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Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE
PER BENCH These appeals are filed against the order dated 24/4/2009, 24/8/2012, 22/1/2010, 2/12/2011 & 24/8/2012 passed by CIT(A)-Faridabad.
The grounds of appeal are as under:- ( Revenue’s appeal Assessment Year 2006-07) 1. “On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in admitting the new additional evidence/ documents submitted by the assessee in violation of Rule 46A of Income Tax Rules 1962 without properly considering the reasonableness, genuineness and reliableness of the additional evidence.”
2. “On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in admitting and relying upon the new additional evidence/ documents in order to delete the addition which was hitherto not before the Assessing Officer during the course of assessment proceedings even though the assessee was given
sufficient opportunity to prove his claim, but he failed to prove his claim despite onus to prove was on him thus denial of deduction was completely in line with the provisions of law and therefore, submissions made should not be admitted.”
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in admitting new additional evidence even though it did not contain any reason as to how any of the circumstances mentioned in clause (a) to (d) of Rule ' 46A(1) had been found to exist so as to justify admission of the new additional evidence, therefore, it is evident that the new additional evidence had been admitted by the Commissioner of Income Tax (Appeals) contrary to the provisions of Rule 46A of the Income Tax Rules, 1962.”
4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition in question by relying upon fresh evidence without complying with the provisions of Rule 46A and as a consequence, the order of the Ld. CIT(A) be restored back to his file to be decided de novo as per law after complying with the provisions of Rule 46A of the Rules allowing the Assessing Officer a reasonable opportunity of being heard and thereafter pass an order in accordance with law.”
I.T.A .No. 5683/DEL/2012 (A.Y .2009-10) “1. The Ld.CIT(A) has erred on the facts and in the circumstances of the case in allowing the deduction of rs.20,88,47,617/- & Rs.12,61,26,152/- claimed by the assessee u/s 80IB & 80IC of the Act out of profit derived from units set up in Jammu & Kashipur ignoring the fact that the assessee was not engaged in the work of manufacturing of any article/thing but was only doing the work of assembling of various components to make D. G sets.”
I.T.A .No. 1191/DEL/2010 (A.Y .2007-08)
On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 1,03,50,120/- made by the Assessing Officer u/s 40(a)(ia) of the Income Tax Act, 1961 disregarding the fact that the assessee’s case falls under section 194 C(2) and not under section 194 C(l) and were doing contractor work as they themselves were getting contract for commissioning and installation of tower by cellular companies and further gave sub-contract for completion of the said work to other sub contractors, moreover, the assessee himself was deducting tax at source and depositing it to the Central Govt. Account.”
2. “On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs. 24,66,58,751 /- made by the Assessing Officer by disallowing deduction claimed by the assessee u/s 80IB of the Income Tax Act, 1961 even though the assessee was not manufacturing any article or thing, the deduction claimed by him u/s 80IB of the Income Tax Act, 1961 of profits in respect of a unit set up in Jammu amounting to Rs. 24,66,58,751/- were not allowable as it does not satisfy the requirements of the aforesaid section.”
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in allowing deduction u/s 80IB of the Income Tax Act, 1961 disregarding the fact that the unit is not doing manufacturing but is doing assembling of inputs such as engine, battery, alternator and the end product i.e. D.G. Set is combination of above inputs and thus no new product has come into existence and thus was not entitled to deduction u/s 80IB of the Income Tax Act, 1961.”
4. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal.
I.T.A .No. 767/DEL/2012 (A.Y .2008-09) "On the facts and in the circumstances of the case, the Ld.CIT(A) has 1. erred on facts and in law in deleting the disallowances made by the Assessing Officer on a/c of (i) deduction of Rs.20,12,90,524/- claimed by the assessee u/s 80IB and (ii) deduction of Rs.2,05,80,440/- u/s 80IC of the Income Tax Act, 1961 even though the assessee was not manufacturing any article or thing. The deductions-claimed by him u/s 80IB and 80IC of the Income Tax Act, 1961 of profits in respect of a unit set up in Jammu and Kashipur amounting to Rs.20,12,90,524/- and Rs.2,05,80,440/- respectively were not allowable as it does not satisfy the requirements of the aforesaid sections".
2. "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in allowing deductions u/s 80IB and 80IC of the Income Tax Act, 1961 disregarding the fact that the units is not doing manufacturing but is doing assembling of inputs such as engine, battery,
alternator and the end product i.e. D.G. Set is combination of above inputs and thus no new product has come into existence and thus was not entitled to deduction u/s 80IB and 80IC of the Income Tax Act, 1961".
"On the facts and in the circumstances of the case, the Ld. CIT(A) has 3. erred on facts and in law in allowing deductions u/s 80IB of the Income Tax Act, 1961 on the excise duty refund received by the appellant ignoring the ratio of the decision of Hon'ble Supreme Court in the case of Liberty India (317 ITR 218). In this case Hon'ble Supreme Court held that profits derived by way of such incentives did not fall within the expression 'profits derived from industrial undertaking'."
4. "That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal."
C.O .No. 11/DEL/2013 (A.Y .2009-10) 1. That having regard to the facts and circumstances of the case, Ld.CIT(A) has erred in law and on facts in upholding the assessee action of Ld. A.O in allocating the expenses incurred by M/s GSP Power Projects, Delhi, amounting to Rs.68,66,109/- to M/s GSP Power, Jammu and M/s GSP Power, Kashipur Units of the assessee merely on the basis of surmises and conjectures and thereby reducing the profits of the units in Jammu and Kashipur by Rs.68,66,109/- and in turn increasing the profits of Head Office by the same amount.”
Now we will first take up the brief facts of the case for A.Y.2006-07. The assessee is engaged in the business of Manufacturing of sheet metal components & engineering parts & D. G Sets with acoustic enclosure and commissioning & installation. Return of income declaring an income of Rs. 86,44,590/- was filed on 30-10-2006. The assessee is deriving income as a proprietor of M/s Chromewell Industries, Faridabad, which is engaged in the business of manufacturing of Sheet-metal components and Engineering parts, and of M/s. G.S.P. Power Projects, Jammu which commenced its activities on 29.07.2005 by manufacturing D.G. Sets and Canopy, pre-fabricated PUF Shelters etc. with acoustic enclosure and commissioning and installation. Details and documents with regard to the income shown and expenses claimed have been obtained and place in the file. Books of accounts and vouchers have also been produced and examined on test check basis. The assessment in this case was completed vide order u/s 143(3) of the Income Tax Act, 1961 dated 31-12-2008 at an income of Rs. 10,87,88,520/-. The Assessing Officer denied the assessee’s claim of deduction u/s 80IB of the Income Tax Act, 1961 amounting to Rs. 10,02,89,361/- on the ground that the assessee was not manufacturing D.G. sets and pre-fabricated shelters at Jammu unit.
For A.Y. 2007-08, the Assessee furnished its return u/s 139 (1) of the Act on 31.10.2007 declaring a taxable income of Rs. 49,13,508/- after claiming a deduction of Rs. 24,66,58,751/- u/s 80IB out of the gross total income of Rs. 25,16,91,009/- which was subsequently processed u/s. 143(1) at the returned income. In the assessment u/s 143(3), the final taxable income was determined at Rs.26,19,22,380/- in which the A.O. denied the assessee’s claim of deduction u/s 80IB on the ground of the last year that the assessee was not manufacturing DG sets at Jammu Unit, (and adding it in the computation of total income, which is evidently not appropriate and cogent, as chapter VI deductions are made out of the Gross Total Income) and also effected an addition u/s 40(a)(ia) of the Act amounting to Rs. 1,03,50,120/-.
For A.Y. 2008-09, the return of income declaring income of Rs. 1,16,14,460/- was filed by the assessee on 30.09.2008. The assessee claimed deduction of Rs. 20,12,90,524/- u/s 80IB of the Act in respect of profits derived from two undertakings at Jammu in the name of M/s GSP Structures and M/s. GSP Power Projects. M/s. GSP Power Projects, Jammu was functioning from 27.06.2005 whereas M/s. GSP Structures, Jammu was commenced production during the year from 04.04.2007. The eligibility of claim of deduction u/s 80IB of Act in the case of M/s. GSP Power Projects, Jammu was examined in detail during the assessment proceedings for A.Y. 2006-07 and 2007-08 and it was held that the assessee was not manufacturing Diesel Generator sets (DG sets) but only assembling various components of DG sets in this unit. According to the AO, the activity of assembling of DG sets by the assessee did not amount to manufacture and hence, deduction u/s 80IB was not allowed. During the year the assessee also started another unit in the name of M/s. GSP Power Projects at Kashipur, Uttarakhand, from 07.09.2007 and claimed deduction of Rs.2,05,80,440/- u/s 80IC of the Act in respect of profits from manufacturing of DG sets. Since, the nature of business in this unit was found to be same as that of M/s. GSP Power Project, Jammu the AO did not allowed the claim of deduction u/s 80IC on the same reasoning. In respect of other newly started unit at Jammu in the name of M/s GSP Structures, which is engaged in fabrication of sheet metal components, the AO held that the business activity of this unit consists of converting sheets into semi finished sheet metal components after applying some process, which were then sold to M/s GSP Power Projects, Jammu. The AO therefore, concluded that the business activity in this unit did not result into any new and distinct commercial product in terms of name and character and therefore, this unit was also not engaged in manufacturing so as to allow the claim of deduction u/s 80IB of the Act and denied the same. The AO further observed that in the P&L accounts of M/s. Chromewell Industries, Faridabad (engaged in fabrication of sheet metal components) and M/s GSP Power Projects, Delhi (Head Officer) (Providing various services like installation and AMCs of DG sets etc.) i.e. the non exempt units, the assessee debited certain expenses, which were not pertaining specifically to Delhi and Faridabad units but to all the units. Such expenses was quantified at Rs. 26,82,288/- and allocated to all the units in certain ratios as mentioned in the order thereby reducing the profits of exempt units and consequential claim of deduction u/s 80IB and 80IC, without prejudice to his decision of non eligibility of claim of deduction u/s 80IB and 80IC and in alternative, if the exempt units are held to be eligible to claim of such deduction. The assessee claimed deduction u/s 80IB of the Act in respect of Excise Duty refund of Rs. 4,20,70,384/- received by M/s GSP Power Projects, Jammu and Rs. 17,16,878/- received by M/s GSP Structures, Jammu. The AO relying on the decision of Liberty India vs. CIT 317 ITR 218 (SC) held that the excise duty refund as profits not derived from the industrial undertaking and not eligible for deduction u/s 80IB of the Act.
For A.Y.2009-10, on the similar lines of A.Y. 2008-09, the AO made additions.
The assessee preferred an appeal before the CIT(A) against the order passed u/s 143(3) dated 31-12-2008 for A.Y. 2006-07. During the course of appellate proceedings, the assessee filed an application for admission of additional evidences dated 12-02-2009 under Rule 46(1)(d) of the Income Tax Rules, 1962. The application alongwith the relevant documents in the paper book were forwarded to the Assessing Officer for her comments vide letter No. 1602-03 dated 13-02-2009 for compliance by 24-02-2009. The Assessing Officer vide letter No. 978 dated 24-02-2009 had submitted the following comments before the CIT(A):-
“During the assessment proceeding assessee was given sufficient opportunity to prove his claim in support of deduction u/s 80-IB but assessee failed to prove his claim.The onus to prove was on assessee. When assessee failed to discharge this onus, the claim made was not admitted. The denial of deduction is completely in line with the provision of law & therefore, submission made now should not be admitted. The assessee has also not pointed out any reason for not raising these additional submission during the course of assessment proceeding. Therefore, the condition of section 46-A for admission of these additional submissions have not been fulfilled. Therefore, the ground of appeal raised should be rejected.
Since additional evidences have been filed by the assessee which were not filed at the time of assessment proceeding, the same needs proper verification. And it is not possible for this office to verify the same in given time by your honour. Therefore, it is requested to verify the claim of assessee this office should be provided at least 30 days. The same may kindly be accepted in the interest of the revenue.”
Thereafter, the CIT(A) directed the Assessing Officer to examine the additional evidence under Rule 46A in accordance with the provisions of Rule 46A(3) of the Income Tax Rule, 1962 and report by 23-03-2009. On 23-03- 2009, the concerned Assessing Officer appeared before the CIT(A) and requested for more time for verification of the additional evidences. After discussion, she was allowed to submit the requisite report under Rule 46A and the case was adjourned to 15-04-2009. However, the AO did not submit the report by the appointed time. The CIT(A) admitted the additional evidence and thereby called for assessment records. After verification of the evidences, the CIT(A) observed that the evidences brought before the CIT(A) was part of the books of accounts before the Assessing Officer and were also examined, but the AO did not commented on the same. The CIT(A) held that the evidences clearly point to the fact that the assessee was manufacturing and not rading in DG sets. The same was clearly set out in paras 19, 20, 21, 22, 23 and 24 of the CIT(A)’s order. Thus, the CIT(A) held that the assessee conclusively proved by various evidences on record that assessee was manufacturer of both DG sets and pre-fabricated shelters, and there is no trading of the D.G. Sets and pre- fabricated shelter, assessee is entitled for deduction u/s. 80IB of the Act and granted the same.
For A.Y. 2007-08, the CIT(A) allowed the deduction u/s. 80IB to the assessee. As relates to issue of disallowance u/s 40(a)(ia) of the Act, the CIT(A) allowed the same by holding that for the year under consideration, no liability for deduction of TDS u/s. 194C(1) was attracted, therefore, the same disallowance was deleted by the CIT(A).
10. For A.Y. 2008-09, the CIT(A) allowed the deduction u/s 80IB of the Act on the basis of the earlier CIT(A)’s orders for A.Ys. 2006-07 & 2007-08. The CIT(A) held that the facts and circumstances of the case for A.Y. 2008-09 are identical to earlier years in as much as the business activity during this year remains same as that of manufacturing of DG sets and pre-fabricated shelters, therefore, the assessee is held eligible for claim for deduction u/s 80IB of the Act in respect of its profits derived from M/s. GSP Power Projects, Jammu. The CIT(A) also allowed the claim of deduction u/s 80IB in respect of profits from M/s. GSP Structures, Jammu. Dispute relating to disallowance of claim of deduction u/s. 80IC of the Act in respect of M/s GSP Projects, Kashipur, Uttarakhand. The CIT(A) followed the decision of the Hon’ble Delhi High Court in case of CIT vs. Jackson Engineers Ltd. (231 CTR 348) and further held that the DG set is the final product which has a distinctive name, character and function different from each of the components. The CIT(A) directed the Assessing Officer to allow the deduction u/s 80IC of the Act. As relates to disallowance of deduction u/s 80IB of the Act on the excise duty refund received by two units namely M/s. GSP Power Projects and M/s. GSP Structures at Jammu, the CIT(A) allowed the said claim.
For A.Y. 2009-10, the CIT(A) allowed the claim u/s 80IB & 80IC of the assessee on the similar grounds. The CIT(A) uphold the addition of Rs. 68,66,109/- in respect of allocation of the common expenses in proportion to the turnover of various units.
The Ld. DR submitted that since, the new additional evidence/ documents had been admitted without considering the reasonableness, genuineness and reliableness of the additional evidence and despite adverse comments/ objections by the Assessing Officer which required detailed enquiries, the conditions of section 46A for admission of these additional submissions have not been fulfilled and is contrary to the provisions of Rule 46A of the Income Tax Rules, 1962. Therefore, the order of the CIT(A) is liable to be restored to the file of the CIT(A) to be decided de novo as per law after complying with the provisions of Rule 46A of the Rules allowing the Assessing Officer a reasonable and sufficient opportunity of being heard and thereafter pass an order in accordance with law. The Ld. DR submitted that the CIT(A) erred in allowing the appeal of the assessee by taking into account additional evidence despite proper opportunity was given before the Assessing Officer . The Ld. DR further submitted that the assessee’s manufacturing activities were in Delhi but only billing is done in Jammu, it is just trading and not manufacturing. Therefore, the claim for Section 80IB of the Act does not sustain. For A.Y. 2007-08, the final taxable income was determined at Rs.26,19,22,380/- in which the A.O. denied the assessee’s claim of deduction u/s 80IB on just and proper ground of the last year that the assessee was not manufacturing DG sets at Jammu Unit, (and adding it in the computation of total income, which is evidently not appropriate and cogent, as chapter VI deductions are made out of the Gross Total Income) and also effected an addition u/s 40(a)(ia) of the Act amounting to Rs. 1,03,50,120/-. For A.Y. 2008-09 and 2009-10, relating to Excise Duty Refund, the AO rightly relied upon the decision in case of Liberty India vs. CIT 317 ITR 218 (SC) wherein it was held that the excise duty refund as profits not derived from the industrial
undertaking and not eligible for deduction u/s 80IB of the Act. As relates to the other issues the Ld. DR relied upon the Assessment Orders.
The Ld. AR relied upon the orders of the CIT(A) in all the Assessment Years. The Ld. AR also pointed out that there was nothing to show by the Assessing Officer that Jammu Unit was only for the billing. In fact, the Assessee has given all the documentary proofs to submit that the manufacturing activity carried out by the Jammu Unit. The Ld. AR submitted that the CIT(A) has rightly allowed the 80IB and 80IC claims made by the Assessee as well as the refund of excise duty. The Ld. AR submitted that in respect of disallowance u/s 40(a)(ia) of the Act, the CIT(A) rightly allowed the same by holding that for the year under consideration, no liability for deduction of TDS u/s. 194C(1) was attracted. As relates to addition of Rs. 68,66,109/- in respect of allocation of the common expenses in proportion to the turnover of various units, the CIT(A) was not correct as the AO made the said addition merely on the basis of surmises and conjectures, thereby reducing the profits of the units in Jammu and Kashipur and in turn increasing the profits of Head office by the same amount.
We have heard both the parties and perused the material available on record. The CIT(A) in Para 9, 10, 19 and 20 of the order held as under (extract of CIT(A) order for A.Y. 2006-07):-
Para “9. Given the above situation, the assessment records (in four volumes) were called for from the office of the AO which she produced, but still never attended this office even in such eventuality, probably "in the interest of revenue," as she has requested for time in her comments dated 24.02.2009. As per my examination of the assessment folders, I find that the AO was conducting enquiries for extraneous irrelevant and information which is, e.g., evident from her letter written to the appellant on 16.03.2009 which was compiled with by the appellant on 23.03.2009. The AO targeted enormous enquiries by issuing summons to the following two parties for her so-called “verification" of the documents No: 1580 and 1588 of the paper book: i) Hutchinson Essar Telecom Limited or Vodafone Essar Mobile Services Ltd. ii) Mahindra and Mahindra.
The details of information sought by the AO in these summons clearly evidence that she was making the off-the-tangent enquiries which are totally irrelevant to determine the authenticity of the certificates submitted by the above parties, and rather she was opening the entire gamit of sprawling fresh investigations which were not required at all, essentially for the requisite verification, not even the production of the persons desired by her, Further, these above parties have submitted the information and the documents which were either produced at the time of assessment proceeding or, even the site was visited by the A.O in the case of Vodafone on 29/12/2008, as informed by them in their letters dated 6/3/2009 & 30/3/2009 in the fresh enquiries by the A.O. As far as the enquiries from M & M is concerned, there is only one order-sheet entry dated 15/4/2009 whereby the requisite documents were furnished by it and were placed on record by the A.O. I have perused these documents on record regarding M & M which clearly establish the case of the appellant in disproving the unfounded inferences of the A.O from the analysis of the information (which was not at all desirable or necessary for conducting the verification aimed at by the A.O). It is established that both the documents No: 1580 & 1588 stand rather authenticated as nothing goes against the appellant from the material gathered on record by the A.O. Therefore, despite the fact that the A.O has made extensive enquiries beyond the scope of Rule 46A(3), these documents being supportive of the assessee stand admitted as verified.
As far as the document No: 1581 ,1582-87 and 1589 of the paper book are concerned, the A.O has not made any effort for their verification as is apparent from the assessment folders in Volume II. Therefore, her silence on them establishes their authenticity abundantly, even though they are the records of various government functionaries. It is then presumably inferred that primarily because all the above fresh evidence rather established and supported the case of the assessee that he was manufacturing D.G Sets and pre-fabricated shelters, the A.O hesitated in submitting the required report by withholding it, once again in her blinkered notion of doing things “in the interest of revenue”. Thus from the above, it becomes evident that even though the A.O had tacitly admitted these evidences when she had requested for their verification, yet “in the interest of revenue”, verification of these documents was allowed, which has resulted favourably to the assessee as brought about above.
……. “19. I have gone through the details of plant and machinery and also the copies of bills relating the purchase of the same filed by the appellant. The machineries have been deployed for various purposes like:- Molding of PUFF/Shelters panel, air supply to various machines, sheet banding, manufacturing of pre-fabricated panels/shelter, chiller plant for cooling tower, assembling of DG sets, besides a few machines for lifting and shifting work. Thus it is clear that a number of machines for various purposes have been deployed by the appellant in its manufacturing process. The A.O has picked out and highlighted only those machines which are used for lifting and shifting work and assembling of the DG Set and has ignored the other machines used by the appellant and thus arrived at a wrong conclusion. The A.O. ought to have looked into the nature of all the machines used by the appellant before arriving at any conclusion. It is, therefore, evident that the machineries were employed in the manufacturing process. The bills of cartages inward, and the transportation copies of GRN's were also placed on record by the Ld. AR to prove the purchases of raw material and dispatch of finished goods i.e. DG Sets. The above evidences being part of the books of accounts were there before the A.O. and were also examined by her but it appears that while passing her assessment order, she has chosen not to comment on the same ostensibly for the reason that there is nothing adverse qua these evidences. All these evidences clearly point to the fact that the assessee was manufacturing and not trading in DG Sets. Since the A.O. has not commented on these facts in her assessment order nor has filed her comments on the submissions made by the appellant before me, it is apparent that there is no infirmity in the above facts and it stands proved from the assessee's own books that the appellant was involved in a manufacturing process. Besides proving this fact from his own books, the appellant has also filed third parties (governmental authorities) evidences in the form of registration with SSI, Sales Tax authorities at Jammu, directorate of Industries and Commerce, Jammu and Kashmir and excise registration certificate which clearly state that the appellant has been registered with the statutory authorities for manufacturing of DG Sets/ Pre-fabricated shelters. These evidences speak by themselves that the appellant was manufacturing DG sets. For example, the analysis of the document No. 1520 pertaining to Central Excise Registration Certificate (Form RC), shows that in the registration number, AFVPP5777 KXMOOZ, the letter "M" stands for manufacture; it would have been "D", if the assessee was a "dealer", i.e. trader. Moreover, this document sufficiently shows that the unit is located in SIDCO Industrial Complax, Phase-II, Bari Brahmana Ind. Complex, Jammu, where there can't legally be any trading activity, but only industrial one. The stock registers maintained as per the excise rules show the quantity of the raw material consumed and the finished goods manufactured by the appellant. In any case, these records are required to be maintained by a manufacturing unit and not by a trading unit. The RG 23A, Part-1 clearly mentions the various raw materials utilized by the appellant in the manufacturing process. The appellant has also produced a Toll Tax exemption certificate from the Directorate of Industries and Commerce Jammu and Kashmir on specified raw material imported into the state by him. This certificate is granted by the DIC to a unit set up in Jammu, allowing it to import raw material upto a specified limit and export finished goods upto as specified limit without payment of Toll Tax. The certificate issued to the appellant shows various items listed as raw material which could be imported into Jammu for manufacturing DC Sets without paying Toll Tax. Being again as statutory certificate issued by a govt. body, the same carries full weight and it also clearly demonstrates that the appellant has purchased raw material for manufacturing DC Sets. The assessee's statement on record also states that he was manufacturing DC Sets and not trading in them and his statement rather explains vociferously the manufacturing processes of his unit at Jammu through elaborate questionnaire posed by the AO to him. A certificate has also been produced by the asses see from Mahindra and Mahindra stating that the assessee was its OEM(original equipment manufacturer) and that it supplied engines to the assessee for manufacturing DC Sets. The certificate goes on to state that the assessee was not authorized to trade in DG Sets. This piece of evidence being unrebutted by the A.O. further strengthens the assessee's case.
All the above facts and details demonstrate that the appellant had already all those evidences generated by the internal records maintained, apart from the third party evidences produced during the course of assessment and appeal proceedings, the preponderance of which proves that the appellant in M/s GSPP produced a distinct and new commodity after a transformation from the raw materials employed by him, and hence there was a "manufacture", not a "trade", in view of the decisions of the Apex Court in the cases of Name Tulaman Manufacturers Pvt. Ltd. Vs.
Collector of Central Excise, (1990) 183 ITR 577 (SC), CIT Vs. N.C. Budhiraja & Co. & Another, (1993) 209 ITR 412 (SC), and Arthur E. Newell Vs. CIT (1997) 223 ITR 776. The A.O's reference to the words "manufacture"," manufacture/produce" and “article or thing" explained in para 4.2, 4.3 and 4.4 of her order, is only general, and rather proves the case of the assessee in all respects, and entitles the assessee to claim deduction u/s 80 IB of the I.T. Act, 1961.
It can be seen that the assessee has produced certain additional evidence before the CIT(A) which was rightly admitted by the CIT(A). As per the facts and circumstances it cannot be held that CIT(A) violated Rule 46A, he had acted in a judicious and proper manner and his order being based on proper appreciation of facts and record cannot be called violative of a procedural provision. The CIT(A) is statutory first appellate authority and has independent power of calling for information and examination of evidences and poses conterminous power of assessment apart from appellate powers. Thus, the CIT(A)’s order is to be upheld. The matter should not be set aside on general ground as it amounts to causing the assessee injustice and giving the AO another innings. Therefore, the CIT(A) has decided the issue in just and proper manner the same is upheld.
The CIT(A) on the issue of disallowance of claim of deduction u/s 80 IB has held that the process flow chart of manufacturing of DG sets filed by the assessee exhaustively describes the manufacturing process which involves three stages i.e. manufacturing of canopy of DG sets, manufacturing of DG set and manufacturing of AMF panel which also includes drilling, cutting acoustic foam pasting, fixing of electrical items, drilling of mounting plate fixing of switch gear, load testing, sound testing etc. The CIT(A) further held that the process of manufacturing DG sets does not involve mere ascending of parts but is actually a manufacturing process resulting in the manufacture of new product from the raw materials by giving them new properties. The CIT(A) has exhaustively given its finding based on the evidences placed before the Assessing Officer as well as before the CIT(A). The CIT(A) has also gone through the details of plant and machinery and also the copies of bills relating to the purchase of the same filed by the assessee. The CIT(A) has also given clear finding that the Assessing Officer has picked out and highlighted only those machines which are used for lifting and shifting work and ascending on the DG set and ignored the other machines used by the assessee for various purposes deployed by the assessee in its manufacturing process. After careful consideration, the CIT(A) held that the assessee is entitled to claim deduction u/s 80 IB of the Act. There is no need to interfere with the detailed finding on record given by the CIT(A). Therefore, this issue is decided correctly by the CIT(A) in all the Assessment Years and there is no need to interfere with the findings of the CIT(A).
As related to issue related to addition u/s 40(a) (ia) of the Act amounting to Rs.1,03,50,120/- in Assessment Year 2007-08. The CIT(A) held that as per the provisions of Section 194C which was made effective by the Finance Act 2006 and the Finance Act 2007 and amendment was made w.e.f 1/6/2007. The CIT(A) further held that the provisions of Section 194C (a) does not become applicable in the instant case because the assessee is an individual being the proprietor of M/s GSP Power Projects and M/s Cromwell Industries with the Assessment Year involved under reference is 2007-08 i.e after 1/6/2007 since for the year under consideration no liability for deduction of TDS u/s 194C (1) is attracted in the present case. The Assessing Officer’s attempt in disallowing the amount u/s 40(a)(ia) is unwarranted. There is no need to interfere with the said findings. Therefore, this ground of appeal for Assessment Year 2007-08 taken by the Revenue is dismissed.
17. As related to issue relating to Excise Duty refund, the CIT(A) has rightly relied upon the Hon'ble Supreme Court decision in case of Liberty India 317 ITR 218 wherein it is held that the payment f Central Excise Duty had a direct nexus with the manufacturing activity and similarly of the refund of Central Excise Duty also had a direct nexus with the manufacturing activity. The issue of payment of Central Excise Duty would not arise in the absence of any industrial activity. There is inextricable link between the manufacturing activity, payment of Central Excise Duty and its refund. Therefore, the CIT(A) has rightly directed the Assessing Officer to allow deduction u/ s 80IB on the Excuse Duty refund received by the assessee. There is no need to interfere with the same finding. This issue raised in Assessment Year 2008-09 by the Revenue is dismissed.
18. As related to non allowability of claim of deduction u/s 80IC, the CIT(A) has given extensive finding based on the evidences produced before the Assessing Officer as well as before the CIT(A). There is no requirement to interfere with the said findings. Thus, this issue is also dismissed.
19. As related to Cross-Objection of the assessee, the CIT(A) after verifying the issue of allocation of expenses has given a finding that the establishment expenses cannot be said to be belonging to the head office only the assessee is coordinating controlling and executing business affairs of all the units as proprietor it cannot be said that the fix asset, staff, establishment , security, telephone etc of the head office we have heard both the parties and perused the material available on record not used for the work of Jammu & Kashipur Units. The assessee has also admitted that the purchase and sales order exempt units placed executed and Delhi only. There is nothing in the submissions that the expenditure on account of AMCs was claimed in the undertakings are eligible for deduction u/s 80IB & 80IC of the Act. There is no need to interfere with the findings of the CIT(A). Therefore, the sole ground in Cross Objection is dismissed.