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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-II’ NEW DELHI
Before: SMT DIVA SINGH
Date of Hearing 04.08.2016 Date of Pronouncement 21.10.2016 ORDER Both these appeals have been filed by the assessee assailing the correctness of the separate orders dated 25.02.2015 of CIT(A)-12, New Delhi pertaining to 2009- 10 and 2010-11 assessment years.
The Ld. AR submitted right at the outset that both the appeals are largely covered in favour of the assessee by virtue of the orders of the ITAT in assessee's own case dated 17.07.2015 in and ITA No.4117/Del/2010 pertaining to 2007-08 assessment year. Copy of the said order, it was submitted is placed at pages 26 to 58 of the Paper Book.
In the said background, inviting attention to Ground No. 1 in it was submitted that the issue has been considered by the ITAT in para 12.10 and 12.11 at internal pages 25-26 of the order (page 50-51 of the Paper Book). Accordingly, it was submitted that the claim deserves to be I.T.A .No.-4345 & 4346/Del/2015 (A.P.PROCESSORS VS ITO)
allowed as the facts and circumstances continue to remain the same. Inviting attention to the dates of the impugned orders which is 25.02.2015 in both the years it was submitted that the order of the ITAT is dated 17.07.2015 thus it was submitted that the benefit of this order of the ITAT was not available to the CIT(A).
Considering the material available on record and the order of the ITAT, the Ld. Sr. DR though placed reliance upon the impugned orders however submitted that facts, circumstances and position of law continue to remain the same.
I have heard the rival submissions and perused the material available record.
It is seen that the assessee is relying upon the following finding of the ITAT:-
12.10.“We have heard both the parties and have perused the records, we find that the assessee has claimed additional depreciation of Rs.5,30,645/- under section 32(1)(iia) of the Act. The AO disallowed the same on the ground that the assessee is neither a manufacturer or producer of an article or thing and it is only doing job work. The appellant brought to the notice of AO that Hon’ble Supreme Court has held that textile dyeing and printing has been held to be manufacturing in the case of Empire Industries Ltd. vs Union of India 162 ITR 846 (S.C). Thereafter, the Hon’ble Supreme Court in the case of Ujagar Prints vs: UOI & Anr. has reconfirmed the same. The issue of job work is also seen to be covered in favour of the assessee by the judgment of the jurisdictional Delhi High Court in the case of CIT vs. Northern Aeromatics Ltd. (2005) 196 CTR (Del) 479. The above decision has been followed in the case of CIT vs. Sadhu Forging Ltd . (2011) 336 ITR 444 (Del.). In this judgment the Court has framed the following questions of law and has held as under:- "i) Whether income received from job work/labour charges on work done based on material supplied by the customers qualifies for deduction under s. 80-IB of the IT Act, 1961? (ii) Whether income received from job work/labour charges on work done on material "(supplied by the customers is profits derived from industrial undertaking to be eligible for deduction under s. 80-IB of the IT Act?
12.11. Thus, in view of above case laws, we find that the activity of processing done by the assessee was "manufacturing". It was immaterial that the assessee was doing the job of processing also for outside customers too and was charging them on job work basis or on the basis of labour charges. We hold that it will still be qualified as carrying eligible business under s.32(1)(iia) of the Act. The ratio of the decisions in the cases of (i) CIT vs. Metalman Auto(P)m Ltd. ( 011) 52 DTR (P&H) 385; (ii) CIT vs. Vallabh Yams (P) Ltd. (2011) 51 DTR (P&H) 236; (iii) CIT vs. Impel Forge & I.T.A .No.-4345 & 4346/Del/2015 (A.P.PROCESSORS VS ITO)
Allied Industries Ltd. (2010) 326 ITR 27 (P&H); (iv) CIT vs. Rane (Madras) Ltd. (1998) 148 CTR (Mad) 404 : (1999) 238 ITR 377 (Mad) and (v) Dy, CIT vs. Harjivandas Juthabhai Zaveri & Anr. (2002) 258 ITR 785 (Guj.) strengthens our aforesaid view. In view of the above detailed discussions and precedents, we hold that assessee is a manufacturer and eligible for deduction u/s 32(1)(iia) of the Act and so we allow the additional depreciation @20% on Rs. 49,83,575/- which comes Rs.9,96,715/- and accordingly decide the ground no. 3 in favor of the Assessee.”
Considering the same, I find where the facts and circumstances continue to remain the same and in the absence of any infirmity pointed out in the impugned order the ground raised by the assessee has to be allowed. Respectfully following the order of the ITAT, Ground No. 1 of the assessee is allowed.
Addressing Ground No. 2, it was submitted by the Ld. AR that the said issue also came up for consideration before the ITAT and the facts and circumstances continue to remain the same. The said prayer was not objected to by the Ld. Sr.DR.
Having heard the submissions and perused the material available record, it is seen that the Co-ordinate Bench had an occasion to restore the issue back to the file of the Assessing Officer. The facts continue to remain the same as therein also the claim under section 80IB was admittedly though made during the assessment proceedings however the AO did not address them and the CIT(A) considering the facts that the issue had not been adjudicated upon by the Assessing Officer also denied the claim. The Co-ordinate Bench considering the fact that the assessee had filed evidences before the Assessing Officer in the form of certificate of registration with the SSI to satisfy that the unit had started production before 31.03.2002 and that it was a small-scale industry undertaking manufacturing fabric restored the issue to the AO holding that the assessee having made the claim has to prove that it is eligible as per 80 IB thereby directing the Assessing Officer to examine the claim
I.T.A .No.-4345 & 4346/Del/2015 (A.P.PROCESSORS VS ITO) after giving the assessee a reasonable opportunity of being heard. In view of the fact that no infirmity in the said direction was pointed out by the Ld. Sr.DR and considering the admitted fact that there was no change in facts and circumstances respectfully following the order of the Co-ordinate Bench the issue is restored to the AO with identical direction.
The issues raised in Ground Nos. 3 and 4, it was submitted by the Ld. AR arise for the first time in the year under consideration as no disallowance in the earlier years was made by the AO on same facts and circumstances and this is the first time that disallowance has been made. It was his submission that the disallowance has been made on the basis of pure estimates. The Ld. Sr.DR relies upon the impugned order.
I have heard the rival submissions and perused the material available on record. I find that the assessee firm consisting of two partners Sh. Arvind Jain and Sh. Pankaj Gupta sharing equal profit ratio engaged in the business of textile dying under the name and style of M/s. A. P. Processors returned an income of Rs.10,33,166/- and Rs.5,15,610/- respectively in the years under consideration.
The business is stated to be carried out from factory situated at Plot No.103, Sector- 24, Faridabad. 1/5 of the car expenses and telephone expenses in the years amounting to Rs.52,985/- and Rs.37,919/- respectively Rs.40,053/- and Rs.29,569/- were added by way of a disallowance on the grounds of personal user by the AO noting that no log book etc. or telephone register was maintained.
10.1. The CIT(A) in appeal at internal page 27 in 2009-10 AY and page 17 in 2010- 11 AY refers that the claim is in regard to the following 3 cars:-
I.T.A .No.-4345 & 4346/Del/2015 (A.P.PROCESSORS VS ITO)
Honda City Card used by partner Sh.ARvind Jain 2. Honda City Car used by partner Sh. Pankaj Gupta 3. Alto Car, stated to be kept at factory. 10.2. Considering the fact that neither log books were maintaining nor exclusive business user by any other evidence was filed the addition was confirmed. I find that the mere argument that addition made on estimates has been sustained in the peculiar facts of the present case is not of much help to the assessee as admittedly no log book has been maintained. Considering the fact that the disallowance has been made for the first time the disallowance by way of an estimated is restricted to one tenth of the amount claimed. While so directing it is made clear that the said estimate is based only on the fact that these are the first few years when such a disallowance has been made as such the assessee may not have been aware that the assessee was required to maintain a log book for claiming exclusive business user. Similarly for the telephone expenses it is seen that the addition by way of a disallowance is made for the first time wherein no Telephone Call Registers have been maintained the disallowance in the absence of evidence is restricted to one tenth of the amount claimed again for similar reasoning. Accordingly Ground Nos.3 & 4 are partly allowed.
Addressing the last Ground, the Ld. AR submitted that the direction to the AO by the ITAT that the benefit of credit for TDS on verification may be allowed to the assessee for which purposes the issue had been remanded in the earlier year.
The said prayer was not objected to by the Ld. Sr.DR. Considering the material on record and the submission advanced respectfully following the order of the Co-
I.T.A .No.-4345 & 4346/Del/2015 (A.P.PROCESSORS VS ITO) ordinate Bench, the issue is restored to the file of the AO to verify and allow necessary relief qua TDS paid, if so warranted on facts.
In the result, of the assessee is partly allowed for statistical purposes.
It was a common stand of the parties before the Bench that the issues raised in ITA No.-4346/Del/2015 in 2010-11 assessment year are identical to the facts, circumstances and position on law as in the earlier year. Only the sequence of the grounds raised have been varied.
Whereas Ground Nos. 1 and 2 address the disallowance made by way of an estimation on telephone and car expenses which have been partly allowed in the earlier year, facts, circumstances, arguments and position of law remain the same.
Ground No. 3, it is seen is identical to Ground No. 1 in and Ground No. 4 in the present appeal is identical to ground No. 2 in Ground No. 5 is identical to Ground No.5 in . Accordingly, following the view taken in ITA No.4345/Del/2015, Ground No. 3 is allowed.
Ground No. 4 following the view taken in the aforesaid appeal is restored back to the AO to arrive at decision on considered of the facts and law. The said ground is allowed for statistical purposes.
Ground No. 5 following the precedent restored back to the file of the Assessing Officer to verify the claim and allow necessary relief, if so warranted on facts.
I.T.A .No.-4345 & 4346/Del/2015 (A.P.PROCESSORS VS ITO)
In the result, the appeals of the assessee are partly allowed for statistical purposes.
The order is pronounced in the open court on 21st of October, 2016.