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The Income Tax Officer Versus M/s Jaydeep Petrochem Co. P. Ltd

2016 (6) TMI 124 - ITAT CHENNAI

Claiming deduction u/s 80IB - Deduction u/s 10B - Held that:- The pre-condition for claiming deduction u/s 80IB is (i) manufacturing activity, (ii) employed more than 10 workers, and (iii) usage of brand new machinery for the new industrial undertaking. Admittedly, the assessee has established a new industrial unit at Pondichery. The Assessing Officer disallowed the claim of the assessee on the ground that the assessee’s activities do not amount to manufacturing. The Assessing Officer has also f .....

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ssessing Officer.

Referring to the old plant and machinery and the new one, the Assessing Officer came to the conclusion that the old plant and machinery was 40% which is more than the permitted limit of 20%. The CIT(A) found that the observation of the Assessing Officer was factually incorrect by saying that the Assessing Officer adopted the opening written down value as on 1.4.2005 and compared with the addition of plant and machinery made during the financial year 2005-06. The Asse .....

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thinner and wood polish. It also needs to be considered whether producing, varnish, thinner and wood polish would amount to manufacturing activity or not. The assessee appears to have produced new material for evidencing the payment of PF before the CIT(A). The CIT(A), without calling for any remand report from the Assessing Officer, accepted the details filed by the assessee. In those circumstances, this Tribunal is of the considered opinion that the matter needs to be reexamined by the Assess .....

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ant : Shri P. Radhakrishnan, JCIT For the Respondent : Shri G. Baskar, Advocate ORDER Per N. R. S. Ganesan, Judicial Member Both the appeals of the Revenue are directed against the common order of the Commissioner of Income-tax (Appeals)-6, Chennai, dated 3.3.2015 for assessment years 2006-07 and 2007-08. Since common issue arises for consideration in both the appeals, we heard them together and disposing of the same by this common order. 2. Shri P. Radhakrishnan, ld. Departmental Representative .....

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tank cannot be considered as plant and machinery for the purpose of assessee s business. Even assuming that storage tank has to be considered as plant and machinery, the ratio of old machinery and new machinery is in the ratio of 40:60, hence, the condition for allowing deduction u/s 80IB was not complied with. According to the ld. DR, for allowing the claim of deduction u/s 80IB, there must be a new business and such business was not formed by transfer of any machinery or plant from other indus .....

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engaged in the manufacturing of thinner from some chemicals. According to the ld. DR, thinner is nothing but mixing of various chemicals at various proportions. The plant and machinery shown in the balance sheet is nothing but a testing machine. For mixing the chemicals at various proportions, the testing machine has no role to play. According to the ld. DR, testing process is different from manufacturing process. The plant and machinery in the assessee s case does only testing process, therefo .....

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s 80IB of the Act. Referring to the order of the CIT(A), the ld. DR submitted that the CIT(A) found that the assessee has employed two sets of workers. One set of employees are own and permanent workers and the other set of employees are through laboour contractors. The CIT(A) found that the permanent employees are six in number and the workers employed through labour contractors is 15 in number, therefore, the CIT(A) found that the assessee is eligible for deduction u/s 80IB of the Act. 4. Refe .....

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T(A) is not justified in allowing the claim of the assessee. 5. On the contrary, Shri G. Baskar, ld. Counsel for the assessee submitted that the assessee has stared a new manufacturing unit at Pondichery in assessment year 2004-05. The assessment year under consideration is third year of claiming deduction u/s 80IB of the Act. The plant and machinery found at the beginning of the assessment year as on 1.4.2005 was at ₹ 8,85,699/-. The addition made during the year under consideration was t .....

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employees. The CIT(A), after considering the number of persons employed by the assessee and the plant and machinery purchased during the year under consideration, found that the assessee has complied with all the pre-conditions required for claiming deduction u/s 80IB of the Act and allowed the claim of the assessee. 6. We have considered the rival submissions on either side and also perused the material available on record. The pre-condition for claiming deduction u/s 80IB is (i) manufacturing .....

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e prescribed limit is only 20%. The CIT(A) found that the assessee has employed two sets of workers. The first set of workers are permanent employees and another set of workers and contract employees. The CIT(A) found that the permanent employees are 6 in number and contract employees are 15 in number totalling to 21 employees. This fact is not available before the Assessing Officer. The CIT(A), by placing reliance on the judgment of the Bombay High Court in the case of CIT vs Jyoti Plastic Work .....

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the Assessing Officer was factually incorrect by saying that the Assessing Officer adopted the opening written down value as on 1.4.2005 and compared with the addition of plant and machinery made during the financial year 2005-06. The Assessing Officer came to the conclusion that the new machinery claimed to be purchased by the assessee is only a storage tank. The CIT(A), without referring to the nature of the plant and machinery said to be purchased, found that the machinery purchased upto 31.3 .....

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