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TMI Blog2020 (10) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of this court on following substantial questions of law: (i) Whether in the facts and circumstances of the case, the tribunal is right in dismissing the appeal preferred by the revenue by holding that the assessee is entitled for deduction under Section 10-B of the Income Tax Act, even when the assessing authority on the basis of the facts and materials on record has categorically rightly held that the assessee has not fulfilled the conditions for seeking deduction under said provisions? (ii) Whether in the facts and circumstances of the case, the order of the tribunal can be said as perverse since it has merely affirmed the findings of the first appellate authority that the assessee is eligible for deduction under Section 10-B without recording finding of its own and omitting to consider and adjudicate the grounds of the revenue in proper perspective? 3. In I.T.A.No.571/2016 and I.T.A.No.580/2016 in addition, to the aforesaid two substantial questions of law, following additional substantial questions of law arise for consideration respectively: I.T.A.No.571/2016: (i) Whether on the facts and circumstances of the case, the Tribunal is right in directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of time and started its first unit in November 2004 and second unit in March 2005. It was further held that there is no material to indicate that assessee as well as FFIPL are separate entities. It was also held that it took over vacant units of FFIPL in May, June and September 2005 and remaining units in April 2007. From the statements of owners of the premises, it was inferred that second unit was handed over to the assessee in July 2005 as construction was completed in the last week of June 2005 and the assessee started the business of stitching i.e., the job work in the year 2004-05 and then took over the warehouse and certain units of FFIPL and thereafter, took new premises as a fishing unit and processing unit and stitching unit of FFIPL within a short span of time. It was further held that the assessee rented new premises mainly to show itself eligible for deduction under Section 10B of the Act but it had reconstructed the business of FFIPL by taking over units of FFIPL and only thereafter, started the manufacturing activity. The assessee did not have an inbuilt infrastructure and resources for export of garments and was completely dependant on FFIPL. It was also held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner given for export oriented unit does not entitle the assessee to claim deduction under Section 10B of the Act. It is also argued that for Assessment Year 2005-06, the assessee had mentioned in Form 3CD that it is involved in job work activity and therefore, is not eligible for deduction under Section 10B of the Act. It is also pointed out that the list of suppliers and customers of both the companies are the same and premises was leased out along with machineries to the assessee. It is also submitted that the finding recorded by the tribunal is perverse as from the material on record, it is evident that the assessee had adopted colorable devise to avoid tax liability, however, the aforesaid aspect has totally been ignored by the tribunal. It is also pointed out that the tribunal erred in ignoring the admission made by one Mr.Nagesh and Mr.Anupam Kothari and the finding recorded by it that there was no transfer for the periods 2004-05, 2005-06 and 2006-07 and the plant and machinery were purchased in the year 2007-08, which does not exceed the prescribed limit of 20%, is factually incorrect as the assessee started using entire plant and machinery of FFIPL from 2004-05 itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions mentioned in Section 10B of the Act and the Commissioner of Income Tax (Appeals) as well as the tribunal have rightly held that the assessee is entitled to claim deduction under Section 10B of the Act. It is further submitted that the aforesaid findings are concurrent findings of fact and are based on meticulous appreciation of evidence on record. Learned counsel for the assessee has taken us through the order passed by the Commissioner of Income Tax (Appeals) and it has been pointed out from the order passed by the tribunal that no material has been brought on record by the revenue even before the tribunal to show that the finding recorded by the Commissioner of Income Tax (Appeals) are either perverse or factually incorrect. It is pointed out that Clause (vii) of Circular dated 17.01.2013 clearly states that setting up of a fresh unit in itself would not make the unit eligible for tax benefits as long as unit is set up after obtaining necessary approval from competent authorities and has not been formed by splitting or reconstruction of an existing business and fulfills all other conditions prescribed in the relevant provisions of law. It is urged that matter stands con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of machinery or plant previously used for any purpose. Explanation.-The provisions of Explanation 1 and Explanation 2 to sub section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub section as they apply for the purposes of clause (ii) of that sub-section. 11. Undoubtedly the conditions mentioned in Section 10B(2) of the Act have to be complied with by an assessee in order to claim deduction under Section 10B of the Act. Now we may advert to the facts of the case to ascertain whether the assessee in the instant case, has complied with the requirements as laid down in Section 10B(2) of the Act. The Commissioner of Income Tax (Appeals) by a detailed order dated 24.08.2012 and on meticulous appreciation of evidence on record has recorded the following findings: (i) Admittedly, the assessee was incorporated in the month of September 2004 as an export oriented unit after necessary approvals and became operational only during Financial Year 2005-06, relevant to Assessment Year 2006-07 and therefore, claimed deduction under Section 10B of the Act for the Assessment Year 2006-07. (ii) The assessee claimed deduction for the first ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures and made substantial investment in the new plant and machinery. The investment in the plant and machinery for the Assessment Years 2005-06 to 2007-08 is to the tune of Rs. 12,10,17,890/-, Rs. 36,41,30,102/- and Rs. 18,04,50,402/- respectively. (viii) The assessee acquired some plant and machinery from FFIPL worth Rs. 9.86 Crores during the Assessment Year 2008-09 and the same does not exceed 20% of the total value of plant and machinery. (ix) Mr.Nagesh and Mr.V.Sreedhar had filed affidavits retracting their statements and therefore, the reliance placed on the statements during the course of survey is not justified. There is no bar under the Act to take land or building on lease for purpose of manufacture. The only restriction under Section 10B of the Act read with Section 80I of the Act is with regard to transfer of any machinery or plant, which was previously used for any other purpose. In the instant case, there is no transfer / lease of plant and machinery used by FFIPL during the financial year 2005-06 as per submissions made by the assessee. (x) There is no reconstruction of the assessee but there was purchase of certain items of plant and machinery and lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for coming to the conclusion that the learned Departmental Representative has not been able to rebut any of the findings of the CIT(A) with any evidence to the contrary. Since, the findings of the CIT(A) are based upon the evidence produced by the assessee which has not been rebutted by the revenue, we do not see any reason to interfere with the order of the CIT(A). Thus, the revenue's appeal is dismissed. 13. The question whether or not assessee has complied with the conditions mentioned in Section 10B(2) of the Act in order to enable him to claim deduction under Section 10B of the Act is essentially a question of fact. From close scrutiny of the orders passed by the Commissioner of Income Tax (Appeals) as well as the tribunal, it is evident that the aforesaid findings are based on meticulous appreciation of evidence on record. The tribunal has affirmed the findings of fact recorded by the tribunal on the basis of meticulous appreciation of evidence on record, which by no stretch of imagination can be said to be perverse. It is pertinent to note that even before the tribunal, the revenue was not able to rebut any of the findings recorded by Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal has taken into account the decision of the Supreme Court in Goetz India Ltd., supra and has held that the aforesaid decision does not restrict the powers of the higher authorities to consider the revised claim and the tribunal and has rightly placed reliance on decision of the Supreme Court in 'NATIONAL THERMAL POWER CORPORATION VS. CIT', 229 ITR 383. Thus, on the facts of the case and in view of the finding recorded by the tribunal in para 12 of the order, the additional substantial question of law framed does not arise for consideration. The same is answered accordingly. 16. Now we may advert to the additional substantial question of law framed in I.T.A.No.580/2016. From perusal of para 4.4 of the order dated 13.05.2013 passed by the Commissioner of Income Tax (Appeals), it is evident that the Commissioner of Income Tax (Appeals) has recorded a finding that there are no accumulated profits available in the books of accounts of FFIPL. The aforesaid finding has been affirmed by the tribunal vide order dated 27.11.2015 in para 7 of its order and it has been held that admittedly, the reserve and surplus amount does not show any accumulated profit but the amount s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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