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IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.2277/AHD/2016 (AY 2011-12) (Hearing in Virtual Court) The Assistant Commissioner Jayshree Aromatics Pvt. Ltd., of Income Tax, Plot No.4703, 4704, 4705/1-4, Vs Circle-2, Bharuch. GIDC Estate, Ankleshwar, Dist. Bharch – 393002. PAN: AABCJ 8258 R Appellant/ Revenue Respondent/ Assessee
Assessee by Shri Milin Mehta – CA Revenue by Shri H.P.Meena – CIT-DR 27/10/2021 Date of hearing Date of pronouncement 21/01/2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld.Commissioner of Income Tax(Appeals)-3, Vadodara, dated 20.06.2016 for Assessment Year (AY) 2011-12 The Revenue raised the following grounds of appeal: “1. On the facts and! in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance of Rs.3,49,53,063/- made u/s 10B of the Act by overruling the factual findings mentioned by the A.O. in the assessment order passed u/s 143(3) of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in not appreciating the fact that the assessee filed revised return of income for the year under consideration only after completion of assessment u/s 143(3) of the Act for A.Y. 2010-11 in which their claim u/s 10B of the Act had been disallowed, with different contents such as address of the unit and date of commencement of production, in revised Form 56G aiming to claim afresh deduction u/s 10B of the Act which is nothing but mens rea.
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in not considering the Circular 1 of 2013 dated 17.01.2013 in its true spirit, which mandates allowability of deduction for existing unit and new unit together, and not for a new unit only owing to the fact that the time for claiming deduction on existing unit has already been elapsed. Further, the Circular itself mandates that expansion of existing unit or creation of new unit is matter of fact requiring examination and verification, which the Ld. CIT(A) failed. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in not appreciating the fact that the assessee, in its submission dated 26.02.2014 had claimed to have invested in new assets worth Rs.28,50,33,512/-, whereas in the computation of income, the assessee had declared to have invested in new fixed assets worth Rs.4,59,69,410/- (Rs.36,78,267/- more than 180 days plus Rs.4,22,91,143/- less than 180 days)., rendering the findings of Ld. CIT(A) perverse. 5. The Ld. C1T(A) erred in not appreciating the fact that the A.O. had verified the sine qua non namely, established absence of separate and independent existence of business, employment or the independent infrastructure and separate plant and machinery as well as identifiable output and determination of profit, the same has not been considered by the Ld. CIT(A). 6. The ld.C1T(A) erred in holding that the A.O. had not controverted the permission for "enhanced" capacity by Kandla SEZ (page 39 of the order) without appreciating that such averment has been dealt with by the A.O. (page 8 of order) treating addition to the existing premises as extension of existing premises. Further, the Kandla SEZ vide its letter dated 28.01.2008, has extended conversion of existing DTA unit into 100% EOU Scheme with annual production capacity of 2734.90 MT which was "enhanced" to 6634.90 MT vide letter dated 12.10.2009, meaning thereby there is an extension of existing premises by splitting or reconstruction of existing business, rendering the assessee ineligible for deduction u/s 10B of the Act. 7. The appellant craves to add to, amend or alter the above grounds as may be deemed necessary.” 2. Brief facts of the case as extracted from the order of the lower authorities are that assessee is a company engaged in the business of manufacturing of 2
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch aromatics and fine chemicals. The assessee filed its return of income for the A.Y. 2011-12 on 15.07.2011 declaring total income of Rs.1,02,63,980/-. In the computation of income, the assessee claimed deduction of Rs.3,39,47,518/- under section 10B of the Act. The return of income was revised by assessee by filing the revised return on 29.03.2013, revising the income to Rs.92,58,440/- and claimed enhanced deduction under section 10B of the Act of Rs.3.49 crore (approx). The case was selected for scrutiny of the assessment was completed under section 143(3) of the Act on 24.03.2014. The Assessing Officer(AO) while passing the assessment order disallowed the deduction under section 10B of the Act of Rs.3.49 crore by taking view that while filing revised return, the assessee filed second report of Chartered Accountant (CA) in Form-56G wherein the facts reported, but total different from the fact reported in 56G, which were filed with original return of income. As per the first report, under Form-56G, the assessee claimed commenced production on 10.09.1999 i.e. A.Y.2000-01 and as per the las year the claim of deduction in case of assessee was 2009-10 which was expired. The AO further took his view that assessee is eligible for deduction for ten consecutive assessment years relevant to the previous year in which undertaking begins to manufacturing of produce, thus, ten years expired in A.Y. 2009-10. The AO compared original Form-56G and Form-56G filed along with revised return held that as per first From-56G, the
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch location of production undertaking was at Plot No.4705/1-4, 4703, 4704, GIDC, Ankleshwar and this was registered as Export Oriented Unit [EOU] in Kandla Special Economic Zone [Kandla SEZ]. However, in the second Form- 56G filed with revised return of income, the location of plant was shown at Plot No.4703 and 4704, GIDC, Ankleshwar and the undertaking was registered as EOU in Kandla SEZ. On the basis of report/contents of two Form-56G, the AO took his view that in original Form-56G it was stated that date commencement of manufacturing or production is 10.09.1999 and permission to manufacture as 100% is obtained w.e.f 27.02.2007. As per the second report, the date of commencement of manufacturing activity is from 10.01.2010 and that it was the first year of claim. The AO concluded that assessee has changed material facts to claim the deduction. The AO has another reason to disallow deduction under section 10B of the Act by taking view that on examination of production and Excise Duty register it was found that there was no separate register maintained for newly established unit. There are no separate employees who are working in newly established unit. The AO also held that Bank Certificate of export realisation filed by assessee to Development Commissioner were containing the details of export and foreign exchange realisation on common premises and there is no separate evidence of export foreign exchange realisation in newly added premises no.
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch 4703 & 4704 as claimed by assessee. On the basis of aforesaid discrepancies, the AO held that the assessee failed to make the compliance of provision of section 10B(5) of the Act and disallowed the deduction under section 10B of Rs. 3.49 Crore claimed in revised return of income. 3. Aggrieved by the action of AO in disallowing deduction under section 10B of the Act, the assessee filed appeal before the ld.CIT(A). Before the ld. CIT(A), the assessee filed detailed written submissions. Submissions of assessee are recorded in para 3.9 at page no.7 to 23 of his order. In submissions, the assessee in sum and substance submitted that assessee established a new unit on 30.01.2008. The production permission for new unit was obtained on 30.01.2008. The production of new unit actually commenced on 18.01.2010 relevant to A.Y. 2010-11. The new unit is eligible to claim deduction under section 10B of the Act. The assessee filed revised return of income claiming deduction for new unit, however, the AO disallowed the claim on the ground that it was only the case of existence of existing premises. The AO disallowed deduction without appreciating the fact in proper perspective. The assessee claimed that they have created a new production facilities at new plot no.4703 and 4704 at Ankleshwar for which the letter of permission was issued by Development Commissioner, Kandla SEZ for inclusion of new unit. The new unit is setup at plot no.4703 and 4704, whereas the old unit of assessee existed
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch on plot no.4705. The assessee obtained approval from the Competent Authority for setting up of new unit. The assessee made substantial investment in land, building and machinery. The assessee installed new plant and machinery at new unit to the extent of Rs.28.50 crore. The assessee recorded new manpower for operation of new unit. The assessee installed DG Set for catering the need of increased supply of power, thus, the production on investment of assessee increased substantially. The assessee shown that annual investment of production was increased from 2734.90 MT to 6634.90MT. The assessee made investment in new unit of Rs. 28.50 Crore. The Development Commissioner SEZ Kandla granted permission for increased capacity. The new unit is capable of working independently and not dependent on the old unit in any way. The new unit is separately identifiable as an independent unit in itself. The assessee also stated that fact and evidence filed by assessee were not controverted by AO. Further, there is no allegation that facts stated by assessee are incorrect. The assessee also relied on the CBDT Circular No.1/2013 dated 17.01.2013. CBDT in its Circular itself explained the fact that setting up of a new unit at the same location would not make the unit ineligible for tax benefit, so, long as new unit is set up after obtaining necessary approval from competent authorities and fulfils all other conditions prescribed in the relevant provisions of law. The assesse has setup a new unit
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch at different plot on land and the case of assessee is of a better footing. The assessee also relied on certain case laws. 4. The ld.CIT(A) after considering the assessment order, various evidences and the submission of assessee held that the assessee vide its reply dated 13.12.2013 and 26.02.2014 explained the fact that assessee made claim of deduction under section 10B of the Act for new unit at plot no.4703 and 4704, GIDC, Ankleshwar. These facts are not controverted by the AO. The AO made disallowance on different grounds. The assessee made substantial investment in land and building and on plant and machinery. The AO has also not controverted such substantial increase in the production capacity of the assessee from 2734.90 MT to 6634.90 MT. There is no denial of fact that Development Commissioner of Kandla SEZ granted permission for increased capacity. The allegation of the AO that there is anexpansion on earlier unit and deduction cannot be allowed. The allegation of AO is not found to be tenable. The CBDT Circular No.1/2013 dated 17.01.2013 clarified that setting up of fresh unit at different place would not make unit ineligible for tax benefit so long as the unit is set up after obtaining necessary approvals from Competent Authority and fulfilled other relevant provisions of law. The ld.CIT(A) also referred the difference compliance and permission granted to assessee for setting up of new unit. On the allegation of AO that two report under Form-
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch 56G was filed by the assessee, the ld CIT(A) held that with the revised return of income the assessee corrected the errors in Form-56G and revised claimed of section 10B. On the observation/allegation of AO regarding separate Excise Registration, separate electricity bill, EPF and Foreign Exchange Earning, the ld.CIT(A) held that in various decisions the different Benches of Tribunal though stated in respect of 80IB of the Act, held that where the units are located in the same location/area no separate registration under Excise Sale Tax or Electricity is required as section 80IB(4) do not provide any separate registration or maintenance of separate record for claiming deduction under section 80IB of the Act, so, the objection of the AO in view of detailed submission of assessee, keeping in view the different decisions, should be ignored. On the basis, of detailed discussion, the ld.CIT(A) held that disallowance under section 10B of the Act made by assessee is not tenable. Aggrieved by the order of ld. CIT(A), the Revenue has filed present appeal before this Tribunal. 5. We have heard the submission of learned Commissioner of Income-tax- Departmental representative (ld.CIT-DR) for the Revenue and the ld. Authorised Representative (ld.AR) for the Assessee and have gone through the orders of Lower Authorities carefully. The ld.CIT-DR for the Revenue submits that though the Revenue has raised as many as six grounds of appeal,
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch however, the substantial ground of appeal relates to deleting the disallowance of deduction under section 10B of the Act. The ld.CIT-DR for the Revenue submits that during the assessment, the AO noted that no separate employee was recruited by the assessee for newly set up unit no new ESI and PF registration was obtained. At the time of filing the original return of income, the assessee claimed deduction under section 10B of the Act of Rs.3.39 crore only. In the revised return, the assessee filed enhanced claim of deduction under section 10B of the Act of Rs.3.49 crore. With the revised return, the assessee filed second report of CA in Form -56G. The Second report was totally different than the report furnished earlier. The AO made detailed investigation and came to the conclusion that the assessee has not recorded new employee. It was an extension of earlier unit. The assessee was using same electricity connection. The ld.CIT-DR for the Revenue submits that he fully supports the order of AO. 6. On the other hand, the ld.AR of the assessee submits that the assessee set up new unit eligible under section 10B of the Act. New unit was setup/established at Plot No.4703, 4704, GIDC, Ankleshwar. For setting up of new unit permission for production in new unit obtained from Kandla SEZ on 30.01.2008. Permission for production new unit obtained from Kandla SEZ vide letter dated 12.10.2009. Production in new unit commenced on
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch 18.10.2010. The copy of sale invoices is filed on page no.66 of the paper book. The ld.AR of the assessee further submits that production in old unit was unit at Plot No.4705 was of 2734.90 MT and at new unit the production is 6634.90 MT. Forty-three employees were employed in old unit and thirty persons is employed in newly setup unit. The gross block of plant and machinery in old unit were Rs. 3.19 crore, however in newly set up unit, the cross block of plant and machinery is of Rs. 28.50 crore. The working capital in old unit was Rs.3.00 crore, however, in new unit, the working capital is Rs.7.50 crore. The ld.AR for the assessee submits that permission granted by Kandla SEZ for old unit at Plot No.4705/1/3, 4705/1/4 and New Unit No.4703/4704 are at different locations. The new unit is capable of working independently and is not dependent on old unit in anyway. New unit is separately identifiable and is an independent unit itself. For newly unit setup at different plots of land, substantial investment made in plant and machinery, new loans raised for funding investment, production capacity has substantially increased. The ld.AR for the assessee also relied on the CBDT Circular No.1/2013. To support his submission, the ld.AR of the assessee relied upon the following decisions: i. Patni Computer System Ltd Vs. DCIT – 135ITD 398 (Pune) ii. Maral Overseas Ltd Vs ACIT – 136 ITD 177 (Indore SB) iii. Jayant Agro Organics Ltd, Vs JCIT – ITA No.5439/Mum/2001 iv. Birlasoft (India) Ltd vs. DCIT – (2015) 152 ITD 677 (Del) 10
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch v. ITO(OSC) vs. DSM Soft (P) Ltd – 115 TTJ 469 (Chennai) 7. The ld.AR of the assessee further submits that in a various decisions, the Hon’ble Supreme Court and the Hon’ble Gujarat and Kolkata High Courts held that where new unit is came into existence by installing new plant and machinery, by employing substantial funds which increased production capacity and by employing additional labour force, such units are separate and distinct unit than deduction cannot be denied. In support his submissions, the ld.AR of the assessee relied upon the following decisions : i. Textile Machinery Corporation Ltd – 107 ITR 195 (SC) ii. Indian Aluminium Co Ltd – 108 ITR 367 (SC) iii. Shri Digvijay Cement Co Ltd – 144 ITR 532 (Guj) iv. CIT vs. Electric Lamps Mfrs (India) (P) Ltd – 165 ITR 115 (Cal) 8. The ld.AR of the Assessee contended for no requirement for new excise or sales tax registration by relying upon the following decisions : i. FIL Industries Ltd vs. ACIT – ITA No.415/Asr/2009 (Amritsar) ii. JCIT vs. Associated Capsules (P) Ltd – 114 ITR 189 (Mum) iii. CIT vs. Finolex Cables Ltd – Tax Appeal NO.129 of 2011 (Bom) iv. CIT vs. Adarsh Cold Storage – 280 ITR 58 (All) 9. The ld.AR of the Assessee contended on furnishing of Form No.56G during pendency of assessment proceedings is sufficient compliance by relying upon the following decisions: i. Sudha Sharma vs. ITO – 46 TTJ 276 (Del)/44 ITD 351 (Del) ii. CIT vs. Gujarat Oil & Allied Industries – 201 ITR 325 (Guj) 11
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch iii. CIT vs. Berger Paints (India) Ltd – 254 ITR 503, 508-09 (Cal) iv. CIT vs. Magnum Export (P) Ltd – 262 ITR 10, 12, 19 (Cal) v. CIT vs. Silver Mines – 170 Taxation 590, 590-91 (Raj) vi. CIT vs. G. Krishnan Nair – 259 ITR 727, 732 (Ker) vii. ITO vs. Novelty Garments – 256 ITR 688 (Raj) 10. The ld.AR of the assessee also filed following documents on record: 1 Acknowledgement of Return of Income and Computation of Income 2 Revised return of Income alongwith commutation of income 3 Audited Annual Financial Statements 4 Tax Audit Report 5 Form No. 56G 6 Revised Form No. 56G 7 Notice u/s. 142(1) 8 Reply to notice u/s. 142(1) dated 16.08.2013 9 Further Submission during Assessment Proceedings u/s. 143(2) 10 Permission letter from Kandla SEZ for inclusion of New Unit 11 Approval from Kandla SEZ for increase in Annual Capacity 12 Profit and Loss Account for year ending 31-03-2011 for new plant and old plant 13 Notice u/s. 142(1) 14 Reply to notice u/s. 142(1) dated 20.02.2014 15 Details of New assets and investments and manpower addition 16 Details of Bank Loans obtained for new unit 17 Letter to Development Commissioner, Kandla SEZ for Capacity Enhancement 18 Letter to AO dated --------- 19 Permission from Kandla SEZ for old -unit at 4705 20 Assessment Order u/s. 143(3) for AY 2010-11 21 Order of CIT(A) u/s. 143(3)' for AY 2010-11 22 Order of Hon'ble ITAT, Ahmedabad for AY 2010-11 23 Submission during Assessment Proceedings u/s.143(2) 24 CBDT Circular No.1/2013 25 Written Submission before CIT(A)-3, Vadodara 11. We have considered the rival submissions of both the parties and have gone through the orders of authorities below. We have also peruse the various 12
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch documentary evidences filed by assessee. Further, we have deliberated on various case laws relied by ld.AR of the assessee. We find that AO denied the deduction under section 10B of the Act by taking viewtaking view that while filing revised return, the assessee filed second report of Chartered Accountant (CA) in Form-56G wherein the facts reported, but total different from the fact reported in 56G, which were filed with original return of income. The AO while denying deduction under section 10B compared original Form-56G and Form-56G and held the location of production undertaking was at Plot No.4705/1-4, 4703, 4704, GIDC, Ankleshwar and this was registered as Export Oriented Unit [EOU] in Kandla Special Economic Zone [Kandla SEZ]. However, in the second Form-56G filed with revised return of income, the location of plant was shown at Plot No.4703 and 4704, GIDC, Ankleshwar and the undertaking was registered as EOU in Kandla SEZ. The AO held that in original Form-56G it was stated that date commencement of manufacturing or production is 10.09.1999 and permission to manufacture as 100% is obtained w.e.f 27.02.2007 but as per the second report, the date of commencement of manufacturing activity is from 10.01.2010 and that it was the first year of claim. The AO concluded that assessee has changed material facts to claim the deduction. The AO also disallow deduction under section 10B of the Act by taking view that no separate production and Excise Duty register and there was
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch no separate register maintained for newly established unit, no separate employees in newly established unit and Bank Certificate of export realisation filed by assessee to Development Commissioner were containing the details of export and foreign exchange realisation on common premises and there is no separate evidence of export foreign exchange realisation in newly added premises no. 4703 & 4704 as claimed by assessee. 12. We find that the ld CIT(A) after considering the detailed submissions of the assessee held that the assessee made claim of deduction under section 10B of the Act for new unit at plot no.4703 and 4704, GIDC, Ankleshwar, such facts are not controverted by the AO. The AO made disallowance on different grounds. The assessee made substantial investment in land and building and on plant and machinery, which is not controverted. There is substantial increase in the production capacity of the assessee from 2734.90 MT to 6634.90 MT. it was also held that there is no denial of fact that Development Commissioner of Kandla SEZ granted permission for increased capacity. The allegation of the AO that there is an expansion on earlier unit and deduction cannot be allowed. The allegation of AO is not acceptable. The ld CIT(A) referred CBDT Circular No.1/2013 dated 17.01.2013, wherein it was clarified that setting up of fresh unit at different place would not make unit ineligible for tax benefit so long as
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch the unit is set up after obtaining necessary approvals from Competent Authority and on fulfilment of other relevant provisions of law. 13. We find that the ld. CIT(A) also considered the difference compliance and permission granted to assessee for setting up of new unit. On the objection of AO that two report under Form-56G was filed by the assessee, the ld CIT(A) held that with the revised return of income the assessee corrected the errors in Form-56G and revised claimed of section 10B. On the observation/allegation of AO regarding separate Excise Registration, separate electricity bill, EPF and Foreign Exchange Earning, the ld.CIT(A) held that in various decisions the different Benches of Tribunal though stated in respect of 80IB of the Act, held that where the units are located in the same location/area no separate registration under Excise Sale Tax or Electricity is required as section 80IB(4) do not provide any separate registration or maintenance of separate record for claiming deduction under section 80IB of the Act. 14. We find that Hon’ble Jurisdictional High Court in CIT Vs Shree Digvijay Cement Company Ltd (supra) on relying and referring the decisions of Hon’ble Apex Court Textile Machinery Corporation Ltd. v. CIT (supra) and CIT v. Indian Aluminium Co. Ltd. (supra), held that when the assessee-company had satisfied all the conditions for claiming relief under section 84/80J, it had invested fresh capital and employed additional labour force in the installation
ITA No.2277/AHD/2016 (AY 2011-12) Jayshree Aromatics Pvt. Ltd., Bharuch of the fourth kiln. The expanded unit had a separate and distinct identity and there was substantial increase in its production resulting in profits. The Tribunal was, therefore, right in granting the impugned relief. 15. In view of the aforesaid factual and legal position mentioned above, we find no infirmity in the order passed by ld CIT(A), which we affirm. No contrary facts or law is brought to our notice to take other view. In the result, the grounds of appeal raised by the revenue are dismissed. 16. In the result, the appeal of the revenue is dismissed. Order announced on 21 January, 2022 in open Court and result was also placed on the notice board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 21/01/2022 /SGR* Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order / / TRUE COPY / / Sr. Pvt. Secretary, ITAT, Surat