TMI Blog2017 (9) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... ements, electricity bill, change of location plot for manufacture, certificate from sale tax authorities availability of plant and machinery etc. These evidences in totality leaves us in no doubt that year of commencement noted by the Accountant in its certificate was inadvertent mistake inconsistent with the underlying facts, for which relief claimed under s.10B of the Act cannot be denied. Mere authorization to enable the Assessee to import material or export produce in the earlier date would not ipso facto tantamount to commencement of substantial activity of ‘manufacture’/’production’. The Assessee has successfully discharged onus which lay upon it. Under the circumstances, we find no fault with the conclusion derived by the CIT(A) and refuse to interfere therewith. - Decided against revenue - I.T.A. No. 40/RJT/2015 - - - Dated:- 11-9-2017 - Shri Pradip Kumar Kedia, Accountant Member And Shri Mahavir Prasad, Judicial Member Appellant by : Shri Yogesh Pandey, CIT-DR Respondent by : Shri M.J. Ranpura, AR ORDER Per Pradip Kumar Kedia AM The captioned appeal is directed by the Revenue is against the order of the Commissioner of Income Tax(Appeals)-Jamnagar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring / processing of scrap ingots and parts, and registered as 100% Export Oriented Unit (EOU) had filed its return of income on 29.09.2011 declaring therein total income at ₹ 61,630/- after claiming exemption u/s 10B of the Act at ₹ 9,50,53,560/-. The AO, vide order u/s. 143(3) of the Act dated 29.03.2014 assessed the total income at ₹ 9,50,53,560/- wherein he disallowed the claim of exemption u/s 10B of the Act on the ground that the year under consideration is the eleventh year of production and hence the appellant is not entitled for exemption. Appellant's submission; 5. Before me, the Id. AR of the appellant filed written submission, which reads as under:- (a) The appellant is a 100 % Export Oriented Unit (EOU) and claimed exemption u/s 10B of the Act at ₹ 9,49,91,927/- being the tenth year of commencement of manufacture activities. (b) The AO disallowed the claim by alleging that in audit report given in form 56G the auditor has mentioned date of commencement of manufacture / production as 26.12.2000 relevant to AY 2001-02. He held that the year under consideration is the 11th assessment year from the date of commencement of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment is absolute need to claim set off as well as subsidy etc. particularly in the cases like the assessee having 100 % EOU where the raw material is imported one. Since the CST certificate is valid from 03.04.2001 the appellant was prohibited from doing any manufacturing activities before that date. Thus, except in the audit report in form 56G in all the documents the date of commencement of manufacture of production is 03.04.2001 which has been mentioned in the assessment order. This cannot be a cooked up story or self serving exercise as alleged. (e) Further in the course of assessment proceedings the appellant furnished a copy of ROI for AY 2000-01 wherein the income returned is NIL in all respect including the gross profit and allocation of profit amongst partners. It is possible that as per the provisions of Income tax Act income of an assessee for-.the purpose of taxation may be NIL, but in the books of accounts the share of profit/loss is allocated amongst partners in reality. Here the profit allocated to partners is also NIL. Had the appellant commenced the manufacture the production there would have been some figures of profit or loss or the unabsorbed depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new industrial undertakings but to control the mischief which might have otherwise taken place. Adopting a literal construction would result in defeating the very purpose of section 15C. Therefore, it becomes necessary to resort to a construction which is reasonable and purposive to make the provision meaningful. The initial exercise, therefore, should be to find out whether the undertaking was new. Once this test is satisfied, then clause (i) should be applied reasonably and liberally keeping in view the spirit of section 15C(1). . .. .. A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it (emphasis supplied). Hon'ble Supreme Court in the case of CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. 196 ITR 149 and the ratio of the Hon'ble Apex Court is reproduced below (from the Head Notes) : It is settled law that the expressions used in a taxing statute would ordinarily be understoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen from the assessment order that, the AO had disallowed the claim on the basis of the remark appearing in form No 56G of the Auditor. At the time of assessment, when this issue was show caused to the appellant, the appellant had stated that this remark appearing in form No 56G was inadvertently caused and that, the actual production / manufacturing started after the receipt of approval from the Sales Tax Department, who had issued registration certificate on 3.4.2001. Therefore, the first year of manufacture was FY 2001-02 viz., AY 2002-03.. The appellant also produced a copy of its accounts, as per which, during AY 2001-02 there were no machinery, fixed assets except shed allotted by the GIDC, no claim of depreciation, no profit or loss, no claim of unabsorbed depreciation, etc. The appellant had also produced proof of certificate issued by the District Industries Centre in support of its arguments that, the year of manufacture was indeed AY 2002- 03 and hence, the year under consideration is the tenth year. The AO however did not accept the contention of the appellant on the ground that, the documents so produced were after thoughts, self serving documents and that, the audito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and this is available with the AO. He could have cross verified this fact, instead of making a passing remark that the evidences are self serving documents. 6.5 Thirdly, the accounts for AY 2001-02 shows no profit or loss, no purchases or sales, no incurring of expenditure and no claim of depreciation. This is only the year in which the business was set up. But the manufacturing activities commenced from AY 2002-03 only. It was held in Kanodia and Sons vs. CIT (2006) 281 ITR 255 (All) that the year in which the business was set up cannot be treated as the first year, which has to be reckoned only from the year of actual production in the context of relief. It would therefore mean that the year in which it is set up, can be different from the year in which commercial production commences for purposes of reckoning eligible period of relief, an inference, consistent with the objective of relief. 6.6 Therefore, against an inadvertent remark made by the auditor (although col. No. 8 of form No 56G states that this is the 10th year of manufacturing activities), the appellant has furnished sufficient evidences which prove that the year of commencement of production was AY 2002- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002-03. 7. The Ld.AR, on the other hand, submitted that there was an inadvertent error in the certificate of the Accountant about the date of commencement of business from 26/12/2000 in place of 03/04/2001. Thus, the year under consideration is the 10th year of the claim of deduction. The Ld.AR submitted that, other than the aforesaid certificate, from the Accountant, all other factual evidences clearly support the year of commencement of manufacture or production to be in FY 2002-03. As pointed out, the sales tax registration certificate has been obtained in FY 2002-03. The Ld.AR next relied upon the copy of return of income 2000-01 to demonstrate that no business whatsoever was carried on by the assessee during FY 2001-02. Thus, no manufacture/production was carried out. The Ld.AR also adverted to the fixed asset schedule for the FY 2001-02 filed with the return of income to show that there was no machinery including the electric fittings, generator and shed construction was at the disposal of the assessee at the beginning of the FY 2002-03. Only a shed value of meager amount of ₹ 8,64,273/- allotted by GIDC was shown in the immediate preceding FY 2000-01 and carried f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or production was commenced in FY 2000-01 or in FY 2001-02. It is the case of the AO that activity of manufacture or production commenced on 26/12/2000 as reported in the certificate of Accountant filed by the assessee-company. The assessee, on the other hand, relied upon multiple documents to establish that manufacture or production or articles or things could not have commenced in the FY 2000-01 as alleged by the Revenue. It is the case on behalf of the assessee that no plant or machinery or electric fittings was available at the disposal of the assessee to enable it to be engaged in any kind of manufacture of production in AY 2000-01 as can be seen from the financial accounts of the assessee. It is further case on behalf of the assessee that the electric bills also support the case of the assessee that no manufacture or production was carried out by the assessee in the FY 2000-01. The assessee also relied upon certificate from the sales tax authorities issued in FY 2001-02 to buttress its claim of commencement of manufacture or production in FY 2002-03. The assessee has also pointed out that plot originally allotted in FY 2000-01 for commencement of manufacture or production co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
