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TMI Blog2018 (11) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... operations should not be an item listed in thirteenth schedule u/s 80-IC(2)(a) of the Income-tax Act, 1961 even if the articles/things covered in fourteenth schedule u/s 80-IC(2)(b). (iii) Ld. CIT(A), on the facts and circumstances of the case, has erred in law in giving superseding effect to Fourteenth Schedule over Thirteenth Schedule as well as under Fourteenth Schedule being Mobile battery which is substantially 'Plastics and articles thereof'. 2. (i) Ld. CIT(A), on the facts and circumstances of the case, has erred in holding that assessee is engaged in the production/manufacturing of article w.e.f. 31.03.2010 ignoring 'the question' as to how a manufacturing unit can be ready to produce an article or thing in a period of one month's time or during the period before the premise was taken on rent which emerges from two rent agreements produced by assessee which proved premise was taken on rent on 01.03.2010/23.06.2011. (ii) Ld. CIT(A), on the facts and circumstances of the case, has erred in law in ignoring the factual discrepancies with regard to the production of article in one month's period prior to 31.03.2010 and F.Y. 2010-11. (iii) Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted its claim with requisite details along with the fact that the products manufactured by the assessee are not falling into the 13th schedule. However the learned assessing officer examined the conditions and also recorded the statement under section 131 of the income tax act of the director of the company. The learned assessing officer noted that the product manufactured by the assessee company has two major components made of plastic and therefore he held that it is covered under item number 20 of the 13th schedule as plastic and articles thereof and accordingly the deduction under section 80 IC of the income tax act is not allowable to the assessee. Consequently the assessment order under section 143 (3) of the income tax act was passed on 23/2/2015 by disallowing the above claim of deduction and further not allowing the carry forward of the business loss of Rs. 5 26268 and unabsorbed depreciation of Rs. 1 86522/- 4. The assessee challenged the same before the learned commissioner of income tax appeals. He deleted the addition vide order dated 2/11/2015 and held that assessee is eligible for deduction under section 80IC of the income tax act. He also allowed the set off of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered for exemption under Section 80 IC. The sector 2 Kasauli should be read as urbanization of the old villages across the country and is now part of sector 2 and the legal documents still continue to carry the old recorded address. The appellant has submitted that land record of the property where factory is situated falls under the notified area and the AO has misunderstood the same. The appellant has stated that the lease deed entered into with the landlord gives complete address and has been mentioned the correct address of the factory and the address given in the lease deed is Khasra No.853/854, Hadbast No. 950, Kasauli Road, Opposite Jogindra Central Co-operative Bank, Sector -2, Parwanoo, Distt. Solan and this area comes under the notification of Central Excise vide notification no. 50/2000. Therefore, the observation of the AO that the factory premises do not fall in the notified area is not correct. It is also submitted by the appellant that address given in the two lease agreements is the same as in the first agreement Khasra No.853/54 is mentioned and in the second agreement it is mentioned as 853/854. Both the addresses mentioned in the above cited lease deeds is one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention, the appellant had submitted following documents before the AO to prove the manufacturing and sale of the batteries. (i) Proof of raw material purchased (ii) Proof of sale of finished product on 31.03.2010 (iii) Customs invoice of machinery and raw material (iv) Border check post received for inward movement of machinery and raw material alongwith proof of outward sales During the course of appellant proceedings the appellant submitted a paper book containing pages from 1 to 67 through which the appellant has explained that manufacturing activity in the case of appellant had commenced in the month of March, 2010. The appellant has further submitted that all these documents submitted submitted before the AO but he has completely ignored those evidences. The appellant has also submitted that manufacturing of battery from different material is a highly technical job and it needs great deal of accuracy at each process. At the time of assessment proceedings the appellant had submitted a complete list of machine installed and used by the appellant. Such machines can be put to use as soon as they arrived at the premises and they do not need elaborate process of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises taken on rent in the notified area and has started production of Mobile batteries, charger and other accessories. During the course of appellate proceedings the AR of the appellant explained the manufacturing process of mobile batteries which is reproducing as under: - The process involves, at the first stage, proper testing of the cells by way of 100% test of the open voltage of the cell, along with the internal resistance with the help of cell testers. After this, random 2% lot is selected for further testing to ensure that capacity of the cells, as measured in milli ampere hours (mAh), is correct as stated by the manufacturers. On the other side, the PCM is also put through a 100% test for ensuring that it carries the necessary protections that are required of it, with a function test to ensure that it will be able to perform as needed in a mobile phone. A PCB tester is used to conduct this test on 100% lot. The PCB is then sent for welding a nickel strip on the terminals, to make it ready for the battery. This is done with the help of a resistance spot welding machine. After the PCM welding with the strip, it is sent to the next welding position to weld the nic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard reliance is placed on the following judicial pronouncement: (i) Commissioner of Income-tax -XI vs. Tej Pal Singh Kohli [ 2015 ] 56 taxmann.com 162 (Delhi) Section 80-IC of the Income-tax Act, 1961 - Deductions - Special provisions in respect of certain undertakings or enterprises in certain special category States (Schedule XIV) - Assessment year 2009-10 - Assessee, engaged in manufacturing of electronic goods, claimed deduction under section 80-IC - Assessing Officer disallowed said claim on ground that no manufacturing activities were being carried out and business involved only trading under brand name of parent company and LCD monitor claimed to be manufactured by assessee was not covered under Schedule XIV - Whether where LCD monitors manufactured by assessee was covered under Schedule XIV and Assessing Officer proceeded on basis of doubts as to genuineness of claim rather than some concrete material, disallowance of deduction under section 80-IC was not justified - Held, yes [Para 9][ln favour of assessee] FACTS The assessee, engaged in the manufacturing of electronic goods, claimed deduction under section 80-IC. The Assessing Officer disallowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certain special category states (Manufacture) - Assessment years 2006-07, 2.008-09 and 2009-10 - Product produced and sold by respondent-assessee was air purification system - For manufacturing said product, assessee had purchased parts like base motors, filters, UV lights etc. but final product produced was entirely different from its constituents or parts - Whether even though assessee carrying out assembling and manufacturing of air purifierSsby using simple tools and testing equipments, it would be entitk ' Induction under section 80-IC - Held, yes [Para 5] [In favour of asses FACTS The assessee, engaged in business of manufacture of healthcare and surgical items, had set up a manufacturing unit for manufacture of air purification systems. It procured various parts/components of air purification system from different vendors and assembled the same at the facility. The assessee claimed deduction under section 80-IC. The Assessing Officer denied deduction holding that the aforesaid activities would not qualify as 'manufacturing activity,' as the assessee was merely a assembler and did not have requisite tools or machinery. On appeal, the Commissioner (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled its return claiming deduction under section 80-IC - Similar claim of assessee had been allowed in earlier assessment years - However, for relevant assessment year, the Assessing Officer rejected assessee's claim taking a view that assessee was not engaged in manufacturing activity - Whether since assessee had been granted deduction under section 80-IC in earlier years, in absence of any change in facts and circumstances, revenue could not suddenly take up ground that assessee was not doing any manufacturing and therefore, was not entitled for deduction - Held, yes - Whether even otherwise, since description of manufacturing process amply proved that imported material as well as local materials were used in manufacturing process which resulted in a final product quite distinct from components used and had distinct usage too, assessee's claim for deduction was to be allowed - Held, yes [In favour of assessee] FACTS The assessee was engaged in manufacturing of 'air springs assembly and other metal parts' which were supplied to Indian Railways in its 'P' unit. The assessee filed its return claiming deduction under section 80-IC. The said deduction h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct which was quite distinct from the components used, and had distinct usage too. [Para 16] In view of aforesaid, the orders of the authorities below are set aside and it is held that the assessee was engaged in manufacturing of air spring assembly and is hence eligible for deduction under section 80- IC for the manufacturing activity undertaking at its 'P' unit. [Para 17] In the result, the appeal filed by the assessee is allowed. [Para 18] (iv) Income-tax Officer vs. Indo Swedish Instrument [ 2015 ] 57 taxmann. com 227 (Delhi - Trib.) Section 80-IC of the Income-tax Act, 1961 - Deductions - Special provisions in respect of certain undertakings or enterprises in certain special category States (Commencement of business) - Assessment year 2008-09 - Assessee, engaged in business of manufacture of multifunction transducer, claimed deduction under section 80-IC - Assessing Officer restricted deduction to 50 per cent on an ad hoc estimation on ground of non submission of any proof of installation of machinery, etc. - On appeal, Commissioner (Appeals) granted relief for entire deduction based on findings that Deputy Director of Industries had issued a certificate of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the specified item. Such details are also furnished along with copies of bills et cetera. The amount of purchases from the related party are also very minuscule that is only of Rs. 5 9568/-. Even otherwise this is not the first year of the claim of the assessee but second-year of the Holiday period of 10 years. In view of this we confirm the finding of the learned CIT appeal in deleting the disallowance of deduction under section 80 IC of the act of Rs. 6 920378/-. In the result ground number 1-3 of the appeal of the revenue is dismissed. 9. The fourth ground of appeal is with respect to allowing carry forward business losses and unabsorbed depreciation for the earlier years. The brief facts shows that the in the computation of the total income the assessee‟s has claimed this deduction. The learned assessing officer did not allow the set off of the brought forward losses and unabsorbed depreciation for the simple reason that assessee has not commenced production and AO was of the view that . Since, it is already held that till the end of A. Y. 2011-12, the unit of the assessee has not commenced production the set off of brought forward losses is not allowed and rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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