TMI Blog1997 (1) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... than, taken in the case of Shri V.N. Dubey. Accordingly, the order of the CIT on this issue is upheld. Ground No. 1 is rejected. 4. The ground No. 2 reads as under: "The learned CIT(A) erred in allowing deduction under s. 80HHA at Rs. 2,38,648 which has been disallowed by the AO without considering the facts that the assessee is not a small scale industrial undertaking as envisaged by the provisions of s. 80HHA of the IT Act." 5. The facts of the case are that the assessee claimed deduction under ss. 80HHA and 80-I. After verification of the assessee s claim, it was found by the AO that the assessee is entitled to deduction under s. 80-I. Accordingly allowed the same. In respect of the claim under s. 80HHA, he opined that the total cost of the plant and machinery as per depreciation chart is much more than Rs. 35 lakhs. Hence, the assessee is not entitled to deduction under s. 80HHA. On appeal, the CIT(A) agreed with the submissions of the assessee s counsel, directed the AO to allow deduction under s. 80HHA. The Revenue aggrieved with the order of the CIT(A) is in appeal before us. 6. At the time of hearing, it is submitted by the learned Departmental Representative that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power failure and is used only in the case of power failure. The assessee is required to instal the generator for the inability of the Government to supply power uninterruptedly. Therefore, the generator which is only a stand-by arrangement cannot be considered for denying exemption under s. 80HHA to the assessee. In support of his contention, he relied upon the definition of small scale industrial undertaking from Industries Manual issued by the Directorate of Industries, Madhya Pradesh. As per this definition, the cost of generator is to be excluded. He further submitted that the provision for grant of exemption under s. 80HHA are the beneficial provision and it should be construed liberally. (b) Tubewell and well He submitted that in the common parlance meaning, the tubewell and well are not the plant and machinery and, therefore, cannot be considered while working out the total value of the assessee s plant and machinery. (c) Motor pump He submitted that the motor pump is used for the purpose of lifting of the water and it does not take part in the manufacturing and production of articles or things and, therefore, should be excluded while working out the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking does not exceed Rs. 35 lakhs. The business of the undertaking is hatchering of eggs. Therefore, it has to be seen, which are the plant and machinery installed for the purpose of hatchering of eggs. Only the cost of such machinery, as on the last day of the previous year has to be taken into account for determining whether the assessee is a SSI. The AO has not given any working, how he reached to the conclusion that value of assessee s plant and machinery exceeded Rs. 35 lakhs. Therefore, the matter has to be restored to his file for fresh consideration. However, the arguments of both the sides with reference to each item of asset are considered as under: (a) Generator It is submitted by the learned counsel for the assessee that the generator is kept only as a stand-by arrangement to be used in case of power failure and, therefore, it has to be excluded from the meaning of "plant and machinery", while determining whether the assessee is a SSI. In support of his contention, he relied upon the Industrial Manual issued by the Directorate of Industries, Madhya Pradesh. Photocopy of the same is filed before us. We find that Industrial Manual Vol. I contains Acts, Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking is carried on with the aid of the power supplied by the Madhya Pradesh Electricity Board, a State Government undertaking. The assessee is required to instal the generator set only because of the inability of the Electricity Board to supply the power uninterruptedly. This contention could not be controverted by the learned Departmental Representative. Only after appreciating, this factual position, which is applicable in the case of many industries, the Government has decided to exclude the cost of generator set from the value of the plant and machinery for the purpose of the definition of SSI., while registering the same by the Department of Industries. Therefore, in our opinion, it would be in the interest of justice, if the value of generators is excluded while determining the value of plant and machinery for s. 80HHA also. While taking the above view, we also derive support from the decision of Hon ble Supreme Court in the case of Bajaj Tempo Ltd. vs. CIT (1992) 104 CTR (SC) 116 : (1992) 196 ITR 188 (SC), wherein their Lordships have held : "A provision in a taxing statute granting incentive for promoting growth and development should be construed liberally; and since a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not find any discussion in the assessment order on this aspect of the matter and, therefore, we direct the AO to examine whether the broiler house or the building was a plant in the light of our above discussion. We do not agree with the submissions of the learned counsel for the assessee that the building can be treated as plant for the purpose of allowing depreciation and at the same time has to be excluded for the purpose of working out the value of the plant and machinery under s. 80HHA. The AO, therefore, has to determine whether the building is a plant or not. If he reached to the conclusion that it is not a plant, he shall be at liberty to take the appropriate action in accordance with law to revise the depreciation allowed thereon. (e) Hatcher setter The learned counsel for the assessee himself admitted that it is a plant required for the purpose of the hatchering activity of the industrial undertaking. (f) Mini Truck Though the truck is a machinery but it is neither installed nor used for the purpose of hatchering. Therefore, in our opinion, it has to be excluded while determining the value of the plant and machinery for the purpose of s. 80HHA. In the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,000 rent paid plus Rs. 12,500 interest @ 15% per annum). That the rent of Rs. 22,500 for a shed of total area of 53,120 sq. ft. is much less than prevailing market rent. (b) that Shri V.N. Dubey is being assessed to tax at the maximum marginal rate and, in fact, the assessee is getting deduction under ss. 80HH and 80-I, so the question of avoidance of tax does not arise, because the burden of tax is more in the case of V.N. Dubey than in the case of the assessee-company. 13. We have carefully considered the arguments of both the sides. The genuineness of agreement dt. 1st Aug., 1988, is not disputed. The assessee has taken on lease a huge shed with the area of 53,120 sq. ft., when as per agreement, the assessee has to pay a sum of Rs. 10,000 as rent and deposit a sum of Rs. 10 lakhs, the AO was not justified in charging the interest on presumptive basis ignoring the agreement. We, therefore, uphold the order of the CIT(A) deleting the addition of Rs. 1,50,000. Ground No. 3 of the Revenue's appeal is rejected. C.O. No. 15/Jab/1994 14. Ground No. 1 of the cross-objection is only in support of the order of the CIT(A). The same being infructuous is dismissed. 15. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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