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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI R. S. SYAL & SMT SUCHITRA KAMBLE
ORDER PER SUCHITRA KAMBLE, JM
These three appeals are filed for Assessment Years 2006-07, 2007-08 & 2008-09 by the Department against the orders dated 15/2/2011, 19/9/2011 & 19/9/2011 passed by CIT(A) II, Dehradun.
The issues involved in the appeal is common. The first ground is related to the claim of deduction u/s 80IC of the Income-tax Act. The second ground is related to interest income for which the Ld. AR submitted that the same is against the Assessee. Hence ground No. 2 is allowed in favour of Revenue.
The assessee is engaged in manufacture and sell of electronics and mechanical equipments and was allowed deduction u/s 80IC in the Assessment Year 2004-05 & 2005-06 but the Assessment Year under challenge herein, the Assessing Officer has recorded that the assessee has sold one amplifier which was purchased from sister concern namely M/s Saraswati Dynamics, Roorkee and, therefore, the year under which the survey took place the assessee was not engaged in manufacturing activities. Thus, the A.O disallowed the claim of Section 80IC of the Act.
Being aggrieved by the same the Assessee went in appeal before the CIT(A). The CIT(A) allowed the appeals of the Assessee. Hence the Revenue is in appeal before us.
The Ld. DR submitted that the A.O has rightly disallowed the claim u/s 80IC of the Act, as assessee was not having any manufacturing activities during relevant assessment years.
The Ld. AR submitted that in earlier Assessments Years 2004- 05 & 2005-06 the tax department accepted the sales and purchases and consequently the production and manufacturing activity was in carried out in the factory with all the required infrastructure of the assessee company. Incidentally, one of these two assessments have been completed by the AO (by name) who has completed the present assessment and has now made several uncalled for and arbitrary unsubstantiated, unsupported allegation despite submitting and producing of various certificates and licenses issued by the Central Government before the Assessing Officer. These have not been found to be false, incorrect, bogus or fake. The AO had also not stated that he had taken a wrong decision in the past.
The Ld. AR further submitted that following documents were submitted to the A.O during Assessment proceedings:
(a) Government of Uttaranchal, Directorate of Industries, has issued a certificate of permanent registration to assessee vide its certificate dated 9/12/04 certifying that Aron Hurley Conceps (P) Ltd. is permanently registered as SSI unit for the manufacture of vibration socker system, digital amplifier etc. The certificate contained other various details such as office address etc.
(b) NQAQSR has issued a certificate of registration vide certification dated 26/8/05 valid upto 25/8/08 holding that the holder has been assessed and found to comply with the requirements of ISO 9001 : 2000 and IS ISO 9001 : 2000. (Copy enclosed). Naval Sciences and Technological Laboratory, Vishakapatnam, vide its certificate dated
9/12/05 has approved your assessee petitioner as an approved vendor. (c) Similarly, Research Center IMARAT VIGNYANA KANCHAPO, Hyderabad has recognized the assessee petitioner as approved vendor vide its letter dated 5/4/05. (copy enclosed). As per this registration certificate, the assessee company has informed that it has been registered as an approved supplier.
(d) A letter from Ministry of Small Central Industry, Government of India, dated 27/1/05 informing the assessee that the officers of the institute of Small Industry Service Institute would be visiting the assessee’s unit at C-18, Industrial Estate, Roorkee on 1/2/05.
(e) The National Small Industries Corporation Ltd. has issued us a registration No: NSIC/Noida/GP/RS/07/AN-102 dated 17/3/05 mentioning the qualitative and quantitative capacity of various specification and various stores of the assessee petitioner at its factory situated at C-18,Industrial Estate, Roorkee. A copy of the letter dated 17.2.05 and a copy of permanent and enlistment certificate was submitted before the Assessing Officer.
(f) The National Small Industry Corporation Ltd. (which is a Govt. India Enterprises) has issued a certificate dated 13/6/07 whereby net sale turnover has been stated for various years. It consist the address of the assessee’s factory and also the name of the directors. It also contains the registration number and several other details such as capacity and quantity etc.
(g) The assessee-company is a manufacturer cum producer and actually engaged in the manufacture & enclosed a pre- dispatch inspection report dated 19/9/05 signed by scientific officer declaring the assessee company as the manufacturer and the buyer was Bhabha Automatic Research Centre (BARC). The place of inspection was the factory premise of the assessee company at Roorkee and the date of inspection was within the relevant accounting period. It has been certified that all the items inspected were found satisfactory. The vibrator was accepted and cleared for dispatch as per the terms of purchase order. The purchase order was dated 27/6/2005. This contains a certificate regarding performance.
(h) Similarly, there is another pre dispatch inspection report dated 23/6/05 and it has been signed by director, K. Jagdishan and also Vipul Aron, B rector. This pre dispatch inspection report signed on behalf of the Government of India. The place of inspection again is the factory premises at Roorkee and date of inspection is within the relevant accounting period. It states that consignment is inspected as per supply order and FAT. It was found to be performing satisfactorily and was cleared for dispatch.
(i) There is another pre dispatch inspection test report. This was signed by Shri Mukesh Kumar, REP.ASL, Hyderabad.
(j) There is another pre dispatch inspection report signed by BVPS RAO scientist ‘E’ NSTL dated 14/3/06. Again even at the cost of repetition, the place of inspection is the factory premises at Roorkee and date of inspection is relevant accounting period. The name of the manufacturer mentioned therein is of Assessee Company. The description of item is the vibration system as declared and stated by the director at the time of the survey during the course of his statement. The address of the company is again the same e C-18, Industrial Estate, Roorkee.
(k) There is a certificate in which mentioned in the remarks column that the consignment has seen inspected and it was performing satisfactorily and was cleared for dispatch to NSTL, Vishakapatnam.
(l) The assessee enclosed a stage inspection of 240 KVA Power Amplifier by SDSC-SHAR. This report is signed by J V Rao, Engineer SDSC, SHAR. This report contains various details relating to the manufactured items. This is signed by the director an also the government functionaries. This also declares the place and test i.e. Roorkee and the period of test is again the relevant accounting period.
The Ld. AR further submitted that in view of the certificates, clarifications, inspections, registration by the Government authorities, it is clear that the assessee company is engaged in manufacturing activities during the relevant assessment years.
We have perused all the records and taken into account the submissions of both the parties. The CIT(A) has rightly pointed out that the A.O has allowed deduction u/s 80IC of the Act in the immediately preceding years. Survey should have been done before allowing deduction u/s 80IC of the Act in the very first year of its claim, but the Revenue has conducted the same in 2008. The survey team failed to collect the evidences during the survey as to how the business was closed for the Assessment Year 2008-09. The operation was closed in November 2008 because of the natural calamities. The production of all the documents were produced by the assessee company before the Assessing Officer related to the business of the assessee to the government organization till September 2006. These documents has categorically revealed that the very foundation of the Assessing Officer’s order was not justified as the Assessing Officer for the Assessment Year 2006-07 has made a clear findings that the assessee has purchased digital powers sub assemblies for which invoice has been raised by M/s Saraswati Dynamics Pvt. Ltd dated 8/3/2006 at page 8 para 8 of the assessment order. Thus the sub assemblies cannot be termed as the amplifier as a whole. In the same para, the Assessing Officer mentioned that assessee had sold amplifier to SHAR Centre, Sriharikota for Rs.1,27,51,250/- for which invoice has been raised dated 06.03.2006. But while computing the total income the Assessing Officer has made disallowance for the receipt for amplifier from the total income amounting to Rs.1,27,51,250/- and as relates to total expenses has disallowed purchase of amplifiers as to Rs.57,20,000/-. There was manufacturing activity going on during the relevant assessment years. The disallowance was not proper and the reason for disallowance of the benefit under Section 80IC does not sustain. Thus, the CIT(A) has rightly held that A.O was not correct while disallowing the benefit under Section 80IC of the Act.
In the result, appeals are dismissed.
The order is pronounced in the open court 26th of July 2016.