M/S GLOBE PRECISION INDUSTRIES PVT. LTD.,SOLAN vs. DCIT, PARWANOO

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.

13, wherein assessee has following grounds of appeal:-

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.

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)].”

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.

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.

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.

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.

authorities.

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.

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.

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.

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.

following grounds have been taken:-

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.

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.

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.

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