TMI Blog2017 (1) TMI 1695X X X X Extracts X X X X X X X X Extracts X X X X ..... was no occasion for repair and maintenance lost its ground. The contention of the ld. AR that the revenue is not entitled to set up a new case by raising argument that, when the building of the new unit was not in existence the question of carrying manufacturing activities therein does not arises , is not tenable for the reason that when illegality of the order is under challenge before the Tribunal it being a fact finding forum is empowered to go into any argument addressed by the parties, though not addressed before the CIT (A), to achieve the ends of justice. So, we are of the considered view that there was no building with assessee at Selaqui unit during the period under assessment to carry out the manufacturing activities. Whether the assessee has transferred its used machinery in excess of 20% from Kala Amb unit to Selaqui unit against which the exemption u/s 80-IC has been claimed, thus failed to satisfy the provisions contained u/s 80-IC (4)(i)? - HELD THAT:- Assessee stated to have purchased the machinery from M/s. Grip Engineers Pvt. Ltd., Ballabhgarh and ABB, Faridabad on 23.04.2007 and 28.04.2007 respectively but stated to have stored the same at Kala Amb unit fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the manufacturing activities, the question of expansion or augment the production in a different and separate location does not arise. Even otherwise, assessee has transferred the used plant and machinery from its Kala Amb unit to Selaqui unit exceeding 20% which bars the assessee from taking benefit of section 80-IC. Plethora of documents brought on record by the assessee even otherwise goes to prove that assessee s case falls u/s 80-IC(2)(b) under which the assessee has not claimed any deduction as the assessee is not manufacturing any article listed under Schedule 14. Rather it is a case of splitting up/ reconstruction of a business already in existence for which the assessee is not eligible due to violation of section 80-IC (4)(ii) of the Act i.e. the use of previously used plant and machinery beyond 20%. Undisputedly the assessee was not having facility of gas filling and testing of RMPU air-conditioners at Selaqui unit for which the assessee stated to have sent the assembly unit to Kala Amb unit but prior to that the assessee has to bring on record the substantial evidence to prove the fact that the RMPU airconditioners against which the assessee has earned turnover of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the manufacturing and production during the year under assessment. Assessee is into the manufacturing of roof mounted air-conditioning units for Indian Railways. The entire manufacturing of assessee was done upto AY 2007-08 from its industrial unit at Kala Amb, Himachal Pradesh and during the year under assessment, the manufacturing process has been split between the unit at Kala Amb and some part to be done at its newly set up unit at Selaqui, Uttarakhand. Assessee claimed that the semi-finished goods are now sent to Kala Amb factory for final assembly and testing. AO noticed from the bills and vouchers produced by the assessee during assessment proceedings that tools and equipments of ₹ 1,59,241/- were transferred from Kala Amb unit to Unit at Selaqui. Assessee claimed to have purchased one 3 ton cap wire rope hoist on 23.04.2007 and one of the two Map 1305 Hydraulic Pallets purchased on 04.04.2007 were subsequently transferred to new unit on 07.07.2007 and in addition to that, old tools and equipments valued at ₹ 18,000/- were also transferred to the new unit. However, AO being not satisfied observed that since the value of the aforesaid machinery, which canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RMPU air-conditioners which does not require high end machinery for manufacturing; that RMPU airconditioners at Selaqui were sent to Kala Amb unit just for gas filling and testing which cannot be called semi-finished goods; that there was no transfer of previously used machinery in excess of 20%; that the assessee applied for and obtained VAT registration vide registration no.05006854433 and the assessee has also obtained registration of the new unit at Selaqui under Central Sales-tax Act on 21.12.2006; that the assessee has used plant and machinery worth ₹ 3,50,563/- at the new unit at Selaqui at the end of 31.03.2008; that new wire rope hoist purchased for Selaqui was received at Kala Amb unit on 03.05.2007 and due to inclement weather, the assessee was forced to take the same inside which was never used at Kala Amb unit either during the period 03.05.2007 to 23.05.2007 or thereafter until it was transferred to Selaqui unit on 07.06.2007; that area based exemption u/s 80-IC should be given liberal interpretation; that activities carried out by the assessee amounted to manufacturing; that the respondent procures various components of RMPU like chassis, compressor, electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Dehradun and nomenclature in para 3 of the Agreement to Sell that vendor is owner of the plot/built up property is given in routine. Had the assessee bought building constructed on the plot no.F-89, its site plan would have annexed with the Agreement to Sell as well as lease deed. 11. Furthermore, bare perusal of Schedule D to the balance sheet for the period 31.03.2008 shows that the total addition of ₹ 32,67,070/- has been made under head land and no addition is attributed to the building. Likewise, there is no addition under the head building as per Annexure-3 to the Form No.3CD and the entire amount of ₹ 32,67,070/- is attributed to the land. 12. When we further examine the contentions raised by ld. AR for the assessee that the assessee has purchased land/built up property in the light of the Schedule D to the balance sheet as on 31.03.2008 wherein capital WIP building is shown at ₹ 35,23,345/-, the argument addressed by the ld. AR that there was no occasion for repair and maintenance lost its ground. The contention of the ld. AR that the revenue is not entitled to set up a new case by raising argument that, when the buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation at Selaqui unit. 17. We are unable to agree with the ld. CIT (A) who has taken the affidavit filed by Shri R.S. Sidhu as a gospel truth even without insisting upon any evidence to support his findings. First of all, the affidavit of Shri R.S. Sidhu relied upon by the ld. CIT (A) is undated. Secondly, the CIT (A) has proceeded in haste in entertaining the undated affidavit in the evidence in violation of Rule 46A of the Income-tax Rules, 1962 (for short the Rules ) to believe the averment made by the assessee in the affidavit as a gospel truth. Thirdly, there was no mention of telephone number, tele-fax and internet facility at the Selaqui unit because in the purchase order dated 05.07.2007 telephone number of Kala Amb unit is given and tele-fax number of Head Office, Delhi of the assessee has been given. Fourthly, documents for transporting the machinery purchased from Grip Engineers Pvt. Ltd., Ballabhgarh and ABB, Faridabad are not tallying with the material receipt dated 03.05.2007 regarding transportation of 21 electrical motors through truck no.DL1M1252 whereas 21 electrical motors were alleged to have been transported by ABB through truck no.HR35J5393 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only one worker can be hired and no expenditure has been debited to P L account on account of travelling expenses nor any telephone, tele-fax and internet facility is proved to have been established at Selaqui unit. So, we are of the considered view that new plant and machinery, even if assumed to be transferred by the assessee from Kala Amb unit to Selaqui unit, it was never put to use to carry out the manufacturing activities to qualify for exemption u/s 80-IC. 21. Furthermore, when we examine the factum of nonavailability of the machinery at Selaqui unit in the light of the fact that no manpower was engaged by the assessee to carry out the manufacturing activities at Selaqui unit, the entire assessee s case to claim exemption u/s 80-IC goes flat. Perusal of the P L account statement, available at page 147 of the supplementary paper book, shows that the expenditure of ₹ 1,35,388/- has been debited to the P L account under the head wages, bonus, gratuity and other benefits which comes to roughly ₹ 50,000/- per month of wages, PF, gratuity, etc. Annexure 4 annexed with the tax auditor s report, available at page 54 of the paper book, shows the monthly cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the FYs 2008-09 and 2009-10 to the existing tools and machinery worth ₹ 3,50,563/-, it again leads to the irresistible conclusion that no manufacturing activities much less assembling activities were being carried out at Selaqui unit during the year under assessment, otherwise if the plant and machinery worth ₹ 3,50,563/- was enough for the assessee to achieve tremendous gross turnover of ₹ 11.11 crores with profit of ₹ 3.13 crores, then the assessee has no need to make substantive addition of tools and machinery worth ₹ 29,70,370/-. 25. For argument s sake, even if it is assumed that the new plant and machinery has been made available by the assessee at its Selaqui unit by transporting the same from its Kala Amb unit, as contended by ld. AR for the assessee, it is not humanly possible that massive manufacturing activities earning gross turnover of ₹ 11.11 crores with profit of ₹ 3.13 crores in a period of 10 months, has been carried out by just a one man army. 26. The last question arises for determination in the case is :- as to whether Selaqui unit has been established by splitting up the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummins Ltd. Anr. (2006) 4 SCC 57. No doubt the Hon ble Apex Court in the case of State of Jharkhand vs. Tata Cummins Ltd. (supra) held that the exemption notification has to be given liberal interpretation keeping in mind the objects envisaged by the industrial policy and not in strict sense as the case of exemption from liability under the taxing statute. But we are of the considered view that the judgment in State of Jharkhand vs. Tata Cummins Ltd. (supra) is again of no support to the assessee because when unit itself has not been established at Selaqui unit rather the product purported to be produced at Selaqui unit were actually produced by Kala Amb unit as discussed in the preceding paras as the assessee is undisputedly producing same product for Indian Railway at its Kala Amb unit and the management of Selaqui unit as well as Kala Amb unit are the same. 30. The ld. DR for the revenue contended that the perusal of the sales-tax return filed by the assessee with Uttarakhand Sales-tax Authorities goes to prove that neither any purchases including capital goods have been made nor any consignment has been received from outside Uttarakhand which shows that Selaqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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