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2015 (11) TMI 1296 - ITAT MUMBAI

2015 (11) TMI 1296 - ITAT MUMBAI - TMI - Reopening of assessment - disallowance of deduction u/s 80IB - CIT(A) allowed claim - Held that:- CIT(A) has given clear finding that the assessee is eligible to claim deduction u/s 80IB as per the provisions of sec. 80IB(3)(ii) of the Act. The Ld CIT(A) has further held that the question as to whether the assessee is a “Small Scale Undertaking” or not has to be examined as per the provisions of Industries (Development and Regulation) Act, 1951. Another i .....

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t in the earlier years and after having allowed the deduction in the initial year as well as in some of the subsequent years, is not correct in examining the eligibility of the assessee again in other subsequent years. Accordingly he held that the action of the AO has to be considered as taken on mere change of opinion only.

CIT(A) was justified in holding that the assessing officer has proceeded to examine the eligibility of the assessee to claim deduction u/s 80IB of the Act for the .....

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- 9-10-2015 - SHRI B.R.BASKARAN, AM AND AMARJIT SINGH, JM For The Appellant : Shri S K Mishra For The Revenue : Shri S C Tiwari ORDER Per B R Baskaran, AM: Both the appeals filed by the revenue are directed against the separate orders passed by Ld CIT(A)-19, Mumbai for assessment years 2004-05 and 2005-06. Since the issues urged in both the appeals are identical in nature, they were heard together and are being disposed of by this common order, for the sake of convenience. 2. In both the years, .....

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e had commenced manufacturing activities on 14.6.1995 only, whereas the provisions of sec. 80IB(3)(i) mandate that the assessee should have commenced manufacturing prior to 31.3.1995. However the above said time limit commencing production was available upto 31.3.2002 for a Small Scale Undertaking u/s 80IB(3)(ii) of the Act. However, the assessing officer also noticed that the investment made by the assessee in the Plant and machinery has exceeded ₹ 1.00 crores and hence the AO took the vi .....

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t it is classified as Small scale undertaking as per Industries (Development & Regulation) Act 1951 and also furnished a copy of registration certificate. Accordingly it contended that it is eligible for deduction u/s 80IB(3)(ii) of the Act. The said contention did not find favour with the assessing officer. Accordingly the AO completed the assessment of both the years by disallowing the claim for deduction u/s 80IB of the Act. 4. Before Ld CIT(A), the assessee challenged the validity of reo .....

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relating to the deduction claimed u/s 80IB was available before the AO in the original assessment proceedings also in both the years. The AO had not brought any fresh material on record. Accordingly he was convinced with the contentions of the assessee that the reopening was done on mere change of opinion. Accordingly the Ld CIT(A) held that the reopening was bad in law in both the years. 5. It is pertinent to note that the assessment for AY 2004-05 was reopened on 24.03.2009 and the assessment .....

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The Ld CIT(A) has accepted the said contentions of the assessee in AY 2005-06. 6. In assessment year 2004-05, the Ld CIT(A) also examined the eligibility of the assessee to claim deduction u/s 80IB of the Act, i.e., on merits also, and held that the assessee is eligible to claim deduction u/s 80IB of the Act. It is pertinent to note that the revenue has not challenged the said decision of the Ld CIT(A), meaning thereby, the appeal filed by the revenue for AY 2004-05 is only academic in nature. 7 .....

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commencement of operation by the undertaking is mentioned as 14.6.1995. Since unit commenced its operation after 31.3.95, it was not entitled to claim the deduction u/s 801B(3)(i). Further, as per Sr. No. 18(b) of Form 10CCAB, the investment in the plant and machinery is more than ₹ 1 crore and therefore the company is not a Small Scale Industrial Undertaking. Hence, the company does not qualify for deduction u/s 80IB(3)(ii). Therefore, the assessee was neither entitled for deduction u/s .....

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sment had originally been completed under s. 143(3) i.e , after scrutiny. The appellant had been allowed deduction under s. 80IB of the Act and which was the subject matter of appeal, albeit on a different matter. However, this denotes application of mind of the A.O. on the eligibility or otherwise of the appellant for the claim of deduction under s.80IB. Thus all the primary facts were disclosed in the return of income as filed. Though it is seen that the notice has been issued before the expir .....

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date of forming an opinion that income has escaped assessment, nothing new has happened. There has been a fresh application of mind by the A.O. on the existing same set of facts, Thus, it amounts to only a change of opinion. In the case of the Kelvinator of India Ltd it has been held that the A.O. does not have the power to review the details already on record regarding the claim of deduction under s. 80IB. All relevant information was disclosed in the Return filed, accompanied with the Audit Re .....

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m deduction u/s 80IB of the Act, the Ld CIT(A) held as under:- 7. I have considered the facts of the case, the findings of the A.O. I have carefully perused the records. The appellant had claimed deduction under s.80IB as per return of income filed originally. The claim under s. 80IB was supported by Audit Report, in form No. 10CCB filed along with return of income. The claim was made in the status of a Small Scale Industrial Undertaking. Therefore, the claim of the appellant has to be examined .....

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in form 10CCB. Thus, the appellant company started commercial production within the eligibility period as prescribed in sub-section (ii) of clause (3) of section 80IB. As mentioned earlier the claim of the appellant has been made considering itself as a Small Scale Industrial Undertaking. Therefore. the claim of the appellant is to be examined in the light of the conditions precedent for deduction under sub-section (ii) of clause 3 of section 80IB stands fulfilled. The term "Small Scale Ind .....

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aining which ancillary and small scale industrial undertaking need supportive measures, exemptions or other favourable treatment under this Act to enable them to maintain their viability and strength so as to be effective in- (a) promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and (b) securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good, specify, hav .....

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ncillary industrial undertaking unless it is, or is proposed to be, engaged in- (i) the manufacture of parts, components, sub-assemblies, toolings or intermediates; or (ii) rendering of services, or supplying or rendering, not more than fifty per cent of its production or its total services, as the case may be, to other units for production of other articles. (2) The factors referred to in sub-section (1) are the following, namely:- (a) The investment by the industrial undertaking in- (i) Plant .....

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velopment and Regulation) Act it is evident that an undertaking has to comply with the requirements under the said enactment so as to be regarded as an ancillary or as a small scale Industrial Undertaking. Sub-section 2 of section 11B refer to the factors with which there has to be compliance and one of the factors mentioned is the investment by the undertaking in plant and machinery. It is further seen that the compliance to the said factor or factors shall be as per notified order. Thus, the s .....

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) Act. 7.3 During the course of hearing of appeal the appellant has furnished copy of application furnished before the District Industry Centre dated 9.2.2007 wherein it is indicated that it is an Small Scale Industrial Undertaking (Pages 46 to 55 of the Paper Book filed). The last page of the said application is Acknowledgement signed by the General Manager. District Industry Centre, Dhule, wherein the undertaking is acknowledged as Small Scale. In the said form, it is stated that the date of c .....

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registered as a Small Scale Industrial Undertaking and continue to be so. The records indicate that the registration granted to an appellant company, as a Small Scale Industrial Undertaking has not been cancelled or withdrawn. Hence, it has to be held that once a registration has been granted to an undertaking as an Small Scale Industrial Undertaking, which is at the time of formation of the business of the company, it would continued to be so, notwithstanding the subsequent notifications issue .....

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handigarh 'A' Bench in Micro Instrument Co.Vs. ITA 2008 12 DTR 501. It has been held by the Hon'ble Tribunal that once the relief under s. 80IB has been allowed to the assessee in the initial year then it is not open to examine the veracity of the relief in the subsequent years especially when the relief allowed in the initial year has not been disturbed. As per the decision of the Hon ble Tribunal, when in initial year the deduction has been allowed the implication is that the under .....

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isions. In the said case, the Hon ble Tribunal was dealing with similar claim under s. 80IA and has observed that the bar as provided in s. 80IA(3) has to be considered only for the first year of the claim of deduction. The Hon'ble Tribunal has observed that the bar as provided in sub-section 3 is in relation to the formation of the undertaking and once the formation is complete, the development of the undertaking cannot put cannot be put under the restraints as stipulated in sub- section 3. .....

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se of the appellant the claim had been allowed in the earlier year and therefore based on the ratio of the decision as cited above it is held that the relief allowed under s. 80IB could not be withdrawn in a subsequent year with reference to the restraints as mentioned in s. 80IB(3)which have to be applied in the initial year. 9. Thus, we notice that the Ld CIT(A) has given clear finding that the assessee is eligible to claim deduction u/s 80IB as per the provisions of sec. 80IB(3)(ii) of the Ac .....

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