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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ NEW DELHI
Before: SHRI B.P. JAIN
This appeal of the assessee arises from the order of learned CIT(A)- XVI, Delhi vide order dated 31.07.2014 for the assessment year 2009-10. 2. The assessee has raised the following grounds of appeal. “1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining the disallowance of claim of deduction of Rs.5,80,225/- U/S 80IB of the Act. 1.1. That the learned Commissioner of Income Tax (Appeals) while upholding the deduction has misinterpreted clause (2) of Part C of Schedule XIII read with fifth proviso to 80IB(4) of the Act to conclude that since the undertaking of the appellant is engaged in blending and bottling of IMFL which results in manufacture or production of distilled/brewed alcoholic drinks, therefore, the undertaking of appellant is clearly not eligible for deduction u/s. 80IB of the Act. The finding overlooks the documentary evidence tendered by the appellant to establish that appellant is eligible for deduction U/S 80IB of the Act. 1.2 That the learned Commissioner of Income Tax (Appeals) has further erred in sustaining the disallowance on the ground that the return was filed beyond the due date by the appellant company.
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That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in confirming the levy of interest under sections 234A and U/S 234B of the Act. It is, therefore, prayed that, disallowance sustained U/S 80IB of the Act alongwith interest levied may kindly be deleted and appeal of the appellant company be allowed.”
The brief facts of the case are as per the order of the AO vide paragraphs 3 to 3.4, pages 1 to 4, reproduced hereinbelow: “3. During the year the assessee has shown gross total income of Rs.19,34,080/- and after claiming deduction under chapter VIA of Rs.5,80,225/- net income of Rs.13,53,860/- has been shown as taxable income. The assessee has claimed deduction u/s.80IB of Rs.5,80,225/- 3. Disallowance of claim u/s 8018 The assessee has filed its return of income for 2009-10 on 30.12.2009 with acknowledgement no.104445601301209. The acknowledgement of the return shows the return filed under the said acknowledgement to be a revised return. The assessee was required to explain as to why the deduction claimed u/s. 80IB may not be withdrawn on account of following reasons. i. In the preceding assessment years i.e. it has been held that the assessee is engaged in the business of blending and bottling of IMFL which does not constitute a manufacturing activity u/s 801B. Since the assessee is not engaged in the manufacturing activity therefore deduction u/s. 801B is not admissible. ii. The return has been filed after the statutory due date prescribed u/s.139(1). iii. Though the assessee has claimed that the original return filed on 30.09.2009 and it was subsequently revised on 30.12.2009. But the perusal of the acknowledgement of the original return filed by the assessee shows that all figures has been reported in zero. iv. The ITD is showing the return filed by the assessee to be a belated return, enclosed as annexure Á’of the order. The ITD system has not allowed deduction u/s.80IB as the return was belated return. 3.2 The assessee in its reply filed on 09.12.2011 submitted that the company is engaged in the business of blending and bottling of IMFL. The assessee claimed that the company imports various sprits and the other ingredients like water, caramel and essence are added as per formulation and after filtration and inspection the blend is packed in different size of bottles and is fit for human consumption.......... In the entire process of blending and bottling there is no
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distillation/brewing of any sprit from molasses or grains nor any process of distillation is following. The company while filing the annual return has claimed deduction u/s.80Ib and in light of the above facts it is allowable to the assessee. 3.3 Submission of the assessee is duly considered and not acceptable on account of following reason. a) The assessee company is engaged in the business of blending and bottling of Indian Made Foreign Liquor in the State of Jammu & Kashmir and having its registered office in Delhi. The company is stated to have commenced its business of blending and bottling of IMFL in the State of J&K w.e.f. 14.02.2003. During the period under consideration, the assessee, besides its normal business, had carried out trading in computer parts, textiles and papers. The assessee has claimed deduction u/s 80IB to the tune of Rs.5,80,2251- but, the assessee 'does not fulfill the condition to claim the deduction u/s 801B of Income-tax Act, 1961. Accordingly, assessee was asked to explain why deduction claimed u/s 801B of the Act should not be disallowed as the assessee company is falling under the purview of Schedule XIII Part C and proviso to sub-section 4 of section 801B which clearly stipulates that no deduction under this sub-section shall be allowed to an industrial undertaking in the state of Jammu & Kashmir. which is engaged in the manufacture & production of any article or thing· specified in part-C of the thirteenth Schedule. In response, the assessee has filed a decision of the High Court. of Chennai clarifying that blending and bottling of IMFL amount to "manufacture" for the purposes of claiming deduction under section 801B of Income-Tax Act, 1961. But, the assessee has failed to appreciate that the case referred to in the decision ·of High Court of Chennai, relates to an assessee who had carried out its business of blending and bottling of IMFL in Pondicherry and not in the State of Jammu and Kashmir. Therefore, the case referred to by the assessee is easily distinguishable. As discussed above, the blending and bottling of IMFL does not qualify for deduction u/s 80lB of Income-Tax Act in the case 'of the assessee. Accordingly, the deduction qlaimed by the assessee u/s. 801B of the Income Tax Act are being initiated separately for providing inaccurate particulars of its income by the assessee. b) The assessee has filed the return after the due date of filing of return therefore in any case the assessee is not eligible for deduction u/s. 801B. c) The assessee’s claim that the original filed on 30.09.2009 is not acceptable because the return filed on 30.12.2009 by the assessee is shown as belated return in the ITD system. Further, the acknowledgement of the original return is being reflected in ITD. The ITD system has also not allowed the deduction claimed u/s.80IB as
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the return has not filed within the due date of filing of return. 3.4 In view of the foregoing discussion the deduction claimed u/s.80IB amounting to Rs.5,80,225/- is being disallowed and added back to the income of the assessee.
I have heard the rival contentions and perused the facts of the case. It was pointed out by the learned counsel for the assessee, Mr. Gautam Jain, Advocate that during the assessment year 2007-08 the claim u/s.80IB was allowed by the Income Tax Department under the assessment made u/s.143(3) of the Act. The said deduction so claimed u/s.80IB of the Act was disallowed u/s.154 of the Act for which the appeal was made before the Income Tax Appellate Tribunal who allowed the claim of the assessee and held that the order u/s.154 was illegal, bad in law and without jurisdiction. The relevant findings of the order of ITAT ‘E’ Bench in ITAs No.5304 and 5305/Del/2012 dated 13th September, 2017 are placed at pages 86 to 100 and relevant page is page no.96 where the findings in paragraph 18 is reproduced hereinbelow: “18. We thus find considerable cogency in the submission of the assessee’s counsel that assessment order passed u/s.143(3) of the Act after considering the relevant material and otherwise also there is no mistake apparent from record which can be rectified u/s.154 of the Act; therefore, the notice u/s.154 and order passed are illegal, bad in law and without jurisdiction and grounds raised are allowed.”
In the same order, the ITAT Delhi ‘E’ Bench for the assessment year 2008-09 following the order of assessment year 2007-08 and allowed the claim of the assessee for the relevant assessment year 2008-09. Following the decision of Hon’ble Delhi High Court in the case of Delhi Patra Prakash, 355 ITR 14 (Del) and also the decision of Hon’ble Supreme Court in the case of Shasun Chemicals and Drugs Ltd. Vs. CIT, 388 ITR 1 (SC) and the
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relevant decision of ITAT Delhi ‘E’ Bench is reproduced hereinbelow:
“We have already held while disposing off ITA No. 5304/D/2012 that order made u/s.143(3) of the Act dated 30.12.2009 for AY 2.007-08 entitling the deduction u/s 80IA of the Act was valid and could not be subject matter of rectification u/s 154 of the Act. The consequent effect of the aforesaid finding is that claim made u/s. 80IA of the Act stands allowed in the: ·initial assessment year 2007-08 in assessment framed U/S 143(3) of the Act. The Hon'ble Delhi High Court In the case of CIT v. Delhi Patra Prakash Ltd. 355 ITR 14 (Del.) has been pleased to consider to question as to whether the ITAT was right in holding that requisite conditions to be fulfilled for allowability of deduction u/s. 80I ought to be satisfied, not only in the first or the initial year, but in all the assessment years in which the deduction u/s.80I is claimed by the assessee. The Hon'ble High Court at para 74 to para 80 has been pleased to hold as under:
'74. In the present case, the' claim of the assessee under section 80-1 of the Act was examined and allowed by the Assessing officer for three years preceding the assessment year 1991-992. It is relevant to note that assessments in the earlier years i.e. relating to assessment years 1988-89, 1989-1990 and 1990-1991 has not been disturbed by the Assessing Officer and there has been no change that ·could justify the Assessing officer adopting a different view in the assessment years 1991-92 and thereafter. As stated hereinbefore, in certain cases where the issues involved have attained finality on account of the subject matter of dispute having been finally adjudicated, the question of re opening and revisiting the same issue again in subsequent years would not arise. This is based on principle that there should be finality in all legal proceedings. The Supreme Court in case of Parashuram Pottery Works Co. Ltd v. ITO [19777 106 ITR 1 had held as under:- ....that the policy of law is that there must be a point of finality in all legal proceedings, stale issues should not be reactivated beyond a particular stage and that lapse of .e must induce repose in and set at rest judicial and quasi-judicial controversies as it t in other spheres of human activity .... 11 7.5. In the facts of the present case, where although the Assessing officer has allowed the essee deduction under section .80-1 of the Act in the preceding years, one may still e certain reservations as to whether the issue of eligibility of Unit nos. 2 and 3 fulfilling the conditions has been finally settled, since the question has not been a subject matter of any appellate proceedings in the years preceding the assessment year 1991-92 matter of any appellate proceedings in the years preceding the assessment year 1991-92. However, there is yet another aspect which needs to be considered. By virtue of section 80I(5) of the Act, deduction u/s.80I of the Act is available to an assessee in respect of the assessment year (referred to as the initial assessment year) relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean going vessels or other powered craft. Such deduction is also available for the seven assessment years immediately succeeding the initial assessment year. Surely in cases where an assessee is held to be eligible for deduction in the initial assessment year, the same cannot be denied in the subsequent assessment years on the ground of ineligibility since the set of facts which enable an assessee to claim to be eligible for deduction under section 80I of the Act occur in the previous year
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relevant to the initial assessment year and have to be examined in the initial assessment year. In matter of an earlier assessment year and do not arise in the current assessment year, it would not be possible for an Assessing Officer to take a different view in the current assessment year without altering or reopening the assessment proceedings in which the eligibility to claim the deduction has been established. 76. In cases where deduction is granted under Section 80I of the Act, the applicability of the Section is determined in the year in which the new industrial undertaking is established. The qualification as to whether any industrial undertaking fulfils the condition as specified under Section 80I of the Act has to be determined in the year in which the new industrial undertaking is established. Although the deduction under Section 80I of the Act is available for the assessment years succeeding the initial assessment year, the conditions for availing the benefit are inextricably linked with the previous year relevant to the assessment year in which the new undertaking was formed. In such circumstances, it would not be possible for an Assessing Officer to reject the claim of an assessee for deduction under Section 80I of the Act on the ground that the industrial undertaking in respect of which deduction is claimed did not fulfil the conditions as specified in Section 80I(2) of the Act, without undermining the basis on which the deduction was granted to the assessee in the initial assessment year. This in our view would not be permissible unless the past assessments are also disturbed. 77. The Assessing Officers over a period of three years being assessment years 1983-89, 1989-1990 and 1990-1991 have consistently accepted the claim of the assessee for deduction under 80-I of the Act and it would not be open for the Assessing Officer to deny the deduction under Section 80-I of the Act on the ground of non fulfilment of the conditions under 80-1(2) of the Ad without disturbing the assessment for the assessment years relevant to the previous year in which the Unit Nos.2 and 3 were established. 78. This view has also been accepted by a Division Bench of Gujarat High Court in the case of Saurashtra Cement & Chemical Industries (supra). In that case, the Gujarat High Court held that where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had to be examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. The relevant extract from the decision of the' Gujarat High Court in Saurashtra Cement & Chemical Industries (supra) is quoted below:- “The next question to which the Tribunal addressed itself, and no our opinion rightly, was whether the Tribunal was justified in refusing to continue the relief of tax holiday granted to the assessee-company for the assessment year 1968-69, in the assessment year under reference, that is, 1969-70, without distributing the relief granted for the initial year. It should be stated that there is no provision in the scheme of s.80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under section 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted 79. The division bench of the Bombay High Court in the case of Paul Brothers (supra) has also adopted the view expressed by the Gujarat High Court in the case of Saurashtra Cement & Chemical Industries (supra) Following the aforesaid decisions, we hold that in facts of the present case Unit Nos.2 & 3
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cannot be stated to have been formed by splitting up or in reconstruction of existing business.” Also Hon’ble Supreme Court in the case of Shasun Chemicals and Drugs Ltd. v. CIT 388 ITR 1 (SC) has held as under: “It is on this satisfaction that for the Assessment Year 1996-97 also the expenses were allowed. Once, this position is accepted and the clock had started running in favour of the assessee, it had to complete the entire period of 10 years and benefit granted in first two years could not have been denied in the subsequent years as the block period was 10 years starting from the Assessment Year 1995-96 to Assessment Year 2004-05. The High Court, however, disallowed the same following the judgment of this Court in the case of Brook Bond India Ltd (supra). In the said case it was held that the expenditure incurred on public issue for the purpose of expansion of the company is a capital expenditure. However, in spite of the argument raised to the effect that the aforesaid judgment was rendered when Section 35D was not on the statute book and this provision had altered the legal position, the High Court still chose to follow the said judgment. It is here where the High Court went wrong as the instant case is to be decided keeping in view the provisions of Section 35D of the Act. In any case, warrants repetition that in the instant case under the very same provisions" benefit is allowed for the first two Assessment Years and, therefore, it could not have been denied in the subsequent block period. We, thus, answer question No. 1 in favour of the assessee holding that the assessee was entitled to the benefit of Section 35D for the Assessments Years in question. ”
Learned counsel for the assessee also placed on record the decision in assessee’s own case for the assessment year 2010-11 of ITAT Delhi ‘SMC’ Bench in ITA No.5566/Del/2014 dated 27th Feb, 2017 and the relevant paragraph is reproduced hereinbelow: “9. Since the facts of the present case are identical to the facts involved in the aforesaid referred to case, so respectfully following the order dated 13.02.2017 in assessee’s own case for the assessment years 2007-08 and 2008-09 in ITA Nos. 5304 & 5305/Del/2012, the impugned order passed by the ld. CIT(A) is set aside and AO is directed to allow the claim of the assessee for deduction u/s.80IB of the Act.”
Therefore, in all the circumstances and facts of the case and decision of Hon’ble ITAT Delhi Bench reproduced hereinabove, the claim of the assessee u/s.80IB is allowable and the order of the learned CIT(A) is reversed accordingly.
As regards the issue with regard to the filing of the original return and
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the revised return. It was pointed out by the learned counsel for the assessee Mr. Gautam Jain, Advocate that original return was filed on 30th September, 2009 and the acknowledgement is placed at paper book page 1 and revised return was filed on 30.12.2009 available at paper book page 25. The issue raised before the AO and the learned CIT(A) is that the original return claimed to have been filed on 30th September, 2009, in fact is no return where all the columns have been filed in as zero and that is simply an acknowledgement downloaded from the ITD system, and therefore, for all practical purpose the return filed on 30th September, 2009 is the original return which is belated return, therefore, no claim u/s.80IB can be allowed.
In this regard, I am of the view as pointed out by the learned counsel for the assessee, Mr. Gautam Jain, Advocate that at page 2 of AO’s order, the AO himself admits that the return filed on 30th September, 2009 is a revised return. Secondly, nowhere authority below has raised a question that the return filed on 30.9.2009 is invalid return and the reliance has been placed on the decision of Hon’ble ITAT Cochin Bench in the case of R. Kasi Vishwanathan and brothers vs. ACIT, available at paper book 101, where it has been held that the assessee filed a revised return in accordance with the provision of Section 139(5) of the Act. The Revenue authorities were not justified in rejecting the said return without following the procedure prescribed u/s.139(9) by merely taking a view that a revised return was afterthought and was filed only to reduce assessee’s tax liability. In the present case also no averment with regard to invalid return has been raised by any of the authorities below and in short the provision of Section 139(9) have not been invoked and in such circumstances the pleadings taken by
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learned DR relying upon the orders of both the authorities below cannot be upheld and the orders of both the authorities are reversed accordingly. Thus, all the grounds of the assessee in view of my discussion hereinabove are allowed.
In the result, the appeal of the assessee in ITA No.5565/Del/2014 is allowed. Order pronounced in the open court on this day 21st April, 2017
Sd/- (B.P. JAIN) ACCOUNTANT MEMBER Dated: 21/04/2017 Prabhat Kumar Kesarwani, Sr.P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR