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The Income Tax Officer Ward-1 (3) , Jamnagar Versus M/s. Royal Recycling Industries

2017 (9) TMI 957 - ITAT RAJKOT

Disallowance of deduction claimed u/s 10B - commencement of manufacture or production or articles or things - year of assessment - CIT(A) has decided the issue in favour of assessee and held that year of manufacture/production as a 100% EO for the purpose of eligibility of claim of under s.10B is FY 2001-02 relevant to AY 2002- 03 - Held that:- CIT(A) has examined the issue in perspective and has come to rightful conclusion on facts. The revenue could not bring any positive evidence other than t .....

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able by plethora of evidence in the form of return of income, financial statements, 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 .....

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dicial 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, [ CIT(A) in short] dated 20/11/2014 in the matter of assessment under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 29/03/2014 to the relevant Assessment Year (AY) 2011-12. 2. The Revenue is aggrieved by th .....

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s commercial production/manufacture from 03/04/2001 relevant to AY 2002-03. The return of income for the AY 2011-12 was filed declaring total income of ₹ 61,630/- after claiming deduction/exemption under s.10B of the Act amounting to ₹ 9,50,53,560/-. The return was subjected to scrutiny assessment. The AO rejected the aforesaid claim of deduction/exemption claimed under s.10B of the Act on the alleged ground that the year under consideration is the 11th year of production and therefo .....

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the GIDC. The assessee has made no claim towards depreciation and no profit or loss arising from the business activities have been reported in FY 2000-01 (AY 001-02). The CIT(A) also took cognizance of the certificate issued by the District Industries Centre to appreciate the case of the assessee that the year of manufacture/production started in FY 2001-02 (AY 2002-03) and hence the year under consideration is the 10th year. The relevant paras of the order of the CIT(A) dealing with the issue .....

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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 ma .....

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ces to the effect that in fact the commencement of ;| manufacture / production was started on 03.04.2001 relevant to AY 2002-03 and as such the year under consideration is the tenth year of commencement of manufacture / production and hence exemption u/s 10B is allowable. The AO discussed the appellant's contention as also his views in the body of the assessment order hence for sake of brevity the same are not repeated. (d) The basic issue is that as to whether the manufacture or production .....

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ed to bring on record any material to the effect that the appellant had claimed the first exemption u/s 10B in the assessment year 2001-02 from the records maintained by the department. (e) In support of claim of exemption in the tenth year the appellant in the course of assessment proceedings furnished a copy of Central Sales Tax (Registration & Turnover) Rules 1957 certificate dated 21.04.2001 (copy attached) wherein it was specifically stated that this certificate is valid from 03.04.2001 .....

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roceedings are come in to play only when the final accounts are prepared and return of income is filed. Whereas for the purpose of commencement of manufacturing activities a certificate of registration with sales tax department 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 acti .....

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rs. 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 to be carried forward to subsequent year. There is no such event and as such it can .....

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diate preceding year which has been carried forward to FY 2001-02. All the machineries, electrical fittings and the construction of shed took place in FY 2001-02 relevant to AY 2002-03. Thus, even if the appellant wish to manufacture any article or thing in FY 2000-01 relevant to AY 2001-02, it was not in a position to do so. Thus, even under the circumstantial evidence available on record it can be said that there was no commencement of manufacture or production during the financial year 2000-0 .....

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ons of the Hon'ble Court is reproduced below (from the Head Notes): "Section 15C of the Indian Income-tax Act, 1922, read as a whole, Is a provision directed towards encouraging industrialization by permitting an assessee setting up a new industrial undertaking to claim relief from tax to the extent of tax on six percent of the capital employed every year. But the Legislature took care to restrict such benefit only to those undertakings which were new in form and substance, by providing .....

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C. 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 libera .....

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te would ordinarily be understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative intention. It is equally settled law that, if the language is plain and unambiguous, one can only look fairly at the language used and interpret it to give effect to the legislative intention. Nevertheless, tax laws have to be interpreted reasonably and in consonance with justice adopting a purposive approach. The contextual meaning has to be ascertained and given .....

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ent benefit to the new industries covered by the provisions of the Act. Consequently, while considering it, care has to be taken to see that the relevant purpose underlying section 803 is augmented and fortified and not frustrated by the construction put upon the said provision. Even assuming that another view is possible on the construction of the second part of sub-section (6A) of section 80J, as that view is likely to frustrate the very object and purpose of the scheme underlying section 80J( .....

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ll have to be construed liberally in a broad commercial sense, keeping its object in view. • Hon'ble Supreme Court in the case of Mysore Minerals Ltd. Vs. CIT 239 ITR 775, has held that a provision enacted for the benefit of an assessee should be so construed which enables the assessee to get its benefits." Decision: 6. I have perused the assessment order and the written submission filed by the Id. AR of the appellant. 6.1 It is seen from the assessment order that, the AO had disal .....

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e 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 ac .....

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10th year of operation. Therefore rely on the basis of clerical error, the claim cannot be denied. The Id. AR, on the other hand, laid stress on the documents submitted by him, in support of his arguments. 6.3 I have carefully perused the facts of the case as also the evidences produced in this regard. I find that, the AR has produced copy of the sales tax registration certificate, as per which, the firm was allowed to operate as "manufacturer' from 3.4.2001. This certificate is forming .....

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of the Indian Evidence Act holds relevancy of entry in public record or an electronic record made in performance of a duty. According to this section, any entry In any public or other official book, register or record or an electronic record, stating a fact in issue or relevant fact, and made by a public servant in discharge of his official duty, or by any other person in performance of a duty specially enjoined by the law of the country in which such book, register, or record is kept, is itsel .....

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al record of the Income tax Department 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. .....

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e 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 2002-03. Therefore, this being the tenth year, the appellant is eligible for claim of deduction u/s. 10B of the I T Act. Hence, the disallowance made is directed to be deleted. In the result, the appellant's appeal is allowed. 5. Aggrieved by the reversal of action of AO by .....

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h the assessee intimated to the Development Commissioner, Kandla Free Trade Zone in pursuance of its agreement dated 03/08/2000. The Ld.DR submitted that the assessee did not have machinery even on 03/04/2001 and therefore date of commencement cannot be taken to be the date of registration with the sales tax authorities by that standard. The Ld.DR submitted that the CIT(A) has observed that the balance-sheet shows only factory shed as on 31/03/2001. However, if the assessee could be manufacturer .....

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export to submit that the assessee was in a position to execute the manufacture/production. The DR next contended that as per certificate in Form 56G filed by the assessee, the date of commencement of business is 26/12/2000 which supports the case of the AO. The ware housing license has been provided by the Central Excise Department w.e.f.08/12/2000 which also supports that the date of commencement was in the FY 2000-01 and not in 2001-02. The ld.DR accordingly submitted that the CIT(A) ought n .....

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r 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 .....

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xhorted that in the absence of any machinery or business set up, the assessee was not in a position to manufacture or production of any article or thing in FY 2000-01 relevant to AY 2001-02 as contemplated under s.10B of the Act. The Ld.AR submitted that the permission for commencement of production was initially given for Plot No.267 GIDC Phase-II Dared, Jamnagar, Gujarat vide letter dated 18/07/2000. However, no manufacturing activities were carried out at Plot No.267 GIDC till 31/03/2001. To .....

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Kandla Free Trade Zone vide letter dated 13/06/2001. The manufacturing activity could be started only thereafter. The Ld.AR relied upon the sample electricity bill for the period November-2001 to show that the consumption of electricity started only during that month and onwards. There was hardly electric consumption in the past. The Ld.AR thereafter referred to return of income for AY 2001-02 and submitted that no claim of exemption under s.10B of the Act was made for the FY 2001-02 as no busin .....

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e have carefully considered the rival submissions and perused the orders of the authorities below and the material referred to in the course of hearing. The basic issue in the instant case is whether manufacture 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 docume .....

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he 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 could not be utilized for commencement of manufacture/production and the unit was later shi .....

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