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Income Tax Appellate Tribunal, CHANDIGARH BENCHES ‘A’, CHANDIGARH
Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA
Per Sanjay Garg, Judicial Member:
These are the cross appeals preferred by the assessee and
Revenue against the order of the Commissioner of Income Tax
(Appeals), [hereinafter referred to as CIT(A)], Shimla dated
24.03.2017.
First, we take the assessee’s appeal for assessment year 2012-
13, wherein assessee has following grounds of appeal:-
That the order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. CIT(A) Shimla in appeal No. 67/2015/16/Sml dated 24.3.2017 is contrary to law and facts of the case.
That the facts and circumstances of the case the Ld. CIT(A), gravelly erred in upholding the action of the Ld. Assessing officer in holding that the appellant is not entitled to 100% deduction under section 80IB on account of substantial expansion made by the appellant during the 8 t h year for which deduction is allowable as per section 80IC of the Income-tax Act, 1961.
That in the facts and circumstances of the case the Ld. CIT(A) gravely erred in upholding the action of the Ld. Assessing officer in restricting the deduction u/s 80IC of the Income-tax Act, 1961 as 30% as
ITA Nos. 872,873,998 & 999/Chd/2017- M/s Globe Precision Industries, Solan 3 against 100% claimed by the appellant in respect of Baddi unit as the substantial expansion was done by the appellant which fact has not been controverted by the Ld. Assessing officer.
That in the facts and circumstances of the case the Ld. CIT(A) gravelly erred in upholding the action of the Ld. Assessing officer in disallowing the deduction u/s 80IC by holding the difference in foreign exchange of 1,14,718/- and liabilities written back amounting to Rs. 3,24,124/- cannot be considered as income derived from manufacturing activity of the industrial undertaking to be eligible for deduction u/s 80IC.
Ground No.1 is general in nature and needs no adjudication.
Ground Nos. 2 & 3 are relating to the grant of 100% deduction
u/s 80IC on account of substantial expansion. The Ld. Counsel for
the assessee, in this respect, has submitted that the issue is now
squarely covered in favour of the assessee by the decision dated
28.11.2017 of the Hon'ble jurisdictional Himachal Pradesh High
Court at Shimla in the case of the assessee itself for earlier
assessment year, which was decided in group of cases decided
together by Hon'ble High Court with the lead case as ‘M/s Stovekraft
India v CIT’ the case of assessee listed at S.No.32 of the said order
bearing ITA No. 70/2017. The Hon'ble High Court in this regard at
para 55 of the order held as under:-
“55.Thus, in view of the above discussion, these appeals are allowed and orders passed by the Assessment Officer as well as the Appellate Authority and the Tribunal, in the case of each one of the Assesses, are quashed and set aside, holding as under:
ITA Nos. 872,873,998 & 999/Chd/2017- M/s Globe Precision Industries, Solan 4 (a) Such of those undertakings or enterprises which were established, became operational and functional prior to 7.1.2003 and have undertaken substantial expansion between 7.1.2003 upto 1.4.2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB. (b) Such of those units which have commenced production after 7.1.2003 and carried out substantial expansion prior to 1.4.2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC. (c) Substantial expansion cannot be confined to one expansion. As long as requirement of Section 80-IC(8)(ix) is met, there can be number of multiple substantial expansions. (d) Correspondingly, there can be more than one initial Assessment Years. (e) Within the window period of 7.1.2013 upto 1.4.2012, an undertaking or an enterprise can be entitled to deduction @ 100% for a period of more than five years. (f) All this, of course, is subject to a cap of ten years. [Section 80-IC(6)]. (g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [Section 80- IB(5)].”
Ld. DR fairly admitted that the issue is squarely covered by the
above decision of the Hon'ble jurisdictional High Court. It was,
however, submitted that the issue be restored to the file of the
Assessing officer for verification as to whether the assessees have
actually carried out the substantial expansion to be entitled to claim
deduction u/s 80IC of the Act.
We do not agree to the above contention raised by the Revenue at
this stage. A perusal of the orders of the Assessing officer reveal that
the Assessing officers have not disputed that the assessees units have
carried out substantial expansion as provided under clause (b) of sub
section (2) read with clause (ix) of sub section (7) of section 80IC of
ITA Nos. 872,873,998 & 999/Chd/2017- M/s Globe Precision Industries, Solan 5 the Act. Almost similar view has also been taken by the Hon'ble
Himachal Pradesh High Court in the case of ‘M/s Stovekraft India vs.
Commissioner of Income Tax’ (supra) in the following concluding para
of the order:-
“58. On facts, we may clarify that the Revenue has not disputed, (a) the units having carried out substantial expansion within the definition of the Section, (b) their entitlement and extent of deduction would be dependent upon interpretation of the relevant provisions.”
We, therefore, do not find any justification at this stage to give the
Assessing officer a second innings to re-examine undisputed facts.
In view of the above discussion, the impugned order of the
CIT(A) is set aside and the Assessing officer is directed to grant to the
assessee deduction at the rate of hundred percent of its eligible profits,
as per the decision of the jurisdictional High Court in this regard in the
case of ‘M/s Stovekraft India vs. Commissioner of Income Tax’ (supra).
In view of this, ground Nos. 2 & 3 are allowed in favour of the
assessee.
Now, coming to ground No. 4 of assessee’s appeal, the Ld.
Counsel has submitted that the issue raised vide ground No.4 of the
appeal is relating to the non allowance of deduction u/s 80IC of the
Act on account of income earned by the assessee on foreign exchange
and liability written back. Ld. Counsel has submitted that the income
from these activities was intrinsically linked with the business
activity of the assessee. He has further submitted that the lower
ITA Nos. 872,873,998 & 999/Chd/2017- M/s Globe Precision Industries, Solan 6 authorities have failed to fully appreciate the true facts relating to
the issue. He, in this respect has submitted that the assessee may be
given opportunity to demonstrate before the Assessing officer that
the income earned from these activities was linked to the business
activity / manufacturing activity of the assessee.
The Ld. DR, however, has relied upon the findings of the lower
authorities.
Admittedly, the deduction u/s 80IC of the Act will be available
to the assessee from the income earned from the eligible Unit u/s
80IC of the Act, if the income from the activities is intrinsically
linked to the aforesaid business activity / manufacturing activity of
the assessee, The assessee in this respect wants to demonstrate the
nexus of the income with the manufacturing activity of the assessee.
In view of this, ground No.4 is restored to the file of the Assessing
officer for decision afresh. Needless to say that the Assessing officer
will provide proper opportunity to the assessee to prove its case and
thereafter decide the same after due appreciation of the facts and
evidence in accordance with law. The appeal of the assessee is partly
allowed.
Now coming to the Revenue’s appeal for assessment year 2012-
13, the sole issue raised by the Revenue in its grounds of appeal is
relating to the denial of deduction on the income earned by the
assessee on sale of scrap.
The Ld. counsel, at the outset has invited our attention to the
impugned order of the CIT(A) wherein the Ld. CIT(A) has given a
ITA Nos. 872,873,998 & 999/Chd/2017- M/s Globe Precision Industries, Solan 7 categorical findings that scrap was generated in process of
manufacturing activity of the assessee. That the generation of scrap
and the manufacturing of the goods go side by side. If the
manufacturing of goods is stopped, the generation of scarp will
automatically will stop and, therefore, has submitted that the
production / generation of scrap has first degree nexus with the
manufacturing activity of the assessee. The Ld. CIT(A) after
considering these facts and while replying upon the decision of the
Hon'ble High Court in the case of ‘CIT Vs. Micro Tuners’ for
assessment year 2006-07 has allowed the relief to the assessee on
this issue.
Before us, the Ld. DR could not bring to our notice any
distinguishable facts or the case laws requiring our interference in
the well reasoned order of the CIT(A), on this issue.
We, therefore, do not find any merit in the appeal of the
Revenue and the same is accordingly dismissed.
Now coming to the assessee’s appeal for AY 2013-14, wherein
following grounds have been taken:-
That the order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. CIT(A) Shima in appeal No. 217/16-17/Sml dated 24.3.2017 is contrary to law and facts of the case.
That in the facts and circumstances of the case, the Ld. CIT(A) gravelly erred in upholding the action of the Ld. Assessing officer in restricting the deduction u/s 80IC of the Income-tax Act, 1961 @ 30% as
ITA Nos. 872,873,998 & 999/Chd/2017- M/s Globe Precision Industries, Solan 8 against 100% claimed by the appellant in respect of Baddi unit.
That in the facts and circumstances of the Ld. CIT(A) gravely erred in upholding the addition of Rs. 1,50,100/- made by the Assessing officer by invoking the provisions of section 14A of the Income Tax Act. The provisions of section 14A are not applicable in this case of the appellant as no exempt income was earned from the investment made by the appellant.
Ground No.1 is general in nature and needs no adjudication.
Ground Nos. 2 is relating to the allowability of deduction u/s
80IC on account of substantial expansion carried out by the Unit. In
view of our findings given above, in relation to ground Nos. 2 & 3 of
the assessee’s appeal for assessment year 2012-13, since, the issue is
now squarely covered in favour of the assessee by the decision of the
Hon'ble jurisdictional Himachal Pradesh High Court at Shimla in the
own case of the assessee, which was decided in group of cases
decided together by Hon'ble High Court with the lead case as ‘M/s
Stovekraft India v CIT’ the case of assessee being listed at S.No.32
of the said order bearing ITA No. 70/2017, hence, this issue is
decided in favour of the assessee.
Now, coming to ground No. 3 of the appeal, a disallowance of
Rs. 1,50,100/- was made by the Assessing officer u/s 14A of the I.T.
Act in respect of tax exempt income earned by the assessee.
Admittedly, the unit of the assessee is eligible for deduction u/s 80IC
of the Act. The disallowance has been made by the income tax
authorities under section 14A, the resultant effect will be an
ITA Nos. 872,873,998 & 999/Chd/2017- M/s Globe Precision Industries, Solan 9
addition to the income of the assessee, which otherwise is exempt
u/s 80IC of the Act. In view of this, no tax liability will be laid on
the assessee even after disallowance u/s 14A of the Act. In view of
this, any discussion on the issue will only be of academic in nature,
since this disallowance is tax neutral. This ground is dismissed with
liberty to the assessee to raise the same in an appropriate case.
Now coming to the Revenue’s appeal for assessment year 2013-
14, the issue in the appeal is identical to that has been raised by the
Revenue in its appeal for assessment year 2012-13, wherein, after
considering the submissions, we have decided the issue against the
Revenue.
There is no merit in the appeal of the Revenue and the same is
accordingly dismissed.
Order pronounced in the open court.
Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 27.03.2018 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR