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Facts
The assessee, engaged in manufacturing fertilizers and feed, declared a total income and was assessed with a higher income by the Assessing Officer. The AO disallowed a deduction claimed under Section 80IB for a new dairy plant, viewing it as a reconstruction of an existing milk chilling center.
Held
The Tribunal held that the new dairy plant was a distinct and bigger industrial undertaking, not a reconstruction of the old milk chilling center. The existing unit was merely an ancillary part of the new plant's operations. Therefore, the assessee was eligible for the deduction under Section 80IB.
Key Issues
Whether the 'new dairy plant' is a new industrial undertaking eligible for deduction under Section 80IB or a reconstruction of an existing 'milk chilling center'.
Sections Cited
80IB, 14A, 143(1), 143(3)
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Before: Shri Inturi Rama Rao & Shri S.S. Viswanethra Ravi
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order dated 06.05.2019 passed by the ld. Commissioner of Income Tax (Appeals) 6, Chennai for the assessment year 2014-15.
The Appellant-Revenue raised 3 grounds of appeal amongst which the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in allowing claim under section 80IB of the Income Tax Act, 1961 [“Act” in short] in the facts and circumstances of the case.
3. The brief facts as emanating from the record are that the assessee is a company engaged in the business of trading and manufacturing of potassic and non-potassic fertilizers, cattle & poultry feed. The assessee filed return of income declaring total income of ₹.129,80,52,130/- on 29.11.2014, which was processed under section 143(1) of the Act. Under scrutiny, the Assessing Officer completed the assessment and determined total income at ₹.132,58,14,413/-, inter alia, making disallowance on account of deduction claimed under section 80IB and disallowance under section 14A of the Act vide his order dated 27.12.2016 passed under section 143(3) of the Act. On appeal by the assessee, the ld. CIT(A) discussed the issue in detail and directed the Assessing Officer to allow the claim of deduction under section 80IB of the Act.
The ld. DR Shri Y. Sudarshan, JCIT argued that the ld. CIT(A) erred in directing the Assessing Officer to allow the assessee’s claim of deduction under section 80IB of the Act by holding that the existing mill chilling centre has only become one of its ancillary unit for procuring and chilling the milk required for dairy processing/manufacturing activity. Further, he argued that the ld. CIT(A) ought to have appreciated that the assessee company has surrendered the old license, which was obtained during 2005, got new license during the period 2010-11 in order to avail deduction under section 80IB of the Act. He argued vehemently by referring to the provisions of sub-section 11A of the section 80IB of the Act that this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products, if it begins to operate such business before 01.04.2009.
The ld. AR Shri Vikram Vijayaraghavan, Advocate relied on the order of the ld. CIT(A).
Heard both the parties and perused the material on record. We find the ld. CIT(A) recorded his reasons in detail in the impugned order and the relevant portion of his order in para 4.1 to 4.1.6 are reproduced herein below: 4.1. Disallowance of the claim of deduction u/s 80-IB of the Act: The first issue is regarding the disallowance of the assessee's claims of deduction u/s.80-1B of the Act. The assessee in its return of income claimed a deduction of Rs.2,36,28,543/-u/s.80-1B of the Act on the income of 'New Dairy Plant at Sikandrabad Dt., Bulandshar, Uttar Pradesh State. The Assessing Officer in his order noticed that the assessee obtained approval in 2011 by surrendering the old license/approval granted for 'milk chilling center. Hence the Assessing Officer opined that what was done by the assessee was nothing but reconstruction of the existing business (milk chilling center). Hence the Assessing Officer held that the assessee is not eligible for deduction u/s.80-IB of the Act. The Assessing Officer also noticed that even the existing Plant & Machinery continued to be in the use. Accordingly, the Assessing Officer, in his order, disallowed the assessee's claim of deduction u/s.80-1B of the Act.
4.1.1. The assessee company, before the undersigned, submitted that the company has an existing 'milk chilling center with capacity of 25 TLPD, which was approved on 30.03.2005. This milk chilling center / unit was located at A-3, UPSIC, Sikandrabad, Dt. Bulandshar, UP. On this unit no deduction u/s.80-IB were claimed. Subsequently, the assessee obtained a fresh permission to establish a new 'Dairy Plant' at Sikandrabad, Dt. Bulandshar, UP. For this purpose, the assessee had to surrender old registration of the existing milk chilling center' with a capacity of 25 TLPD, which was approved on 30.03.2005. The assessee further submitted that the existing 'milk chilling center' of 25 TLPD capacity, was only a chilling unit, while the new 'dairy plant' is a complete milk and dairy processing plant with 6 'milk chilling centers' attached to it. The existing 'milk chilling center' located at A-3, UPSIC, Sikandrabad, Dt. Bulandshar, UP, is one of such 6 centers. Hence the assessee claimed that new 'Dairy Plant' is not a reconstruction of the old unit. It is a separate, bigger and complete 'milk and dairy processing plant' unlike the old unit where only 'milk chilling' is undertaken. The assessee, therefore, claimed that its new 'dairy plant' is a new industrial undertaking and, hence, its claim of deduction/s.80-1B of the Act, needs to be allowed. 4.1.2. I have considered the submissions of the assessee, contents of the assessment order, carefully. The Assessing Officer is of the opinion that the present 'new dairy plant' is the reconstruction of the old existing 'milk chilling center'. This observation of the Assessing Officer is not correct. What was held by the assessee from 2005 is a mere 'milk chilling center' where milk is chilled to lower temperatures so that it can stand for a relatively longer periods and fit for long distance transportation. In other words, 'milk chilling' is the first step in milk collection for increasing its self- life before it is sent to the customers (for fresh milk consumption), or to milk/dairy processing plants for processing. Whereas, in the case of total 'milk/dairy plants' the major part of the activity will be pasteurization of milk, reconstruction of milk by removal of excess fat, conversion of surplus milk into powder or reconversion of milk powder into milk during lean season, conversion of milk into milk products etc. 'Milk chilling' is one of the several activities undertaken by a total milk plant. In fact, as could be seen from the details, assessee's 'new dairy plant' is a complete milk and dairy processing plant and has six 'milk chilling units' attached to it. The existing unit is one of such 'milk chilling units' units. Therefore, the present new dairy plant' of the assessee company, cannot be considered as a reconstruction of the existing business (milk chilling unit). 4.1.3. Further, as could be seen from the approval of 'new dairy plant' sanctioned by Food Safety & Standards Authority of India (or FSSAI), vide F.No.26-06/10/MMPO/FSSA/dated 07.02.2011, the premises for the 'new dairy plant' is No.2. 4A. 5A, UPSIC, Sikandrabad-203205, Dt. Bulandshar (UP) While the address of the old existing 'milk chilling center' was No.A-3.
UPSIC, Sikandrabad Dt., Bulandshar (UP). Thus, the existing 'milk chilling center and the 'new dairy plant' are two separate and distinct units located at different premises. The approval /registration certificate granted by FSSAI clearly contained these details. In fact, the registration certificate clearly contained that there are two distinct types of units granted to the assessee, i.e. (i) Authorised premises for manufacturing etc, located at No.2, 4A, 5A, UPSIC, Sikandrabad-203205, Dt. Bulandshar (UP). (ii) Six milk chilling centers at different places, one of them is located at No.A-3, UPSIC, Sikandrabad Dt., Bulandshar (UP). for details see sl. No. in the table given at para 4 (b) of the registration certificate granted by FSSAI For the sake of convenience, scanned copy of the registration certificate is enclosed as under: [Scanned image] 4.1.4. Thus, the present 'new dairy plant' is a new, distinct and a bigger full- pledged milk/diary processing plant and located in a different location. The existing 'milk chilling center' only becomes one of its six milk procuring and chilling units. Hence the present new milk/dairy plant cannot be termed as reconstruction of the existing 'milk chilling center'. 4.1.5. Next observation of the Assessing Officer is that the plant and machinery of the existing 'milk chilling center' are continued to be in the assessee's use and hence the present 'new dairy plant' is expansion of the existing business. This observation of the Assessing Officer is not correct. The old plant and machinery of the existing 'milk chilling center' continues to be in the same center. For the 'new dairy plant' new plant machinery has been acquired. Such new plant and machinery acquired during the financial year 2013-14, relevant to the current assessment year, alone is about Rs.44.54 crores, as against the opening WDV (as on 01.04.2013) of just Rs.4.34 crores. The new plant and machinery acquired during the present year alone is more than 90% of the total plant and machinery employed. In other words, the old plant and machinery constitutes less than 10%. In any case, the old plant and machinery is not deployed in the 'new dairy plant' constructed by the assessee. Hence no adverse inference can be drawn in this regard. 4.1.6. In view of the above reasons, I am of the considered opinion that the above 'new dairy plant' approved by FSSAI on 07.02.2011 is a new industrial undertaking, eligible for deduction u/s.80-IB of the Act. The existing 'milk chilling center' has only become one of its ancillary unit for procuring and chilling the milk required for dairy processing/ manufacturing activity. Therefore, the Assessing Officer is directed to allow the assessee's claim of deduction u/s.80-1B of the Act. The assessee succeeds in its appeals in this regard.
On examination of the above, we note that the Assessing Officer denied the claim under section 80IB of the Act, on his opinion that the new dairy plant is the reconstruction of existing ‘milk chilling centre’ and the ld. CIT(A) held that the same is a new, distinct and a bigger full- fledged milk/dairy processing plant and located in a different location. We find no evidence brought on record by the Assessing Officer for his observations that the assessee reconstructed the existing milk chilling centre and we find that the existing milk chilling centre is located at a different location forming part of other six milk processing and chilling units in the absence of any evidence on record supporting the view of the Assessing Officer, we find no infirmity in the order of the ld. CIT(A) and it is justified. Thus, the ground raised by the Appellant-Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on 10th March, 2026 at Chennai.
Sd/- Sd/- (INTURI RAMA RAO) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 10.03.2026