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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri Satbeer Singh Godara, JM & Shri M.Balaganesh, AM ]
ORDER PER BENCH
The assesseee has filed the instant appeals for A.Y.2010-11, 2011-12 & 2013- 14, against the CIT(A)-IV, Kolkata’s separate orders dated 11/08/2014 & 22.11.2016 passed in Appeal No. 20/CIT(A)-IV/2013-14, 127/CIT(A)-IV/2013-14 & 199/CIT(A)-2/16-17; respectively, in proceedings u/s 143(3) of the Income Tax Act, 1961 (hereinafter the Act).
Heard both parties. Case files perused.
We advert to assessee’s pleadings first. Its identical grievance in the former two assessment years challenges correctness of both the lower authorities action invoking section 14A r.w.r. 8D disallowance in relation to its exempt income (s) without establishing the relevant nexus between the corresponding income and expenditure. We notice in this background that the CIT(A) has already granted relief 1879/Kol/2014 & 2451/Kol/2016 Jay Shree Tea & Industries Ltd. A.Y.2010-11,2011-12 & 2013-14 to the assessee in former two assessment years 2010-11 and 2011-12 deleting proportionate interest expenditure disallowance under Rule 8D(2)(ii) of Income Tax Rules. It further transpires that the assessee had suo moto disallowed the relevant direct and administrative expenditure in the two assessment years. Learned counsel fails to dispute the same during the course of hearing. We therefore see that there can hardly be any grievance on assessee’s part so far as these two remaining components of the impugned disallowance are concerned. The assessee had not challenged the said two disallowance (s) during the lower appellate proceedings as well. The assessee’s grievance is not maintainable therefore. Thus this first substantive ground in the former two assessment years is rejected.
The assessee’s identical latter substantive ground in former two assessment years and the sole grievance in last assessment year challenges both the lower authorities’ action denying section 80IE deduction in respect of its unit/garden situated in north-east in the course of assessment as confirmed in the lower appellate proceedings. The CIT(A) affirms the impugned disallowance by referring to his order dated 05.12.2013 in A.Y.2009-10. Both parties take us to this tribunal’s coordinate bench’s order in assessee’s own case dated 16.03.2018 accepting the very substantive ground for statistical purposes as under :-
“4. The next issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the action of the ld. AO in denial of deduction u/s 80IE of the Act, in the facts and circumstances of the case.
4.1. The brief facts of this issue is that the assessee is engaged in the business of growing and manufacturing of tea, manufacturing chemical and fertilizers, trading of tea, warehousing and development of real estate. The assessee claimed deduction of Rs. 1,30,08,824/- u/s 80IE of the Act in respect of following units situated at North-Eastern States.
, 1879/Kol/2014 & 2451/Kol/2016 Jay Shree Tea & Industries Ltd. A.Y.2010-11,2011-12 & 2013-14
The ld. AO did not discuss anything about the claim of deduction u/s 80IE of the Act in the assessment order but merely proceeded to disallow the deduction u/s 80IE while completing the assessment. The Ld. CIT(A) on going through the accounts of the assessee as well as audit report submitted in form 10CCB in respect of eligible units, observed that the assessee had carried out substantial expansion and had not completed the same within the same year in which such substantial expansion were undertaken. In other words, in the opinion of Ld. CIT(A), the substantial expansion once undertaken should be completed within the same financial year in order to claim deduction u/s 80IE of the Act. The Ld. CIT(A) also made a passing reference that the additions to plant and machineries were made in 2 to 3 years time by the assessee in the normal way which are on account of replacement of old machineries. The Ld. CIT(A) did not agree to the contention of the assessee that there is no time limit prescribed in Section 80IE of the Act to complete the substantial expansion within the year in which it was undertaken.. Based on this observation, the Ld. CIT(A) upheld the action of the ld. AO in denying deduction u/s 80IE of the Act. Aggrieved, the assessee is in appeal before us on the following grounds:
2. For that the learned CIT(Appeals) confirmed the action taken by the learned Assessing Officer for not allowing deduction against income earned from our unit/garden situated in the north-east, which is deductible u/s 80IE of the Income Tax Act, 1961 although the appellate has increase in the investment in the plant and machinery by more then twenty-five per cent of the books value of plant and machinery (before taking depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken.
, 1879/Kol/2014 & 2451/Kol/2016 Jay Shree Tea & Industries Ltd. A.Y.2010-11,2011-12 & 2013-14
4.2 We have heard the rival submissions. It is not in dispute that the assessee had set up tea estates in North-eastern States. The assessee had carried out certain substantial expansion in its existing eligible undertakings and had claimed deduction u/s 80IE of the Act in the return of income. It is a fact that the ld. AO had not discussed anything about the claim of deduction u/s 80IE of the Act in his assessment order. We find that the deduction u/s 80IE of the Act is eligible to assessee who begins to manufacture in any of the North Eastern States during the period 01.04.2007 to 31.03.2017 either by setting up a new unit or by undertaking substantial expansion to manufacture or produce any eligible article or thing. The provision of Section 80IE(1) stipulates that the assessee would be entitled to 100% of the profits and gains derived from such business as deduction for 10 assessment years commencing with the Initial Assessment Year. The expression ‘Initial Assessment year’ is defined in section 80IE(7) as under: (7) For the purposes of this section,— (i ) "initial assessment year" means the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things, or completes substantial expansion; [Underlining provided by us]
From the aforesaid definition of ‘initial assessment year’, it could be inferred that the initial assessment year shall be the year in which the substantial expansion is completed by the assessee which would enable it to generate revenues and claim deduction thereon u/s 80IE of the Act. This goes to prove that there is no time limit prescribed in Section 80IE as to when the substantial expansion should be completed by the assessee. The provisions of section 80IE(2) of the Act stipulates that if an undertaking begins to manufacture or eligible article or thing by undertaking substantial expansion on any date after 01.04.2007 and before 31.03.2017. This is the only requirement with regard to time limit specified in section 80IE of the Act. Nowhere it mandates, as pointed out by the revenue herein, that the substantial expansion once commenced should be completed within same financial year. Hence, the denial of deduction u/s 80IE of the Act by the revenue is not tenable as per law. However, we find that the expression ‘substantial expansion’ is also defined in 80IE(7)(iii) of the Act wherein, it should result in increase in investment of plant and machinery by at least 25% of the book value of plant and machinery. This factual aspect as to whether the assessee had indeed invested in plant and machinery more than 25% of the book value of plant and machinery (before depreciation in any year); as on the first day of the previous year in which substantial expansion is undertaken, was not verified by the authorities below. Hence, in the interest of justice and fair play, we deem it fit and appropriate, to remand this issue to the file of the ld. AO, for this limited purpose of verification of quantum of investment in plant and machinery so as to satisfy the definition of substantial expansion within the meaning of 80IE(7)(iii) of the Act. If the assessee is found to be so 1879/Kol/2014 & 2451/Kol/2016 Jay Shree Tea & Industries Ltd. A.Y.2010-11,2011-12 & 2013-14 satisfied, then deduction u/s 80IE of the Act should be allowed to the assessee. Accordingly, ground no. 2 raised by the assessee is allowed for statistical purposes.”
There is no distinction on fact evident in the impugned assessment year on the very issue. We therefore adopt judicial consistency in all these three assessment years to remit the instant issue as well back to the Assessing Officer for the purpose of limited verification on quantum of investment in plant and machinery the concerned. The assessee’s latter grievance is accepted for statistical purposes accordingly.
We quote our above discussion to partly accept assessee’s former two appeals and 1879/Kol/2014 for statistical purposes whereas its last appeal is accepted for statistical purposes. Ordered accordingly.
Order pronounced in the open Court on 04.05.2018.
Sd/- Sd/- [M.Balaganesh] [ S.S. Godara ] Accountant Member Judicial Member Dated : 04.05.2018. [RG Sr.PS] Copy of the order forwarded to: 1.Jay Shree Tea & Industries Ltd., 10, Camac Street, Kolkata-700017. 2. J.C.I.T. (OSD)- Circle-4, Kolkata/DCIT-Circle-4(1), Kolkata 3. C.I.T.(A)- IV, Kolkata 4. C.I.T.-II, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches 1879/Kol/2014 & 2451/Kol/2016 Jay Shree Tea & Industries Ltd. A.Y.2010-11,2011-12 & 2013-14 , 1879/Kol/2014 & 2451/Kol/2016 Jay Shree Tea & Industries Ltd. A.Y.2010-11,2011-12 & 2013-14