M/S. INDIA PISTONS LTD.,CHENNAI vs. ACIT, CC - 2(3), CHENNAI

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-6, Chennai, in dated 19.09.2019. The assessment was framed by the ACIT, Company Circle-II(3), Chennai for the assessment year 1999-2000 u/s.143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 11.12.2009.

The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing the pre- operative expenses of existing business claimed in respect of expansion of existing business at Sengundram, Chennai. For this, assessee has raised following ground:- “Rejecting the entire claim of pre operative expenses of Rs.2,89,03,774/- in respect of the expansion of the existing business at Sengundram, Chennai and granting deduction u/s.35D at 5%”

We have heard rival contentions and gone through facts and circumstances of the case. Now before us, the ld.counsel for the assessee made only one submission that the order of CIT(A) is ex- parte and the finding of CIT(A) that new plant for manufacture of Rink Blank has been set up by the assessee and claimed the same to new industrial undertaking due to gross total income being negative, deduction u/s.80IA of the Act has not been claimed. According to ld.counsel, the AO as well as the CIT(A) has not considered that the alleged pre-operative expenses of Rs.2,89,03,774/- are actually in respect of expansion of existing business at Sengundram, Chennai on which the CIT(A) has allowed deduction u/s.35D @ 5%. The ld.counsel for the assessee took us through ground Nos.2 to 5 raised before CIT(A), which is adjudicated at para 6.4 to 6.8 and stated that the entire premise of the authorities below is wrong that this is a new project. On the

We noted that the order of CIT(A) is ex-parte and moreover the CIT(A) has not gone into the fact whether the project at Sengundram, Chennai is expansion of the existing business of the assessee or which is altogether a new project. The CIT(A) has not examined the interlacing of funds, common management and common shareholding of the company and the details of installation of project i.e., expansion of existing business. In the absence of all these, we cannot reach to a point to decide the allowance of claim of expenses of Rs.2,89,03,774/-. Hence, in this regard, we set aside this issue back to the file of the CIT(A) who will examine these facts and then, will decide the issue afresh after allowing reasonable opportunity of being heard to the assessee. This issue of assessee’s appeal is allowed for statistical purposes.

The next issue in this appeal of assessee is as regards to the assessment of book profit and increase by an amount of Rs.54,61,636/- being the amount of sale adjusted against the pre- operative expenses capitalized in the books of accounts. For this, assessee has raised following ground:-

As in the above issue, this issue is also interconnected with the amount of sale adjusted against pre-operative expenses capitalized and the above issue is going back to the file of the CIT(A), as contended by ld.counsel for the assessee and ld. Senior DR, we are restoring this issue also back to the file of the CIT(A), who will decide afresh after allowing reasonable opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.