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The Commissioner of Income-tax, Panchkula Versus M/s Micro Instruments Company

2016 (9) TMI 210 - PUNJAB AND HARYANA HIGH COURT

Entitled to the deduction u/s 80-IB in respect of Unit No.II - Held that:- Merely because the relief granted for a previous assessment year is not withdrawn, it does not follow that the assessee is entitled to the relief for the subsequent years even if during the subsequent years the assessee fails to comply with the provisions of Section 80-IB or a condition precedent to a claim for deduction under Section 80-IB ceases to exist in the subsequent years for any reason. - The mere fact that t .....

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the second question of law framed by us, it was noted by the Tribunal that the assessee had explained that the manufacturing process required uninterrupted regulated electric power supply and that, therefore, the assessee had not availed of any regular power connection but was entirely dependent on the power supplied by its own generator. The assessee also explained that the prices of the diesel had increased. The attention of the Tribunal was also invited to the paper books wherein an analysis .....

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f they can otherwise function with common telephone numbers. The section does not require the same either. - The Assessing Officer also disallowed the deduction on the ground that the workers/employees were common in respect of Unit-I and Unit-II and that there was no demarcation of employees/workers as per the attendance register produced. As per Section 80-IB(2)(iv), where the industrial undertaking manufactures or produces articles or things, the section would apply if the undertaking int .....

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tely. The assessee seeks the deduction. It would, therefore, have been for the assessee to produce evidence that the undertaking employs ten or more workers provided it was called for. The Assessing Officer did not seek any information regarding the number of workers employed by the assessee for these years. Mr. Kapoor infact stated that separate wage registers were not maintained only in the initial years but that, thereafter including for the assessment year 2006-07 onwards separate wage regis .....

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fall in the GP rate. The assessee had explained, as is evident from the assessment order itself, that the fall in the GP rate was on account inter-alia of stiff competition from China. Sales bills of the respective years showing a fall in the prices of the assessee’s finished products were filed. Further it was also contended that there was an increase in proportionate generator expenses, manufacturing expenses and job work charges. A detailed summary of these expenses was furnished. Moreover t .....

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e as suggested by the assessee is plausible warrants no interference. This was essentially a question of fact and not a substantial question of law. - INCOME TAX APPEAL No. 958 of 2008 (O&M), INCOME TAX APPEAL No. 700 of 2009 (O&M), INCOME TAX APPEAL No.701 of 2009 (O&M), INCOME TAX APPEAL No.714 of 2009 (O&M), INCOME TAX APPEAL No.11 of 2012 (O&M), INCOME TAX APPEAL No.340 of 2013 (O&M) - Dated:- 2-9-2016 - MR. S.J.VAZIFDAR AND MR. DEEPAK SIBAL, JJ. For The Appellant : Mr. Yogesh Putney, Advoca .....

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the same it is necessary to deal with the facts and the proceedings in ITA No. 958 of 2008 which pertain to the assessment year 2003-04 as the orders passed by the authorities i.e. the Assessing Officer, CIT (Appeals) and the Income Tax Appellate Tribunal for the subsequent assessment years are based on their respective orders passed in respect of the proceedings pertaining to the assessment year 2003-04. ITA Nos.714 of 2009, 11 of 2012 and 340 of 2013 are in respect of the assessment years 2006 .....

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equent years. 3. ITA No.958 of 2008 pertaining to the assessment year 2003-04 is an appeal against the order of the Income Tax Appellate Tribunal setting aside the order of the Commissioner of Income Tax (Appeals) [for short, CIT (A)] affirming the order of the Assessing Officer on the issues under consideration. According to the appellant, the following substantial questions of law arise:- 1. Whether the Ld. ITAT was right in holding that deduction u/s 80-IB of R.16,22,661/- in respect of Unit- .....

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the assessee for the year. The appeal raises the substantial questions to the above effect but are modified as under:- 1. Whether the Ld. ITAT was right in holding that the assessee was entitled to the deduction u/s 80-IB of R.16,22,661/- in respect of Unit No.II. 2. Whether the Ld. ITAT was right in deleting the addition made u/s 145(3) at ₹ 14,75,940/-? The contentions raised in the questions framed by the appellant in the appeal will be considered while dealing with the questions refram .....

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ng Officer rejected the books of account under Section 145(3) and computed the gross profit by applying a G.P. rate of 30% on the total sales of about ₹ 9.83 crores. The gross profit so computed amounted to about ₹ 2.94 crores resulting in an addition of about ₹ 14.76 crores. The Assessing Officer completed the assessment by making the said addition of ₹ 16,22,661/- after refusing the deduction under Section 80- IB and ₹ 14,75,940/- on account of the trading results .....

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ce with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) it is not formed by splitting up, or the reconstruction, of a business already in existence. ….. ….. ….. .....

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of an industrial undertaking shall be twenty-five percent (or thirty per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a cooperative society) beginning with the initial assessment year subject to the fulfillment of the following conditions, namely:- (i) it begins to manufacture or produce, articles or things or to operate such .....

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ction (5) at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, 2002. ….. ….. ….. ….. (14) For the purposes of this Section,- ….. ….. ….. ….. (c) initial assessment year - (i) in the case of an industrial undertaking or cold storage plant or ship or hotel, means the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles .....

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er Attendance Register Produced (c) Job work charges of ₹ 78,09,320/- has been claimed, its unit-wise bifurcation has been give (sic) as under:- As per unit-wise P&L a/c filed As per job-work lodger produced Unit-I Unit-II Total Unit-I Unit-II Total 1866580 5942740 7809320 3866580 3942740 7809320 This shows the manipulation of job-work charges. Job work charges amounting to ₹ 23,65,462/- to M/s Micro Motion Pvt. Ltd. (sister concern) is an attempt to evade the tax. (d) There is n .....

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of the business of the assessee s industrial undertaking being Unit-I already in existence. Unit-I was in existence from the year 1989 and Unit-II came into existence in March, 2000. It is necessary to note the Assessing Officer s observations that preceded these conclusions in the assessment order. They are as follows: No separate trading account or profit & loss account had been filed. The assessee, in reply to the Assessing Officer s letter calling upon them to furnish information, stated .....

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t prepared by the Inspector of the office of the Assessing Officer who was deputed to make a spot enquiry in respect of the assessee s claim for deduction under Section 80-IB. As recorded in the assessment order, the Inspector reported as under:- (i) The premises of unit-1 & 2 is the same i.e. 8, Industrial Area, Ambala Cantt. However the unit-2 is working in two halls constructed separately on the same plot. (ii) Administrative block for both the unit is same. (iii) Partners of both the uni .....

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From the assessment order, it is not clear as to which part is a reference to the Inspector s report and which part is the finding of the Assessing Officer. Be that as it may, we will deal with what is stated in the assessment order for, in any event, the Inspector s report was relied upon by the Assessing Officer. (B) The CIT (A) upheld the Assessing Officer s rejection of the assessee s claim for deduction under Section 80-IB on the ground that the business complex was one. There was no separ .....

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common employees was in view of the fact that there was no demarcation of the employees of the said Unit-I and Unit-II. 7. The Tribunal, however, set aside the order of the CIT(A) and held that the assessees were entitled to the deduction under Section 80-IB. This was on the ground that the assessee s claim for this deduction was allowed for the previous assessment years being Assessment Years 2001-02 and 2002-03. The same has not been withdrawn. The revenue did not deny the same. The Tribunal, .....

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he Assessing Officer to re-examine the issue all over again and to come to a different conclusion in a subsequent year without justifying such departure. The Tribunal further held that the onus was, therefore, on the revenue which the revenue had not discharged and that there was no discussion in this regard in the assessment order or in the order of the CIT(A) despite the contention having been raised by the assessee. 8. Mr. Kapoor at the outset contended, on behalf of the assessee, that the de .....

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bmission first and then deal with each of the grounds on the basis of which the Assessing Officer and the CIT (A) rejected the assessee s claim for a deduction under Section 80-IB. 9. Sub-section (1) of Section 80-IB entitles an assessee to a deduction for a specified number of years. Subsection (2) provides that the section applies to an industrial undertaking that fulfills all the conditions enumerated therein. The deduction is, therefore, for each of the years. It follows, therefore, that the .....

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med to be eligible for the deduction. If it were not so, the entire purpose of Section 80-IB would be defeated rendering it nugatory. The assessee would be able to form the new undertaking in accordance with the section and from the very next financial year avoid the condition by splitting up its existing undertaking by taking it into the new undertaking such that the split up portion of the existing undertaking is far in excess in its productive capacity than the new undertaking even as it was .....

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entire purpose of Section 80-IB which is to encourage setting up new undertakings which in turn would generate further employment. Further still, an assessee would be entitled then, in the subsequent years, to dispose of the new plant and machinery and use the plant and machinery already in use by an existing undertaking. 11. In our view, therefore, an assessee must fulfill each of the conditions stipulated in Section 80-IB in each of the years in which the deduction thereunder is sought. The A .....

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Section 80-IB remained fulfilled or not. If not, he is bound to deny the deduction. 12. However, while undertaking this exercise, the Assessing Officer is not entitled to reopen an issue that had been decided in respect of a previous assessment year. In other words, an Assessing Officer is not entitled to question the validity of the grant of a deduction under Section 80-IB in a previous assessment year on any ground. The Assessing Officer would not be entitled to say that a particular condition .....

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r. Putney relied upon a judgment of the Gujarat High Court in Commissioner of Income Tax, Gujarat-I vs. Satellite Engineering Ltd.,[1978] 113 ITR 208 (GUJ) wherein Section 84(2)(ii) read with the explanation to sub-section (3) of the Income Tax Act, 1961, as it then stood, fell for consideration. Section 84, as it stood at the time relevant to the case, provided that income tax shall not be payable on so much of the profits and gains derived inter alia from any industrial undertaking to which th .....

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ding, machinery or plant previously used for any purpose. It was firstly contended that the taxing authority was required to determine whether in the year of its formation i.e. coming into existence by incorporation or otherwise the newly established industrial undertaking satisfied the conditions stipulated in Section 84. Alternatively, it was contended that the latest point of time, by reference to which the applicability could be ascertained, was the date of commencement of manufacture or pro .....

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ld not be available even if conditions were satisfied in the subsequent years. The Division Bench rejected the contention that the year of formation of the undertaking was relevant. The Division Bench held that in relation to a new industrial undertaking the section is firstly attracted in the assessment year relevant to the previous year in which the undertaking began to manufacture or produce articles. The Division Bench then held:- ….. ….. …… ….. ….. .....

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ions on the claim of a new industrial undertaking to the benefit of tax holiday: first, that the benefit will be available for a total period of five consecutive years only and, secondly, that the starting point of such period would be the year in which the manufacture or production of the article begins. We find nothing in the language of the relevant statutory provisions which, however, imposes a further limitation, namely, that if the condition laid down in section 84(2)(ii) is not satisfied .....

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holiday, satisfies the conditions laid down in clause (ii) of subsection (2). In other words, according to the legislative scheme, it is apparent that in each assessment year commencing from the assessment year relevant to the previous year in which such new industrial undertaking begins manufacture or production the taxing authority will have to consider whether the industrial undertaking was formed by the transfer to its new business of building, machinery or plant previously used for any purp .....

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d in clause (ii) of subsection (2) is fulfilled, then, as from the assessment year in which such condition is satisfied, the benefit of tax holiday will be available to it for the remaining period of the five-year term. This appears to us to be the only reasonable construction possible having regard to the plain words of the statutory enactment. The view which we are inclined to take as aforesaid on the plain language of the statute is supported also by the object behind the enactment and avoids .....

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r building, machinery or plant as the business grows and more capital becomes available. If the construction for which the revenue contends were accepted, such industrial units would be denied the benefit of tax holiday, even though they are still going through the teething trouble and are still in their infancy. Such a construction would totally nullify the object of the enactment. A converse case than the one illustrated above would, however, still clearly show how the construction for which t .....

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int of time at which the condition as to the applicability of the relevant provisions has to be satisfied is when the new undertaking starts the manufacturing activity, such an industrial undertaking which subsequently adds used assets to its new business will continue to have the tax holiday for the full period of five years even though it has in fact and reality ceased to be a new industrial undertaking. Could it ever have been intended by the legislature that the benefit of tax holiday should .....

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ich modifies the meaning of the words, and even the structure of the sentences (See Tirath Singh v. Bachittar Singh, AIR 1955 SC 830). This is not a case where the meaning of the word is to be modified or the structure of the sentence is to be changed to achieve the legislative object. At the highest, this is a case where the language employed by the legislature might be capable of bearing more than one construction and, in such a case, in arriving at the true meaning, regard must be had to the .....

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ivision Bench of the Gujarat High in the case of Saurashtra Cement & Chemical Industries Ltd. vs. Commissioner of Income Tax, [1980] 123 ITR 669 (GUJ). The appellant was granted relief under section 80J for the assessment year 1968-69. The issue was whether the relief should be continued for the subsequent year. The Division Bench held:- The ITO disallowed the assessee's claim as in his opinion the expansion of cement manufacturing unit did not amount to setting up a new industrial under .....

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xpanded unit. ….. ….. ….. ….. 6. This takes us to the questions referred to us in IT Reference No. 239 of 1975 at the instance of the revenue. We do not find any justifying reasons to interfere with the order of the Tribunal so far as both these questions are concerned. The Tribunal was perfectly justified in taking the view that if the relief of tax holiday was granted to the assessee-company for the asst. yr. 1968-69, the assessee was entitled to continuance of that .....

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same commodities or some distinct commodities (vide Textile Machinery Corporation Ltd. v. CIT, [1977] 107 ITR 195 (SC): TC25R.490 and CIT v. Indian Aluminium Co. Ltd., [1977] 108 ITR 367 (SC): TC25R.547. It should be emphasised that it was common ground between the parties that the assessee-company has increased the capacity of its cement manufacturing plant from 600 tonnes per day to 1,600 tonnes, per day by setting up new machinery and plant necessary for that purpose. In our opinion, the Trib .....

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lief granted for the initial year. It should be stated that there is no provision in the scheme of s. 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under s. 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, .....

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year can successfully claim the relief, if the prescribed conditions are satisfied in the subsequent years. We do not think that this decision of this court in Satellite Engineering Ltd.'s case (supra) can be of any assistance to the cause of the revenue, because the question with which this court was concerned in that case was altogether a different one in the context in which the Division Bench was speaking. It should be understood that this is subject to the right of the ITO to adjust the .....

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nly if it fulfills all the conditions in each of the years in which it is sought. The Assessing Officer would, therefore, be entitled to be satisfied that the assessee has fulfilled all the conditions in the assessment year which is the subject matter of the assessment proceedings before him. He would be entitled, therefore, to raise queries and seek information to ascertain whether the assessee fulfilled all the conditions prescribed in Section 80-IB in the assessment year in question. In doing .....

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ar in question before him on the ground that the assessee was wrongly granted a deduction under the section in a previous assessment year. He can, however, refuse a deduction for noncompliance with the provisions of the section in respect of the assessment year being dealt with by him. That is why the Division Bench observed: ….. ….. ….. ….. .. But without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withho .....

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st the revenue and in favour of the assessee. The Division Bench also proceeded on the basis that there was no provision in the scheme of Section 80J similar to the one found in the case of a development rebate which could be withdrawn in the subsequent year for breach of certain conditions. Whether that observation is correct or not is irrelevant. What is important is that the Division Bench was of the view that Section 80J does not have a provision by which the benefit thereunder once given ca .....

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. 16. A Division Bench of the Kerala High Court in Commissioner of Income Tax vs. Seeyan Plywoods, [1991] 190 ITR 564 concurred with the decisions of the Gujarat High Court in Satellite Engineering Limited, [1978] 113 ITR 208 (GUJ) and CIT vs. Suessin Textile Bearing Ltd., [1982] 135 ITR 443 and disagreed with the decision of the Karnataka High Court in CIT vs. Nippon Electronics (India) Pvt. Ltd, [1990] 181 ITR 518. 17. A Division Bench of the Bombay High Court, in Commissioner of Income-Tax v. .....

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ith respect unable to agree with this view assuming that it applies to cases under Section 80-IB. We express no opinion in so far as it is in the context of the provisions dealt with therein. Merely because the relief granted for a previous assessment year is not withdrawn, it does not follow that the assessee is entitled to the relief for the subsequent years even if during the subsequent years the assessee fails to comply with the provisions of Section 80-IB or a condition precedent to a claim .....

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sion of the monetary limits for filing appeals by the department before the Tribunal, the High Court and the Special Leave Petition before the Supreme Court. Paragraph-3 provides that appeals shall not be filed before the High Court where the tax effect does not exceed ₹ 20 lakhs. The tax effect in respect of these three appeals, namely, ITA Nos.958 of 2008, 700 of 2009 and 701 of 2009 does not exceed ₹ 20 lakhs. Paragraphs 5 and 10 of the circular, relied upon by Mr. Kapoor, read as .....

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which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all such assessment years even if the tax effect is less than the prescribed monetary limits .....

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limits in para 3 above may be withdrawn/ not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed. 19. The circular firstly applies retrospectively even to the pending appeals. It, therefore, applies to these three appeals. Although the disputed issues arise in more than one assessment year, in view of Paragraph-5 of the circular, the appeals could be filed only in respect of such assessment years in whi .....

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. Thus, whereas an assessee may be entitled to a deduction in respect of one or more years, he may not be entitled to the deduction for another year or other years. Further, the composite order referred to in paragraph-5 is of another High Court or appellate authority. Although the issue of law is common in respect of each of the assessment years, the issues of fact are not. 20. Mr. Putney, on the other hand, relied upon the following observations in the judgment of the Supreme Court in the case .....

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the High Court will not apply the Circular ipso facto. For that purpose, liberty is granted to the Department to move the High Court in two weeks. The special leave petition is, accordingly, disposed of. 21. The judgment would have no application for more than one reason. In the cases before us the matter in one year, namely, the assessment year 2003-04 does not have a cascading effect on the subsequent years. At the cost of repetition, the application for deduction would have to be determined i .....

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ase for it is based on the decisions in respect of the assessment year 2003- 04 that the authorities passed the orders in the subsequent years. 24. We will first deal with the Assessing Officer and the CIT(A) s decision to disallow the deduction on the ground that the assessee had not maintained separate books of account. 25. The assessment order for the earlier assessment year i.e. Assessment Year 2001-02 was under Section 143(3). That assessment order records that Unit-II had started commercia .....

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aph-3 of the assessment order reads as under:- 3. In response to query on the subject, the assessee submitted that this is the first year of full operation of Unit-II, as such inadvertently separate books of accounts have not been maintained. The assessee further submitted that section 80 IB of the Income-tax Act, 1961 does not envisage any such requirement for maintaining separate books of accounts. In support, the assessee relied upon various case laws in this regard. In view of the fact that .....

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er has not applied his mind to this aspect and that this was not a reasoned order. He submitted, therefore, that the Assessing Officer was, for the assessment year in question, entitled to go into this aspect even in respect of the previous assessment years. We do not agree. 27. Paragraphs 2 and 3 read together make it clear that the Assessing Officer had applied his mind to the very issues that are sought to be raised in the present proceedings. That the Assessing Officer had applied his mind b .....

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is is first year of full operation of Unit-II as such inadvertently assessee has not maintained the separate books of accounts. However, from next year onward separate books of account are maintained. However, assessee firm is fulfilling all the conditions of section 80-IB as stated above. Further, we wish to submit that section 80-IB does not envisage any such requirement for maintaining separate books of accounts. We have worked out the profit of new unit from the books of accounts produced be .....

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assessee not having kept separate books of account in respect of the two units was, therefore, specifically raised by the Assessing Officer and was specifically answered by the assessee. Further, as is evident from paragraph-3 of the assessment order set out earlier, the assessment order itself expressly referred to and dealt with this aspect. The assessment order specifically referred to the assessee s reply and dealt with the issue of the assessee not having kept separate books of account for .....

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sees had relied upon authorities in this regard. The Assessing Officer also recorded that in respect of Unit-II, the assessees had been registered with the Sales Tax Department, Haryana as an independent unit with a separate registration number as well as as per the rules of the Central Excise & Customs Department to the effect that no separate registration is required if a new unit is set up in the existing premises. The claim for deduction was, therefore, considered, to wit, was allowed. T .....

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or deduction under Section 80- IB in the event of separate books of account being maintained is another matter altogether. That is a question of evidence and not a legal obligation. 30. Section 80-IB itself does not expressly require an assessee to maintain separate books of account to maintain a claim for a deduction thereunder. Nor do we find anything in the section that implies such a requirement. So long as an assessee fulfills all the conditions stipulated in sub-section (2), the section wo .....

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ing whether the assessee fulfills all the conditions of Section 80-IB and, in particular, sub-section (2) thereof. It would be relevant, for instance, while considering whether the industrial undertaking concerned is formed by splitting up or a reconstruction of a business already in existence or not. If separate books of account are kept in respect of the new industrial undertaking, it would certainly be a factor in favour of the assessee. That, however, relates to the question of evidence in s .....

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rdinarily, we would have remitted the case to the High Court for de novo consideration. The High Court has relied upon its earlier judgment, which, in our view, is not applicable on all fours to the facts of the present case. However, to put an end to the litigation, we are of the view, that though neither Section 80-HH nor Section 80-I (as it then stood) statutorily obliged BRPL to maintain its accounts unit-wise and that it was open to BRPL to maintain its accounts in a consolidated form in or .....

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it-wise net profits. If not done, it could be done by the auditors even today from the Consolidated Books of Accounts. Once such working is certified by the auditors the net profit computation (unit-wise) could be placed before the Assessing Officer who can find out whether such profit(s) is properly worked out and on that basis compute deduction under Sections 80-HH/80-I. [Emphasis supplied] The Supreme Court held that neither Section 80-HH nor Section 80-I statutorily oblige the assessee to ma .....

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g question of law and proceeded to answer it as follows:- (i) Whether on the facts and in the circumstances of the case the Tribunal was correct in law in holding that no separate accounts are required to be maintained for claiming deductions under ss. 80HH and 80-I of the Income-tax Act, 1961? …. ….. ……. ……. ……. 5. Regarding the first question we find that the law does not require that a separate accounts are required to be maintained for .....

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on below sub-s. (2) of s. 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. That will not help the revenue in this case as in this case the assessee is a company. It is pertinent to note that Section 80-IB does not even have a provision similar to sub-section (5) of Section 80-I of the Act as it then stood. The absence of a provision in Section 80-IB similar to sub-section (5) of Section 8 .....

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e to be dismissed in view of the circular No. 21 of 2015. In respect of the subsequent assessment years separate books of account were kept. 37. The contention that the assessees are not entitled to the deduction under Section 80-IB as they did not maintain separate books of account is, therefore, rejected. 38. It was next contended that the products are the same. Although a new undertaking may manufacture the same products, this contention was raised only to substantiate the contention that the .....

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ucts are, therefore, indicated. The Assessing Officer did not suggest that the products are the same. The Assessing Officer raised queries in the course of the assessment proceedings but did not seek any clarification to this effect. It is not possible in this appeal to consider the appellant s suggestion that the products are the same and, in any event, very similar. 39. The contention that the two units are in the same premises is also erroneous. The inspection report, called for by the Assess .....

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er that job-work charges have been claimed in respect of the two units separately and as per the profit and loss account in respect of each of them, in fact, supports the assessee s case that the two units are separate. The job-work ledger produced by the assessees also indicated the same. 41. The assessment order also cannot be supported in so far as the Assessing Officer denies the deduction on the ground that there was no separate power connection in Unit-II, that the bank account of the two .....

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important to note in this regard that while dealing with the point that arises under the second question of law framed by us, it was noted by the Tribunal that the assessee had explained that the manufacturing process required uninterrupted regulated electric power supply and that, therefore, the assessee had not availed of any regular power connection but was entirely dependent on the power supplied by its own generator. The assessee also explained that the prices of the diesel had increased. .....

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or the assessees to have separate telephone connections in respect of each unit, if they can otherwise function with common telephone numbers. The section does not require the same either. 44. The Assessing Officer also disallowed the deduction on the ground that the workers/employees were common in respect of Unit-I and Unit-II and that there was no demarcation of employees/workers as per the attendance register produced. As per Section 80-IB(2)(iv), where the industrial undertaking manufacture .....

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t the said wage and attendance registers were produced. It is not clear whether they were produced before the Assessing Officer or before the Inspector appointed by him. However, it makes no difference who they were produced before. The assessment order records that there is a common register for both the units which records that there are 93 employees but without any demarcation of the employees of Unit-I and Unit-II. 46. Let us first examine the provisions of Section 80- IB(2)(iv). It requires .....

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ssee but they must be employed for the new undertaking. The contractual relationship would be between the workmen and the assessee and not between the workmen and the undertaking for the undertaking has no independent legal existence. However, the assessee must employ the workmen for the new undertaking. Further, the undertaking must employ ten or more workers throughout the period in respect of which the deduction is claimed. The section applies to industrial undertakings which fulfill, inter a .....

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hat could never have been the intention of the legislature. The conditions stipulated in sub-section (2) must be fulfilled in the year in which the deduction is sought. If any of the conditions is not fulfilled during a particular assessment year, the assessee would not be entitled to the deduction for that year. The issue as to whether the assessees had fulfilled the provisions of sub-section (2)(iv) for the assessment year in question or not could not be decided merely with reference to the as .....

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sessment year 2003-04. That could not be so on the force of Mr. Putney s argument itself that each assessment year is to be considered separately. The assessee seeks the deduction. It would, therefore, have been for the assessee to produce evidence that the undertaking employs ten or more workers provided it was called for. The Assessing Officer did not seek any information regarding the number of workers employed by the assessee for these years. Mr. Kapoor infact stated that separate wage regis .....

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rtment on facts. Re: ISSUE No.2 49. CIT (Appeals) sustained the Assessing Officer having added ₹ 14,75,940/- on account of trading results after rejecting the assessee s books of account. The Assessing Officer noted that the GP rates for the years 2001-02, 2002-03 and 2003-04 was 33.28%, 34.04% and 28.5%. The Assessing Officer was not satisfied with the assessees explanation for the fall in the GP rate and therefore adopted the GP rate at 30%. The entire exercise was essentially one of fac .....

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