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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G.S.PANNU (AM) & SHRI RAM LAL NEGI (JM)
This appeal has been preferred by the assessee against impugned order dated 09/01/2013, passed by the Ld. CIT(Appeals)-14, Mumbai, for the Asst. year 2009-10,whereby the Ld. CIT(A) dismissed the appeal filed by the assessee against assessment order dated 26/12/2011 passed under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
2. Brief facts of the case are that the assessee engaged in the business of manufacturing of fuel additives filed its return of income for the assessment year 2009-10 declaring the total income of Rs. 19,87,347/-. The return was processed and assessment order was passed u/s 143(3) of the Act determining the total income of the assessee at Rs. 3,38,03,390/-after making disallowance of Rs.3,18,07,827/-claimed by the assessee u/s 80IC of the Act. The assessee challenged the assessment order before the Ld. CIT(A), however, the Ld. CIT(A) following the decision of the first appellate authority passed in assessee’s own case for the assessment year 2008-09, affirmed the action of the AO and dismissed the appeal of the assessee. Still aggrieved, the assessee is in appeal before the Tribunal. Initially the assessee was having manufacturing unit at Wada in Maharashtra which was shifted to Baddi in Himachal Pradesh. Accordingly, the assessee claimed deduction u/s 80IB of the Act which was rejected by the revenue authorities.
The assessee has challenged the impugned order passed by the Ld. CIT(A) on the following effective grounds of appeal:-
“1. On the facts and circumstances and in law, the Ld. CIT Appeal erred in confirming the disallowance of deductions u/s 80IC of Rs. 3,18,07,827/- made by assessing officer.
On the facts and circumstances and in law, the Ld. CIT Appeal erred in concluding that shifting of unit from wada, Maharashtra to Baddi, Himachal Pradesh amount to “reconstruction of business”.
At the outset, the Ld. Counsel for the assessee submitted that this case is covered by the order of the Tribunal passed in assessee’s own case for the assessment year 2008-09 and Tribunal has decided the identical issue in favour of the assessee. The Ld. DR did not controvert the said fact.
We have perused the material placed on record in the light of the contention of the assessee. We find that the coordinate Bench has decided the identical issue in favour of the assessee in assessee’s own case referred above. The relevant part of the order reads as under:-
“6. We have heard rival contentions and perused the record. The sub. Sec.1,2, and 4 of sec. 80IC read as under :-
“Special provisions in respect of certain undertakings or enterprises in certain special category States.
80-IC. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3).
(2) This section applies to any undertaking or enterprise,–– (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning–
(i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2007 in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-Eastern States; (b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning— (i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2007, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any of the North-Eastern States. (3) …… (4) This section applies to any undertaking or enterprise which fulfils all the following conditions, namely:— (i) it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
Explanation.— The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that subsection.”
A careful perusal of the above said provisions would show that the deduction under this section shall be available to any undertaking or enterprise which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning.....
There is no dispute with regard to the fact that the article or thing manufactured by the assessee does not fall under Thirteenth Schedule. There is also no dispute that the assessee is manufacturing or producing an article or thing. Hence, the assessee should be eligible for deduction u/s 80IC of the Act, if it undertakes substantial expansion. The details of plant and machinery available with the assessee as on 1.4.2007 and the value of new plant & machinery purchased by the assessee during the financial year 2007-08 relevant to the assessment year 2008-09 would show that the assessee has carried out “substantial expansion” of its undertaking, since the value of new machinery exceeds by more than 50% of the book value of Plant & Machinery as on 1.4.2007.
We have noticed that the tax authorities have rejected the claim of the assessee on the ground that the assessee has established the unit at Baddi by reconstruction of the existing unit. The assessee has furnished the details of employees, electricity bills and water bills issued by The Himachal Pradesh State Industrial Development Corporation Ltd. The assessee has also furnished the letter issued by the Deputy Director of Industries, Baddi, Dist. Solan (H.P) allocating the undertaking of the assessee as Micro/small/Medium scale Enterprise for manufacturing of Additives. By placing reliance on these documents, the Ld A.R submitted that the assessee has set up a new undertaking at a new place and in that process it has used certain old plant and machinery also. He submitted that the provisions of sec. 80IC also provide for using of old Plant and Machinery up to a certain limit. Accordingly he submitted that the new undertaking set up at Baddi cannot be considered as reconstruction of the unit. He submitted that the assessee has claimed deduction u/s 80IC of the Act in view of substantial expansion of the unit and not on account of setting up of the unit.
We find merit in the said submissions of the Ld A.R. We have earlier noticed that the assessee qualifies under the category of “Substantial Expansion” of the unit and hence we are of the view that the provisions of sec. 80IC(4) shall not come in the way of the assessee in claiming deduction u/s 80IC of the Act.
In view of the above, we set aside the order of Ld CIT(A) and direct the assessing officer to allow the deduction claimed by the assessee u/s 80IC of the Act.”
The facts and the issues involved in the present case are identical to the facts and issues involved in the assessee’s own case for the assessment year 2008-09 and the coordinate Bench has decided the identical issue in favour of the assessee. Hence, respectfully following the decision of the coordinate Bench in the above referred case, we decide the sole issue raised in the appeal in favour of the assessee and allow the appeal filed by the assessee.