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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: Shri Mahavir Singh & Shri G Manjunatha
per form 10CCB filed alongwith return of income. The AO has brought out clear facts to the effect that Unit II which is claiming exemption u/s 80IB(4) is nothing but extension of Unit I and also formed by splitting up of already existing business. Therefore, the CIT(A) was completely erred in directing the AO to allow deduction u/s 80IB(4) of the Act.
On the other hand, the Ld.AR for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of 9 M/s Diamond Tools Industries ITAT, Mumbai Bench “D” in assessee’s own case for AY 2005-06 in dated 08-03-2017, wherein the ITAT, under similar set of facts has allowed the claim of deduction u/s 80IB(4) in respect of profit derived from Unit II. The CIT(A), after rightly considering relevant facts has allowed the claim of deduction u/s 80IB(4) and his order should be upheld.
We have heard both the parties and perused the material available on record. The AO has disallowed deduction claimed u/s 80IB(4), on the ground that both the units functioning from the same premise, they have same registration number assigned by SSI authorities, sales-tax authorities and central excise authorities. According to the AO , Unit II is nothing but an extension of Unit I and also formed by splitting up of an already existing business. Therefore, he opined that the assessee has not fulfilled conditions specified u/s 80IB(4) of the Income-tax Act, 1961 so as to claim deduction for profit derived from unit II. The AO proceeded mainly on the premises that both units are functioning from same premise and also both units are having common registration number of all the authorities. We find that the above issue has already been considered by the co-ordinate bench of ITAT, Mumbai Bench “D” in assessee’s own case for AY 2005-06 and after apprising relevant facts has come to the conclusion that the assessee has maintained separate
10 M/s Diamond Tools Industries books of account for both the units and Unit II has been set up by making investment in new plant & machinery. The co-ordinate bench further observed that the revenue failed to bring on record any evidences to demonstrate that Unit II has been set up by splitting up of an existing business or by using old machinery by an existing business.
Moreover, assessee’s claim of deduction u/s 80IB(4) in respect of Unit II was examined in detail in the initial year of claim i.e. AY 2003-04. The AO, after making necessary enquiry and verifying the documentary evidence submitted by the assessee, and also being satisfied that Unit II has fulfilled all the conditions has allowed assessee’s claim of deduction in respect of Unit II. That being the case, in the absence of any material difference in facts in the impugned assessment year, the assessee’s claim of deduction u/s 80IB(4) on the same set of facts cannot be denied. The relevant portion of the order of the ITAT is extracted below:-
Insofar as merits of the issue is concerned, it is evident from the order that the Assessing Officer has denied assessee's claim of deduction primarily for the reason that both the units function from the same premise, they have the same registration number SSI authorities, sales tax authorities and central excise ities. However, on a perusal of the order passed by the learned Commissioner (Appeals), we have noticed that the assessee has maintained separate books of account for both the units, Unit-II has been set- up by making investment in new plant and machinery and supporting details and vouchers were also produced. It has employed separate set of employees for both the units and most importantly there is no material brought on record by the Department to demonstrate that Unit-II has been set-up by splitting
11 M/s Diamond Tools Industries up of or reconstruction of an existing business or by using old machinery of an existing business. Moreover, as already stated, assessee's claim of deduction under section 80IB in respect of Unit- II was examined in detail in the initial year of claim i.e., assessment year 2003-04. The Assessing Officer after making necessary enquiry and verifying the documentary evidence submitted by the assessee the Assessing Officer being satisfied that Unit-II has fulfilled all the conditions has allowed assessee's claim of deduction in respect of Unit-II. That being the case, in the absence of any material difference in fact in the impugned assessment year, assessee's claim of deduction under section 80IB on the same set of facts and circumstances cannot be jn view of the ratio laid down by the Hon'ble Jurisdictional High Court in Western Outdoor Interactive Pvt. Ltd. (supra). Therefore, on merits also, the assessee is bound to succeed. Thus, grounds no.2, 3 and 4 are also dismissed.”
9. In this view of the matter and being consistent with the view taken by the co-ordinate bench, we are of the considered view that the assessee is eligible for deduction u/s 80IB(4) in respect of profit derived from unit II. The CIT(A), after considering relevant facts, has rightly deleted addition made towards disallowance of deduction claimed u/s 80IB(4) of the Act. We do not find any error in the order of the CIT(A).
Hence, we are inclined to uphold the findings of CIT(A) and reject ground raised by the revenue.
The next issue that came up for our consideration is reopening of assessment under section 147 of the Act. The AO reopened the assessment on the ground that income chargeable to tax had been escaped assessment in view of wrong claim made u/s 80IB (4) of the Act. The Ld.CIT(A) quashed the re-assessment order passed by 12 M/s Diamond Tools Industries the AO on the ground that the AO has reopened the assessment on mere change of opinion without there being any new material which suggests escapement of income and also the assessment has been reopened after a period of 4 years without any allegation on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The revenue has failed to bring on record any evidence to controvert the finding of facts recorded by the Ld.CIT(A) to quash re- assessment order. Therefore, we are of the considered view that the CIT(A) was right in quashing re-assessment order for the reason stated in his order at para 5.1 and 5.2. There is no error or infirmity in the order of the CIT(A). Hence we are inclined to uphold the finding of CIT(A) and reject ground raised by the revenue.
In the result, the appeal filed by the revenue for A.Y. 2006-07 is dismissed. AYs 2007-08 & 2008-09
The issues involved in & 6938/Mum/2016 are identical to the issues discussed in , but for figures. The reasons given by us in shall mutatits mutandis apply to these appeals also. Therefore, for the detailed reasons given by us in , we dismiss the appeals filed by the revenue for AYs 2007-08 and 2008-09.
13 M/s Diamond Tools Industries AYs 2010-11 & 2011-12
In these two appeals, except the issue of reopening of assessment u/s 147, the issue on merit is similar to . The reasons given by us in preceding paras in appeal No.6936/Mum/2016 shall mutatis mutandis apply to these appeals also. . Therefore, for the detailed reasons given by us in AYs 2010-11 and 2011-12.
As a result, all the five appeals filed by the revenue are dismissed. Order pronounced in the open court on 13th June, 2018.