TMI Blog2021 (9) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing has been carried out by the assessee is self-contradictory and not justified - assessee that assessee was engaged in colourable device of evasion of taxes has not been found to be correct. The allegation of the AO that there were large amount of carryforward losses in the case of Umang and therefore deduction has been claimed in the case of assessee. This claim of the Assessing Officer has been not found to be correct as Ld. CIT(A) has pointed out that there was profit in the case of the Umang during the year under consideration. AO in the scrutiny assessment assessment year 2018-19 has accepted the claim of the assessee for deduction under section 80IB of the Act. In our opinion, when the same claim has been accepted by the Assessing Officer in assessment year 2008-19, the Assessing Officer is not justified in contesting the same issue for earlier year - Decided against revenue. - ITA No.937/Del/2017 - - - Dated:- 8-9-2021 - Shri O.P. Kant, Accountant Member And Shri K.N. Chary, Judicial Member For the Appellant : Sh. Gautam Pundir, Sr.DR For the Respondent : Sh. Gautam Jain, Adv. ORDER PER O.P. KANT, AM: This appeal by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Mother Dairy ) for processing, preservation and packaging of milk, under which Mother Dairy supplied pasteurized/raw chilled milk and commodities for processing and packaging of liquid milk in poly packs of different categories of milk. As the assessee company was not having its own facility, it entered into back-to-back agreement with one of its related party i.e. Umang Dairy Ltd. (Umang). At the time of the agreement, Umang was under BIFR process. Under the agreement assessee company provided funds to Umang for construction of factory building on the land of Umang . The said factory building was to be transferred back to the assessee at the agreed cost after its completion and after taking approval from appropriate authorities including BIFR. The assessee company purchased plants machinery for the purpose of processing, preservation and packaging and contracted with Umang for its operation and maintenance, since they had expertise for such activities and for this purpose the assessee company paid conversion charges of ₹ 15.34 crores to Umang . The Assessing Officer observed that no manufacturing charges were debited by the assessee in the profit and loss ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 : Annex. F-1 / F.Y-2.011-12 : Annex.G-1). 3. It is not formed by splitting up or the reconstruction of business already in existence The business of the appellant is new one as is evident from annual accounts for the F.Y. 2009-10 enclosed as Annexure B-1. 4. It is not formed by the transfer to a new business of machinery or plant previously used for any purpose. All the plant Machinery used for such business are new and was not at any time previous to the date of the installation by the appellant used in India. The same is evident from fixed assets Schedule forming part of annual accounts (Annex.B-1) and Tax Audit Report of F.Y.2009- 10 (Annex.E-1) read with Form 10CCB (Annex.H-1) of paper book dated 14.09.2016). 5. It manufacturers or produces any article or thing not being any article or thing specified in the list in the Eleventh Schedule The appellant company is engaged in the business of processing, preservation and packaging of dairy products which is not specified in Eleve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e - It is seen that the company was incorporated in A.Y. 2007-08 and no activities were carried out in the years preceding A.Y. 2010-11. In A.Y. 2009- 10 except for securing term loan of ₹ 5.87 crores from Axis Bank and unsecured loan of ₹ 4 crores from its holding company Bengal and Assam Company Ltd. which has been advanced to Umang Dairy Ltd. for construction of factory building, no commercial activities were carried out. Further the balance sheet of M/s Umang Dairy Ltd. for A.Ys 2010-11 onwards were also requisitioned in order to examine whether any existing plant and machinery had been transferred to the appellant. The balance sheet of M/s Umang Dairy Ltd. for A.Y. 2010-11 reveals that there is no transfer of any fixed asset to anybody including the appellant. (iii) The undertaking manufactures or produces any article or claim not being any article or claim specified in the list in 11th Schedule - I have perused the 11th Schedule and find that dairy products are not specified in the 11th Schedule. (iv) The undertaking employs 10 or more workers in a manufacturing process carried on with the aid of power or employs 20 or more workers in a manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emuneration or not, in any manufacturing process, or in any other kind of work incidental to or connected with the manufacturing process. The High Court held that it would not be proper to give a restricted meaning to the expression worker and it was immaterial as to whether the workers were directly employed or employed through contractor and hence the condition imposed u/s 80IB(2)(iv) could be said to have been met. The issue is thus settled, with the dismissal of the SLP by the Hon'ble Supreme Court in favour of the assessee and it is found that the deduction cannot be denied on the ground that requisite number of workers were not employed by the appellant. 3.5 It can be seen from the discussion in the preceding paragraph that the conditionalities specified under sub section (2) of section 80IB are fulfilled. The only issue that remains to be examined is whether, as the AO has held, the assessee claiming the benefit of deduction u/s 80IB(11A) should itself be engaged in the business of processing, preservation and packaging of dairy products, or, as the appellant has argued. Any profit, derived from such a business referred to above, even though the same is outsourced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficial ownership of the building is available with the appellant. Even otherwise, as held by the Pune ITAT in the case of Anurag Radhesham Attal (ITA nos. 8 to 9 and 863/PN/2012) the ownership of the facilities and manpower on pay roll is not a sine qua non for claiming deduction u/s 80IB(11A). 3.6 The other objection of the AO is that the claim of benefit u/s 80IB (11A) is a colourable device to evade tax as the entity, which is actually engaged in the business of processing of dairy products, i.e. Umang Dairy Ltd., is an erstwhile sick company which has been rehabilitated vide BIFR order dated 03.08.2009, and would be having heavy brought forward losses and thereby would be unable to claim the deduction. In this regard, the appellant has filed as requested, the ITR as well as annual accounts of Umang Dairy w.e.f A.Y. 2009-10 to 2013-14, which reveals the following picture: A.Y. 2009-10 : Rs. (-) 4,54,00,952 A.Y. 2010-11 : Rs. (-) 4,23,41,887 A.Y. 2011-12 : Rs.nil (after set off of unabsorbed business loss ₹ 3,77,01,783) A.Y. 2012-13 : Rs.nil (after set off of unabsorbed business loss ₹ 14,67,37,286) A.Y.2013-14 : ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the case of Jyoti Plastic Works Private Limited (supra) only part of job work was outsourced and, therefore, facts of said case are distinguishable. 5.7 We have heard rival submission of the parties on the issue in dispute and perused the relevant metal on record. The issue in dispute regarding the disallowance of deduction under section 80IB(11A) is mainly related to manufacturing. According to the Assessing Officer the assessee has outsourced its entire manufacturing and, therefore, the assessee is not entitled for benefit of deduction. However, on perusal of the facts on record, we find that the assessee is owner of plant and machinery which have been engaged for the purpose of manufacturing. The Assessing Officer disallowed the claim of depreciation on such plant and machinery, however, Ld. CIT(A) deleted such disallowance and the Revenue has not challenged said finding of the Learned CIT(A). This means, the Revenue has accepted the plant and machinery on which depreciation has been claimed, was put to use for manufacturing process by the assessee. Once the claim of the depreciation on machinery engaged for manufacturing has been accepted by the revenue, contest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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