COMMISSIONER OF INCOME TAX AP-I HYD vs. M/S.BHARAT RICE AND OIL MILLS SHAMSHERGUNJ

O/TAXAP/32/2001 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 32 of 2001 With TAX APPEAL NO. 33 of 2001 With TAX APPEAL NO. 34 of 2001 FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ ASST. C I T....Appellant(s) Versus AMBICA SPECIFIC FAMILY TRUST....Opponent(s) ================================================================ Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 MR SN SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ================================================================ Page 1 of 7

O/TAXAP/32/2001 JUDGMENT CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 25/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. All these appeals are filed by the appellant­ revenue. In all these appeals, the facts as well as the question of law are identical, therefore, they are being disposed of by this common judgment. 2. Tax  Appeal  No.32  of  2001  is  filed  against the order dated 12.06.2000 passed by the Income Tax Appeal Tribunal, Ahmedabad [for short “the Tribunal”] in ITA No.630/Ahd/93, whereby the the appeal filed by the assessee was partly allowed. 3. Tax Appeal No.33 of 2001 & Tax Appeal No.34 of   2001   are   filed   against   the   common   order   dated 30.08.2000   passed   by   the   Tribunal   in   ITA No.4275/Ahd/1990 and ITA No.5500/Ahd/91, whereby the appeals filed by the assessee were partly allowed. 4. The   facts   of   the   case   are   that   the respondent­assessee   had   filed   its   return   for   the Assessment Year 1986­87 on 29.08.1986, showing total income of Rs.4,89,02,101/­, for  the Assessment  Year 1987­88   on   30.06.1987,   showing   total   income   of Rs.3,47,60,150/­ and for the assessment year 1988­89 on 29.6.1988, showing total income of Rs.29,22,920/­ The assessing Officer, after scrutiny, had passed the order under Section 143(3) read with Section 250 of the Income Tax Act and made certain additions. Against Page 2 of 7

O/TAXAP/32/2001 JUDGMENT the order of the Assessing Officer, the assessee filed appeals before the Income Tax Appellate Tribunal. The CIT(A) partly allowed the said  appeals. 4.1. Being   aggrieved   and   dissatisfied   with   the orders   of   the   CIT(A),   the   assessee   filed   appeals before the Income Tax Appellate Tribunal. The Tribunal after hearing both the parties and after considering the evidence on record has partly allowed the appeals of the assessee.  Hence, this appeals are filed at the instance of the revenue. 5. In   all   these   appeals   the   Court   has formulated the following substantial question of law:­ “Whether   the   appellate   Tribunal   has substantially erred in law in holding that the assessee is entitled to deduction under Section 80I of the Income Tax Act. 6. Learned   counsel   for   the   appellant­revenue has submitted that the Tribunal has committed error in deleting the addition and holding that the assessee is entitled to deduction u/s. 80I of the Income Tax Act. He further submitted that the Tribunal as well as the CIT(A) have not properly considered the material on record. Therefore, he urged that the present appeals deserve to be allowed. 7. As against this, learned senior advocate Mr. Soparkar appearing for the assessee has supported the impugned   judgment   and   order   of   the   Tribunal   and Page 3 of 7

O/TAXAP/32/2001 JUDGMENT submitted that the impugned order does not warrant any interference by this Court in view of the concurrent findings of both the authorities namely the CIT(A) as well as the Tribunal. Therefore, he urged that the present appeals deserve to be dismissed. 8. We have heard learned counsel appearing for both the parties and considered the rival submissions made by both the counsel. While deciding the appeals, the   Tribunal   in   paragraph   No.15.3.   and     51.4   has observed as under:­ 15.3.   We   have   considered   the   rival submissions and have also gone through the orders passed by the Assessing Officer and CIT(A) in the case of the assessee for A.Ys. Under consideration as well as the order of the   CIT(A)   for   A.Yr.   1987088   wherein   the issue   with   regard   to   the   allowability   of deduction   u/s   80I   has   been   discussed   in detail. In the order for A.Yr. 1987­88 the Ld.   first   appellant   authority   in   para­23 while   giving   his   finding   has   observed   as under:­ “23.   On careful consideration of the facts and circumstances of the case, I am of the view that there is no case for   the   assessing   Officer   to   denying the appellant the benefit of deduction u/s. 80I. The new unit in the name of Harsidh Detergents had not set up any business   by   the   previous   owner   M/s. Harsidh   Specific   Family   Trust   who   had only purchased some amount of the new plant and machinery intending to start a   new   undertaking   for   manufacture   of detergent   power   in   the   city   of Ahmedabad.   It   was   not   even   set   up during the existence of the partnership Page 4 of 7

O/TAXAP/32/2001 JUDGMENT for   a   brief   period.   Additional quantities   of   plant   and   machineries were   purchased   by   the   appellant   trust after   it   took   over   the   unstated business of Harsidh Detergents and with the help of all these new machineries, it started manufacturing activities in A.Y.   1985   from   which   it   earned   very substantial   profit   out   of   substantial turnover of Rs.36 crores approximately. I agree with the A.R. That the previous owner   M/s.   Harsidh   Specific   Family Trust

had

its

own

industrial undertakings functioning elsewhere i.e. at   Chhatral   and   Mehsana   and   therefore the new unit Harsidh Detergents started at   Ahmedabad   was   in   no   way   connected with   those   existing   units.   After   the appellant   took   over   this   unit,   it recruited   its   own   staff   and   obtained various   registration   certificates   i.e. for   Central   Excise,   Small   scale industries,   P.F.   Etc.   It   started   its own business with the help of its own finance as well as substantial finance borrowed   from   different   concerns.   It has   its   own   marketing   infrastructure and   its   area   of   operation   was   also separate   and   distinct.   Therefore,   it can not be said that this new unit was formed

splitting

or reconstruction     of   a   business   already in   existence.   The   fact   that   the industrial   undertaking   manufactured articles in premises highered from M/s Nirma Chemical Works Pvt. Ltd. does not militate   against   the   claim   for deduction us. 80L in as much as, there is   no   such   provision   in   the   said section   debarring   the   claim.   Nirma Chemical Works Pvt. Ltd. has a number of industrial sheds in its complex and tow   or   other     concerns   in   the   same group   are   also   operating   by   hiring sheds   for   manufacture   of   detergent powder.   Therefore,   there   is   nothing Page 5 of 7

O/TAXAP/32/2001 JUDGMENT wrong   if   the   appellant   hired   the infrastructural   facilities   being   land, building etc. from the said concern by paying   required   lease   rent.   New industrial   undertakings   are   also allowed   to   be   started   in   leased premises owned by the State Governments or   Central   Governments   located   in   the Industrial estates and deduction under the appropriate sections of the Income Tax   Act   are   allowed   to   these undertakings.   Therefore,   there   is   no reason   to   deny   the   claim   if   the appellant   hired   a   shed   and   other infrastructural   facilities   from   a sister   concern   for   starting   a   new industrial   undertaking.   In   view   of these   reason,   the   appellant   trust   is entitled to deduction u/s 80I.” 15.4. After taking into consideration the rival submissions we do not find any good ground   to   differ   with   the   reasoning   and conclusion   of   the   CIT(A)   as   recorded   in para­   23   of   his   order   for   A.Yr.   1987­88 which   we   have   reproduced   above   because deduction   u/s.   80I   is   available   to   the industrial   undertaking   and   not   the   the assessee and prior to having been over by the   assessee,   the   plant   and   machinery valuing Rs.6,92,397/­ was in fact never used by the earlier owner viz. Harsidh Specific Family   Trust.   Accordingly,   we   do   not   find any   merit   in   this   ground   taken   by   the Revenue and we will uphold the order of the CIT(A)   in   this   regard   directing   the Assessing   Officer   to   grant   deduction   u/s. 80I to the Assessee.” 9. In   view   of   the   aforesaid,   we   are   of   the opinion   that   the   Tribunal   has   given   cogent   and convincing reasons in arriving at the conclusion and we are in complete agreement with the view taken by Page 6 of 7

O/TAXAP/32/2001 JUDGMENT the Tribunal.  The Tribunal has rightly observed that the plant and machinery were never used by the earlier owner, therefore, the assessee is entitled to grant deduction under Section 80I of the Income Tax Act. Apart from that,  learned advocate for the appellant­ revenue is not in a position to show how the findings of the Tribunal are bad in law and on facts. 10. In that view of the matter, we do not find any error in the order of the Tribunal. Hence, the present   appeals   are   dismissed.   Accordingly,   the question of law posed in these appeals is answered in favour of the assessee and against the revenue. (K.S.JHAVERI, J.) (K.J.THAKER, J)

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