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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आदेश / O R D E R
Per B R Baskaran, AM:
The assessee has filed this appeal challenging the order dated 28.10.2011 passed by Ld CIT(A)-39, Mumbai for assessment year 2008-09 confirming the order of the AO rejecting the claim for deduction u/s 80IC made by the assessee.
The facts relating to the issue are stated in brief. The assessee is engaged in the business of manufacture of fuel additives. Initially it was having manufacturing unit at a place called Wada. Subsequently, the assessee shifted its manufacturing activities to a place called Baddi located
State of Himachal Pradesh during the year 2004. The assessee carried substantial expansion during the financial year relevant to the assessment year under consideration, i.e., AY 2008-09. Accordingly it claimed deduction u/s 80IC of the Act in that year. The AO rejected the claim on the reasoning that the undertaking located in Baddi is established by reconstruction of existing business, which is in violation of provisions of sec. 80IC(4)(i) of the Act.
The Ld CIT(A) noticed that the assessee had claimed deduction u/s 80IB of the Act for assessment years 2004-05 to 2007-08 and the said claim was rejected on the reasoning that the undertaking was set up by transfer of old machineries. The Ld CIT(A) further noticed that the assessee has accepted the orders of the AO in the above said years. The Ld CIT(A) accordingly held that the shifting of entire business activities from Wada to Baddi would amount to reconstruction of business and accordingly upheld the order of the AO. Aggrieved, the assessee has filed this appeal before us.
The Ld A.R submitted that the deduction u/s 80IC of the Act is allowed in the case of “substantial expansion” of the existing unit also. He submitted that the above said expression has been defined as under in sec. 80IC(8)(ix) of the Act as under:- “Substantial expansion” means increase in the investment in the plant and machinery by at least fifty percent of the book value of plant and machinery (before depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken.”
The Ld A.R submitted that the book value of Plant and Machinery that were available with the assessee as on 1.4.2007 was Rs.30.50 lakhs and the assessee has invested a sum of Rs.103.17 lakhs in purchasing of new
2007-08 relevant to the assessment year 2008-09. Accordingly, the Ld A.R submitted that the assessee has complied with the definition of “Substantial Expansion” given in sec. 80IC of the Act and hence it is eligible for deduction under that section.
On the contrary, the Ld D.R placed strong reliance on the order passed by Ld CIT(A).
We have heard rival contentions and perused the record. The sub. Sec. 1, 2 and 4 of sec. 80IC reads 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 notified97 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 notified96 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 notified97 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 sub- section.” 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.
In the result, the appeal filed by the assessee is allowed. Pronounced accordingly on 3rd Feb, 2016. घोषणध खुरे न्मधमधरम भें ददनधंकः 3rd Feb, 2016 को की गई । Sd sd (AMARJIT SINGH) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER भुंफई Mumbai: 3rd Feb, 2015. व.नन.स./ SRL , Sr. PS