TMI Blog2019 (8) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... on 260A of the Income Tax Act, 1961 (for short the Act, 1961 ) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, SMC Bench, Ahmedabad dated 2nd August, 2018 in the ITA No.267/Ahd/2015 for the A.Y. 2008- 09. 2. This tax appeal was ordered to be admitted on the following substantial question of law: Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of claim of ₹ 64,04,327/- u/s 80JJA of the Income Tax Act, 1961 though the years was eighth year of the business operation ? 3. It appears from the materials on record that the appellant-assessee filed its e-return of income on 28th September, 2008, declaring its total income of Rs. NIL after claiming deductions of ₹ 19,21,298/- and ₹ 64,04,327/- under Sections 80IB and 80JJA respectively. The return of income was processed under Section 143(1) of the Act. The scrutiny assessment under Section 143(3) of the Act was finalized on 3rd May, 2010, determining the total income at ₹ 6,17,217/- 4. The case was re-ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 14th February, 2014. In response to the same, the assessee submitted as under: 2.01 As provided u/s. 80JJA of The Income Tax Act, 1961 exemption under the provision of such section is available up to 5 (five) consecutive years beginning with the assessment year relevant to previous year in which such business commences. 2.2 In show cause notice your good self has pointed out as under: It is stated that on perusal of the records, it is noticed that you have claimed deduction under section 80JJA of the Act amounting to ₹ 64,04,327/-. The business was commenced in previous year 1999-2000 relevant to Asst. Year 2000-01. Thus, this was the eighth year of claim of deduction under section 80JJA of the Act. Further, the deduction under section 80JJA of the Act was admissible for a period of five years only from the previous year in which the business commences. 2.03 Without prejudice to your notice we would like to distinguish provision laid down u/s. 80JJA of The Income Tax Act, 1961. Section is reproduced as under: 80JJA. Where the gross total income of an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year of the claim. During assessment proceedings Leaned Assessing Officer has asked us a specific question which is produced as under: 8. Show cause deduction of section 80JJA is allowable during the year under consideration as no such deduction was claimed in earlier year. 6. The Assessing Officer took the view that the assessee had commenced the business of manufacturing and exporting the biological agents (Enzymes) in the F.Y.1999-2000 relating to the A.Y.2000-01. According to the Assessing Officer as per the provision of Section 80JJA, the deduction would be available only for a period of five years from the initial year in which the business commenced. The Assessing Officer took the view that the deduction was allowable upto A.Y.2004-05 being the fifth and the last year for the claim. The year under consideration was the eighth year from the year, in which, the business eligible for deduction under Section 80JJA was commenced. 7. In such circumstances, referred to above, the deduction of ₹ 64,07,327/- claimed under Section 80JJA came to be disallowed and was added to the total income of the assessee. At the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ymes. It has not been able to demonstrate that it has completely changed the product and the earlier product which was being produced is not being produced now and a new type of product which is different and not an enzyme is being produced now. The appellant still fails in the same category of the producer of biological agent. Therefore, the claim of the appellant that the first year of production should be taken as A.Y. 2004-05 is not acceptable. The other important aspect which is to be kept in mind is that section 80JJA provide the calculation of five years from the year in which such business commences. It is not related to the year in which the deduction is claimed for the first time as is available in section 80I-A etc. Therefore, the claim of the appellant cannot be accepted and I am constrained to uphold the decision of the A0. The appellant has also placed reliance on the judgement of Honourable Gujarat High Court in the case of T J Agro Fertilisers Pvt. Ltd. (supra). I have carefully gone through the judgement delivered by Honourable High Court, it is noted that the facts of the case are different. In the present case, the limitation of the number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer duly accepted it as the first year of claim. By this basis, the current year s claim is fifth and final year. There is no infirmity in the claim thus. The mere fact that the assessee was involved in somewhat similar activity is not really relevant inasmuch as the character of activity was materially distinct from assessment year 2004-05 and that aspect of the matter, by the Assessing Officer having accepted it as first year of claim, has reached finality. In view of these discussions, I find merits in the plea of the assessee. The disallowance of claim under section 80JJA is thus devoid of legally sustainable merits, and cannot be upheld. Accordingly, I direct the Assessing Officer to delete the impugned disallowance of section 80JJA claim of ₹ 64,04,327/- 10. Thus, the Appellate Tribunal took into consideration the fact emerging from the record that the first year, in which, the Section 80JJA deduction was claimed, was the A.Y. 2004-05 and during the course of the scrutiny assessment proceedings, the Assessing Officer had specifically called upon the assessee to show that the deduction under Section 80JJA was allowable during the year und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention of this Court to a letter issued by the Income Tax Officer to the respondent-assessee, calling for certain information. The information, called for, reads as follows: What is Enzyme, it is used by whom and for what purposes. Furnish copies of sample sales bills. Furnish proof of staring of business of manufacture or production between 1.4.1991 to 31.03.2002. Show how deduction of section 80JJA is allowable during the year under consideration as no such deduction was claimed in the earlier year. 17. The questions which were raised by the Income Tax Officer came to be answered by the respondent-assessee as under: We are a core industrial Biotechnology Company producing various Enzymes which are Bio-logical agents, Bio-catalyst using Solid State Fermentation (SSF) technology.The main Enzymes we are producing as are follows: 1) Alpha Amylase Enzyme (Palkozyme Ultra 1OOS, Palkozyme HT Plus, Palkozyme Plus SPL. Palkozyme CLL, Palkolase HT) 2) Fungal Alpha Amylase Enzyme (Pidkoamylo SOS) 3) Alkaline Protease Enzyme (Palko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, we request you to cover us under the section 130.1.IA of the Income Tax Act. 18. The aforesaid questions were raised by the Income Tax Officer in connection with the A.Y. 2004-05. Ultimately, the assessment order for the A.Y. 2004-05 came to be passed as under: The return of income was filed by the assessee company on 31.10.2004 showing income of Rs.NIL after claiming deductions under chapter VIA of the Income Tax Act, 1961. The return was processed under section 143(1) without making any adjustment on 04.03.2005. The case was selected for scrutiny assessment by issuing notice u/s.143 [2] on 27-07-2005 which was duly served on the assessee by RPAD. The assessee is engaged in the business of Manufacturing of Enzyme. During the course of assessment proceedings Shri D.R. Thakkar C.A., A.R. attended alongwith the director Shri Dipal P. Palkhiwala, director from time to time as per the dates mentioned in the order sheet and produced details called for. During the course of assessment proceedings the following points arose for consideration: Claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me cannot be rejected for the subsequent assessment years unless the relief for the initial year has withdrawn. We may quote the relevant observations made by the Bombay High Court in Simple Food Products (supra). According to us. the entire issue is no longer res-integra. The impugned order of the Tribunal has. after recording that the appellant Assessee relies upon the decision of this Court in Paul Brothers (supra) has not dealt with the same. It gives no finding as to why and in what manner it would not apply to the present facts. Further, we find that distinction which has been made in the impugned order of the Tribunal with regard to Dinshaw Frozen Foods Ltd. (supra) viz. that the assessment in that case has been completed under Section 143(3) of the Act in initial year and it is only in such cases that the Revenue be barred from denying the claim for deduction in the subsequent Assessment Years, unless the claim for deduction has been withdrawn in the initial year when deduction was claimed and allowed unlike an assessment which is completed under Section 143(1) of the Act. We have perused the decision of this Court in Dinshaw Frozen Food Ltd. Nagpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of withholding the relief under Section 80lA/lB of the Act. ( I) Mr. Bhattad also points out that under the Act, there is distinction between assessment which has been completed under Section l43(3) of the Act and intimation given to Assessee under Section 143(1) of the Act. In support of, he places reliance in Rajesh Jhaveri Stock Brokers, (supra) which brings out the distinction, by pointing out that an intimation under Section 143(1) of the Act is only a ministerial act and no examination of the claim is made by the Assessing Officer. However, one must recognize the fact that the aforesaid decision in case of Rajesh Jhaveri Stock Brokers (supra) was rendered in the context of reopening of assessments. As against that the decisions of this Court in Paul Brothers (supra) and Dinshaw Frozen Food Ltd. Nagpur (supra) were while dealing with deduction under Chapter VI-A of the Act. This Court in the above two cases has very categorically held that in absence of relief/deduction for the initial year being withdrawn, the relief under Chapter Vl-A of the Act (Section 801A/801B of the Act) in case of Dinshaw Frozen Food Ltd, Nagpur (supra) cannot be withheld fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In the subsequent assessment years also, i.e. in the assessment years 2010-11 and 2011-12, such claim was made and accepted by the Department. We may notice that Section 10B pertains to special provisions in respect of newly established hundred per cent export-oriented undertakings. Sub-section (1) of Section 10B provides for deduction of profits and gains derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive years beginning with assessment relevant to the previous year in which the undertaking begins to manufacturer, produce articles or things or computer software from the total income of the assessee. Thus, the provision envisaged is for a period of ten consecutive years commencing from the first year during which the undertaking begins to manufacture or produce articles, things or computer software, as the case may be. When the Revenue therefore, did not question the certification by the Director, Software Technology Park of India, in the initial year of the claim made by the assessee as well as in the subsequent years, it would not be open for the Revenue to pick one year out of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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