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

2016 (9) TMI 210 - PUNJAB AND HARYANA HIGH COURT - [2016] 388 ITR 46 - 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80-IB in respect of Unit No.II - Held that:- Merely because the relief granted for a previous assessment year is not withdrawn, it does not follow that the assessee is entitled to the relief for the subsequent years even if during the subsequent years the assessee fails to comply with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 e .....

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ote 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. The attention o .....

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ssees 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. - 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 prod .....

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ís 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 registers were not maintained only in the initial years but that, thereafte .....

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sideration various aspects including the assesseeís explanation for the 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 assesseeís finished products were filed. Further it was also contended that there was an increase in proportionate generator expenses, manufacturing expenses and job work .....

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based on the material on record. The Tribunalís finding that the GP rate 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 .....

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dated 10.12.2015 issued by the Central Board of Direct Taxes. Despite 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, .....

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t the orders have been passed by the authorities in respect of the subsequent 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 i .....

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er without which it is not possible to determine the correct income of 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 i .....

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₹ 9.83 crores yielding a gross profit rate of 28.50%. The Assessing 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 S .....

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inafter referred to as the eligible business), there shall, in accordance 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 .....

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ed on without the aid of power. (3) The amount of deduction in the case 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 b .....

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erate its cold storage plant not specified in sub-section (4) or sub-section (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 whic .....

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of Unit I and Unit II there is no demarcation of employees/workers as per 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 Pv .....

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ew unit for the purpose of Section 80-IB, was nothing but an extension 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 Asse .....

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It is important to note that the assessment order referred to the report 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) Adminis .....

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ne godown for raw materials. (vi) Bank account of both the unit is one. 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 .....

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ucturing of business already in existence. The finding that there were 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 ha .....

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Section 80-IB. The Tribunal held that it was thereafter not open for the 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. .....

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claim for the deduction under Section 80-IB. We will deal with this submission 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 deductio .....

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deduction is claimed and not merely for the year of formation be so formed 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 exc .....

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kers engaged earlier in the existing undertaking. This would defeat the 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 .....

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ntitled to ascertain whether in that assessment year the conditions in 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 Ass .....

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ther assessment year without following the provisions of the Act. 13. Mr. 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 a .....

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llip; (ii) It is not formed by the transfer to a new business of a building, 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 c .....

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e condition was not satisfied in either of these years, the benefit would 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 th .....

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re or produce articles. According to this scheme, there are two limitations 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, .....

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hether the new industrial undertaking, which claims the benefit of tax 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 ne .....

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sment years and as a result of such acquisition the condition prescribed 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 .....

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production. In fact, there are many industrial units which add to their 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 ab .....

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and thereby varies the ratio of the new and old assets. If the only point 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 .....

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njustice, presumably not intended, a construction may be put upon it which 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 s .....

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d, in support of his contentions, relied upon the judgment of another Division 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 .....

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precisely ascertained as to how much capital had been invested in the expanded 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 .....

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, that new plants and machineries are erected for producing either the 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 m .....

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sment year under reference, that is, 1969-70, without disturbing the relief 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 g .....

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ions so as to entitle itself to the relief under s. 80J in the initial 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 b .....

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ier, an assessee would be entitled to a deduction under Section 80-IB only 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 p .....

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annot, for instance, refuse a deduction in respect of the assessment year 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 initi .....

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it did and we answer question No. 1, in the affirmative, that is, against 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 .....

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tled to the rebate. Thus, in any event, the judgment is distinguishable. 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 Di .....

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ement and Chemical Industries Ltd. v. CIT [1980] 123 ITR 669]. We are with 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 w .....

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ar No.21/2015. The circular, which is dated 10.12.2015, contains a revision 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. .....

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No appeal shall be filed in respect of an assessment year or years in 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 ye .....

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orth in High Courts/ Tribunals. Pending appeals below the specified tax 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 .....

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would depend upon the facts and circumstances obtaining in a given year. 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 .....

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rs. In our view, in such cases if attention of the High Court is drawn 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 .....

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ed in view of Circular No.21/2015, we will refer to the facts in that case 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 1 .....

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What follows in the assessment order on this issue is important. Paragraph-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 .....

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nit-II is considered. 26. Mr. Putney submitted that the Assessing Officer 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 .....

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w Industrial undertaking has been maintained. We wish to submit that this 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 w .....

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ght by the Assessing Officer on 11.12.2003. 28. The issue regarding the 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 .....

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t require them to maintain separate books of account and that the assessees 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 .....

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f account. That it may be easier for an assessee to establish a claim for 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 fu .....

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unt that fact would, along with other facts, be relevant while considering 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 o .....

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t may be stated that the impugned order of the High Court is cryptic. Ordinarily, 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 .....

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ancial statements on consolidated basis from which it has worked out unit-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 neith .....

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2002) 255 ITR 253 (Gau). 35. The Gauhati High Court framed the following 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 .....

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claimed have been audited by an accountant as defined in the Explanation 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 .....

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rlier the appeals for the assessment years 2003-04 to 2005-06 are liable 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, .....

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ic motors (4-Pole) inlet and outlet valves in Unit No.2. Different products 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 prem .....

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t as per the Inspector s report. 40. The finding of the Assessing Officer 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 .....

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e s case before us was that both the units were using generators. It is 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. Th .....

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n merely because the telephone numbers are common. There is no reason for 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 .....

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gisters of the new and old units. The assessment order also records that 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. Le .....

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is not less than ten. The workers indeed would be employed by the assessee 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 .....

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en or more workers in the first year and not for the remaining years. That 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 .....

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2006-07 to 2009-10 only on the basis of the assessment order for the assessment 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 asse .....

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6-07 onwards. 48. Issue No.1 in the result is answered against the department 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 ado .....

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