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Dy. CIT, Cir-1 (2) , Baroda Versus Amigo Brushes (P) Ltd., (Now Jewel Consumer Care (P) Ltd.) and others

2015 (7) TMI 244 - ITAT AHMEDABAD

Addition made u/s 2(22)(e) for deemed dividend - advance received from sister concern - CIT(A) deleted the addition - Held that:- We are not inclined to interfere in the order of ld. CIT(A) who has deleted the impugned addition of ₹ 58,12,248/- made u/s 2(22)(e) on account of advance received from sister concern. The assessee company does not hold a share in lender company from which it had received deposit then it cannot be treated to be a deemed dividend under section 2(22)(e) of the Act .....

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from the facts of the case that the assessee submitted two reports which contained that the assessee visited Germany to negotiate supply of spares for the company’s machines and also understand certain technical issues related to the operations of the machines. In view of these facts, the assessee incurred this foreign traveling expenditure. We find no evidence that these tour expenditures are not for the purpose of the business rather it is for negotiating for spares and purchases of manufactu .....

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s have been culled out on the issue on the basis of various judicial pronouncements. An expenditure which involves mere replacement of a part of the machine and not the entire machine, or does not result in the creation of any new asset, cannot be termed as capital expenditure. Therefore, the impugned repair expenditure would amount to a revenue expense and it would qualify for deduction as repairs and maintenance. In view of this, we find no infirmity in the order of CIT(A).- Decided in favour .....

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irect the AO to allow the claim as per the law.- Decided in favour of assessee. - ITA No.2674/Ahd/2010,ITA Nos.2617/Ahd/2010 - Dated:- 29-6-2015 - Shri Shailendra Kumar Yadav and Shri Anil Chaturvedi, JJ. For the Petitioner : Shri B. L. Yadav, Sr. DR For the Respondent : Shri S. N. Soparkar, AR ORDER PER Shailendra Kumar Yadav, Judicial Member. Both these appeals of Revenue pertain to the same group of companies and the issues being similar, these were heard together and are being disposed of .....

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in law, the ld. CIT(A) erred in deleting the addition of ₹ 10,91,373/- on account of disallowance of foreign travel expenditure without appreciating the fact that the assessee had failed to establish that the expenditure was incurred wholly and exclusively for business purpose. 3. On the facts and in the circumstances of the case the ld. CIT(A) erred in deleting the addition of ₹ 1,01,804/- made on account of repairs for excavation of pond, purchase of wood shaft, ply, Burma teak woo .....

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ackers Pvt. Ltd. It was further noted that Smt. Geeta Goradia had share holding in excess of 20% in the assessee company as well as more than 20% in each of the above companies. He also further observed that each of the above companies had accumulated profits as on the first date of the accounting period. Hence it was held that the provisions of section 2(22)(e) were attracted and the advances/loans as under were brought to tax as deemed dividend :- a) Baroda Precimould Pvt. Ltd. Rs.41,00,000/- .....

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Brushes Pvt. Ltd. vs. ACIT for AY 2003-04 (ITA No.157/Ahd/2008), Garodia Innovative Technologies Pvt. Ltd. for AY 2000-01 (ITA No.1655/Ahd/2006). It was prayed that since the issue was identical, the Tribunal s orders indicated may be followed. In this background, the ld. CIT(A) observed that in the case of assessee s group companies, in three separate orders, the Tribunal has held that the provisions of section 2(22)(e) would not be attracted in the case where the loan was made to a person who .....

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d the order of Assessing Officer and stated that ld. CIT(A) has wrongly deleted the addition. So, the impugned order may be set aside and that of the Assessing Officer be restored. On the other hand, the ld. AR supported the order of ld. CIT(A) and submitted that the issue is now covered in favour of assessee by the decisions of Hon ble Gujarat High Court in the case of CIT vs. Daisy Packers Pvt. Ltd. vide order dated 18/07/2012 (copy of order has been submitted which is placed on record). 3.3 A .....

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1 (for short 'the Act') and income of the assessee was declared under Section 115JA of the Act. Thereafter the case was reopened under Section 147 of the Act which was served on the assessee. The case of the department was that the Amigo Brushes Pvt. Ltd. had a total surplus of ₹ 70 lacs as on 31st March 1999 and it has advanced a loan to the assessee to the tune of ₹ 25 lacs. Whereas the assessee contended that he received deposit from Amigo Brushes Pvt. Ltd. and Daisy Packe .....

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it was not the case of the deemed dividend and it was the case of the deposits. The Tribunal further recorded finding that it was not a loan given by Amigo Brushes Pvt Ltd. to the assessee company and it was intercorporate deposits. However, we need not go into various questions raised by learned counsel for the parties as admittedly the assessee was not shareholder in the Amigo Brushes Pvt. Ltd. The Division Bench of this Court inCommissioner of Income Tax vs. Ankitach(P) Ltd. [(2012) 340 ITR .....

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aspect has not been considered by the Tribunal but since the order of the Tribunal can be supported by another legal reason on the admitted facts, we need not send the matter back. 3.0 For the aforesaid reasons, we are of the considered opinion that substantial question of law formulated by the Division Bench is to be answered in affirmative against the assessee in favour of the department. Nothing contrary was brought to our notice in this regard. Facts being similar so following same reasoning .....

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from said lender companies was an inter corporate deposit and not a deemed dividend, therefore, CIT(A) was justified in deleting the addition. We uphold the same. 4. Ground No.2 relates to disallowance of foreign travel expenses of ₹ 10,97,373/- on the ground that the same were not established to be for business purposes. 4.1 The matter was carried in appeal before the ld. CIT(A) and having considered the submissions of assessee the ld. CIT(A) deleted the impugned addition. The Revenue be .....

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Copy of order placed on record. 4.3 After considering the rival submissions and going through the material on record, we find force in the submissions of ld. AR. We find that the Tribunal in the case of Jewel Consumer Care (P) Ltd. (supra) has decided the issue with the following observation:- 5. We find from the facts of the case that the assessee is in the business of manufacturing of tooth brushes and the assessee s MD Shri Amit Goradia, who is an IIT Mechanical Engineer visited M/s Anton Za .....

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he assessee visited Germany to negotiate supply of spares for the company s machines and also understand certain technical issues related to the operations of the machines. In view of these facts, the assessee incurred this foreign traveling expenditure. We find no evidence that these tour expenditures are not for the purpose of the business rather it is for negotiating for spares and purchases of manufacturing machinery of tooth brushes, the visit was undertaken by the Managing Director. We fin .....

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, purchase of wood shaft, ply, Burma teak wood, tiles etc. treating the same as capital in nature. The facts of the case are that the Assessing Officer noted that the assessee had claimed expenditure on account of repairs for excavation of pond, purchase of wood shaft, ply, Burma teak wood, tiles, door, etc. aggregating to ₹ 1,13,116/-. He held the same to be of capital nature. The net expenditure of ₹ 1,01,804/- was disallowed after allowing depreciation amounting to ₹ 11,311/ .....

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t of ₹ 1,01,804/- observing that the expenditure was on account of repairs and replacement and hence lay in the revenue field and not in the capital field. 5.2 Being aggrieved by this order the Revenue is in appeal before us. The ld. DR relied on the order of Assessing Officer whereas the ld. AR supported the order of CIT(A). 5.3 After considering the rival submissions and going through the material we find that some important principles have been culled out on the issue on the basis of va .....

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7. Now we take ITA No.2617/Ahd/2010 for AY 2000-01 filed by Revenue on following grounds: 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 20,00,000 considering the same as deemed dividend without appreciating the fact that the director of the assessee company had share holding to the extent of 75.98% in the assessee company as well as more than 20% share in Amigo Brushes. 2. On the facts and in the circumstances of the ca .....

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#8377; 20,00,000/- being deemed dividend. The Assessing Officer observed that the assessee company had received loan of ₹ 20 lakhs from M/s Amigo Brushes. It was further noted that a Director of the assessee company, M/s Geeta Goradia, had share holding to the extent of 75.98% in the assessee company as well as more than 20% in Amigo Brushes. It was also observed that the accumulated profits of Amigo Brushes as on the first day of accounting period stood at ₹ 73,78,514/-. Hence it wa .....

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ons of section 2(22)(e) would not be attracted where the loan was made to a person who was not a shareholder or beneficial owner of shares of the lender company. In the instant case also the assessee did not have even a single share in the lender company, i.e. Amigo Brushes. Hence following the decision of the Tribunal, Mumbai Special Bench in ACIT vs. Bhaumik Colour Pvt. Ltd. 313 ITR (AT) 146 as well as in the case of assessee s group companies addition of ₹ 20,00,000 addition was directe .....

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para No.3.3 of this order. Facts being similar so same reasoning we uphold the finding of CIT(A) on this issue. 8. The next ground of the appeal is regarding allowing deduction under section 80IA of the Act claimed by the assessee after considering the report of Chartered Engineer without appreciating the fact the assessee had not produced SSI certificate issued by the District Industries Commissioner especially because the assessee had plant and machinery worth ₹ 3 crores at the beginning .....

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oner. The Assessing Officer hence concluded that on this aspect itself, the claim of the assessee for deduction u/s 80IA must fail. The Assessing Officer further observed that though the activity of manufacturing toothbrushes was reserved for the SSI sector, the same could not be said to cover the activity of manufacture of toothbrush handles. It was noted that under various notifications issued under the Industries (Development and Regulation) Act (IDRA), the limits for investment of an SSI uni .....

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raised on behalf of the assessee, the remand reports of the Assessing Officer and the facts of the case. He observed that upto Asst. Year 1999- 2000, section 80IA(2)(iv)(d) entitled a small scale industrial undertaking to claim deduction u/s 80IA. However, w.e.f. 1.4.2000, i.e. Asst. Year 2000-01 and onwards, section 80IB came into the statute book. The provisions of section 80IB would be applicable to the assessee s case. As per section 80IB(ii), the same benefit continued to be extended to an .....

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Department of Industries. Small scale industrial undertaking has been defined in sub-section 14(g) of section 80IB to mean an industrial undertaking which is, as on the last day of the previous year, regarded as a small scale industrial undertaking u/s 11B of Industries Development and Regularation Act (IDRA), 1941 . Section 11B of IDRA provides as follows :- Power of Central Government to specify the requirements which shall be complied with by the small scale industrial undertakings. 11B(1) T .....

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best to subserve the common good. Specify, having regard to the factors mentioned in sub-section (2) by notified order, the requirements which shall be complied with by an industrial undertaking to enable it to be regarded for the purposes of this Act, as an ancillary or small scale industrial undertaking and different requirements may be so specified for different purposes or with respect to industrial undertakings engaged in the manufacture or production of different articles. In exercise of .....

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Ministry of Industry (Department of Industrial Development) No.S.O. 232(E) dated the 2nd April, 1991, the Central Government hereby specifies the following factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of the said Act. (1) Small Scale Industrial Undertaking - An industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or .....

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graphs (1) and (2) of this notification, the original price thereof irrespective of whether the plant and machinery are new or second shall be taken into account. b) In calculating the value of plant and machinery following shall be excluded namely - i) Cost of equipment such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores. ii) Cost of installation of plant and machinery, iii) Cost of research and development equipment and pollution control equipmen .....

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ing electrical power to the plant and machinery from the place of manufacturing/safety measures. vii) The cost of gas producer plant, viii) Transportation charges (excluding of taxes i.e. sales tax, excise etc.), ix) Charges paid for technical know-how for erection of plant and machinery, x) Cost of such storage tanks which store raw materials finished products only and are linked with the manufacturing process, xi) Cost of five fighting equipment. Thus it was found that (a) the value of plant a .....

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tification comes to ₹ 2,87,32,967/-. Thus the assessee company was within the prescribed limit of investment of plant and machinery and deduction u/s 80IB of this amount, cannot be denied as observed by CIT(A). 8.1.2 So far as the other issue is concerned i.e. relating to omission on the part of the assessee to get itself registered as SSIU, the notification issued by the Department of Industry dt.10.12.1997 itself permits the assessee to exercise an opinion whether to get itself registere .....

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ghty days from the date of publication of this notification in the Official Gazette. The CIT(A) observed that the assessee did in fact obtain temporary registration earlier but later on did not exercise its option to obtain the regular certificate of registration. However, this would not take away from the fact that assessee company continued to be regarded as a small scale undertaking for the purposes of section 11B of the IDRA. The only requirement as per the notification issued u/s 11B for be .....

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ll the requirements for being regarded as SSIU and the deduction u/s 80IB cannot be denied on this ground as a whole. 8.2 Being aggrieved the Revenue has come in appeal before us. The DR supported the order of Assessing Officer whereas on the other hand the learned Authorized Representative relied on the order of CIT(A). Learned Authorized Representative also submitted that the is covered in favour of assessee by the decision of the Tribunal in assessee s own case for Asst. Year 2001-02 and in o .....

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d. Vs. ITO, ITA No.2278/Ahd/2006 dated 19-12-2008 is placed on record wherein vide para-9, an observation has been made that the registration is not a precondition to avail the benefit of deduction under Section 80IB of the Act. The relevant portion is reproduced below: 9. We have heard both the parties and gone through the facts of the case. At the outset, we may advert to the contention of the ld. DR that registration of an industrial undertaking as an SSI is necessary for conferring the benef .....

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taxpayer is a small scale industrial undertaking within the meaning of proviso to sec. 80IB(2)(iii) read with clause (g) of sec.80IB(14) of the Act. The relevant clause (g) defines small scale industrial undertaking (SSI) in the following terms: xxxxx In addition to the above decision of the respective co-ordinate Bench, we have also been informed that in assessee s own case for the same assessment year, the Revenue has challenged certain findings of the first appellate authority passed in the f .....

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turing process and various types of handles manufactured which in turn are sold to various tooth brush manufacturing unit who put in different type of bristles to make tooth brushes. It was contended that similar issue arose in the case of sister concern of the assessee viz. Ruby Moulders Pvt. Ltd. CIT(A) held this to be manufacturing and allowed claim of deduction under Section 80IA. While deciding this appeal, CIT(A) has relied on the case of Ruby Moulders Pvt. Ltd. against which department ha .....

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he order of CIT(A) allowing similar claim. Though from the side of the Revenue, the learned DR has tried to explain that as per the said scheme, it was necessary to obtain registration but we are not examining the claim of registration of SSI unit as per the Govt. of Gujarat, Industries and Mines Department. Rather, we are examining the proviso of section 80IA wherein vide clause (f) of sub-section 12 of Section 80IA has defined the definition of small scale undertaking as follows: (f) small-sca .....

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