TMI Blog1994 (4) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of tax at a lower rate, is dependent on the outcome of the third issue. The fifth issue is whether, the excise duty actually paid in the accounting year, which is so allowed to be deducted on payment basis only, could be included as part of the value of unsold stocks at the close of the accounting year. 2. We shall first deal with the issue of the valuation of closing stock of finished goods. It is an accepted position that, on these finished goods, excise duty had been paid, at the time of removal of the goods. The objection raised by the assessee, is that, when section 43B of the Income-tax Act, 1961, allows deduction of duty, on the consideration of it having been paid in the accounting year, relevant to the assessment year, then so much of the duty as paid in the accounting year, should not be included in the value of unsold stocks, because, otherwise it would amount to not allowing of deduction of the duty according to the provisions of that section of the Act. The counsel for the appellant, Shri Ganesan, placed on our record, a copy of the order of the Special Bench of the Tribunal in the case of the appellant company for the assessment year 1984-85 in ITA No. 3483/Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, Shri Ganesan submitted that, section 37(3A) of the Act, had been invoked about the expenses of Rs. 2,26,217 incurred on conferences for training of company's officials. He fairly submitted that, the identical claim of the appellant company, for the earlier assessment year, did not find favour with the Special Bench. Therefore, respectfully following the said decision, we reject this claim of the assessee, for the present assessment year under appeal. 5. Shri Ganesan submitted that, section 37(3A) of the Act, had been applied on the conveyance expenses and two-thirds had been considered for purposes of disallowance under that section. This issue was also considered by the Special Bench and it was held that. conveyance expenses to the extent of fifty per cent of two-thirds, could be considered for disallowance under the said section. Therefore, respectfully following the decision of the Special Bench, we have to hold that, fifty per cent of two-thirds of the conveyance expenses are liable to be considered for purposes of disallowance under section 37(3A) of the Act. 6. Shri Ganesan submitted that, the appellant company had claimed deduction of Rs. 54,347 under the heads 'a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is that, the aggregate value of machinery and plant has to be determined with reference to only that machinery and plant, that are actually involved in the production or manufacturing process. The department's contention, he submitted is that, all items that are installed in the factory premises, with the exception of tools, jigs, dies and tools, are to be aggregated. He contended that, on this basis, the department had concluded that, since, the value of machinery and plant exceeds Rs. 20 lakhs, therefore, the assessee, could not be categorised as a small-scale industry. Accordingly, the department had resorted to the Schedule XI of the Act and had denied the claim of investment allowance. He contended that, PHD Chamber of Commerce had issued for the benefit of its members, broad guidelines for determining the value of the plant machinery of small-scale units, copy of which, he had placed at pages 37 to 39. According to this guideline, the value of equipment used for research development, power generating sets, airconditioning equipment used for maintaining temperature, moulds, dies, jigs, tools and consumable articles have all to be excluded. He contended that, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all the notifications as issued by the Ministry of Industries, is fully justified in the light of the observation made in the abovementioned memorandum explaining the Finance Bill. He filed copies of various notifications issued in this behalf, to support his contention that, equipments of research development, generating sets, dies, jigs, moulds, tools, airconditioners, etc., are to be excluded for determining the aggregate value of plant machinery of the small-scale unit. He also filed a chart showing the value of items of machinery, etc., which would have to be excluded, based on which, he claimed that, the aggregate value of machinery falls within the permissible limits. He pleaded that, the assessee having satisfied the pre-requisites for recognition as a small-scale industry, it should be allowed the claim of investment allowance. Shri Ganesan submitted that, he derives support from the decision of Calcutta High Court in CIT v. Technico Enterprise (P.) Ltd. [1994] 206 ITR 36. He submitted that, to categories all items of assets installed in the factory premises as plant machinery is therefore wrong and it should be limited to only those machinery, that process the var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1982] 1 ITD 106 (Delhi) and the identical claim of stretching the meaning was made, but, it was held that, the meaning should be confined to the Act alone. She submitted that, in that case, the assessee desired exclusion of certain machinery on the pretext that, they form part of the tools and it was held that, such exclusion was not permissible. She contended that, in Electrolytic Foil Ltd. v. ITO [1984] 7 ITD 635 (Hyd.) it was held that, the assessee though was treated as a small-scale unit by the Directorate of Industries, since, it did not satisfy the conditions laid down under the Act, it could not be granted the benefit of investment allowance. She referred to the decision in UBS Publishers Distributors Ltd. v. LAC [1991] 36 ITD 457 (Delhi) and submitted that, the recognition by the Ministry of Industries as a small-scale unit is not the criteria, but, it is on the satisfaction of the condition laid down under the Act, that, the assessee could be treated as a small-scale unit. She contended that, the definition of the term small-scale unit concerning the value of plant machinery, states that, only four items, namely, dies, jigs, moulds and tools are not to be considered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as substituted for the then existing provision for development rebate. Under the provisions for development rebate, there was no mention of small scale unit being eligible for the deduction. It was for the first time that, the deduction was permitted along with the introduction of Investment Allowance by the Finance Act, 1976. The Notes on Clauses and the Memorandum explaining the provisions of the Finance Bill, 1976 do not throw much light on the Intention behind the grant of investment allowance to the small scale unit. The Press Note issued by the Ministry of Industries in 1975, throws some light on the policy of the Government concerning the small scale units. This Press Note state that, the success of the small scale units in the country's overall economic development had been recognised in the 32nd meeting of the Small Scale Industries Board, held in November 1974 and it was unanimously decided to revise the definition of Small Scale Industries. Considering the steep increase in prices, the limits that were prescribed for value of machinery to be held by a unit to be recognised had become unrealistic, which was the reason for upward revision of the value of the machinery to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance is admissible in respect of any machinery or plant installed in such an undertaking for the purposes of the business of manufacture or production of any article or thing including any article or thing of low priority specified in the list in the Eleventh Schedule to the Income-tax Act. A concern which does not fall under the category of a small scale industrial undertaking is denied the benefit of investment allowance if it is engaged in the manufacture or production of any article or thing listed in the Eleventh Schedule. (ii) Under section 80HHA of the Income-tax Act, a taxpayer is entitled to a deduction in the computation of his taxable income of an amount equal to 20% of the profits and gains derived from a small scale industrial under-taking set up in a rural area for ten initial assessment years. (iii) Under section 80-I of the Income-tax Act, a taxpayer owning a small scale industrial undertaking is entitled to a deduction, in the computation of his taxable income, of an amount equal to 20 per cent of profits and gains (25 per cent in the case of a company) derived from a small-scale industrial undertaking which may be engaged in the manufacture or production of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985. The Finance Bill, 1986, does not make any further reference to the other contents of the notification so issued by the Department of Industrial Development, such as the determination of the aggregate value of investment in machinery and plant. In our view, this was felt unnecessary because, through the Income-tax Acts, only some more benefits are extended to such small-scale units. From the time, small-scale units were given concessions under the Income-tax Act, there was never any explanation or provision added to the Act, as to manner of determination of the aggregate value of the machinery and plant, that was contrary to the one laid by the Ministry of Industry. We may assure that unlike the provisions of sections 80-I, 80HH, etc., where, the pre-requisites for a new industrial undertaking had been defined, there are no conditions specified in section 32A of the Act for grant of recognition as a small-scale unit, other than, borrowal of the definition from the one recognised by the Ministry of Industries. This, in our view suggests that, the only authority, which has the power to grant recognition to a unit as a small-scale unit being the Industries Ministry or the concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and the other conditions of creation of reserve, etc., are satisfied and allow the claim, in accordance with law. Before we part on this issue, we may observe that, by the Finance Bill, 1992, the definition of the term 'small-scale industrial undertaking' in section 80-IA has been amended to the effect that, the said expression cover only those small-scale industrial undertakings which are regarded as such undertakings under section 11B of the Industries (Development and Regulation) Act, 1951. This further fortifies our view that, the intention of the Government is only to give uniform treatment to small-scale industrial undertakings under different statutes. The claim of deduction under section 80-I, which is on identical lines as those of investment allowance, for the reasons given therein, we direct the AO, to examine the satisfaction of other requirements of that section and the quantum of deduction allowable, and allow deduction, in accordance with law. 12. The claim of determination of profit derived from the undertaking for purposes of deduction under section 80HH of the Act, is based on the plea, that income shown under the head services, is from the industrial underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectric current, they carry out several operations that are not possible in an electric or manual typewriter. The electronic typewriters on being switched on for the electric current, sends the current to the main board. The keyboard, the daisy wheel, the liquid crystal display, etc., are linked with the main board by the use of electric cables. The main board is stated to have a controller, which controller is called as the Central Processing Unit (CPU) and as the brain. The assessee, had separated the value of this brain from the value of the typewriters in its sale invoices, which for excise duty purposes, was claimed as services, not attracting excise duty. The submission of the appellant before the authorities was that, without the software, the typewriter remains a dumb box only. The so-called software, is impressed into a silicone chip (CPU) or the brain, with the aid of a machine called EPROM writers. The various letters of the keyboard of the typewriters, send electronic signals to the brain, which in its turn activates and responds to the various commands, translates them into various letters, by selecting and pressing the corresponding letters in the plastic daisy wheels, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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