TMI Blog2015 (10) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was able to show us the various letters through which it was ascertained that various bills etc. are being enclosed with those letters and no comments have been given by the authorities in their respective orders. These bills etc. wherever found necessary, were produced even before us for our clarification. Therefore this ground is allowed (in fact during the hearing certain bills and other documents were produced before us which we examined to avoid further controversy) - Decided in favour of assessee. Disallowance of deduction u/s 80IB(11A) - Held that:- 100% deduction cannot be allowed to the assessee because we have already held while discussing the activities of the assessee that processing of paddy cannot be said to be covered by the activities given in Sec 80IB(11A). Therefore to find out the quantum of deduction we refer to the assessment order for Assessment year 2010-11 wherein it was observed that milling expenses vary from ₹ 15 to 25 per Qtl depending upon the nature of paddy to be milled. It is also to be noted that some of the bi-products are also obtained in the milling process which also generate some profits. It has to be noted that major profit wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 80-I(6) and 80B(5). Since section 80B(5) is starting with non-obstante clause, therefore full effect has to be given to the same. In any case, by reducing the loss of power plant from the other business the assessee is rather losing the deduction on the other business instead of getting any benefit. Therefore, in view of the decision of Synco Industries Ltd v Assessing Officer (Income Tax) & Another [2008 (3) TMI 13 - Supreme court ] we decide this issue in favour of the assessee. Additional depreciation on the power plant - Held that:- he plain reading of the above provision shows that in case of the business of generation and distribution of power, the provision for allowance of additional depreciation was inserted by Finance Ac, 2012 w.e.f. 1.4.2013, therefore, the additional depreciation can be considered in case of assessee engaged in the business of generation or distribution of power only form assessment year 2013-14. Therefore, we set aside the order of Ld. CIT(A) and hold that additional deduction @ 20% is not allowable in the case of assessee against power plant. - Decided against assessee. Unsecured investment u/s 69 - CIT(A) deleted the addition - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in rejecting the additional ground of appeal No. 2 raised u/s 250 (5) contending that the order u/s 127 transferring jurisdiction of the case from DCIT (Central) Chandigarh was passed by the CIT on 1.12.2010 i.e. just before less than two months for passing the assessment order and hence the assessment order dated 30.12.2010 was apparently passed hurriedly without allowing adequate opportunity of being heard to the appellant to substantiate its claim regarding deduction u/s 80IB(11A)therefore the assessment order passing without adequate opportunity is bad in law and deserves to be quashed. 4.3 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in rejecting the additional ground of appeal NO. 1 raised u/s 250(5) of Income -tax Act, 1961 contending that the assessment made on 30.12.2010 u/s 153A(1)(b) r.w.s. 143(3) is bad in law as no incriminating material suggesting of any suppression of income was found during the course of search and seizure operation u/s 132(1) on 12.2.2009 and therefore the entire assessment being bad in law, deserves to be quashed. 5 That on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further erred in not allowing the additional depreciation on plant machinery allowable u/s 31(1)(iia) of the Income -tax Act, 1961 a claim raised by way of additional ground of appeal No.4. 3. Out of above, grounds No. 2, 4, 4.2, 4.3 and 9 were not pressed before us, therefore the same are dismissed as not pressed. 4 Ground No. 1 is general in nature and does not require any separate adjudication. Though various other grounds have been raised but principally there are three disputes namely: (i) Admission of additional evidence (ii) Disallowance of deduction u/s 80IB(11A) (iii) Disallowance of depreciation on power plant 5 Before we discuss the facts in respect of first issue, it would be pertinent to consider the background of the case. In this group of cases a search was conducted in the office premises of the assessee on 12.2.2009 and some relevant books and documents were found and seized. Thereafter a notice u/s 153A(1)(a) was issued by the Assessing officer, the DCIT (Central), Patiala to the assessee on 6..4.2009 requiring it to file its return of income in respect of Assessment Year 2008-09. A request was made by the assessee-company to transfer their ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2007-08, 2008-09 and 2009-10 as well as the Exports out of India, can by no stretch of imagination, be said that these documents were not available for production during the course of assessment proceedings. The case laws cited do not come to the rescue of the assessee either keeping in mind the facts of the case in hand. It is not a case where the assessee was not in the know of the nature of the proceedings, so it was incumbent upon him to lead necessary evidence in the form of the documents which are now sought for admission as additional evidence. In fact, on no occasion has the assessee stated before the A.O the reason why the concerned documents/ certain documents could not be filed during the course of assessment proceedings. Needless to say, before any additional evidence can be admitted, the assessee has to first prove that his case comes within the exceptional calsue as laid down in Rule 46A. I am afraid the assessee has been unable to substantiate his claim. Thus the request of the assessee for admission of additional evidence under clauses (b), (c) and (d) of Rule- 46A of the Income-tax Rules, 1962 cannot be acceded to. 7. Before us it was mainly submitted that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Y. 2008-09 xi) The copies of assessment orders passed by different tax authorities to prove that Mr. Rajinder Sandal, Chartered Accountant, was exlusively handling tax matters of M/s Lakshmi Energy Foods Ltd., its promoters, directors and group companies. xii) The copy of account statement of Mr. Sandal s full final payment in the books of Co. He was with the company for the period 22.03.2006 to 31.03.2010. xiii) The photograph and CD of storage capacity / godowns year wise and new plant installed after March 2009. xiv) The copy of the letter 27/10/2010 along with its annexures i.e. the judgments passed by the Hon ble Supreme Court of India Punjab Haryana High Court evidencing that the above mentioned orders were duly served upon DCIT-Central Circle-I. Chandigarh Additional Commissioner of Income TaxChandigarh and Commissioner of Income Tax. (C). Ludhiana. 10 For admission of additional evidence Rule 46A of Income -tax Rules, 1962 is relevant which is as under: 46A. (1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the assessee- company that since the DCIT, Central circle, Patiala happens to be the officer as DDIT (Invg) who carried the search and therefore the cases should be transferred to the Central circle, Chandigarh. Lot of litigation happened in this regard and ultimately the Revenue agreed to the request and the cases were transferred to the Central circle, Chandigarh on 28.10.2010. In fact the Assessing officer himself has observed in this regard as under: The request of the group was accepted but in the whole process invaluable time was lost and hence any submission of the assesse that the process of assessment was delayed would have to account for this fact. The above clearly show that the assessee did not have sufficient time to represent in about 105 assessments in the Central Circle, Chandigarh. When a period of less than two months was available and certain documents were not easily traceable then the same would constitute a reasonable cause for not producing the documents sought to be admitted as additional evidence. This has to be further considered in the light of the fact that the assessee had serious disputes with its auditor, Shri Rajinder Sandal whose servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvent oil and generation of power were sanctioned by the Govt of Punjab and relevant documents were filed with that letter. It was stated that old machinery was discarded and new machinery was installed and even land and building for new venture were purchased afresh which have been shown in the schedule of fixed assets. It was pointed out that in case of CIT Vs. Hindustan General Industries Ltd, 137 ITR 851 it was held by the Hon'ble Delhi High Court that the word splitting up of the business already in existence indicate a case where the integrity of a business earlier in existence is broken up and different sections of the activities previously conducted are carried on independently. In this case there is no such case as the entire machinery was reinstalled by discarding the one already in existence. Similarly, on the facts of the case it cannot be a case of reconstruction as the earlier business was killed and in place a new business was started. Further no part of the old machinery was transferred to the new project. It was also contended that the assessee has complied with all other conditions therefore deduction should be allowed. The Assessing officer observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this background the Assessing officer denied deduction u/s 80IB by giving various reasons which can be summarized as under: (i) He referred to the provisions of section 80IB(11A) and explanatory notes on the provisions and observed that deduction was brought on the statute to encourage building of infrastructure to handle food grains to ensure better storage conditions and minimization of wastage. The intention behind Sec 80IB (11A) was to address the basic concern relating to enhanced food security and agricultural development by upgradation and modernization of infrastructure facilities and therefore this aspect of storage and handling and transport of food grains were central concerns. According to him the main business of the assessee as per Form 3CD itself was Manufacturer of rice, cattle feed, crushing of oil, solvent extraction and refinery and generation of power. Thus the assessee was mainly engaged in the manufacture of rice, cattle feed etc. which cannot be equated with integral business of handling, storage and transportation of food items. He referred to the following written submissions of the assessee: that the assessee buys paddy from different places ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24480913.32 From above he noted that no income or receipt were shown in respect of integrated business of handling, storage and transportation of goods. (ii) The assessee has not filed Form 10CCB within the prescribed period. (iii) He further referred to provisions of section 80AC which provides that no deduction shall be allowed u/s 80IB unless the return of income has been filed on or before due dates specified in sub-sec (1) of Sec 139. Since the assessee has not filed the return before due date specified u/s 139(1) the deduction was not available. (iv) Finally he referred to the provisions of section 80IB(2)(i) which provides that deduction is available to industrial undertaking which fulfils the conditions given in that Section. According to him there was no addition of plant Machinery during the year. This fact was taken from a chart given by Shri Rajinder Sandal, C.A. in response to Sec 131: Sl.No Particulars W.D.V as on 01.04.07 Additions before 30.09.07 Additions after 30.09.07 Sale Total cost as on 31.03.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 it is to be marked that there is absolutely no addition in plant machinery during the year. There is clear evidence that there is no killing of an earlier business and a new business initiated. Also no plant or machinery was sold by the assessee during the year. Also from the above chart it is clear that no machinery was sold off/discarded by the assessee during the year. It is thus apparent that no new unit was set up by the assessee during the year. The machinery or plant and other assets previously used had been transferred to the new business; hence the integrity of business earlier in existence is not broken up. In this background the Assessing officer did not allow the deduction u/s 80IB(11A). 14. On appeal before the Ld. CIT(A), it was pointed out that the concern under the name and style of Lakshmi Grain Processor Ltd. was formed in the year 1995 with the object of dealing in food grains and other by products obtained in the course of manufacturing. The name of the company was changed to Lakshmi Overseas Industries Ltd. w.e.f 01.08.1995 and then to Lakshmi Energy Foods Ltd. Since the concern started business in the year 1995 and the machinery and buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee were eligible for deduction u/s 80IB(11A). 15 With regard to the issue regarding new plant Machinery it was submitted that deduction u/s 80IB(11A) relates to services in connection with preservation of food grains promoted by the Govt of India under TFC/99-Vol. III dated 4.7.2000 following the national policy in respect of handling, storage and transportation of food grains. It was pointed out that in case of the assessee the Govt of Punjab had sanctioned mega project for installation of new machinery for handling, storage of paddy and processing of paddy and its bi-products such as rice bran etc. during the period relevant to Assessment Year 2007-08. Upon sanction of this project the entire plant was replaced and new industrial undertaking was set up which carried out operation with new machinery installed which becomes clear from the reply filed before the Assessing officer vide reply dated 19.12.2010. 16 In reply to the issue of late filing of return and denial of deduction in view of Sec 80AC it was pointed out that the assessee has changed the accounting period from 1.4.2007 to 30.9.2008 for the purpose of Companies Act and the accounts were maintained for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correctness of its claim by leading some evidences. In this back ground the Ld. CIT(A) rejected the claim for deduction vide para 8.3.6 which is as under: In the aforesaid paras, I have held that the assessee has violated the basic requirement for claiming deduction u/s 80IB. These statutory defaults cannot be overlooked. No doubt a liberal interpretation is required to be made in respect of incentive provisions allowing tax exemptions, it is also vital that we abide by the intent of the legislature. In this case, the assessee has filed the return of income beyond the due date as stipulated u/s 139(1). The Form 10CCB required to be filed alongwith the tax audit report to support the claim of deduction u/s 80IB is also not credible. Thus as the assessee has violated the provisions of Sec 80AC and 80IA(7), the claim of the assessee cannot be considered for such deduction u/s 80IB. In this backdrop, I deem it merely academic to go into the allowability of deduction / merits of the case, as I have held that the assessee is not eligible for deduction u/s 80 IB for the technical defaults as already elucidated. Consequently the assessee fails on this ground of appeal. 18 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-company was entirely dependent on Shri Sandal s advice relating to tax matters for the last six years. He was having various details and information relating to accounts and tax matters in his custody which were not handed over to the assessee-company. These facts become clear from the face of assessment order itself as Shri Sandal has deposed against the assessee. Shri Sandal had gone to the extent of stating that some observations in his audit were made due to clerical mistake of junior staff. In this regard reference was made to page 39 of the assessment order. Form 10CCB was signed by another C.A which was filed before the Assessing officer. Copy of Form 10CCB was also filed before the Ld. CIT(A). It was contended that filing of Form 10CCB is merely a technical requirement and this form can be filed at any time during assessment proceedings before the Assessing officer or before the Ld. CIT(A) or even before the Tribunal. In this regard reliance was placed on the following decisions: (i) CIT Vs. Trehan Enterprises, 248 ITR 333 (J K) (ii) CIT Vs. ACE Multitaxes Systems Pvt Ltd, 317 ITR 207 (Karn) (iii) CIT Vs. Jayant Patel, 248 ITR 199(Mad) (iv) CIT Vs. Magnum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng is not defined in the Act but he made reference to various Acts where the word handling has been defined which clearly show that handling would include processing, manufacture, sale of a particular good. It was emphasized that the Ministry of Food which is a nodal Ministry for designing the policy for processing and storage of food etc. in their circular has categorically stated that deduction u/s 80IB(11A) will be available to the entities which manufacture, process or are engaged in the milling of rice. In this regard reference was made to the scope of Food processing in India given by the Ministry of Food Processing Industries. (copy of which is available at pages 198 to 210 of the synopsis. It was contended that it seems the Assessing officer was doubtful that if the assessee was consuming paddy for its own processing unit then if the activities of handling, storage, transportation would not be entitled to deduction but this is wrong approach because even if such services are used for assessee s own consumption the deduction has to be allowed and in this regard reliance was placed on the decision of Mumbai Bench of the Tribunal in case of Sanchita Marine Production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance with the requirements of Sec 80IB(2)(i) First of all it was submitted that the condition of splitting of and reconstruction of a undertaking was applicable to the industrial undertaking only. The same is not applicable to eligible business. In this regard our attention was invited to the provisions of section 80IB which provides for deduction in case of industrial undertaking, operation of theatre, hotels and various other fields like multiplex theatres. Wherever the condition of usage of old machinery of less than 20% was required, has been mentioned and no such mention is made of this condition u/s 80IB(11A). It was further pointed that the value of old machinery which was claimed to be discarded was ₹ 60531624/- as on 31.3.2005 whereas new machinery added was at ₹ 33.35 Crore. Keeping the amount of new machinery it becomes clear that old machinery was less than 20%, in fact it would be about 18.14%. In this regard it was emphasized that old machinery has to be reckoned on WDV and in this regard reliance was placed on the following decisions: (i) Hindustan General Industries Ltd. 67 Taxman 360 (Delhi) (ii) Harin Khola Ice Cold Storage, 6 Taxman 362 (Kol) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2571.67 4875.08 6126.90 8331.36 7619.42 3 Wheat / Damaged wheat 0.00 1261.54 203.42 295.67 80.74 3.60 4 Other sales 27.57 107.92 46.97 165.58 419.98 419.83 5 Power 514.91 Total 2251.02 4077.14 5583.89 6962.66 9544.84 9116.66 Above clearly show that there was no change in the business. This becomes further clears from the fact that in Assessment Year 2005- 06, 2006-07 and 2007-08 the assessee returned income of ₹ 23.33 crores, 24.61 crores and ₹ 42.79 crores but no deduction has been claimed u/s 80IA and 80IB which means that the assessee was aware that it was not el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xisting or new industrial undertaking engaged in manufacturing or production of food grains as the same was available under sub-sec (3) to (5) of section 80IB to such undertaking depending upon the period of commencement of business and the location of industrial undertaking for the period as specified therein. The Memorandum explaining the provisions of section 80IB(11A) makes it explicitly clear that the sole emphasis was to encourage building of storage capacities by undertaking upgradation and modernization of infrastructure for storage, handling and transportation of food grains. 21 The Ld. D.R. for the Revenue referred to the contention raised by the Ld. Counsel for the assessee with respect to the meaning of handling given in various Acts and pointed out that the word Handling is polymarphous word and is used in different senses in different contexts. He contended that definition in other Acts or technical meaning of a word or expression in the statute may be relevant but not sacrosanct. In this regard he referred to the decision of Hon'ble Supreme Court in case of CGT Vs. NS Getty Chettiar, 82 ITR 599 wherein it was observed as under: Words in the section of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interpretation of statutes have been given. He referred to the contention of the Ld. Counsel for the assessee with regard to the circular and clarification given by the Ministry of Food Processing wherein various incentive provisions are reproduced. Detail of various benefits in form of duty and tax benefits are disclosed and various sections of processing sectors have been defined and classified on the basis of a data for the purpose of clarity and compilation of data. However, there is nothing in these documents to suggest that the Ministry of Food Processing has classified rice milling as integrated business to handling, storage and transportation of the food grains. Though this is applicable in case of preservation and packing of fruits and vegetables. 22 The Ld. D.R. for the Revenue submitted that reliance placed by the Ld. Counsel for the assessee on the assessment order for Assessment Year 2010-11 is not relevant because the assessment orders are not binding on the Tribunal and the order passed by the Assessing officer is not inconformity with the law. Reference to the decision of Bajaj Tempo Ltd. Vs. CIT, 196 ITR 188 (S.C) is also mis-construed because it has been hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (257 ITR 51) He contended that reliance on the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. MS. Jagriti Aggarwal (supra) was misplaced because in that case the Court was concerned with the interpretation of Sec 54. When a specific provision is there then same cannot be interpreted so as to make the provision redundant. 24. Referring to the objection of the Assessing officer in non filing of form 10CCB he submitted that there is a specific requirement u/s 80IA(7) r.w.s. 80IB(13). Initially this report was not filed and the report which was filed has been signed by Shri Narinder Gulati, C.A. wherein deduction has been worked out at ₹ 50.95 crores whereas the assessee has claimed the deduction at ₹ 17.32 crores which is self contradictory. 25 The Ld. D.R. for the Revenue also referred to non fulfilling of the requirements of Sec 80IB(2)(i) and pointed out that the assessee had not filed any copy of the bills of various plant Machinery which was purchased by the assessee. (as noted earlier this is not correct). He contended that there is no force in the submissions that the conditions is not applicable in the case of eligible business. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with handling, storage and transportation of the food grains and the assessee has not given any evidence to show that these machineries were also for the purpose of integrated business of handling, storage and transportation of food grains. The decisions relied for the proposition that it is WDV which has to be considered in respect of old Plant Machinery are not relevant because the same were rendered in the context of block of Plant Machinery where uniform rate of depreciation was provided whereas different rate of 15, 60, 80, and 100%, is provided now and therefore likes have to be compared with likes. If this proposition is accepted and if investment of ₹ 23.50 crores is ignored then new investment of ₹ 9.85 crores is considered then old investment of ₹ 6.05 crores would constitute more than 60% of the machinery. Further as far as contention that the old machinery was discarded for which reliance was placed on the certificate of Chartered Engineer filed at page 394 and certificate of the C.A filed at page 420 are only self serving documents. There are contradictions in these certificates as the Chartered Engineer has certified that the plant Machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking 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 industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial 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; (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 : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as the Central Government may, by notification in the Official Gazette, specify with reference to any particular undertaking; (ii) where it is an industrial undertaking being a small scale industrial undertaking, it begins to manufacture or produce articles or things or to operate its cold storage plant [not specified in subsection (4) or sub-section (5)] at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, [2002]. (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 : Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) subject to fulfillment of the condition that it begins to manufacture or produce ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the period beginning on the 1st day of October, 1994 and ending on the 31st day of March, [2004]; (ii) hundred per cent of the profits and gains derived from an industrial undertaking located in a backward district of category 'B' for three 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 of an industrial undertaking : Provided that the total period of deduction does not exceed eight consecutive assessment years (or where the assessee is a co-operative society, twelve consecutive assessment years) : Provided further that the industrial undertaking begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 31st day of March, [2004]. (6) The amount of deduction in the case of the business of a ship shall be thirty per cent of the profits and gains derived from such ship for a period of ten consecutive assessment years including the initial assessment year provided that the ship- (i) is owned by an Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1995 or beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001: Provided that nothing contained in this clause shall apply to a hotel located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai, which has started or starts functioning on or after the 1st day of April, 1997 and before the 31st day of March, 2001; (c) the deduction under clause (a) or clause (b) shall be available only if- (i) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose; (ii) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees; (iii) the hotel is for the time being approved by the prescribed authority: Provided that any hotel approved by the prescribed authority before the 1st day of April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed.] (8) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of five assessment years beginning from the initial assessment year if such company- (a) is registered in India; (b) has the main object of scientific and industrial research and development; (c) is for the time being approved by the prescribed authority at any time before the 1st day of April, 1999. [(8A) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of ten consecutive assessment years, beginning from the initial assessment year, if such company- (i) is registered in India; (ii) has its main object the scientific and industrial research and development; (iii) is for the time being approved by the prescribed authority at any time after the 31st day of Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 [but not later than the 31st day of March, 2005], within four years from the end of the financial year in which the housing project is approved by the local authority; [(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.] Explanation.-For the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central or State Government).] (11) Notwithstanding anything contained in clause (iii) of sub-section (2) and sub-sections (3), (4) and (5), the amount of deduction in a case of industrial undertaking deriving profit from the business of setting up and operating a cold chain facility for agricultural produce, 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 the operation of such facility in a manner that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co- operative society) and subject to fulfillment of the condition that it begins to operate such facility on or after the 1st day of April, 1999 but before the [1st day of April, 2004]. [(11A) The amount of deduction in a case of [an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or [meat and meat products or poultry or marine or da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from such business for a period of five consecutive assessment years, beginning with the initial assessment year, if- (i) the hospital is constructed and has started or starts functioning at any time during the period beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2013; (ii) the hospital has at least one hundred beds for patients; (iii) the construction of the hospital is in accordance with the regulations or bye-laws of the local authority; and (iv) the assessee furnishes along with the return of income, a report of audit in such form and containing such particulars, as may be prescribed, and duly signed and verified by an accountant, as defined in the Explanation to sub-section (2) of section 288, certifying that the deduction has been correctly claimed. Explanation.-For the purposes of this sub-section- (a) a hospital shall be deemed to have been constructed on the date on which a completion certificate in respect of such construction is issued by the local authority concerned; (b) initial assessment year means the assessment year relevant to the previous year in which the business of the hospital starts functioning; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80AC, no deduction u/s 80IB(11 A) can be allowed. The main contention of the assessee in this regard was that the assessee had adopted a period of 18 months ending on 30.9.2008 for preparing its accounts and balance sheet was prepared accordingly which was filed with the Registrar of Companies and for carving out the accounts for 12 months ending on 31.3.2008 which was cumbersome procedure and which led to late filing of return. Reliance was placed on various case laws. Sec 80AC has been introduced in the statute w.e.f. 1.4.2006. Similar provision was introduced by way of a proviso u/s 10A(1A) and reads as under: 10A[(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,- (i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made has to be reckoned as return furnished u/s 139(1). These contentions were considered by the Hon'ble Supreme Court and it was observed as under: One of the significant terms used in section 276CC (offence of failure to furnish return of income) of the Income-tax Act, 1961, is in due time . The time within which the return of income is to be furnished is indicated only in sub-section (1) of section 139 and not in sub-section (4). Even if a return is filed under section 139(4) that would not dilute the infraction in not furnishing the return within the time as prescribed under sub-section (1) of section 139. Thus above clearly shows that expression in due time has to be reckoned with reference to sub-sec (1) of Sec 139. Sec 80AC very clearly refers to sub-sec (1) of Sec 139. Therefore unless and until return is filed within the due date as provided u/s 139 (1), the deduction cannot be allowed. The Ld. Counsel for the assessee placed very strong reliance on the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. MS. Jagriti Aggarwal (Supra) it was vehemently contended that once the Hon'ble Jurisdictional High Court has clearly held that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, principle laid down by the Hon'ble High Court in case of CIT Vs. MS. Jagriti Aggarwal (Supra) cannot be applied while interpreting the provision of Sec 80AC. 32 The Ld. Counsel for the assessee has also relied on the decision of ACIT Vs. Dhir Global Industrial Pvt Ltd (supra) wherein it was observed that though the proviso to Sec 10B for filing of return u/s 139 (1) for claiming deduction but the same was of directory nature and not mandatory. In our opinion, this judgment of Division Bench is no more valid after pronouncement of the decision of Special Bench in case of Saffire Garments Vs. ITO (supra). Similarly in ITO Vs. S. Venktaya(supra), Hyderabad Bench of the Tribunal held that if return was filed late then despite the provisions of section 80AC the deduction was held to be allowable if such delay is beyond the control of the assessee. This position also stands reversed after the decision of Special Bench in case of Saffire Garments Vs. ITO (supra) wherein it is clearly held that the provisions of section 80AC are of mandatory nature. As far as decision of Hon'ble Delhi High Court is concerned, the same is distinguishable on facts because in that case the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) encouragement of mechanical harvesting, cleaning and drying at farm and market level (iii) transportation of grains from farm to silos by specially designed trucks. (iv) construction of chain silos at receipt as well as distribution points. (v) encouraging private sector for building storage capacities in which grains procured by Govt agencies would be stored on payment of storage charges; (vi) encouraging private sector for development of infrastructure for the integrated bulk handling, storage and transportation of foodgrains. Therefore for encouraging the private sector, participation in the activities of integrated business of handling, storage and transportation of food grains, Sec 80IB(11A) was inserted in the Act. While introducing this provision the Finance Minister in his speech stated as under: The storage of food grains and their transportation are our major concern. Sir, I propose to provide a tax holiday for five years and 30% deduction of profits for the next five years to the enterprises engaged in the integrated business of handling, transportation and storage of food grains. Memorandum explaining this provision reads as under: TA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve incentives and encourage the participation of the private sector. However the term handling, storage and transportation has not been defined anywhere in the Act. Therefore to understand the meaning of this term first of all we need to understand the definitions of these terms. The Ld. Counsel for the assessee has referred to definition of the term handling in various Acts which is as under: According to Section 2(e) of the National Environment Tribunal Act, 1995 (27 of 1995), handling in relation to any hazardous substance, means the manufacture, processing, treatment, package, storage transportation by vehicle, use collection, destruction, conversion, offering for sale, transfer or the like of such hazardous substance. As per section 2(c) of the Public Liability Insurance Act, 1991, (6 of 1991), handling means the manufacture, processing, treatment, package, storage, transportation by vehicle, use collection, destruction, conversion, offering for sale, transfer or the like of such hazardous substance. According to section 2(d) of the Environment (Protection) Act, 1986, handling means the manufacture, processing, treatment, package, storage, transportation, use, col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the integrated business of processing, packaging, handling, storage and transportation of food grains . With reference to activities in respect of food grains what is described as from the integrated business of storage and handling and transportation of food grains. In our opinion, the processing and packaging cannot be part of the business of handling, storage and transportation of food grains. 38 The Ld. Counsel for the assessee has very strongly referred to the various observations of the Ministry of Food processing and handling particularly the extracts filed in paper book at page 198 to 210. The careful perusal of these observations show that the Ministry of Food processing has firstly described the tax benefits which are allowable under Income -tax Act, 1961, Central Excise Act, Service Tax and in this respect respective provisions have been reproduced. For example Sec 80IB (11A) has been reproduced in respect of business of handling, storage and transportation of food grains. At page 202 to 204 certain observations have been made under the head Data bank of examining parameters of foodgrains and ultimately it has been observed that it is important to define the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book filed on 30.9.2013 at page 58 to 82), the process has been described as: (1) paddy harvested in the farm - (2) Paddy is loaded in the trollys automatically through a combine - (3) Trollys comes to the mandi - (4) Paddy is unloaded and mounds are created - (5) Paddy is purchased in terms of mounds through auction - (6) Paddy is cleaned by the labour and filled in the gunny bags which are stitched manually - (7 Bags are loaded in company trucks and transported to the factory - (8) At factory the weight is recorded at the factory gates - (9) The bags are opened and paddy is poured in the open godowns where driers and fans are installed to reduce the moisture for proper storage - (10) After demoisturisation is completed paddy is repacked and loaded into the trucks - (11) These loaded trucks of the company transport the paddy to covered godowns - (12) Paddy is unloaded in the godown and put in stacks - (13) Paddy is stored in such godown for a period of one year to two years depending on the quality and time required for maturing the same - (14) Godowns are fitted with climatic control and fumigation facilities so as to preserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the gate wherein drying process and initial cleaning takes place. After opening the bags and putting the paddy through these processes particularly the process of defusing so as to remove the inborn pests. After this the process it is again packed and carried to the stores where the same is kept for maturing for a period of one year to two years. All facilities for securing maximum security to the foodgrains i.e; paddy have been installed to safeguard the paddy from withering, spillage and other natural calamities. Regular fumigation is done to preserve the food grains from natural calamities and to save it from various pests. After keeping the paddy for a period of 12 to 24 months the same is transferred to the Silos where the same is again stored for a period of 15 to 60 days and then sent to milling machine. Therefore it is clear that before process of milling of paddy begins it has to be stored in a proper storage so as to prevent the losses of such food grains. This has been definitely done by the assessee. Therefore it is clear that the assessee has definitely done handling and storage of food grains as well as the transportation because the assessee has employed its ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich about ₹ 3 crores was spent on the building for stores and another ₹ 33 crores for installation of water treatment, stream channel and drier, cleaners etc. was spent which is said to be towards handling of such food grains. ₹ 2.88 crores was spent for acquisition of trucks and about ₹ 80 lakhs was spent towards acquisition of computer and office building etc. The assessee has further spent substantial amount amounting to ₹ 123 crores in Financial year 2006-07 and ₹ 191 crores in Financial year 2007-08 and ₹ 52 crores in Financial year 2008-09. Out of this substantial amount have been spent towards acquisition of trucks, creation of storing facility and various handling equipments. Only a sum of ₹ 12.99 crores is said to have been spent for purchase of paddy milling machine. These facts clearly shows that new project came up over a period of time starting with the financial year 2005-06. In our opinion, it is not necessary to start new handling unit separately for claiming benefit of Sec 80IB(11A) even the upgradation of old unit would also entitle a businessman to this benefit. Memorandum explaining the provisions of section 80IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also been undertaken. 44 From the above a question would arise whether the assessee is required to carry out only activity of handling, storage and transportation of food grains for claiming deduction u/s 80IB(11A). In our opinion, the answer has to be no because in the commercial word an entrepreneur would engage in any business only when the same is commercially profitable. Therefore in case of integrated business of handling, storage and transportation of food grains may not itself be very profitable and if the same is combined with the activity of processing of paddy into rice by spending smaller amount of money for milling mills then such entrepreneur would definitely extend the activity and get into the composite business of handling, storage and transportation and processing of the rice. Let us imagine the situation where the businessman is engaged in the business of procuring, handling, storage and transportation of paddy separately and then selling the same to another businessman who is engaged in the business of only processing of paddy into rice then same would involve unnecessary further cost in terms of carrying the paddy from handling and storage unit to proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed deduction u/s 80IB. The deduction was denied by the Revenue because the assessee was not running a cold storage independently. On appeal the Tribunal held as under: Section 80-IB provides that where gross total income of an assessee includes any profits and gains derived from any of the eligible businesses, a deduction equal to specified percentage of such profits will be granted in computation of total income, and that this deduction will be given only for such period as may be specified. This section applies only to an industrial undertaking and one of the eligible businesses is that such an industrial undertaking operates one or more cold storage plant or plants in any part of the India. The words in section 80-IB(1) are profits and gains derived from any of the eligible business and it is only specified percentage of such profits which is eligible for deduction under section 80-IB. Therefore, the question that arose for consideration in the instant case was as to whether or not the profits earned by the assessee could be said to be derived from the business of operating cold storage plant, and if so, to what extent the profits earned by the assessee could be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is not necessary to carry out a particular activity independently for which the deduction is eligible. Even if such activity is part of overall activity even then the deduction is allowable but of course such deduction is to be allowed on a proportionate basis. Similar view was taken by Mumbai Bench of the Tribunal in case of Samraj Seafoods Pvt Ltd Vs. ITO, ITA No. 2875/Mum/2005. In the case before us the Assessing officer has observed that the assessee has not received any independent income from handling, storage and transportation of the food grains. We have already discussed this aspect earlier and further in view of the decision in case of Sanchita Marine Products (P) Ltd. Vs. DCIT (supra) and Samraj Seafoods Pvt Ltd Vs. ITO (supra). it is clear that it is not necessary for a businessman to receive income from each of the activity separately in case of a composite business. This can be further understood from a simple example of a car manufacturer. Let us say for example a deduction is available for manufacture and sale of engine of the car. Now a car manufacturer could be producing its own engines and using the same in final assembly of the Car then it cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble High Court. Our constitution under article 14 ensures equal treatment of law to every citizen. Therefore if a particular assessee has been granted exemption similar deduction cannot be denied to another person in similar circumstances. The Revenue has not shown that the order in case of L.T. Overseas Pvt Ltd (supra) was reversed later on in any proceedings. Therefore on this principle also we are of the opinion that the assessee is entitled to deduction u/s 80IB(11A). It is also worthwhile to note that the assessee has been allowed deduction in Assessment year 2010-11 and copy of the assessment order has been filed at page 151-197 in the synopsis paper book. After detailed analysis in Assessment year 2010-11 deduction u/s 80IB(11A) was allowed at 70% of the overall profits. It has not been shown before us that this order has been reversed in any legal proceedings. Further the Ld. Counsel for the assessee had relied on the decision of Amritsar Bench of the Tribunal in case of DCIT Vs. Chaman Lal Sons (supra). In that case the deduction u/s 80IA was denied because there was an issue whether the assessee was manufacturing rice or not. One of the contention before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision and not to frustrate it. 48 The Ld. D.R. for the Revenue had tried to distinguish the decision by referring to many other decisions where it is observed that if the provisions of the Act are clear and if there is no ambiguity then there is no need to resort to the principle of liberal construction. We find that the way Sec 80IB(11A) has been worded there is definitely some ambiguity in the sense that it is not clarified anywhere in the provision whether the activity or integrated business of handling, storage and transportation of food grains has to be carried out independently. Even the term handling and storage has not been defined. We have already observed that economically it was not possible to independently carry on the business of handling, storage and transportation of food grains because normally a person engaged in this activity would also carry next logical steps by processing of the paddy into rice. Otherwise the person who is in the business of handling, storage and transportation of food grains will have to sell such paddy to a businessman who is engaged in the business of processing of paddy into rice which would un-necessary lead to further handling, storag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Taxes System Pvt Ltd (supra) even went to the extent that if report is filed even before the tribunal the same is valid. The Ld. D.R. for the Revenue has also relied on various judgments but in our opinion, they stand distinguished in the light of the above noted judgments and particularly the decision of Hon'ble Punjab and Haryana High Court in case of CIT Vs. Shahzedanand Charity Trust (supra) and CIT Vs. Mahalaxmi Rice Factory (supra). 52 The Ld. Counsel for the assessee had also referred to decision of Hon'ble Punjab and Haryana High Court in case of National Horticulture Board Vs. CCIT, CWP No. 9339 of 2008. In this case an application for exemption u/s 10(23C)(iv) was rejected because audit report in form No. 10BB were not filed with the return and same was not dated even. Hon'ble High Court made the following observations: The view taken in the impugned order is highly technical. The provision having been substantially complied with, the audit report should have been taken into account even if, strictly speaking, it was not filed with the return and not in Form 10BB but in Form 10B as stated in the impugned order. This made no difference to the spirit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Sec 80IB(11A) does not incorporate the requirement of Sec 80IB (2)(i) because the deduction is allowable under sub-sec 3 to 11, 11A, 11B and requirement of sub-sec (2(i)) were specifically made applicable to industrial undertakings only. 56 What the Ld. Counsel for the assessee is trying to emphasize is that the restriction contained in Sec 80IB(2)(i) refers to only industrial undertaking whereas the deduction itself is allowable under various sub- sections for different kinds of businesses and some of them are industrial undertakings and some of them are not industrial undertaking for example deduction is allowable in case of hotels or operation of ship or for development of housing project, multiplex theatres etc. which cannot be called industrial undertaking. Similarly deduction u/s 80IB(11A) is for the eligible business and specifically for the integrated business of handling, storage and transportation of food grains which cannot be called industrial undertaking. Without going into this controversy let us first examine whether the assessee has violated the restrictions provided u/s 80IB(2)(i). 57 Before we consider the addition of new plant Machinery, let us consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ga project was sanctioned in 2005 thereafter the assessee started acquiring new land, building and machinery in the financial year 2005-06 onwards. Moreover Ld. Counsel for the assessee conceded that the project was started in A.Y. 2006-07 then the assessee is likely to loose the deduction for first two years, therefore it is rather against the assessee then in favour of the assessee. Otherwise also as pointed out by the Ld. Counsel for the assessee that there cannot be any estoppel against the law. The Ld. D.R. for the Revenue has referred to the decision of Agra Bench of the Tribunal in case of Aqua Plumbing Pvt Ltd Vs. ACIT (supra) and Jain Udai Hotel (P) Ltd Vs. ACIT (Chandigarh Bench) (supra) wherein it was observed that the applicability of the conditions contained in Sec 80IB(2)(i) has to be examined in the first year. We have already concluded that in this case first year has to be reckoned as Assessment year 2006-07. The Ld. D.R. for the Revenue had referred to certain figures and objected that the figure of ₹ 6,05,31,624/- cannot be taken for old machinery because figure is on higher side. The difference is mainly because the Revenue is trying to take up the gross f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in credits and out-goings as well as debts and liabilities of the partnership were also not taken up by the new company. It was held that the agreement in sub-stance as well as in form was one of out and out sale and that it could not be described as a reconstruction of an existing business. In other words, the expression reconstruction in that case was looked at from the point of view of the ownership of the business and the decision of the Court was that where there was a real and effective change in the ownership of the business that could not be reconstruction. In the course of the discussion, however, certain observations have been made by the Bombay High Court (which have been underlined*earlier) to indicate the circumstances in which a reorganization of a business can be taken to involve a reconstruction. But it is not every alteration in the mode, method or scope of the activities of a business and it is not every transfer of assets from one unit to another that will involve reconstruction. The expression is no doubt very wide but it does not take in a case of a company setting up or establishing a totally independent and viable industrial unit for carrying on the same or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med in the return of income perhaps some mistake was committed during the processing of return and that is why the assessee had applied for rectification of mistake and this mistake was rectified in the order u/s 154 on 25.11.2009 (copy available at page 27 of the paper book), therefore this allegation of the Assessing officer is totally incorrect. 65 The next objection which has been raised by the Ld. CIT(A) is that the deduction was claimed initially at 35% and later on claim was made for 100% and same has not basis. We find force in the submissions of the Ld. Counsel for the assessee that because of the dispute with Shri Rajinder Sandal, C.A the assessee may have wrongly been advised to claim the deduction at 35% but when the company came to know about the actual deduction allowable then same was claimed at 100% and even in the next year the deduction has been claimed @ 100%. Otherwise also as pointed out by the Ld. Counsel for the assessee it was held in case of Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi Others, 118 ITR 507 (S.C), that mistake committed by the Counsel for the assessee cannot be used for denying a benefit to the appellant. 66 In respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is definitely eligible for deduction u/s 80IB(11A) because the assessee started integrated business of handling, storage and transportation of food grains in Financial year 2005-06 i.e. Assessment year 2006-07 on proportionate basis @ 70%. However, the assessee is not entitled to deduction in Assessment year 2008-09 because the return of income was filed late and therefore deduction cannot be allowed in view of the restrictions contained in Sec 80AC. Therefore we confirm the action of Assessing officer and Ld. CIT(A) in denying the deduction because return has been filed late in violation of Section 80AC. 70. Third Issue The third issue in this appeal is regarding disallowance of depreciation amounting to ₹ 72,21,35,592/-. This depreciation was claimed at the rate of 50% (1/2 of 100%) for the power plant installed during the second half of financial year. It was claimed before the Assessing Officer that this power plant was commissioned and a certificate from the fabricator M/s Shriram epc was filed for this purpose. The Assessing Officer noticed that no depreciation on this power plant has been claimed under the Companies Act. Even the director s report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of an expert that too from reputed company like M/s Shriram epc without any reason. Further, complete bills and vouchers were produced before him and, therefore, it is wrong to state that no bills were produced. Further, a certificate from the Director of Boilers, Punjab was also submitted showing that power plant was in fact started w.e.f. 25.3.2008 was not considered by him. The power generated in the power plant in the period starting from 25.3.2008 till middle of August 2008 was used for internal consumption of the assessee. It was strongly contended that statement of Shri Rajinder Sandal was recorded at the back of the assessee and, therefore, has no evidentiary value. Moreover, the statement of Mr. Sandal was not correct because earlier he was auditor of the company as well as tax consultant and annexure attached to the balance sheet including depreciation were actually initialed by him. The depreciation schedule given during the statement was fully signed which shows that it was different. It was pointed out that Mr. Sandal has given a false statement perhaps under the duress. Mr. Sandal was involved in the processing of the return filed for the said assessment year wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. It was also pointed out that 19 boxes containing bills and vouchers showing purchases of power point were filed before CIT(A) vide letter dated 8.5.2012, (copy of which is placed at pages 337 338 of the paper book). Since the bills were voluminous, the CIT(A) directed that the same may be produced before Assessing Officer for his verification. Therefore, bills were produced before Assessing Officer and copy of the letter requesting him to see these bills were filed on 8.5.2012, (copy of which is available at page 450 of the paper book). However, the Assessing Officer declined to go through these bills. In these circumstances, a request was made before us to go through the bills as the same were brought to the Court and we have test checked these bills. 74. The Ld. Counsel further submitted that a confirmation from M/s Shriram epc has been filed, (copy of which is available at page 323 of the paper book). It was submitted that M/s Shriram epc was contractor and fabricator of the power plant and, therefore, this certificate should not have been rejected lightly. It is also pointed out that Assessing Officer misunderstood this certificate by stating that boilers were produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , copy of which is available at pages 4 to 11 of the paper book, it is clearly stated that generation of power is one of the business of the assessee company and this report has been signed by Shri Rajinder Sandal. He pointed out that depreciation chart provided by Shri Rajinder Sandal to the Assessing Officer is same except the last line is missing. He has initialed on all the annexures whereas on the chart he has put full signatures which creates a suspicion. In any case, Shri Rajinder Sandal had himself prepared the return of income for the said assessment year in which this depreciation was claimed. However, there was some mistake in the processing and therefore, an application for rectification u/s 154 was filed which was ultimately allowed by the Department and relevant papers in this regard are filed at pages 25 to 27 of the paper book. No cross examination of Mr. Sandal was allowed which was pointed out to the Assessing Officer in a letter (copy of which is placed at pages 312 to 314 of the paper book) and, therefore, this statement could not have been relied. He also contended that a disallowance cannot be made merely on the basis of statement of an expert or a counsel and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn and the chart given by Shri Rajinder Sandal clearly shows that total claim of the depreciation was ₹ 49.99 crores which did not include any depreciation on the power plant. A statement of Shri Rajinder Sandal given by the assessee alongwith questionnaire in this respect was confronted to the assessee. In response, the assessee filed a letter stating that opinion of a professional would not affect the claim which is otherwise statutorily allowable. The Assessing Officer correctly observed that the assessee has failed to produce any certificate form any statutory authority regarding commissioning of the plant. It was further contended that the statement of Shri Rajinder Sandal as well as report of the Director, clearly shows that power plant was commissioned in August 2008, therefore, it cannot be said that power plant was commissioned in March 2008. In this regard he referred to the decision of Allahabad Bench of the Tribunal in the case of India Polyfibres Ltd v ACIT 60 ITD 433 wherein it was held that directors report shall be given a statutory recognition. It was pointed out that certificate issued by the Directors of Boilers only refers to the inspection and passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er plant was filed before the Assessing Officer, copy of which is available at pages 196 to 271 of the paper book. According to the assessee, the plant has been commissioned on 25th March 2008 whereas on the basis of the director s report and statement of Shri Rajinder Sandal in which it was stated that plant was commissioned in August 2008, depreciation was denied. First of all we find that main turbines have been imported from Japan and the invoices have been issued (copy of the same is available from pages 994 995) in the name of M/s Shriram epc Ltd, Chennai, account of M/s Lakshi Overseas Industrial Ltd i.e. the assessee company. The turbines have been shown to have been given to ship in November 2006 and February 2007, therefore, the same must have been received by the assessee by March 2007. Once the turbines come as early March 2007 there is every likelihood that plant can be commissioned by March 2008. The perusal of the copy of agreement with Shriram epc ( placed at pages 971 to 979) shows that assessee had issued a letter of intent for erection of the power plant on 4.6.2005 and ultimately an agreement for this erection was entered on 29.6.2005. A letter was issued on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same clearly mention the names of M/s Shriram epc on account of Lakshmi Energy Foods Ltd. This shows that M/s Shriram epc was engaged in the business of erection of the plant, therefore, it is their duty that after erection is completed and the plant becomes functional. The individual suppliers of the particular machine cannot be held responsible for non functioning of the plant, therefore, what ever coordination is required, was being done by M/s Shriram epc. After all in such large projects some specialized agency like Shriram epc is required to make it sure that after assembly of individual machines and parts the whole plant becomes functional. Therefore even if boiler was manufactured by M/s Thermax Ltd, it was only M/s Shriram epc. who could give a certificate for commissioning of the plant. 81 It was vehemently argued by Ld. DR that there is no certificate available from any statutory authority like Pollution Control Board, Central Excise Department or Customs Dept. or Central Ground Water Board, District Town Planning office. We do not find any force in these submissions. Firstly, a no objection certificate dated 12.4.2007 has been filed before us from the District T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s commissioned obviously after 30.09.2008. As observed earlier, we are satisfied with the explanation that the Director s report could be for the purpose of share holders and could be on the basis of actual revenue generation from the government and will not have any bearing on the allowance of depreciation. In fact, as observed earlier, both the turbines have been purchased from Japan and the same were dispatched or loaded in the ship on November 30, 2006 February 07, 2007, therefore, there cannot be a gap of starting the power plant and it is not possible that second turbine was started as late as after September 2009. In this regard, we further find force in the contention of Ld. Counsel for the assessee that no major purchases have been made after 31.3.2008 (copy of the account of the power plant has been furnished at pages 992 to 993 of the paper book) which is running from the period 1.4.2008 to 31.3.2008 which clearly shows that only purchase to the tune of ₹ 19,28,949/- have been depicted in the power plant account which was stated to be on account of replacement of minor parts and some small repairs. This makes it clear that purchases in respect of power plant were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d controverting the same, then it was obligatory on the part of the assessing authority to allow cross examination. Many other decisions were cited by the Ld. Counsel for the assessee but we are not discussing the same because it is settled that if statement is given by the third party the same cannot be relied without allowing cross examination particularly when the cross examination was sought by the assessee. In fact the Hon'ble Supreme Court in the case of Kishan Chand Chela Ram 125 ITR 713, (SC) has very clearly held that statement of third party cannot be used unless opportunity to controvert the same has been given to the assessee. 84 The Ld. DR has also contended that assessee has not provided any depreciation as per section 205 and 350 of the Companies Act and the Ld. Counsel for the assessee has pointed out that part I II of the Schedule VI of the Companies Act provides that depreciation should be provided u/s 350 over the useful life of any specific asset which means depreciation is to be provided on the useful life of the asset. This clearly shows that no specific rate of depreciation has been provided under part I II of Schedule VI of the Companies Act. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also find that expression used in section 32 of the Act has been judicially interpreted to include machinery kept for use, even if the same was not actively used. Passive user has also been held to be user where it may be necessary for business of the assessee to keep the machinery ready for use. Reference may be made to the judgment of the Delhi High Court in the case of CIT v Refrigeration Allied Industries Ltd [2001] 247 ITR 12. Therein reliance was placed on the following judgments:- (i) Machinery Manufacturers Corporation Ltd v CIT [1957] 31 ITR 203 (Bom). (ii) CIT v Vishwanath Bhaskar Sathe [1937] 5 ITR 62 (Bom.) (iii) CIT v Dalmia Cement Ltd [1945] 13 ITR 415 (Patna) (iv) Liquidators of Pursa Ltd v CIT [1954] 25 ITR 265 (SC) (v) CIT v Bombay State Transport Corporation [1979] 118 ITR 399 (Bom.) (vi) G.R. Govindarajulu Naidy v CIT [1973] 90 ITR 13 (Mad.) (vii) CIT v Elecon Engineering Co. Ltd [1974] 96 ITR 672 (Guj.) and (viii) CIT v Geo Tech Construction Corporation [2000] 244 ITR 452 (Ker.) Reference was also made to the dictionary meaning of the word depreciation as also the object of allowing depreciation. In the present case, the machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hd/2013 is partly allowed. ITA No. 251/Chd/2013 - Assessee s appeal 89 In this appeal the assessee has raised the following grounds: 1 That the order of the Ld. CIT(A)(Central), Gurgaon dated 29.1.2013 is bad in law and on facts. 2 That the Ld. CIT(A) has erred in summarily ignoring the judgment of the Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court regarding jurisdiction/place of assessment. The Ld. CIT(A) inspite of the detailed discuss on the subject and a ground having been specifically taken by the appellant has by passed the issue by not even making whisper on the same. 3 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in not admitting the crucial additional evidence filed under Rule 46A of the Income -tax Rules on the ground that the appellant was allowed sufficient opportunities to adduce evidence during the course of assessment proceedings and it has failed to substantiate its claim for admission of additional evidence under the said rule. 4 That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in rejecting the additional ground of appeal No. 1 raised u/s 250(5) contendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off against profits from difference source or income under different heads without considering the provisions of section 70 of the Income -tax Act, 1961 under which loss can be set off against other income. 90 Ground No.1 is of general nature and does not require any separate adjudication. Ground No.2, 4, 4.1 were not pressed before us and, therefore, the same are dismissed. 91 Through ground No. 3, the issue raised is against rejection of request for admission of additional evidence. The facts and circumstances in this case are identical to the facts and circumstances as adjudicated by us in above noted para Nos. 9 to 11 in assessment year 2008-09 in ITA No. 250/Chd/2013, therefore, following that decision we are of the opinion that Ld. CIT(A) should have admitted the additional evidence. 92 Through ground Nos.5, 5.1, 5.2, 5.3 5.4, the issue regarding allowability of deduction u/s 80 IB(11A) has been raised. In this year, the deduction has been denied to the assessee mainly because the activities of the assessee are not in the nature of integrated business of handling, storage, transportation of food gains . Further the assessee has not submitted proper audit report. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as contended. The income from the Power plant otherwise is from a source which is exempt to tax, so loss arising from therein cannot be set off against profits from a different source or income under a different head, which in this case at hand is income from rice milling. Furthermore, the assessee is claiming additional depreciation i.r.o its additions to P M, which includes Power Plant. While adjudicating the appeal for AY 89-09, the Power Plant has been held to be commissioned on August 2008, based on the Director s Report. In other words, the previous year relevant to this AY is treated as the initial year and it is with this reason that the additional depreciation claimed on the Power Plant [only] as interalia raised in the additional ground of appeal is allowed to be availed off. Consequently, I uphold the disallowance made by the AO in not permitting the set off of the loss. The assessee fails on this ground. 97 Before us, Ld. Counsel for the assessee referred to section 70 of the Act and submitted that loss from one business is allowed to be set off against another business. Further, ultimately deduction under Chapter VI can be allowed only after computing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unabsorbed depreciation, etc. Only if the gross total income so determined is positive the question of allowing the deductions under Chapter VIA would arise, not otherwise. It is well settled that where the predominant majority of the High Courts have taken a certain view on the interpretation of certain provisions, the Supreme Court should lean in favour of that view. The words includes any profits in section 80-I(1) are important and indicate that the gross total income of an assessee shall include profits from a priority undertaking. While computing the quantum of deduction under section 80-I(6) the Assessing Officer, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at the deduction under Chapter VI-A. However, the non obstante clause in section 80-I(6) is applicable only to the quantum of deduction, whereas, the gross total income under section 80B(5) which is also referred to in section 80-I(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in s tock found during the course of search merely on the grounds that the business of the assessee is voluminous and it is not expected from the assessee to reconcile the alleged stock difference. 104 Ground No.1 2 - After hearing both the parties we find that while adjudicating the issue regarding claim of loss from power plant against the other income of the assessee, the Ld. CIT(A) observed at para 9.3 9.3.1 as under:- 9.3 I have considered the submissions of the assessee and the impugned order. The Power Plant no doubt is eligible for deduction u/s 80IA (4) as stated by the AO. However, the assessee has not claimed any deduction. However it is not a question of thrusting the exemption on the assessee as contended. The income from the Power plant otherwise is from a source which is exempt to tax, so loss arising from therein cannot be set off against profits from a different source or income under a different head, which in this case at hand is income from rice milling. Furthermore, the assessee is claiming additional depreciation i.r.o its additions to P M, which includes Power Plant. While adjudicating the appeal for AY 89-09, the Power Plant has been held to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that during the search it was noticed that stock as per books was ₹ 780.15 crores and stock pertain to different government agencies was ₹ 80 crores. The physical stock found during the search in eight godowns was valued at ₹ 786 crores excluding the stock belonging to different government agencies. In response to the query that why difference of ₹ 6 crores should not be added to the income of the assessee, it was stated that on stock taking the value of Bardana was taken on estimated basis at uniform rate whereas the same has to be valued at market rate. The bills of bardana were also produced before the Assessing Officer. However, Assessing Officer observed that since books of account were not produced, therefore, addition is required to be made and consequently he added the sum of ₹ 6 crores as unsecured investment u/s 69 of the Act. 109 On appeal before the CIT(A), submissions made before Assessing Officer were reiterated. It was further stated that assessee had attended the assessment proceedings from time to time along with books of account but the Assessing Officer has not taken the trouble to examine the books and, therefore, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of specific findings, I do not think it approximate to expect him to reconcile the alleged stock difference especially when the books / stock register have not been rejected. Consequently, I am inclined to delete the addition made by the AO. The assessee succeeds on this ground of appeal. 113 The careful perusal of the above para shows that Ld. CIT(A) has correctly decided the issue with good reasoning. During the search, the following question was raised in respect of stock which has been reproduced in the assessment order at pages 35, which reads as under:- Q.5 As the books of accounts stock as on 12.02.2009 is ₹ 780.15 crores + 70 Crores Govt. Stock whereas on physical taking stock has worked out to approx. 786 crores. Please explain the difference (Refer Annexure A-2) A.5 It shall be explained later. However I want to clarify that 70 crores Govt. stock as per books has not be counted in physical stock taking. Our Government stock is lying at Ferozepur Bhaamri etc. Which has not been counted in physical stock taking of ₹ 786 crores . 114 The question itself depicts that stock has been valued on approximate basis. Further, the books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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