SOEX INDIA P.LTD,MUMBAI vs. ASST CIT CEN CIR 44, MUMBAI

Date of hearing : 09-01-2017 Date of order : 15 -02-2017 O R D E R Per Ashwani Taneja, AM:- These appeals pertain to same assessee for different assessment years involving identical issues; therefore these were heard together and are being disposed of by this common order.

The learned CIT(A) erred in confirming order of learned “1. Assessing Officer denying claim of assessee u/s. 10B of 2 ITA 38764-3877/Mum/2013 ITA 402/Mum/2015 Rs.65,06,583/- without appreciating that assessee has complied with all conditions prescribed u/s. 10B and there is no violation of condition prescribed U/s. 10B(2)(iii) as new undertaking of the assessee is not formed by the transfer of plant and machinery previously used by the assessee and hence assessee claim u/s.10B may be allowed. 1.1 The learned CIT(A) erred in not appreciating the decision of the Delhi High Court in CIT vs. Orissa Cement Ltd. (2002) 254 ITR 24 which while dealing with deduction u/s. 80J held that the condition that the undertaking is not formed by transfer to new business of machinery and plant previously used means machinery and plant must have been previously used by the assessee and hence, the said decision was directly in favour of assessee and there was no other contrary decision and hence assessee claim u/s.10B may be allowed.

2. Without prejudice to above, the learned CIT(A) erred in confirming order of learned Assessing Officer denying Assessee claim u/s. 10B of Rs.65,06,583/- without appreciating that value of old/second hand plant and machinery has dipped below 20% of total plant and machinery during the current Assessment year and all conditions of S. 10B are satisfied in the current Asst. Year & assessee has made claim u/s. 10B for the first time in the current Assessment year and hence assessee claim u/s. 10B may be granted from current Assessment year which would be the relevant assessment year in view of Explanation 2(v) of S. 10B 9(A). 2.1 The learned CIT(A) erred in not appreciating the decision of Gujarat High Court in CIT vs. Satellite Engineering Ltd. 113 ITR 208 (Guj.) which while dealing with deduction u/s. 80J held that Undertaking not fulfilling condition for relief in first year after commencement of productions fulfills the condition in subsequent years is entitled to relief in subsequent years and the said decision was directly in favour of assessee and there was no other contrary decision and hence assessee claim u/s. 10B may be granted in current year wherein assessee has fulfilled all conditions prescribed u/s.10B. Additional Ground 3. The learned CIT(A) & A.O. failed to appreciate that claim u/s.10B 3 ITA 38764-3877/Mum/2013 ITA 402/Mum/2015 is to be allowed before setting off unabsorbed losses of earlier years.”

3. The solitary issue raised in all these grounds is about allowability of deduction u/s 80IB. The AO denied the benefit of deduction u/s 10B inter-alia on the ground that assessee’s eligible unit was formed by transfer of plant & machinery which was previously used and it was not new plant & machinery. The CIT(A) also upheld the order of the AO.

1. CIT vs Orissa Cement Ltd (2002) 254 ITR 24 (Del)

4 ITA 38764-3877/Mum/2013 ITA 402/Mum/2015 2. CIT vs Satellite Engineering Ltd (1978) 113 ITR 208 (Guj) 3. CIT vs Gopal Plastics (P) Ltd (1995) 215 ITR 136 (Mad) 4. CIT vs Micro Instruments Co (2016) 388 ITR 46 (P&H) 5. Advani Oerlikon Pvt Ltd vs CIT 18 Taxmann 106 (Bom), 5. Per contra, the Ld. DR vehemently opposed the arguments of the assessee and submitted that no finding has been recorded by any of the authorities below that percentage of old plant & machinery in the year 2006-07 came down to less than 20%. The assessee’s claim in this regard remained unverified and unsubstantiated. It was further submitted that in law also, the assessee is NOT eligible to claim the deduction in subsequent years if the conditions are not fulfilled in the first year itself in view of the following judgements:-

1.

6. In the rejoinder, the Ld. Counsel of the assessee also fairly stated this issue may be sent back to the file of the AO for deciding the same after verifying the facts and in accordance with law.

7. We have gone through the orders passed by lower authorities and find that the requisite finding of fact to decide the issue before us is conspicuously 5 ITA 38764-3877/Mum/2013 ITA 402/Mum/2015 missing; therefore we send the matter to the file of the AO. The assessee shall submit all the requisite details and evidences to show compliance of all the conditions of section 10B including the condition of old plant and machinery being less than 20%. The AO shall take into account the facts of the case and also judgements placed by both the sides before us to decide whether the assessee would be eligible to claim the deduction in A.Y. 2006-07 (third year of formation of unit) particularly when all the conditions were not fulfilled in AY 2003-04, being first year of the formation. The assessee shall be free to raise all the legal and factual issues in this regard. With these directions, all the grounds are sent back to the file of the AO and may be treated as allowed, for statistical purposes.

6 ITA 38764-3877/Mum/2013 ITA 402/Mum/2015 11. In the result, all the appeals are treated as allowed, for statistical purpose. Order was pronounced in the open court at the conclusion of the hearing.