Appeal No.62/2014 was admitted by order dated 1st October, 2014 on the following substantial questions of law : (A) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal, is right in allowing deduction under Section 80IB and under Section 80IC ignoring the fact that the assessee has not furnished properly filled Form No.10CCB report. The statute requires such obligation and it is seen from the 10CCB report that such obligation has not been properly complied with.

Tax Appeal No.13/2015 was admitted by order dated 9th April, 2015 on the same substantial questions of law.

Accordingly, the learned Counsel for the parties agree that both these Appeals can be disposed of by a common Judgment and Order.

In this case, the Assessing Officer, in respect of both the assessment years, declined the Assessee deduction under Section 80IB of the Income Tax Act, 1961, mainly on the ground that the Assessee had not properly filled in Form 10CCB. This form, inter alia, relates to the details of number of workers working in various units of the Assessee.

The AO disallowed the Assessee deduction under Section 80IC by reasoning that there was a serious disparity in the rate of consumption of electricity and the sales as between Nalagarh Unit of the Assessee and the other Units of the Assessee at Daman and Goa.

The Assessee appealed to the Commissioner of Income Tax (Appeals) and such appeals were allowed and deductions under Section 80IB and Section 80IC of the Income Tax Act were directed to be granted to the Assessee.

The Revenue then appealed to the Income Tax Appellate Tribunal (ITAT) and by the impugned orders, the ITAT dismissed the appeals. Hence, these Appeals which came to be admitted on the aforesaid substantial questions of law.

At the outset, we note that nothing was pointed out to us to suggest that the ITAT in these matters admitted any new evidences. In the absence of the ITAT admitting any new evidences, the substantial question of law 'C', as framed, really will not even arise.

In so far as the substantial question of law 'A' is concerned, the Hon'ble Supreme Court has held that mere furnishing of deduction form 10CCB could, at the most, be a default of technical and venial nature. Such omission cannot be held to be so fatal as to merit the penalty of disallowance of deduction under consideration. The view taken by the Commissioner (Appeals) and the ITAT is in consonance with the law laid down by the Hon'ble Apex Court in Hindustan Steel Limited (supra). Accordingly, the substantial question of law 'A' is required to be decided against the Revenue and in favour of the Assessee.

In so far as substantial question 'B' is concerned, the AO has compared the consumption of electricity in various Units of the Assessee and on such basis, concluded that the profits in respect of the newly established Unit at Nalagarh appeared to be unreasonably high. The AO has held that the profits are not matching with the consumption of the electricity at the said Unit. On this basis, the AO denied the Assessee deduction under Section 80IC of the Income Tax Act.

The record indicates that the Assessee, in this case, had offered detailed explanation as to why the production and consequently profits at the Nalagarh Unit is higher than the production and profits at the Units in Goa and Daman. The 1 83 ITR 26 (SC)

The AO rejected the aforesaid explanation by observing that the consumption of electricity is increased only by 1497%, but the sales have increased by 7102%.

Now, both the Commissioner (Appeals) as well as the ITAT, have quite correctly held that the alleged mismatch between the production and the profits at the various Units as determined by consumption of electricity at such units, cannot be the sole ground for concluding that there has been some unreasonable inflation of profits. The two authorities have held that several factors can contribute to the increased profits and upon consideration of such several factors which were not only pleaded, but made good by the Assessee to conclude that there was no good ground to deny the Assessee deduction under Section 80IC of the Income Tax Act. According to us, the two authorities, having recorded the concurrent findings on this issue, the substantial question 'B' does not deserve to be answered in favour of the Revenue.

There is no perversity pointed out in the appreciation of the material on record by the Commissioner (Appeals) and the ITAT. In fact, these two authorities have applied the correct principles and the correct tests for determining whether there is indeed any inflation in 9 the production figures or in the consequent profits. These two authorities have held that it is not proper to focus on the singular aspect of the alleged disparity in the electricity consumption and the production figures.

The reasoning of the ITAT on this issue is to be found in paragraph 11.3 of the impugned order and the same reads as follows : “11.3 We have heard the rival contention of both the parties, looking to the facts of the circumstances of the case, we find that the Assessing Officer has verified the electricity consumed and sales in different unit situated at different far way places. The Assessing Officer has verified the disparity of electricity consumption of Nalagarh Unit and income of sales of Nalagrah Unit in comparison to other units were higher. The main contention of the AO that in comparison to electricity consumed the sales of Nalagarh Unit has shown very high sales. We find that the assessee has explained before us that the machineries at Goa Units are 20 years old whereas the various machineries at Daman are 10 years old, and machineries at Nalagarh Unit are less than 1 year old. All the machineries are of different technologies. The Goa Unit is manufacturing only two colour printing, whereas the Daman Unit is manufacturing six colour printing and Nalagarh Unit is manufacturing in multiple colours. The machineries at Nalagarh are fully automatic and technically advanced with much higher output i.e. more than 10 times higher than machineries at Goa and Daman which are capable of achieving this production more efficiently with less than consumption of electricity. The requirements of customers at Goa Unit are different from those of Daman Unit. The quality of printing, sale value and contribution of Nalagarh Unit is much higher as compared to other units. The products

Again, we find that the view taken by both, the Commissioner (Appeals) as well as the ITAT, is a reasonable view. The findings arrived at by both the authorities are substantially turned out from the material on record. Accordingly, it cannot be said that there is any perversity involved either in recording of the findings, or in the approach adopted by the Commissioner (Appeals) and the ITAT. It will not be possible to answer the substantial question 'B' in favour of the Revenue and against the Assessee.

Since Ms. Linhares was unable to point out any documents which were said to have been admitted by the ITAT as new evidences, the substantial question 'C' does not arise and the same is not required to be answered. The subtantial questions of law at 'A' and 'B', in the facts and circumstances of the present case, are answered against the Revenue and in favour of the Assessee.

The Appeals are, accordingly, disposed of in the aforesaid terms.

There shall, however, be no order as to costs. Dama Seshadri Naidu, J. M.S. Sonak, J.