TMI Blog2013 (11) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... an industrially backward State' of Pondicherry, there was no need to fulfill the requirements of SSI - The assessee was eligible for deduction u/s.80-IB(4) of the Act - The CIT(A) had given well reasoned and categoric finding with respect to eligibility of the assessee for claiming deduction under section 80IB – Decided against Revenue. Claim of Deduction u/s 35(1)(i) - Held that:- The assessee had incurred expenditure on the research and development activity in relation to its own business - Therefore, the assessee was eligible for deduction under section 35(1)(i) of the Act - Relying upon CIT Vs. U.P. Electronics Pvt. Ltd. [2005 (2) TMI 57 - ALLAHABAD High Court] - As per the provisions of section 35(1)(i), the only requirement for claiming deduction was that the amount should have been spent during previous year on research and development in relation to assessee’s own business only - It was not the case of the assessee or the Revenue that the assessee was contributing amount towards another organization engaged in research and development. The deduction claimed by the assessee under section 35 of the Act towards in house expenditure on scientific research - the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the order of the CIT(A) on the ground that assessee while claiming deduction under section 80IB could not satisfy the conditions laid down under the Industrial (Development and Regulation) Act, 1951 for being small scale undertaking. The item manufactured by the assessee company being covered by the Eleventh Schedule disentitles the assessee from being claiming deduction under section 80IB of the Act. The Revenue further assailed the order of the CIT(A) in granting deduction under section 35 of the Act. 4. Shri Shaji P.Jacob appearing on behalf of the Revenue strongly relied on the order of the Assessing Officer and prayed for setting aside the order of CIT(A). 5. On the other hand Ms. Fara Sultana appearing on behalf of the assessee submitted that the order of the CIT(A) is a well-reasoned and detailed order. She submitted that the assessee is a company registered under the provisions of the Companies Act, 1956 and is located in Pondicherry which is classified as backward State specified in Eighth Schedule and the assessee is also registered as SSI vide letter dated 24.3.2008. The assessee has claimed deduction under the provisions of section 80IB(4) of the Act. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state' (as included in Sth Schedule at S1.No.16), (c) The assessee has been registered as a "Small Scale Industry" (SSI) with the Director of Industries and Commerce, Pondicherry, Based on the above facts and the requirements of the sec.80-IB of the Act, let us examine whether the assessee is eligible for claiming the deduction u/s.80-IB. The first and foremost requirement is the fulfillment of four conditions stipulated in sub-section (2) of sec.80-IB of the Act. These conditions are - (i) it is not formed by splitting up, or the reconstruction, of a business already inexistence (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India: (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as SSI or if located in an industrially backward State, the assessee is eligible for deduction u/s.80-IB even on the items (manufactured) specified in 11th schedule. The assessee claimed its deduction u/s.80-IB(4) of the Act, the provisions of which are as under: Sec.80-IB: (4) The amount of deduction in the case of an industrial undertaking in an industrially backward State specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from such industrial undertaking Now, let us examine the assessee's case. The assessee's manufacturing unit is located in the State of Pondicherry, which is an "industrially backward State" as notified in 8th Schedule (at Sl.No.16). There is no dispute regarding this position. Therefore, the assessee's case is covered by the second limb of proviso to clause (iii) of sub-section (2) of sec.80-IB of the Act. Hence, the words "not being any article or thing specified in the list in the Ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther condition. Thus, in the instant case, the assessee is located in the State of Pondicherry, which is in an industrially backward State. There is no dispute regarding this. Hence, the assessee is eligible for deduction under the sub-section (4) of sec.80-IB of the Act, on all the article/things (including those mentioned in 11th schedule) manufactured by it. In also make no difference whether the undertaking is a SSI or not. In fact, the assessee claimed deduction under the sub-section (4) of sec.80-IB of the Act. Once, the industrial undertaking is located in an industrially backward State the assessee is eligible for deduction u/s.80-IB(4) of the Act. In such a situation there is no need to fulfill the requirements of 'SSI' nature. If the assessee wants to claim deduction u/s.80-IB of the Act, being in the nature of 'SSI' (i.e. if wants to claim exception as per the first limb of proviso to clause(iii)), then only the assessee has to prove that it is recognised as a SSI and all the relevant conditions are fulfilled. In the instant case, as the assessee's industrial undertaking is 'located in an industrially backward State' of Pondicherry, there is no need to ful ..... X X X X Extracts X X X X X X X X Extracts X X X X
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