TMI Blog2018 (6) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... - Bhavnesh Saini (Judicial Member) and O. P. Kant (Accountant Member) S. Barnwal, Senior Departmental representative, for the appellant. Vidhur Puri, Chartered Accountant, for the respondent. ORDER O. P. Kant (Accountant Member).- This appeal by the Revenue is directed against order dated October 17, 2014 passed by the Commissioner of Income-tax (Appeals)-XXIII, New Delhi (in short the CIT-(A) ) for assessment year 2010-11, raising following grounds : 1. On the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in deleting addition of ₹ 86,59,086 made by the Assessing Officer without appreciating the facts of the case. 2. On the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in allowing the deduction under section 80-IC because the enquiries conducted during the assessment proceedings suggested that the manufacturing unit of the assessee does not exist in the notified area as claimed by the assessee. 3. On the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in allowing the deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Central Excise Authorities regarding existence of the unit and the Tribunal upheld the finding of the learned Commissioner of Income-tax (Appeals)-I, Dehradun. 6. We have heard the rival submissions and perused the relevant material on record. In the assessment year 2009-10, the Assessing Officer disallowed the deduction under section 80-IC of the Act on the ground that unit of the assessee claiming deduction was not found to be in existence. In the assessment year 2009-10, the Tribunal in I. T. A. No. 1300/Delhi/2013 allowed the deduction under section 80-IC of the Act. The relevant extract of the order of the Tribunal is reproduced as under : 5. We have heard the rival submissions and perused the material on record. The Assessing Officer held that the assessee failed to prove the existence of the unit at the given address as at the time of site inquiry, a unit dealing in rubber products was found at the premises. Before the learned Commissioner of Income-tax (Appeals), the asses see filed copy of rental agreement for the premises, documents in support of power connection, documents in relation to registration of the unit with the District Industry Centre, Roorkee, Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income was rooted in the books of the assessee and any comparable cases which could establish that the gross profit rate was abnormal in the line of assessees's business. The learned Commissioner of Income-tax (Appeals) has also dealt the objection of the Assessing Officer of having plant and machinery only of ₹ 60,985 and it was not possible to have manufacturing of goods worth crores of rupees, no expenses on freight inward or outward, no quantitative details of principal items such as raw material, finished goods, by products, etc., in the tax audit report. The relevant findings of the learned Commis sioner of Income-tax (Appeals) are reproduced as under : '1.5.1 According to the Assessing Officer, the assessee had shown turnover of ₹ 3 crore but had plant machinery of only ₹ 60,985 in the balance-sheet. In this connection, the assessee has made the following submission : We wish to inform your goodself that manufacturing of embedded systems requires mounting of components on a printed circuit board. Boards and components are purchased from external parties. The micro-controller, which, is the heart of the system, are also purchased f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are persons of who have received not only national but also international recognition for their work in the areas of design and development of software and electronic embedded systems. Such a team is more than capable of designing and developing the prod ucts which were manufactured by the assessee-firm. Now, it is very clear that the partners of the assessee-firm are self sufficient and do not require to pay any royalty to anyone. ' 1.5.2 The business was primarily of software development ; the hardware part was of secondary importance. It did not require heavy investment in plant and machinery. The partners are technically qual ified persons who were doing the software part themselves. The low investment in plant and machinery was a ground for raising doubt about the assessee's business results. But, if heavy investment in plant and machinery was not actually required for the business process, it stands to reason that the same was not made by the assessee. 1.6.1 According to the Assessing Officer, the assessee had not debited expenses on freight inward or outward. In this connection, the assessee has made the following submission : 'That the assessee was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chers and all the sales and purchase have been properly submitted to the VAT Department on quarterly basis which have been acknowl edged by VAT Department.' 1.7.2 The explanation is self-explanatory. Even if the assessee did not furnish quantitative details, its books of account were available for verification. Unless some discrepancy was pointed out in the same, the non furnishing of quantitative details in the tax audit report, by itself, would not mean much. 1.8 The assessee furnished copies of the following documents in support of its contention : 1. Partnership deed dated June 1, 2008. 2. Qualification/achievement certificates of the partners. 3. Rent deed. 4. DIC registration (Part 1). 5. VAT inspection report. 6. VAT registration certificate. 7. NOG from pollution office. 8. Electricity certificate. 9. Declaration to Central Excise. 10. Excise inspection report. 11. Sample of purchase bills along with Form 16. 12. Sample of Sale Invoices. 13. Rent deed for tyre manufacturing plant which was causing pollution. 14. DIC registration (Part 2). 15. Letter to Excise for closure. 16. Closure acknowledgment from VAT Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng assessment year, the assessee has filed sufficient evidence of existence of unit at the address i.e. village Salempur, Rajputana, Roorkee, district Hardwar (Uttaranchal), and accordingly the Tribunal accepted the finding of the learned Commissioner of Income-tax (Appeals)-I, Dehradun for holding that the unit was in existence during relevant period. 8. Since in the year under consideration, the identical issue of denying deduction under section 80-IC of the Act on the allegation of non-existence of the unit is involved, respectfully following the decision of the Tribunal (supra), we uphold the finding of the learned Commissioner of Income-tax (Appeals) on the issue in dispute and dismiss the grounds of the appeal. 9. We may like to specifically mention that in the grounds of appeal the Revenue has not raised any ground challenging whether the software development activity of the assessee was not manufacturing and, therefore the arguments of the learned senior Departmental representative challenging the deduction under section 80-IC of the Act in this regard, cannot be considered. 10. In the result, the appeal of the Revenue is dismissed 11. The decision is pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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