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2016 (5) TMI 232 - ITAT CHENNAI

2016 (5) TMI 232 - ITAT CHENNAI - TMI - Claim of deduction u/s.80IB(10) - CIT(A) allowed the claim - filing of additional evidence - Held that:- Where the signature and verification on the memorandum of appeal was made by any agent of the assessee or for the Revenue and not by the assessee or the Assessing Officer, it cannot be held that the appeal or any application filed is a valid appeal or application. Further, as per the ITAT Rules, 1963, filing of additional grounds equates the procedure f .....

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is relating to poultry, feed, compound premix was brought out but, the AO ignored all these and proceeded to compare the profit margin of independent companies manufacturing feeds and compound premix, which are dissimilar. The assessee has also furnished price level comparability of an identical product manufactured by an independent party and the same was also ignored by the AO. However, the assessee was produced the same before the CIT(Appeals), who after examining came to the conclusion that .....

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ojari, Accountant Member This appeal by the Revenue is directed against the order of the Commissioner of Income-tax(Appeals) dated 18.3.2015. 2. The Revenue has raised the following grounds: 2. The learned CIT(A) ought to have appreciated the fact that the assessing officer has rightly restricted the claim of deduction u/s.80IB(10). 3. The learned CIT(A) has failed to note that the restriction on claim of deduction u/s.80HHIB(10) was made by the assessing officer after analyzing the similar case .....

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ison and deleted the lawful disallowance of excessive claim made by the assessee u/s.80IB. 3. The facts of the case are that the assessee is a public limited company and is fully integrated poultry processor committed to the food service industry. Integration, typically encompassing enterprises ranging from breeding, feed milling and contract growing to wholesale and retail marketing. The end to end poultry farming comprises of independent business activities. Each activity has become a separate .....

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that premix manufactured is intermediate product not having an independent market. 3.1 According to the AO, premix price charged is arbitrary for the following reasons as the profit margin vary year to year while - no significant change is noticed in the assets employed or operations - This has resulted in artificially inflating the cost of premix that ultimately increases the cost of feed mill. The AO observed that ROI from premix unit is 3189% as against ROI of 13.9% at enterprise level. Profi .....

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x unit to 3%, thereby restricted the claim of deduction u/s.80IB of the Act, to ₹ 2,11,30,061/- as against the claim of Rs. 11,86,74,886/-. Aggrieved, the assessee carried the matter before the Commissioner of Income-tax(Appeals). 4. On appeal, the Commissioner of Income-tax(Appeals) observed that the feed premix has a compound of various nutrients necessary for the poultry birds. The premix is prepared in two stages, one dealing in vitamins, amino acids and various micro ingredients. The .....

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ring the day time to avoid photosynthesis due to artificial lighting. This is prepared in imported specialized machineries and packed in 25 Kg per bag. Before the CIT(Appeals), the assessee submitted the copies of invoice where the assessee has purchased an identical product whenever the supply from Pondicherry Unit falls short of assessee's demand. The CIT(Appeals) observed that the assessee furnished before him invoices of purchase made from M/s. Divi Enterprises where on 14.10.2009 the br .....

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trition Pvt Ltd. Gurgaon @ Rs. 320/- per kg. whereas the internal transfer made by Suguna to its feed mixing units was @ Rs. 240/- per kg. 4.1 However, the Commissioner of Income-tax(Appeals) asked the assessee to produce further details regarding the sale made by the Premix Unit to outside agencies apart from internal transfers. The assessee produced copies of invoices during the month of October 2011 where the Poultry Feed Premix (Broiler Premix) was supplied to M/s. Godrej Agrovet Ltd. Surat .....

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@ Rs. 194.50 per kg. The comparison was made by the CIT(Appeals) to find out the prices at which the Prernix Unit at Pondicherry was transferring to the Internal Units for Premix when compared to purchase/sales made by Premix Unit. The CIT(Appeals) observed that all the invoice data shows that the Premix Unit was selling its Premix Concentrate to some of the outside parties at a higher rate than the internal transfers and also a comparison of the supplement purchased from outside parties showed .....

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he profits u/s 80IB of the assessee company and he has not made comparison of the comparables to restrict the profit margin u/s 80 IB of the Income Tax Act, 1961. The CIT(Appeals) further observed that the Assessing Officer has not brought any adverse evidence on record to show that the profit margin has been inflated at the Premix unit to claim deduction u/s 801B of the Income Tax Act, 1961. Therefore, the CIT(Appeals) directed the Assessing Officer to allow the deduction u/s. 80IB of the Act. .....

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9 2. CIT v. Assam Travels Shipping Services (199 ITR 1)(SC) 3. Bhavana Chemicals Ltd. v. CIT (231 ITR 507) (SC) 4. Thanthi Trust v. ACIT (238 ITR 117)(Mad.) 5. Shaw Scott Distilleries (P) Ltd. v. ACIT (76 ITD 89)(Spl. Bench Kolkata) 6. ACIT v. Indwel Lianings P. Ltd. (313 ITR(AT) 118) According to the DR, this preliminary objection to be admitted and adjudicated. 6. On the other hand, the ld. AR strongly opposed the above ground raised by the D.R. stating that denial deduction cannot be subject .....

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s, 1963 allows the appellant to urge any ground not taken in the memorandum of appeal, that does not mean that, with the leave of the Tribunal, the appellant can take any ground of appeal even if he was not originally entitled to take it in the memorandum of appeal. The Supreme Court in the case of Hukumchand Mills Ltd. v. CIT(63 ITR 232) observed that : "The word 'thereon', of course, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal." 9. In our vi .....

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66 ITR 710)(SC), Addl. CIT v. Gurjargravures P. Ltd. (111 ITR 1) and CIT v. S. Nelliappan(66 ITR 722)(SC). The Full Bench of the Gujarat High Court dissented from the view of this court in CIT v. Gangappa Cables Ltd. (251 ITR 61). 10. In the decision of the Supreme Court in Jute Corporation of India Ltd. v. CIT (187 ITR 688), the Supreme Court once again reviewed the law on this question and referring in particular to the decision in Addl. CIT v. Gurjargravures P. Ltd. (supra) held that the obse .....

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to be any clear pronouncement of the Supreme Court on the question whether, when the assessee submits an income for assessment and does not question the same in the appeal preferred by him before the CIT(Appeals), he can question the assessment of the said income for the first time in the second appeal before the Income-tax Appellate Tribunal and whether he is barred from questioning the same on the ground that the said assessment had become final by virtue of his not questioning the same before .....

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up before the Commissioner of Income-tax (Appeals) or any other ground which he had not taken by the Madras High Court. The Bombay High Court has held the assessee entitled to claim for the first time before the Tribunal certain benefits which he had not claimed before. In CIT v. Karamchand Premchand P. Ltd. , the Gujarat High Court held that if a point arising in the assessment order is not taken in appeal by the assessee and is therefore, not dealt wit by the Commissioner of Income-tax (Appeal .....

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administer the law correctly, and if, for instance, as a result of a subsequent judicial decision it is found that a non-taxable item is taxed or a permissible deduction is denied, the assessee can reasonably be said to be aggrieved by the Commissioner of Income-tax (Appeals)'s order in its totality, as it finally sustains the assessment. The Gujarat High Court's attention does not seem to have been drawn to Kamala Mills Ltd. v. State of Bombay in which the Supreme Court held that if a .....

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issioner of Income-tax (Appeals) for the first time a point which he had not raised before the Assessing Officer and which was therefore not dealt with in the assessment order. It is submitted that the correct position in laws that both the Commissioner of Income-tax (Appeals) and the Tribunal have the jurisdiction in every case to entertain a ground which was not urged before the authority whose order is appealed against, but they, judicially exercising their discretion, may or may not entertai .....

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even a plausible argument. The income-tax authorities who have power to assess ad recover tax are not acting as judged deciding a litigation between the citizen and the State : they are administrative authorities whose proceedings are regulated by statute, but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate. Tax legislation necessitates the setting up of machinery to ascertain the taxable income and to assess a tax on the income, b .....

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e 392 of 51 STC) : "An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the Legislature. An appeal is a continuation of the adjustment of the tax liability to accord with the taxable event in the particular taxpayer's case. There can be no analogy or parallel between a tax appeal .....

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sitting in appeal over the assessing authority's order assessment is not strictly an arbitral Tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority can itself enter the arena of assessment, either by pursing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity af .....

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ning additional grounds and an authoritative pronouncement is needed. 14. In our opinion, this Tribunal has no jurisdiction to grant relief on consideration of an additional ground raised by the ld. DR in arguing for the first time although such ground related to an item of assessment. For this purpose, we are considering the judgment in the case of CIT v. Indian Express (Madurai) Pvt. Ltd. (140 ITR 705), wherein the Madras High Court held that the Tribunal is not precluded in examining and dete .....

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cannot be entertained by the Tribunal and it is squarely applicable to the facts of the present case. Admission of additional ground does not involve a mere question of discretion. It is also as question relating to jurisdiction of the Tribunal. If the Revenue filed an application for permission to file additional grounds of appeal in relation to the subject-matter which is already before the Tribunal by way of an appeal, the matter will merely rest on the discretion of the Tribunal. But, where .....

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this appeal is filed by the Department and subject matter of appeal is whether quantification of deduction u/s.80IB of the Act is correct or not. No relief can be given to the Revenue unless it asks for it and is entitled in law to get it; the Tribunal has no jurisdiction to give it any relief though it may be entitled to it, if it does not ask for it in the appeal. The power conferred upon Tribunal is certainly very wide but is so wide only within the subject-matter of the appeal. However, wid .....

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within its scope. In the Department s appeal for increase in the assessable income the only question for its consideration is whether the increase or part of it should be allowed or not. Whether the amount already assessed was wrongly assessed or not or whether the assessee is liable to be assessed at all or not is question quite outside the scope of the appeal and any decision on it cannot be said to be an order on the appeal. Consequently it cannot be said that the Tribunal would have power t .....

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ce of the Revenue would be the enhancement of the assessment and that this would be quite the reverse of supporting it by the ground of defence and it is nothing but enhancement of assessment by the Tribunal for which this Tribunal have no power. 16. In the instant case, the assessee could contend that the Department was not entitled to succeed in the appeal, i.e., to an increase in the assessed income. In other words, so long as it did not ask for the enhancing the assessment, its plea with reg .....

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ease in the assessed income and not against the assessment itself. It itself never distinguished between the contention that it wanted to raise and its effect and did not say that though its effect might be to render the assessment already done invalid did not seek invalidation of it. Actually if it only desired that the appeal be allowed and did not desire any positive order it had the right, under Rule 27 of the ITAT Rules. Since the fact as it appears, is that the ld. DR wanted permission to .....

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logy to file additional ground or additional evidence before the Tribunal. Thus, we are unable to entertain the primary objection raised by the ld DR on the reason that the procedures for filing additional ground was not followed as discussed in Rule 29 of Income Tax Rules, which is as follows:- Rule 29:- The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any wi .....

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e is applicable for filing the appeal before the Tribunal is also applicable for filing additional grounds. Thus sec. 253(6) of the Act prescribes that appeal to the Tribunal shall be filed in the prescribed form and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of October, 1998 irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of :- (a) where the total income of the assess .....

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red thousand rupees, one per cent. of the assessed income, subject to a maximum of ten thousand rupees : (d) where the subject matter of an appeal relates to any matter, other than those specified in clauses (a), (b) and (c), five hundred rupees. Provided that no such fee shall be payable in the case of an appeal referred to in sub-section (2) or a memorandum of cross-objections referred to in sub-section (4). Further, Income Tax Rules, prescribes in Rule 47 as under:- (1) An appeal under sub-se .....

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e, the form of memorandum of cross-objections, the grounds of cross-objections and the form of verification appended thereto shall be signed by the person specified in sub-rule (2) of rule 45) The Rule 45(2) reads as under:- The form of appeal prescribed by sub-rule (1), the grounds of appeal and the form of verification appended thereto relating to an assessee shall be signed and verified by the person who is authorised to sign the return of income under section 140 of the Income Tax Act, 1961 .....

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d the Tribunal, in exercise of its own powers, can verify the mistake whether pointed out by the D.R. or on its own. This decision of the jurisdictional High Court pertains to the old Income-tax Act of 1922 where rectification by the Tribunal is provided under section 35 of the old Act and in section 35 of the old Act, it was specifically provided that the words "in like manner" appearing in sub-section (2) of section 35 in relation to sub-section (1) of section 35 are not sufficient t .....

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sign the appeals, co-objections, grounds and additional grounds before the Tribunal. a) in the case of an individual, (i) by the individual himself; (ii) where the individual is absent from India, by the individual concerned or by some person duly authorised by him in this behalf; and where the individual is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf; (iii) where he is mentally incapacitated from attending to his af .....

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where the karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family; (c) in the case of a company, by the managing director thereof, or where for any unavoidable reason such managing director is not able to verify the return, or where there is no managing director, by any director thereof; Provided that where the company is not resident in India, the return may be verified by a person who holds a valid power of attorney from s .....

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any shall be verified by the principal officer thereof ; (cc) in the case of a firm, by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor ; (cd) in the case of a limited liability partnership, by the designated partner thereof, or where for any unavoidable reason such designated partner is not able to verify the return, or where there is .....

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by that person or by some person competent to act on his behalf. 20. The procedure for filing of additional grounds is at par with the filing of appeal and the rules framed under ITAT Rules for filing of appeal will also apply to additional ground also. The IT Rules, 1962, prescribes an appeal shall be in form No.36 and the form gives the required verification portion. It is also prescribed in Rule 47 that memorandum and the grounds of appeal as also the verification portion shall be signed by .....

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result can file the additional ground and the Tribunal has to act on representation made to it by the assessee or by the Department, i.e. through Assessing Officer only who is party to the appeal. The assessee or the Assessing Officer has a right just like a party to draw the attention of the Tribunal and they have a further right to insist that the Tribunal shall examine the additional ground. In view of the above legal and factual situation, the Authorised Representative whether of the Revenue .....

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the ITAT Rules, 1963, filing of additional grounds equates the procedure for filing of appeal with that of these applications. As far the assessee is concerned, the appeals are to be signed by the assessee and none other than the assessee. Hence, the preliminary objection by the ld. DR is not maintainable. Accordingly, the preliminary objection by the ld. DR is dismissed as non-maintainable and only AO can raise such ground. 21. Now, coming to the merit of the issue raised by the Revenue, at th .....

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