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M/s Japna Exports, Delhi Versus Income Tax Officer, Ward-25 (1) , New Delhi

Disallowing the claim u/s. 80IC - Not treating the activity at Kala Amb as a manufacturing activity by revenue - definition of manufacture u/s. 2(29BA) - whether a mosquito repellant is distinct from the parts constituting it such as mould, plug, wire, porcelain, led etc. and therefore is manufacture? - Held that:- Revenue Authorities has given a sufficient opportunity to the assessee for filing the Satisfaction Note for filing the eligibility condition for claiming deduction u/s. 80IC of the I. .....

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f ₹ 10,400/- odd is being used at Kala Amb (HP). So it can be visualized what portion of the complete manufacturing process is being carried out at Kala Amb. We fully agree with the findings given by the revenue authorities. Secondly, the assessee has also not produced the electricity bill issued by the concerned electricity department. After examining the details of electricity bill, we find that as much as ₹ 35,124/- were incurred for electricity in Delhi whereas as paltry sum of & .....

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al its claim before the Assessing Officer, Ld. CIT(A) as well as before us establishing that assessee is in manufacturing of Mosquito Repellant machines etc. The entire machine was not made at Kala Amb. Only assembling of machine was done at Kala Amb (HP). The assessee has also not furnished any purchase bills of machinery to show that it was a new purchase. The assessee was in the business of manufacturing of Mosquito Repellant machine from the year 1998, that means the business of manufacturin .....

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or part of the work and the unit at Kala Amb gets the article in the same condition in which it is to be sold. The cabinet or the main part of the machine is made at Delhi. The plug is made in the moulding machines and the pins in the plug are procured. The resistance wire and LED are procured from Delhi and the machinery is assembled at Kala Amb (H.P.). The main machines for making this item are moulds which are used to give shape to the plugs and heaters. Therefore conditions uls 80IC 4(i)& (i .....

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of the case the Ld. ASSESSING OFFICER & Ld. CIT(A) erred in: 1) Disallowing the claim u/s. 80IV of the Income Tax Act of ₹ 12,97,007/-. 2) Not treating the activity at Kala Amb as a manufacturing activity. 3) Stating that before setting up the Kala Amb plant the Assessee was manufacturing although it was only trading. 4) Not holding that a mosquito repellant is distinct from the parts constituting it such as mould, plug, wire, porcelain, led etc. and therefore is manufacture. 5) Ignori .....

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ice u/s 143(2) of the IT Act on 25.10.2006 and the same was served upon the assessee. In response to the same, Authorised Representative of the assesse attended the proceedings from time to time and filed the requisite details. Assessee is involved in the business of manufacturing and export of Mosquito Repellent, Medicines etc. The assessee has registered a turnover of ₹ 41.44 lakhs as against ₹ 1.56 crores in the previous year. Assessee has also earned a gross profit of ₹ 21. .....

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essing Officer considered the explanation of the assessee and noted that major activity of production is being carried out by the assessee outside of Kala Amb factory. He also noted that the firm was already in the business of Mosquito Repellent Machines since 1998. The issue of substantial expansion of the activity is quite apparent from the submissions of the assessee. Therefore, prima facie the claim of deduction u/sec 80IC did not seem sustainable. Assessing Officer further confronted to the .....

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ng machinery being used previously for any other purpose. In response, the AR in his submission dated 12.12.07 explained the issue of manufacturing activity being carried out at Kala Amb. 2.1 Assessee's reply was considered and Assessing Officer is of the view that hardly any manufacturing activity is taking place in Kala Amb. He further held that major part of manufacturing process is being placed outside the Kala Amb, (Himachal Pradesh) to corroborate such fact reference is made to the inv .....

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ala Amb. and dies and moulds are very heavy so their movement is restricted, as submitted by the AR. If these were to be true, then machinery worth ₹ 10,400/- odd is being used at Kala Amb. So it can be visualized what portion of the complete manufacturing process is being carried out at Kala Amb. 2.3 Assessing Officer further observed that detail of electricity bills reveal that as much as ₹ 35,124/- were incurred for electricity in Delhi whereas a paltry sum of ₹ 3153/- has b .....

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uls 80IC. 2.4 On the issue of substantial expansion, AR only provided certain figures without enclosing bills for plant and machinery Which were acquired during F.Y. 03-04 when the substantial expansion was said to have taken place. Moreover, in view of negligible plant and machinery installed at Kala Amb, the aspect of substantial expansion automatically stands disproved. It has been observed by the Assessing Officer in the assessment order that question of complete rule out of substantial expa .....

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onstruction of a business already in existence, but by Substantial Expansion which took place in the previous AY. i.e, the first year of establishment of the unit. The Assessing Officer considered this submissions and rejected the same by stating that M/s Japna Exports is a unit already in existence since 1998 as already submitted by the Assessee and is involved in manufacturing of mosquito repellant machine, though some restructuring has happened with entry and exit of partners. This goes to sh .....

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out at Kala Amb. Assessee has tried to portray as if by virtue of substantial expansion in a backward state, its business becomes entitled for deduction u/s 80IC of the I.T. Act. Assessing Officer was of the view that if such hollow and superfluous claims of deduction are to be allowed then the entire purpose of enacting such provisions will stand defeated. Deduction and exemptions have been brought on statute in order to fulfill the role of the government in equitable development of various pa .....

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extending benefits like 100% deduction u/s 80IC to various assesees. 2.7 Lastly, he submitted that assessee was claiming deduction u/s 80 HHC by virtue of being an exporter. With phasing out of deduction u/s 80HHC, the assessee has tried to wrongly seek the benefit of deduction u/s 80lC to avoid paying taxes. The noninclusion of the auditor's report with the return also stands explained in view of the dubious claim of deduction u/s 80IC and he disallowed the claim of deduction u/s 80IC by as .....

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26.8.2013 passed by the Ld. First Appellate Authority filed the present appeal. 5. At the time of hearing, Sh. R.S. Ahuja, CA/Authorised Representative of the Assessee has filed a Paper Book containing pages 1 to 164 in which he has attached the various documents for substantiating the claim of assessee. He draw our attention towards a letter dated 14.12.2011 written by him to the Ld. CIT(A) in which he has mentioned the facts of the case of assessee, provisions of law and the manufacturing pro .....

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f the I.T. Act, 1961 on 28.12.2007 assessing the income of the assessee of ₹ 15,19,222/-. The assessee went in appeal before the Ld. CIT(A) who vide impugned order upheld the assessment order and dismissed the appeal of the assessee. He stated that Sh. Sandeep Gulati, CA attended the proceedings before the Assessing Officer . Due to some reason the assessee has not filed the Audit Report as required in Form 10 CCB during the assessment proceedings the same was filed vide letter dated 3.1.2 .....

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ds which form the bulk portion of the Plant & Machinery is being used at Delhi because there is no tool room facility a Kala Amb. III. Only Machinery worth ₹ 10,400/- is being used at Kala Amb and as such no manufacturing activity is being carried out there and if at all only negligible manufacturing activity is being carried out there. IV. Only a sum of ₹ 3,153/- has been incurred on electricity at Kala Amb for which also there are no bills of electricity company but payments ha .....

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hip firm. Its head office is situated at 186, Sainik Vihar, Pitampura, Delhi - 110034 and its undertaking which deals with its work and manufacturing is situated at Village - Moginand, Tehsil - Nahan, Post - Kala Amb, Disti: - Sirmor, Himachal Pradesh. The firm was constituted on 01.06.1994 with the following partners and respective profit sharing ratios Name of Partner Shares in Profit/Loss Ms. Angela Bhasin 60% Mr. Narinder Sachdeva 20% Ms. Namrita Sachdeva 20% 5.3 Subsequently there were addi .....

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o Repel/ant Machines in the year 1998. For this purpose the entire products were got manufactured on Job Work basis. The design and specification were provided by Assessee. Due to business necessities Assessee firm took decision to have their own plant for the manufacture of the said Machine. Before that the business process of Assessee consists of following steps - I. Export order with design specification received from t-t/s Charlie International, Moscow, Russia. II. Raw materials like Neon/Le .....

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be more cost efficient to have its own manufacturing plant to manufacture the Mosquito Repellant Machine, a detailed Project Report was submitted for registration of the undertaking as a 551 unit for the manufacture of Mosquito Repellant Machines to DIC Nahan. The project report got its required approval and the provisional certificate was granted on 14.10.2003 from Director of Industries, Nahan. The said approved Project Report in its Chapter where manufacturing process has been explained. 5.6 .....

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e work as it has submitted in its Project report. Assessees also have provided in course of Assessment proceedings the rent agreement of the premises at Kala Amb. He invited the attention towards clause '5' of the said agreement which states that - "That the premises have been let out for the purpose of Industry only and the tenant shall not use premises for a purpose other than Business/ Industry". 5.7 Ld. AR further submitted that Assessee has also got the consent of HP State .....

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t Kala Amb is in the area for which deduction u/s 80 IC is available in the State of Himachal Pradesh as per Notification No 5O 1269E, dated 04.11.2003. The said undertaking is having all the necessary approvals and papers to prove its existence and these documents have already been submitted during the course of assessment proceedings. The undertaking of the Assessee firm is also registered with Sales Tax Department of state of Himachal Pradesh under Central Sales Tax Act as well as Local Sales .....

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itted that the Sales tax Department of the Himachal Pradesh, HP State Environment Protection & Pollution Control Board, Director General of Foreign Trade, Federation of Indian Exporters Organization all have acknowledged presence of this industrial undertaking at Kala Amb and they cannot be overruled on the basis of some illogical reasoning of the Assessing Officer . 5.10 Assessee also stated that earlier in the foregoing paragraphs the existence of the industrial undertaking stands confirme .....

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undertaking. It is also to be noted that that almost all sales of the Assessee are export for which documentary evidences are available in the form of Invoices, bill of lading etc and it decisively points out that the Goods are being manufactured at Kala Amb. He stated that the Assessing Officer is in opinion that the major part of Manufacturing Activity is being carried out outside Kala Amb. He came to this conclusion on the basis of following submissions made by the Ld AR during the Assessmen .....

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by fitting in MOR (Metal Oxide Resistance). Resistance and LED are procured from Delhi and sent to Kala Amb. d) The complete machine gets shape and assembly is done at Kala Amb for final sale. 5.11 It was submitted that in situation like this where different types of equipments made of different material is required for making of a Mosquito Repellant Machine it is quite obvious and natural that different parts of the machine has to be sourced from different places. In the current situation Asses .....

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duction and tor being a producer of product which can withstand international competition in terms of quality and cost it has to source the best quality raw material according to its availability. In the current scenario Assessee is doing the same by sourcing materials from the places where they are available in their best form and assembling with the aid of labour and machine to produce a final product that is separate and distinct from the ingredients that go into it and it therefore constitut .....

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rchased and transferred directly to the undertaking of Assessee at Kala Amb. III. Plastic Dana purchased from Vendor & supplied to the Job worker. IV. Dyes for manufacturing of Cabinet were also provided to the Job Worker. V. Job Worker manufactures 'Cabinet' from the Plastic Dana using the Dues supplied by Assessee. The Cabinet is then supplied to Undertaking of the Assessee at Kala Amb. VI. Plastic Dana is moulded in Dyes to manufacture Plug in Kala Amb. VII. Porcelain filled with .....

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ained in the foregoing Para what we manufacture is a product of distinct physical character with a distinct name known as 'Mosquito Repellant Machine'. The question of what is manufacturing has to be taken by in the simplest form. Assessee submitted that this process is without any IOTA of doubt being carried out only at Kala Amb and therefore the manufacturing of the Mosquito Repel/ant Machines is taking place at Kala Amb and no other place. In this behalf, he invited our attention to t .....

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nsel of the assessee submitted that the Hon'ble Supreme Court has followed the spirit of above judgment on numerous occasions without any exception; some of them are being quoted below - 1. CIT Vs Emptee Poly Yarn Pvt. Ud, [2010J 320 ITR 665 (SC), held that" Twisting and texturising of Partially Oriented Yarn (POY) by using thermo-mechanical process, which converts POY into a texturised yarn, amounts to manufacture". 2. CIT Vs Oracle Software India Ltd, [2010J 320 ITR 546 (SC), hel .....

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ng raw berries into cottee beans constitutes manufacture". V. Ship Scrap Traders Vs CIT [2oo1j 251 ITR 806 (Bom), held that Ship Breaking will constitute manufacture. VI. CIT Vs Hem Sons Industries [2001] 251 ITR 693 (AP), held that "Oecortification of groundnut constitutes manufacturing because there is qualitative difference between groundnut kernel & ground nut". VII. CIT Vs Tata Locomotive &,Engg.Co .. Ltd, [1968]68 ITR 325 (Bom), held that "Assembling of bus/truc .....

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ct 2009, wherein a new clause '29BA' has been added to the Section 2 of the Income Tax Act 1961. The said clause states that - "(29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,- a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or b) bringing into existence of a new and distinct object or art .....

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l review in a number of cases. In order to remove any kind of ambiguity which may still persist in this regard, it is proposed to insert a new clause (29BA) in section 2 so as to provide that 'manufacture' with its ……. 5.15 Ld. Counsel further assessee submitted that in light of above provision it is crystal clear that manufacturing is taking place in Kala Amb and not at any other place. Before being used in the manufacture of Electronic Mosquito Repellant Machine the Cabin .....

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y which may still persist" in the interpretation of word "Manufacturer" with all its grammatical variations. The above explanation also clarifies the actual meaning of word "Manufacturer" as envisaged by the statute. He stated that this definition has been made applicable from 1st day of April, 2009 but, being clarificatory introduction in the statute it will be applicable as it was already been in the said act since inception. In this behalf, he referred the judgment of .....

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reasonable interpretation can be given to the section as a whole". 5.17 Ld. Counsel of the assessee further submitted that the Assessing Officer has raised some question marks on Consumption of electricity and the type of connection which this undertaking has got. He submitted that Assessee has applied for an Electricity Connection which is meant for the commercial use and the same has been granted. Certificate from the State Electricity Board in this regard also proves this fact. It is al .....

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eing manufactured. The Assessing Officer has compared the amount in Rs which has been spent on electricity not the units of electricity which has been consumed. The rate of Electricity per unit is much higher in Delhi than in Himachal Pradesh available to an SSI Unit. SSI units generally get electricity at subsidized rate than other industrial connections. 5.19 He submitted that the Assessing Officer has also alleged in his assessment order that there are no bills of Electricity Company and in t .....

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the books of account or, nomenclature of the head of account is in no way determinative of true nature of transaction. For this proposition, he referred the case law in the case CIT Vs India Discount Company, 75 ITR 191 (SC), CIT Vs Provincial Farmer Pvt. Ltd, 108 ITR 219 (CAL), KCP Ltd Vs CIT, 245 ITR 421. He submitted that what have to be seen is actual nature of transaction which is in the current case can be verified from receipt of the Electricity Bill Payments. 5.20 Ld. Counsel of the ass .....

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specified uls.80IC(2)(b) has not been satisfied. He submitted that the prime question is whether the requirement of 'Substantial Expansion' as envisaged in the said section is applicable to the company. In the simple words the answer is no. A. The Assessee firm was operating as a trading entity; It had no manufacturing plant of its own; It was and still running its operations from its office where manufacturing is not possible; The Assessee firm did not have any Warehouse either owned o .....

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nsel of the assessee stated that after going through the Subsection (2)(b), it is clear that the deduction is available to an undertaking which has been begun to manufacture or produce any article or thing or has undertaken - substantial expansion in the specified period in the State of Himachal Pradesh. Now according to the statute and the facts of the case stated above, it has been proved beyond doubt that - I. This is an undertaking which is situated in the Notified area of the state of Himac .....

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tantial Expansion" is necessary to claim this deduction. Said word has been very well defined in the act and it clearly says that increase in investment in Plant and Machinery by at least 50% of the book value of the Plant & Machinery. Now the question that needs to be answered that how an entirely new manufacturing unit which has been created from a scratch is going to be tested on the clause of Substantial Expansion. He stated that it is not possible because for calculation of 50% of .....

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y controlled manner. Even if ₹ 5,000/- is being invested in an undertaking which is having its distinct physical appearance and a new born existence qualifies for the deduction under said Section because - it not only fulfills the condition specified in the Section that the "undertaking which begins to manufacture or produce any article or thing" but also satisfies the intention of the Legislature regarding encouragement of industrial activity in industrially and economical backw .....

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657, explained the law relating to interpretation of fiscal statutes as under: (AIR @ 661) "(I) In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four co .....

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the ambit of the charging section by dear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all. It was further submitted that in the light of above definition of Substantial Expansion which has been defined in the said Section should be interpreted in the similar manner and it should not be concluded in a different form. I .....

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ala Amb and hence the Investments made for the said manufacturing process comes under definition of Substantial Expansion it/sec 80 IC (8) (ix). It was further submitted that the Unit of the Assessee was established in the Kala Amb in the Financial Year 2003-04 relevant to A. Y. 2004-05 and the addition in the Plant & Machinery in the same year aggregated to ₹ 2,71,016/- for undertaking the expansion. The opening WOV of the Plant & Machinery stood at ₹ 4,02,972/- as on 01.04. .....

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essee firm is set up. It is may please be noted that the Assessee firm has given deduction under said section of ₹ 14,01.745/- in the AY 2004-05. The question of substantial expansion is totally irrelevant in the AY 2005-06 as even if substantial expansion has been taken place it has been during the AY 2004-05. The law in this regard is very clear. The statute has determined the word Initial Assessment Year as - "Initial assessment year" means the (relevant to the previous year i .....

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fies the condition laid down in subsection 4(i), regarding the undertaking not being formed by splitting up or reconstruction of a business already in existence. While doing so it has been stated by him that - "AR has already submitted that M/s Japna Exports is a unit already in existence since 1998 and is involved in manufacturing of Mosquito repel/ant Machines, though some restructuring has happened with entry and exit of partners. This goes to show that Assessee is a manufacturing concer .....

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it is not formed by splitting up, or the reconstruction, of a business already in existence: (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. " It is quite clear from the above, that law specifically bars deduction to undertakings which has been formed via splitting up or a reconstruction of a business already in existence. In view of the fact that the only reason which led the ITO to this conclusion is that Assessee is in same b .....

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t in case of Textile Machinery Corporation Vs CIT (1977) 107 ITR 195 (SC) wherein it has been enunciated that - ... The true test is not whether the new industrial undertaking connotes expansion of the existing business of the Assessee but whether it is all the same a new and identifiable undertaking ... " " .... In order that a new undertaking can be said to be not formed out of already existing business, there must be a new emergence of a physically separate industrial unit which may .....

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se of Textile machinery Corporation has been followed by various High Courts and Apex Court without any exception regarding the condition specified in Section 80 IC(4)(i) which is same as in Section 15C of the Income Tax Act 1922. It was also submitted that the Assessing Officer cannot advise the Assessee regarding the way he should conduct business. It is an established fact that how to do a business is totally in domain of Assessee and the Assessing Officer cannot question this. The purpose of .....

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is not allowable as no Audit Report has been attached alongwith the return. In this connection we would like to submit here that the requirement of filing an Audit Report in the prescribed form is although mandatory, is procedural in nature and be made good by filing the same in the course of assessment proceedings. While filing of Audit Report is mandatory the time of filing thereof is not mandatory. In this connection he invited to the judgment of Delhi Bench of Hon'ble ITAT in the case o .....

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n for the grant of exemption could not be so strictly construed as to prevent the Assessee of his legitimate claim of deduction. As the certificate required U/sec. 80 HHC (4) had been filed during the course of assessee proceedings, the Assessee was entitled to the deduction claimed u/s. 80HHC. Further support to the above view is governed from the following judicial pronouncements - CIT vs. G. Krishnan Nair (2003) 259 ITR 727 (Ker.) - CIT vs. Berger Paints (India) Ltd. (2002) 254 ITR 503 (Cal) .....

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ount is not warranted. Keeping in view of the aforesaid Written Submission, Ld. Counsel of the assessee stated that Assessing Officer as well as Ld. First Appellate Authority has not properly appreciated the version of the assessee mentioned in the Written Submission alongwith documentary evidence filed by the assessee before them and they decided the issue in dispute against the assessee, which is contrary to the law and facts of the file and the finding of these lower authorities deserve to be .....

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n u/s. 80IC of the I.T. Act, but the assessee failed to file the same before the Assessing Officer as well as before the Ld. CIT(A). He draw our attention towards the order of the Assessing Officer at page 1 to 3 and stated that negligible activities is being taken place by the assessee in Kala Amb and major part of the manufacturing process is being taken place outside Kala Amb. To corroborate this version, he draw our attention towards the Schedule of Fixed Assets in which the assessee owns th .....

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after examining the details of electricity bills, it revealed that as much as ₹ 35,124/- were incurred for electricity in Delhi whereas a paltry sum of ₹ 3153/- has been incurred on electricity at Kala Amb. Even for ₹ 3153/- there are no bills of electricity company. Only payments to some Sh. Rajinder Singh and Inderjit Singh have, been made. This evidence proved that no manufacturing or negligible manufacturing activity is being carried out at Kala Amb and major portion are st .....

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s established beyond any doubt that no plant and machinery exists at Kala Amb. The question of substantial expansion is completely ruled out. Hence, the conditioin laid down in sub-section 2(b) has also not been satisfied by the assessee, therefore, on this count also claim of deduction u/s 80lC I.T. Act is rightly been denied by the Assessing Officer. 6.1 Ld. DR finally stated that keeping in view of the arguments advanced by the Ld. Counsel of the assessee and the orders passed by the Revenue .....

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t the Appeal filed by the assessee may be dismissed. 7. We have heard both the parties and perused the records available with us, especially the orders of the revenue authorities alongwith the Written Submissions filed by the assessee as well as other documentary evidence. According to assessee, assessee is involved in the business of manufacturing and export of Mosquito Repellent, Medicines etc. The assessee has registered a turnover of ₹ 41.44 lakhs as against ₹ 1.56 crores in the .....

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ply alongwith Note of manufacturing process. Assessing Officer considered the same and found that the majority activity of production is being carried out by the assessee outside of Kala Amb factory. AO also noted that the firm was already in the business of Mosquito Repellent Machines, medicines since 1998. He is of the view that the issue of substantial expansion of the activity is quite apparent from the submissions as well as the evidences filed by the assessee. AO has confronted to the asse .....

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f the eligibility in sub-section 4(ii) regarding machinery being used previously for other purposes. In response to these queries the assessee filed its submission dated 12.12.2007 explaining therein the issue of manufacturing activities being carried out at Kala Amb. In the said reply dated 12.12.2007 assessee submitted that the firm is in the business of Exports and Balances outstanding at the end of year with Foreign Buyers are tallied in foreign currency. The difference in the rate of Foreig .....

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lds for the same are very heavy roughly the 100-200 kg. each, the movement of same is restricted. All the major working parts of the machine are made at Kala Amb (HP) and final assembly and product takes shape at Kala Amb (HP). After inspection and packing the same is billed / exported from Kala Amb (HP) only. 7.1 The Assessing Officer considered the reply of the assessee and was of the view that hardly any manufacturing activity is taking place in Kala Amb. He further held that major part of ma .....

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d moulds are formed bulk portion of the plant and machinery which are being used at Delhi, because there is no tool room facility at Kala Amb (HP) as submitted by the assessee, as aforesaid. He is of the view that if these were to be true then machinery worth of ₹ 10,400/- odd is being used at Kala Amb (H.P.). So it can be visualized what portion of the complete manufacturing process is being carried out at Kala Amb. Even for ₹ 3153/- there are no bills of electricity company. Only p .....

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holding that hardly any manufacturing activity was being carried out at Kala Amb, the place where the plant of the assessee was located. Secondly, the assessee has not filed Auditor Report in Form 3CD and 10CCB. The deduction claimed by the assessee was not supported in any way by the auditors. 7.5 We have perused the orders passed by the revenue authorities, especially the impugned order passed by the Ld. CIT(A) on the issue of deduction u/s. 80IC of the I.T. Act amounting to ₹ 12,97,007 .....

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the I.T. Act. Section 80-IC(2)(b) Which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period of beginning. (ii) On the 7th day of January, 2003 and ending before the 1st day of April, 2012, i .....

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me is restricted. 7.6.1 We find that Revenue Authorities has considered the reply dated 12.12.2007 and has rightly held that it is apparent that dies and moulds which form bulk portion of the plant and machinery are being used at Delhi because there is no tool room facility at Kala Amb. Dies and moulds are very heavy so their movement is restricted. If this is true, then machincery wort of ₹ 10,400/- odd is being used at Kala Amb (HP). So it can be visualized what portion of the complete m .....

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ricity bills received from the electricity department. In our considered view that no manufacturing activity is being carried out at Kala Amb. If there is any activity i.e. neglible activity was carried out. Therefore, the Revenue Authorities has rightly denied the deduction u/s. 80IC of the I.T. Act to the assessee. 7.7 After disproving the claim of existence of manufacturing activity or negligible activity being carried out at Kala Amb (HP). The Assessing Officer is of the view that assessee h .....

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dustrial activity in industrially and economically backward state like Himachal Pradesh, by encouraging investment in such states so that backward areas and inhabitants of such States find employment. The entire backward area flourishes by creation of a climate favorable for industrial and economic activity and benefits of the same permeating down to the local population. If such aims are not achieved then there is no purpose in extending benefits like 100% deduction u/s. 80IC of the I.T. Act to .....

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plant and machinery by at least fifty per cent of the book value of plant and machinery (before taking depreciation in any year), as on the first day or the previous year in which the substantial expansion is undertaken. 7.7.1 On the issue of substantial expansion, the assessee provided certain figures without inclusive bills for plant and machinery, which was acquired during Financial Year 2003-04 when the substantial expansion was said to have been taken place. After examining the plant and ma .....

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taking not being formed splitting up or reconstruction of the business already in existence. On this issue the assessee has not satisfied the conditions as discussed above. As per sub-section 4(i) of Section 80IC of the I.T.Act, the unit was not formed by splitting up, or the reconstruction, of a business already in existence. But by substantial expansion which took place in the previous year i.e. a first year of establishment of the unit. This version of the assessee has also been rejected by t .....

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llant machines etc. The entire machine was not made at Kala Amb. Only assembling of machine was done at Kala Amb (HP). The assessee has also not furnished any purchase bills of machinery to show that it was a new purchase. The assessee was in the business of manufacturing of Mosquito Repellant machine from the year 1998, that means the business of manufacturing and export of Mosquito Repellant was already in existence. A unit was set up at Kala Amb where the same activity or rather part of the a .....

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t of the machine is made at Delhi. The plug is made in the moulding machines and the pins in the plug are procured. The resistance wire and LED are procured from Delhi and the machinery is assembled at Kala Amb (H.P.). The main machines for making this item are moulds which are used to give shape to the plugs and heaters. Therefore conditions uls 80IC 4(i)& (ii) are not satisfied. 7.9. To support our contention, we draw support from the case of Textile Machinery Corporation Ltd. Vs. CIT(1977 .....

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tantial expansion is undertaken. The assessee has stated that addition to plant and machinery was ₹ 2,71,016/-, whereas the written down value was ₹ 4,02,972/-. There is hardly any addition to Plant and Machinery at Kala Amb out of the above addition. The Assessing Officer has stated that only a small part of the machinery was at Kala Amb and the assessee has not refuted this aspect. The assessee has not given details of plant and machinery at Kala Amb. Even in the audit report the a .....

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