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Income Tax Appellate Tribunal, ‘ B’ BENCH : CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI GEORGE MATHAN
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:
, C.O.No.104/Mds/2016, ITA No.2288/Mds/2016, C.O.No.136/Mds/2016, C.O.No.52/Mds/2017 and ITA No.335/Mds/2017, C.O.No.53/Mds/2017 for assessment years 2010-11, 2003-04, 2004-05 and 2005-2006 respectively, are appeals and cross objections of the Revenue and assessee respectively for assessment years 2010-11, 2003-04, 2004-05 and 2005-2006. Grievance of the Department are similar for all these years, except for assessment year 2010-2011, where there is one other issue. Common grievance of the Revenue is on the directions of the ld. Commissioner of Income Tax (Appeals) to allow the assessee, deduction claimed by it under Sec. 80IB of the Income Tax Act, 1961 (herein after referred to as ‘the Act’) in respect of one of its units at No.55D, Sidco Industrial Estate, Ambattur.
Facts apropos are that assessee engaged in the manufacture of different types of plastic items, had three units. These were at 271, Sidco Industrial Estate, Ambattur, 55-D, Sidco Industrial Estate, Ambattur and one at Sriperambudur. Assessee had for all these years claimed deduction u/s. 80IB of the Act on its undertaking at 55-D, , 2288/16, 336& 335/17 :- 3 -: & CO 104, 136/16, 52 &53/17.
Sidco Industrial Estate, Ambattur. As per assessee, investment in plant and machinery in the said unit was less than �3,00,00,000/- and the said unit was independently eligible for deduction under section 80IB of the Act as a small scale industrial undertaking. Contention of the assessee was that once investment in a particular undertaking was below �3,00,00,000/-, eligibility for deduction u/s. 80IB of the Act, continued for the entire tenure for which such deduction was available, since all other conditions were satisfied. However, the ld. Assessing Officer did not accept this contention. According to him, definition of Small Scale Industrial Undertaking given in clause (g) of Sec. 80IB(14) of the Act, clearly mandated that Sec. 11B of Industries (Development and Regulation) Act, 1951 was to be applied for determining whether an industrial undertaking was small scale or not.
According to the ld. Assessing Officer, classification made by the State Government was not relevant for this purpose. Ld. Assessing Officer also found that the aggregate of investments made by the assessee in plant and machinery, when its units at 271, Sidco Industrial Estate, Ambattur and 55-D, Sidco Industrial Estate, Ambattur, were considered together, exceeded �3,00,00,000/-. Further as per the ld. Assessing Officer unit at 55-D, Sidco Industrial Estate, Ambattur was only a branch of the unit in 271, Sidco Industrial Estate, Ambattur and not a separate industrial undertaking. According , 2288/16, 336& 335/17 :- 4 -: & CO 104, 136/16, 52 &53/17. to him, permanent registration certificate issued by the State Government on 29.12.2000 clearly indicated that unit at 55-D, Sidco Industrial Estate, Ambattur was only an expansion of original unit at 271, Sidco Industrial Estate, Ambattur. Ld. Assessing Officer held that assessee had lost its character of Small Scale Industrial undertaking, since its investment in plant and machinery exceeded �3,00,00,000/-. According to him, limits on investment in plant and machinery had to be fulfilled not only in the initial year of the claim u/s. 80IB of the Act but also in subsequent years. Thus, he denied the claim of the assessee u/s. 80IB of the Act for all these years.
Aggrieved, assessee moved in appeals before the ld. Commissioner of Income Tax (Appeals). Contention of the assessee was that deduction u/s. 80IB of the Act was available for each undertaking and the two units investments of which were aggregated by the ld. Assessing Officer were manufacturing different things using different processes. As per the assessee its unit at 55-D, Sidco Industrial Estate, Ambattur was not a branch of its unit at 271, Sidco Industrial Estate, Ambattur. Assessee also relied on a decision of Co- ordinate Bench in its own case for assessment years 2008-09 and 2009-2010, wherein it was held by the Tribunal that its unit at 55-D, , 2288/16, 336& 335/17 :- 5 -: & CO 104, 136/16, 52 &53/17.
Sidco Industrial Estate, Ambattur was an independent one and therefore had to be considered as separate industrial undertaking.
Assessee also reiterated its contention that eligibility for claiming deduction u/s. 80IB of the Act was to be satisfied only in initial year of preferring such claim and not in the subsequent years. Ld. Commissioner of Income Tax (Appeals) following the order of the Co- ordinate Bench in assessee’s own case for assessment years 2008-09 and 2009-10 held in favour of the assessee. According to him, investment of the assessee in 55-D, Sidco Industrial Estate, Ambattur was only �211.09 lakhs and this was within the upper cap of �3,00,00,000/-. He directed the ld. Assessing Officer to allow the claim of the assessee.
Now before us, ld. Departmental Representative strongly 4. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that by virtue of the definition of Industrial undertaking given in Sec.3(d) of the Industries (Development and Regulation) Act, 1951, an industrial undertaking meant any undertaking pertaining to a scheduled industry carried on in one or more factories, by any person.
Further, according to him by virtue of (j) of Sec.3 of the Industries (Development and Regulation) Act, 1951, the first requirement was that the claim pertained to an industrial undertaking. As per the ld. , 2288/16, 336& 335/17 :- 6 -: & CO 104, 136/16, 52 &53/17.
Departmental Representative , the two units of the assessee though they were manufacturing different items, were both part of plastic manufacturing industry and could not be considered as different undertakings for the purpose of Sec. 80IB(3) of the Act. According to him, aggregate investment in two units exceeded �3,00,00,000/- in all these years. This as per the ld. Departmental Representative disentitled the assessee from claiming deduction u/s. 80IB of the Act.
Thus, as per the ld. Departmental Representative, the Commissioner of Income Tax (Appeals) erred in allowing the claim.
Per contra, ld. Authorised Representative submitted that the 5.
issue stood squarely covered by the decision of Co-ordinate Bench in assessee’s own case for assessment years 2008-09 and 2009-2010 (ITA Nos. 399/2015 and 1015/2014, dated 17.07.2015). Further, according to him, investment of the assessee in plant and machinery in respect of units at 55-D, Sidco Industrial Estate, Ambattur was below �3,00,00,000/-. In any case, according to him, once the claim was allowed in an initial year, it was not necessary for the assessee to meet the threshold norms in every one of the succeeding years where it was eligible for the deduction. Reliance was placed on the judgment of Hon’ble Punjab and Haryana High Court in the case of CIT vs. M/s. Sunder Forging (ITA Nos.242 and 243 of 2012 and 92 of 2014 dated 30.07.2015) , 2288/16, 336& 335/17 :- 7 -: & CO 104, 136/16, 52 &53/17.
We have considered the rival contentions and perused the orders of the authorities below. It is not disputed that the claim preferred by the assessee u/s. 80IB of the Act was on its unit at 55-D, Sidco Industrial Estate, Ambattur. The question whether the said unit could be considered as a branch as it’s unit at 271, Sidco Industrial Estate, Ambattur, and whether the former could be construed as an independent industrial undertaking, have been dealt by the Co- ordinate Bench of the Tribunal in assessee’s own case for assessment years 2008-09 and 2009-2010 in and 1015/2014, dated 17.07.2015. Paras 3 to 8 of the said decision is reproduced hereunder:-
‘’3. According to the ld. Representative, the assessee is engaged in the business of manufacturing and sale of plastic cans and containers. The assessee-company was registered as a small scale industry by the Directorate of Industries, Tamilnadu. The copy of the registration certificate is available at page 2 of the paper book. Referring to the letter dated 9.9.2004 by General Manager, District Industries Centre, Thiruvallur, the ld. Representative pointed out that so long as the value of the plant and machinery does not exceed ` 3 crores, the assessee continues to be a small scale industry. The cost of plant and machinery as on 31.3.2002 is at ` 1,30,88,806/-. After depreciation, the net block of plant and machinery as on 31.3.2002 is at ` 64,21,616/-. The cost of plant and machinery of Unit-II as on 31.3.2002 is ` 92,97,315/-. Therefore, according to the ld. Representative, as on today the cost of asset does not exceed ` 3 crores, so the assessee continues to be a small scale industry eligible for deduction u/s 80IB of the Act. The Assessing Officer simply referring to provisions of section 80IB(3) of the Act found that the , 2288/16, 336& 335/17 :- 8 -: & CO 104, 136/16, 52 &53/17. cost of plant and machinery is not less than ` 1 crores therefore, the assessee is not eligible for deduction u/s 80IB of the Act. The certificate issued by the Industries Department of Government of Tamilnadu was not considered by the lower authorities. Referring to the provisions of sections 25 & 26 of the Industries (Development and Regulation) Act, 1951, the ld. Representative submitted that the Central Government delegated its power to the State Government and its officers to specify the industries which are of small scale in nature. According to the ld. Representative, to provide single window service to small scale industries, the entire procedural aspect was simplified by delegating the power to District Industries Centre. The ld. Representative has also placed his reliance on the judgment of the Hon'ble Karnataka High Court in Ace Multi Axes Systems Ltd vs DCIT in I.T.A.No. 477 of 2013 dated 28.7.2014, a copy of which is available at page 8 of the paper book. The ld. Representative also placed his reliance on the decision of Chandigarh Bench of this Tribunal in MicroInstruments Co. vs ITO [2008] 12 DTR 501. The ld. Representative has also placed his reliance on the decision of the Hyderabad Bench of this Tribunal in Sawaria Pipes (P) Ltd vs ACIT [2013] 33 taxmann.com 380.
On the contrary, Shri P. Radhakrishnan, ld. Departmental Representative submitted that the assessee claimed deduction u/s 80IB claiming it as a small scale industry. Referring to the assessment order, the ld. DR submitted that the claim of deduction u/s 80IB was made in respect of second unit of the assessee at 55D, SIDCO Industrial Estate, Ambattur. According to the ld. DR, the second unit is only an expansion of the earlier unit. According to the ld. DR, two units are not independent and separate, therefore, the claim of the assessee for the second unit cannot be allowed. According to the ld. DR, both units are owned and controlled by the assessee therefore, the assessee cannot be construed as having separate and independent unit for the purpose of claiming deduction u/s 80IB. The ld. DR placed his reliance on the decision of this Tribunal in M/s Caress Beauty Care Products Pvt. Ltd vs CIT in I.T.A.No. 79/Mds/2011 dated 15.1.2013, a copy of which is filed by the ld. DR.
We have considered the rival submissions on either side and also perused the material available on record. The , 2288/16, 336& 335/17 :- 9 -: & CO 104, 136/16, 52 &53/17.
Assessing Office rdisallowed the claim of the assessee on the ground that the unit at 55-D SIDCO Industrial Estate, Ambattur, is only a branch unit. The Assessing Officer has also observed that even assuming it was considered to be an independent and separate unit still the assessee is not eligible for deduction u/s 80IB. The Assessing Officer also found that the investment in plant and machinery was at gross value of 212.71 lakhs as on 31.3.2009. Accordingly, the Assessing Officer found that the assessee is not eligible for deduction u/s 80IB since the investment exceeded ` 1 crores. Apparently, the Assessing Officer placed his reliance on the guidelines issued under Industries (Development and Regulation) Act, 1951 for small scale industries. Both the authorities below overlooked the power delegated to State Industries Department and the criteria determined by State Industries Department for small scale industries.
6. We have also gone through the provisions of section 80IB of the Act. Sec. 80IB(14)(g) of the Act defines small scale industrial undertaking as follows:
“small scale industrial undertaking” means an industrial undertaking which is, as on the last day of the previous year regarded as a small scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951).”
The Hyderabad Bench of this Tribunal in the case of Sawaria Pipes (P) Ltd. (supra), after considering the notification issued by the Government of India under the Industries (Development and Regulation) Act, 1951, found that if the investment on fixed plant and machinery of a small scale industrial undertaking as on the last day of the previous year does not exceed ` 3 crores, it is entitled for deduction u/s 80IB of the Act. In the case before the Hyderabad Bench of this Tribunal the investment in the plant and machinery was more than ` 4 crores therefore, the Tribunal found that the assessee is not entitled for deduction u/s 80IB. In the case before us, the investment in the plant and machinery does not exceed ` 3 crores in both units of the assessee, therefore, the decision of the Hyderabad Bench of the Tribunal is in favour of the assessee. In other words, so long as the investment in plant , 2288/16, 336& 335/17 :- 10 -: & CO 104, 136/16, 52 &53/17.
and machinery does not exceed ` 3 crores, the assessee is eligible for deduction u/s 80IB of the Act. In this case, admittedly, the investment in plant and machinery is only ` 212.71 lakhs as on 31.3.2009, therefore, this Tribunal is of the considered opinion that the assessee continues to be a small scale industry as on the last day of the previous year hence, it is eligible for deduction u/s 80IB. This Tribunal is of the considered opinion that when the Central Government delegates its power to State Government under (Industries and Delegation) Act 1951, the guidelines issued by the State Industries Department has to be followed for determining whether an undertaking is small scale industry or not.
The next contention of the ld. DR is that the assessee is claiming deduction only in respect of the branch unit at 55D, SIDCO Industrial Estate, Ambattur. We have carefully gone through the permanent registration certificate copy of which available at page 2 of the paper book. The registration certificate issued by the Directorate of Industries shows that the main unit manufacturing blow moulded plastic containers only. The branch unit manufactures injection moulded plastic buckets only. The branch unit, in addition to the above, manufacturing injection moulded plastic components such as pails and buckets made out of HD, Ld. and PP material and blow moulded plastic barrels, drums and containers. In fact, the methods of production in main unit at 271, SIDCO Industrial Estate and the method in the branch unit at 55D, SIDCO Industrial unit are different even though both units producing various plastic products. The Assessing Officer further observed that production was commenced on 20.10.1997 and Expansion-I was on 2.12.2007. In fact, the Expansion-I was on 2.12.2000 as mentioned in the Certificate of Registration and not on 2.12.2007 as observed by the Assessing Officer. Merely because the second unit was shown as branch unit or expanded unit, it cannot be said that the branch unit is not an independent unit. In fact, the injection moulded plastic components are manufactured at 55-D, SIDCO Industrial unit. This method is not used in the main unit. This Tribunal is of the considered opinion that both units are functioning differently even though the end product in both units are plastic components. Therefore, both the authorities below are not justified in treating both the units as same unit.
, 2288/16, 336& 335/17 :- 11 -: & CO 104, 136/16, 52 &53/17.
Merely because one unit is treated as branch unit for administrative convenience, it does not mean that both the units are one and the same. In view of the above, both the authorities below are not justified in treating both the units as one and the same. This Tribunal is of the considered opinion that both main and branch unit are separate and independent one, therefore, the authorities below are not justified in rejecting the claim of the assessee u/s 80IB of the Act. Accordingly, the orders of the authorities below are set aside and the Assessing Officer is directed to allow the claim of the assessee u/s 80IB of the Act’’.
Co-ordinate Bench has held that the guidelines issued by the State Industries Department was binding since Central Government had delegated its power to State Government to issue such guideline under (Industries and Delegation) Act 1951. Co-ordinate Bench also pointed out that the two units were in different manufacturing line and therefore 55-D, Sidco Industrial Estate, Ambattur had to be considered as a separate industrial undertaking. Audited financial accounts of the assessee for the impugned assessment years placed before us show that investment in plant and machinery in 55-D, Sidco Industrial Estate, Ambattur remained within the limit of �3,00,00,000/-. That apart, the question whether an assessee has to satisfy the threshold conditions for claiming deduction u/s. 80IB of the Act in every year of such claim after the initial year, had come up before the Hon’ble Punjab and Haryana High Court in the case M/s. , 2288/16, 336& 335/17 :- 12 -: & CO 104, 136/16, 52 &53/17.
Sunder Forging (supra). Para 6 of the said judgment is reproduced hereunder:-
‘’6. In respect of the assessment year 2006-07, the assessee did not claim a deduction under Section 80-IB(3)(ii). By a notification dated 10.12.1997 issued in exercise of powers conferred by Section 11B(1) and Section 29B(1) of the IDR Act, the Central Government specified the factors on the basis of which an industrial undertaking would be regarded as a small scale industrial undertaking for the purpose of IDR Act. One of the conditions for considering an industrial undertaking to be regarded as a small scale industrial undertaking was that its investment in fixed assets in plant and machinery did not exceed rupees three crores. Admittedly, the assessee’s investment did not exceed rupees three crores. It, therefore, fell within the definition of the words "small-scale industrial undertaking" in Section 80-IB(14)(g). The assessee also fulfilled the other requirements. The assessee was, therefore, entitled to the deduction as provided in Section 80-IB. The amount of deduction in respect of this assessee was stipulated in sub-section(3)(ii) of Section 80-IB and “for a period of ten consecutive assessment years”. The respondent-assessee was, therefore, allowed a deduction under Section 80-IB for the assessment years 2002-03 to 2005-06’’.
Their lordships had held that it was not necessary for an assessee to satisfy the conditions in each year of the claim, if it had satisfied the conditions in initial year, in respect of a small scale industrial undertaking unit. In the circumstances, we do not find any lacuna in the order of the ld. Commissioner of Income Tax (Appeals) with regard to his direction to allow the claim of the assessee u/s. 80IB of the Act. , 2288/16, 336& 335/17 :- 13 -: & CO 104, 136/16, 52 &53/17.
7. Only other issue that has to be considered is the grievance raised by the Revenue in its appeal for assessment year 2010-2011.
This is on the directions of the ld. Commissioner of Income Tax (Appeals) that there could be no adjustment of carried forward notional depreciation of earlier years, while computing deduction available to the assessee on its windmills u/s. 80IA of the Act.
The issue whether notional depreciation which was set off 8. against other income of the assessee in the earlier years had to be again set off while computing the deduction available u/s. 80IA of the Act was an issue before the Hon’ble Jurisdictional High Court in the case of M/s. Sri Valayuthasamy Spinning Mills Ltd vs. ACIT 340 ITR
Their lordship had held that there could not be any forced carried forward of notional depreciation, while working out deduction available u/s. 80IA of the Act on windmills. Special Leave Petition filed by the Revenue, against this judgment has been dismissed by the Hon’ble Supreme Court. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals) on this issue as well.
Since appeals of the Revenue have been dismissed on 9. merits, cross appeals of the assessee in which it assail the re-opening done for the assessment years 2003-04, 2004-05 and 2005-06 have , 2288/16, 336& 335/17 :- 14 -: & CO 104, 136/16, 52 &53/17. become academic. Cross appeal for assessment year 2010-2011 only supports the order of the ld. Commissioner of Income Tax (Appeals) and is infructuous.
To summarize the result, appeals of the Revenue as well as 10. Cross appeals of the assessee are dismissed. Order pronounced on Tuesday, the 26th day of September, 2017, at Chennai.