Samruddhi Industries Ltd.,, Sangli v. Jt.CIT Range-1, Sangli

ITA 1002/PUN/2009 | 2006-2007
Pronouncement Date: 31-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 100224514 RSA 2009
Assessee PAN AABCM8805D
Bench Pune
Appeal Number ITA 1002/PUN/2009
Duration Of Justice 1 year(s) 7 month(s) 11 day(s)
Appellant Samruddhi Industries Ltd.,, Sangli
Respondent Jt.CIT Range-1, Sangli
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-03-2011
Assessment Year 2006-2007
Appeal Filed On 20-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDIC IAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER I.T.A. NO. 1002/PN/09 (ASSTT. YEAR: 2006-07) SAMRUDDHI INDUSTRIES LTD. .. APPELL ANT PLOT NO J-98 MIDC KUPWAD SANGLI PAN AABCM8805D VS. JT. COMMISSIONER OF INCOME-TAX R-1 SANGLI .. RESPONDENT APPELLANT BY: SHRI SUNIL GANOO RESPONDENT BY: SHRI ABHAY DAMLE ORDER PER G.S. PANNU AM THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) KOLHAPUR DATE D 20.03.2009 WHICH IN TURN HAS ARISEN FROM AN ORDER OF THE ASSESSING OFF ICER DATED 22.12.2008 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. GROUNDS NO. 1 & 2 OF THE APPEAL RELATE TO THE DI SALLOWANCE OF ASSESSEES CLAIM OF RS 66 99 329/- UNDER SECTION 80 -IB OF THE ACT. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF MANUFACTURING AND SELLING OF VARIOUS PLASTIC ARTICLES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER PERUSED THE ACC OUNTS AND DETAILS FILED ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 2 VIS--VIS THE AUDITED ACCOUNTS AND AUDIT REPORT IN FORM NO 10CCB FILED IN CONNECTION WITH DEDUCTION UNDER SECTION 80-IB OF TH E ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAD CLAIM ED DEDUCTION UNDER SECTION 80-IB OF THE ACT OF RS 62 99 329/- AS PER FORM NO. 10CCB. IN SR. NO. 21 THE PROFIT AND GAINS DERIVED BY THE UNDERTA KING FROM THE ELIGIBLE BUSINESS WAS SHOWN AT RS 2 15 57 585/- (PROFIT AND GAINS FROM ELIGIBLE BUSINESS SHOULD BE RS 2 09 97 763/-). THE DEDUCTIO N UNDER SECTION 80-IB WAS CLAIMED AT THE RATE OF 30% OF THE AFORESAID AMO UNT OF RS 2 09 97 763/- BEING RS 62 99 329/-. IT WAS FURTHER NOTICED BY THE ASSESSING OFFICER THAT IN SR. NO. 18(C) OF THE SAID FORM NO 10CCB TOTAL VALU E OF MACHINERY AND PLANT USED IN THE BUSINESS OF THE INDUSTRIAL UNDERTAKING WAS MENTIONED AS GROSS RS 3 57 40 550/-. THE DATE OF COMMENCEMENT OF OPER ATION BY THE UNDERTAKING WAS MENTIONED IN SR. NO. 8 OF THE SAID FORM AS 01.08.1996. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE ISSUE RELATING TO ACQUISITION OF PLANT AND MACHINERY EXCEEDING RS ONE CRORE IN THE ELIGIBLE BUSINESS AND AS TO WHY IN VIEW OF THE ABOVE FACT D EDUCTION UNDER SECTION 80-IB OF THE ACT SHOULD NOT BE DENIED SINCE ASSESS EE DID NOT REMAIN A SMALL SCALE UNDERTAKING. FROM THE DETAILS OF ASSETS FILED FOR THE PERIOD FROM FINANCIAL YEARS 2002-03 TO 2005-06 RELEVANT TO ASSE SSMENT YEARS 2003-04 TO 2006-07 IT WAS FOUND THAT THE ASSESSEE COMPANY OWN ED PLANT AND MACHINERY EXCEEDING RS ONE CRORE IN EACH OF THE ASS ESSMENT YEAR FOR ITS INDUSTRIAL UNDERTAKING IN WHICH IT HAD CLAIMED DEDU CTION UNDER SECTION 80-IB OF THE ACT. THE ASSESSEE COMPANY FILED DETAILED WRI TTEN SUBMISSIONS IN SUPPORT OF ITS CLAIM FOR DEDUCTION UNDER SECTION 80 -IB OF THE ACT. AFTER CONSIDERING THE SAID SUBMISSIONS OF THE ASSESSEE T HE ASSESSING OFFICER DID NOT FIND ANY MERIT IN THEM AND OBSERVED THAT FOR EN TITLEMENT OF DEDUCTION UNDER SECTION 80-IB OF THE ACT AN INDUSTRIAL UNDER TAKING HAS TO COMPLY WITH CERTAIN CONDITIONS AS LAID DOWN IN THE SAID SECTION SPECIFICALLY SECTION 80- ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 3 IB(2)(II) WHICH MEANS THAT THE INDUSTRIAL UNDERTAK ING MUST BE A SMALL SCALE INDUSTRIAL UNDERTAKING IN TERMS OF SECTION 80-IB(14 )(G) OF THE ACT. AFTER ANALYZING THE REQUIREMENTS TO BE COMPLIED WITH BY A N INDUSTRIAL UNDERTAKING FOR BEING REGARDED AS A SMALL SCALE/ANCILLARY INDUS TRIAL UNDERTAKING AS DETAILED IN THE S.O 857(E) DATED 10.12.1999 IN APPE NDIX ONE TO THE ACT THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE A SSESSEE COMPANY CANNOT BE DEFINED AS A SMALL SCALE INDUSTRIAL UNDERTAKING WITHIN THE PROVISIONS OF SECTION 80-IB(14)(G) OF THE ACT IN THE IMPUGNED ASS ESSMENT YEAR ESPECIALLY WHEN THE VALUE OF ITS PLANT AND MACHINERY EXCEEDED RS ONE CRORE. HE FURTHER HELD THAT THE ASSESSEE CANNOT CLAIM DEDUCTI ON U/S 80-IB OF THE ACT FOR ANY SUBSEQUENT YEARS WHEN THE REQUIREMENTS FOR ENTI TLING SUCH DEDUCTION HAVE NOT BEEN COMPLIED OR FULFILLED BY THE ASSESSEE DESPITE THE FACT THAT SUCH DEDUCTION WAS ALLOWED TO THE ASSESSEE IN AN EA RLIER YEAR. THE ASSESSING OFFICER FURTHER HELD THAT THE RELIANCE PL ACED BY THE ASSESSEE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD V CIT 123 ITR 669 (GUJ) WAS MISPLACED AND DID NOT APPLY TO THE FACTS OF THE INSTANT CASE. THE ASSESSING OFFICER FOUND NO MERIT IN THE ASSESSEES CONTENTION THAT ON CE IT HAS BEEN GRANTED DEDUCTION UNDER SECTION 80-IB OF THE ACT FOR THE RE ASON THAT IT COMPLIED WITH THE REQUIREMENTS OF ELIGIBILITY FOR SUCH DEDUCTION THE ASSESSEE ACQUIRES A RIGHT FOR ALL THE YEARS DESPITE THE FACT THAT IT HA D VIOLATED THE REQUIRED CONDITIONS IN OTHER YEARS. FOR THE ABOVE REASONS A MONGST OTHERS THE ASSESSING OFFICER DISALLOWED THE DEDUCTION OF RS 62 99 329/- UNDER SECTION 80-IB OF THE ACT CLAIMED BY THE ASSESSEE FOR THE YE AR UNDER CONSIDERATION. AGAINST THIS DECISION OF THE ASSESSING OFFICER ASS ESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). 3. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) THE ASSESSEE SUBMITTED THAT THE ELIGIBILITY FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT HAS ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 4 TO BE VERIFIED IN RESPECT OF INVESTMENT IN PLANT AN D MACHINERY ONLY WITH REFERENCE TO THE INITIAL YEAR; AND THAT THE BENEFI T OF SECTION 80-IB IS AVAILABLE TO BOTH SMALL AS WELL AS LARGE SCALE UNDERTAKING T HE ONLY DIFFERENCE BEING IN THE DATES BEFORE WHICH THE UNIT HAS TO BEGIN PRODUC TION. IN THE FIRST YEAR THE INVESTMENT IN PLANT AND MACHINERY WAS BELOW RS. ONE CRORE AND IT WAS ALLOWED DEDUCTION AND THAT DEDUCTION ONCE ALLOWED CANNOT BE DENIED IN SUBSEQUENT YEARS. IT WAS FURTHER SUBMITTED THAT TH E ASSESSING OFFICER WITHOUT DISTURBING RELIEF GRANTED IN THE INITIAL YE AR CANNOT EXAMINE THE QUESTION AGAIN AND DECIDE TO WITHDRAW OR WITHHOLD R ELIEF ALREADY GRANTED; THAT THERE WAS NO SPECIFIC PROVISION IN SECTION 80-IB TH AT THE ASSESSEE HAD TO COMPLY WITH THE REQUIREMENT OF CAPITAL EMPLOYED IN PLANT AND MACHINERY IN EVERY YEAR FOR WHICH DEDUCTION IS TO BE GIVEN. SUCH A PROVISION EXISTED IN SECTION 80-HHA AND ABSENCE OF SUCH A PROVISION IN S ECTION 80-IB CLEARLY SHOWED THE LEGISLATIVE INTENT. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NATRAJ STAT IONARY PRODUCTS P LTD. 16 DTR 270 WHERE IT WAS HELD THAT ELIGIBILITY OF THE U NIT IS TO BE TESTED ONLY IN THE INITIAL YEAR. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE ELIGIBILITY FOR THE DEDUCTION THE AMOUNT OF DEDUCTION AVAILABLE HAS T O BE DECIDED IN EACH YEAR. ACCORDING TO HIM IT CANNOT BE SAID THAT ONCE THE ASSESSEE HAS BEEN DECLARED ELIGIBLE FOR DEDUCTION IN THE INITIAL ASSE SSMENT YEAR SUCH DEDUCTION CAN BE CONTINUED FOR 10 YEARS WITHOUT AGAIN EXAMINI NG ASSESSEES ELIGIBILITY FOR DEDUCTION FOR THE ENTIRE PERIOD. THE COMMISSION ER OF INCOME-TAX (APPEALS) ACCORDINGLY HELD THAT THE ASSESSING OFFIC ER WAS JUSTIFIED IN DISALLOWING THE DEDUCTION UNDER SECTION 80-IB CLAIM ED BY THE ASSESSEE AS IT DID NOT MEET THE ELIGIBILITY CRITERIA SPECIFIED IN THE SECTION FOR ALLOWANCE OF DEDUCTION TO SMALL SCALE INDUSTRIAL UNDERTAKING. AG AINST THIS DECISION OF THE ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 5 COMMISSIONER OF INCOME-TAX (APPEALS) THE ASSESSEE HAS TAKEN UP GROUND NOS. 1 & 2 OF THE APPEAL BEFORE US. 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE DETAILED SUBMISSIONS JUSTIFYING THE ENTITLEMENT OF THE ASSES SEE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80-IB OF THE ACT. FACTUALLY IT IS NOT DISPUTED ON BEHALF OF THE APPELLANT THAT IN TERMS OF THE MEANIN G OF SMALL SCALE INDUSTRIAL UNDERTAKING STATED IN CLAUSE (G) OF SECTION 80-IB( 14) THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE AS ON THE LAST DAY OF T HE PREVIOUS YEAR DOES NOT QUALIFY TO BE REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING SINCE THE VALUE OF ASSETS EXCEED THE PRESCRIBED LIMIT OF RS ONE CRO RE. THE CASE BUILT UP BY THE APPELLANT IS THAT THE DEDUCTION IS AVAILABLE FO R THE SPECIFIED NUMBER OF CONSECUTIVE YEARS THE CONDITIONS HAVE TO BE EXAMIN ED ONLY IN THE CONTEXT OF THE INITIAL ASSESSMENT YEAR. ONCE THE ASSESSEE FULF ILLS THE PRESCRIBED CONDITIONS IN THE INITIAL ASSESSMENT YEAR THEN THE ASSESSEE WOULD BE ELIGIBLE FOR THE GRANT OF DEDUCTION IN EACH OF THE SUBSEQUEN T ASSESSMENT YEARS WITHOUT THE CONDITIONS BEING TESTED AGAIN IN THE SU BSEQUENT YEARS. COMING TO THE SPECIFIC OBJECTION IN THE PRESENT CASE WHICH I S IN TERMS OF 80-IB(2)(III) IT IS POINTED OUT THAT THE ASSESSEE WAS A SMALL SCALE UNDERTAKING IN THE INITIAL ASSESSMENT YEAR AND IT HAD BEEN ALLOWED THE DEDUCTI ON EARLIER. THAT THERE IS NO PROVISION IN SECTION 80-IB EMPOWERING THE ASSESS ING OFFICER TO DENY THE DEDUCTION IN A SUBSEQUENT YEAR IF SUCH DEDUCTION HA S BEEN ALLOWED IN THE INITIAL YEAR AFTER CONSIDERING THE ASSESSEE AS A SM ALL SCALE INDUSTRIAL UNDERTAKING EVEN IF IN THE LATTER YEARS THE UNDE RTAKING CEASES TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING. IN THIS CONTEXT THE LEARNED COUNSEL REFERRED TO THE PROVISIONS OF SECTION 80-HHA OF THE ACT WHEREI N A SPECIFIC PROVISION BY WAY OF PROVISO TO SECTION 80-HHA(3) WAS INSERTED BY THE LEGISLATURE TO PROVIDE THAT THE DEDUCTION SHALL NOT BE AVAILABLE I N RESPECT OF AN UNDERTAKING WHICH DOES NOT REMAIN A SMALL SCALE INDUSTRIAL UNDE RTAKING DURING ANY OF THE ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 6 TEN PREVIOUS YEARS. IT HAS BEEN ARGUED THAT IN THE ABSENCE OF ANY SUCH SPECIFIC PROVISION IN SECTION 80-IB THE INTENT OF THE LEGISLATURE BECOMES CLEAR TO THE EFFECT THAT EVEN IF ASSESSEE DOES NOT FULFIL L SUCH CONDITION IN THE SUBSEQUENT YEARS DEDUCTION CANNOT BE DENIED IF SUC H CONDITION HAS BEEN FULFILLED IN THE INITIAL YEAR. FURTHER IT IS ALSO CONTENDED THAT SO LONG AS THE RELIEF GRANTED IN THE INITIAL ASSESSMENT YEAR IS NO T DISTURBED THE ASSESSING OFFICER CANNOT WITHDRAW THE CLAIM IN THE SUBSEQUENT PERIOD. IN SUPPORT OF THIS PROPOSITION RELIANCE HAS BEEN PLACED ON THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMI CAL INDUSTRIES LTD. V. CIT 123 ITR 669 (GUJ) AND HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT V PAUL BROTHERS 216 ITR 548 (BOM). IT HAS BEEN POINTE D OUT THAT THE ASSESSEE HAS COMPLIED WITH ALL THE REQUIREMENTS OF SECTION 8 0-IB OF THE ACT AS IS EVIDENT FROM ITS CLAIM BEING ALLOWED IN THE INITIAL ASSESSMENT YEAR AND THEREFORE THE ASSESSING OFFICER CANNOT EXAMINE THE QUESTION AGAIN AND DISTURB THE RELIEF IN THIS YEAR ESPECIALLY WHEN TH E RELIEF GRANTED IN THE INITIAL YEAR HAS NOT BEEN DISTURBED. APART FROM RELYING ON THE AFORESAID JUDICIAL DECISION REFERENCE HAS ALSO BEEN MADE TO THE DECIS ION OF THE HONBLE DELHI HIGH COURT IN NATRAJ STATIONARY PRODUCTS P LTD. 16 DTR 270. AS PER THE LEARNED COUNSEL THE FOLLOWING JUDGMENTS REFERRED TO BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN HIS ORDER DO NOT SUPPORT T HE CASE OF THE REVENUE: A. CIT V SATELLITE ENGINEERING LTD. 113 ITR 208 (GU J) B. CIT V ORISSA CEMENT LTD. 254 ITR 24 (DEL) C. CIT V SEEYAN PLYWOODS 190 ITR 564 (KER) 5. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS SUBMITTED THAT THE A PPELLANT IS REQUIRED TO FULFILL THE CONDITIONS PRESCRIBED IN SECTION 80-IB( 2) OF THE ACT FOR EACH OF THE ASSESSMENT YEAR SINCE EACH YEAR IS A SEPARATE UNI T OF ASSESSMENT. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER POINTED OUT THAT THE PROVISIONS OF ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 7 SUB-SECTION (2) OF SECTION 80-IB CLEARLY SHOW THAT THE DEDUCTION IS AVAILABLE ON FULFILLMENT OF THE PRESCRIBED CONDITIONS AND IN THIS CASE CONDITION PRESCRIBED IN 80-IB(2)(III) IS NOT FULFILLED BY THE ASSESSEE INASMUCH AS THE ASSESSEE IS NOT A SMALL SCALE UNDERTAKING WITHIN TH E MEANING OF CLAUSE (G) OF SECTION 80-IB(14) AS ON THE LAST DAY OF THE PREVIOU S YEAR UNDER CONSIDERATION. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS FURTHER RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE HAVE ALSO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BEL OW AND ALSO THE CASE LAWS CITED AT BAR AS ALSO THOSE REFERRED IN THE ORDERS O F THE AUTHORITIES BELOW. THE DISPUTE RELATES TO DEDUCTION CLAIMED UNDER SECTION 80IB OF THE ACT IN RELATION TO THE PROFITS DERIVED BY THE ASSESSEE FROM ITS IND USTRIAL UNDERTAKING. BEFORE PROCEEDING TO ADJUDICATE THE CONTROVERSY WE FIND I T EXPEDIENT TO REPRODUCE THE RELEVANT PORTION OF SECTION 80-IB AND NOTE ITS SALIENT FEATURES: 80IB(1): WHERE THE GROSS TOTAL INCOME OF AN ASSESS EE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB- SECTIONS (3) TO (11) (11A) AND (11B) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVIS IONS OF THIS SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE A DEDUC TION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. (2) THIS SECTION APPLIES TO ANY INDUSTRIAL UNDERTA KING WHICH FULFILS ALL THE FOLLOWING CONDITIONS NAMELY:- (I) IT IS NOT FORMED BY SPLITTING UP OR THE RECONS TRUCTION OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RE SPECT OF AN INDUSTRIAL UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-E STABLISHMENT RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN SE CTION 33B IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN TH AT SECTION; (II) IT S NOT FORMED BY THE TRANSFER TO A NEW BUSIN ESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE; (III) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR TH ING NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVE NTH SCHEDULE OR OPERATES ONE OR MORE COLD STORAGE PLANT OR PLANTS IN ANY PART OF INDIA: PROVIDED THAT THE CONDITION IN THIS CLAUSE SHALL IN RELATION TO A SMALL SCALE INDUSTRIAL UNDERTAKING OR AN INDUSTRIAL UNDER TAKING REFERRED TO ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 8 IN SUB-SECTION (4) SHALL APPLY AS IF THE WORDS NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDUL E HAD BEEN OMITTED. EXPLANATION I: EXPLANATION 2: .. (IV) IN A CASE WHERE THE INDUSTRIAL UNDERTAKING MAN UFACTURES OR PRODUCES ARTICLES OR THINGS THE UNDERTAKING EMPLOY S TEN OR MORE WORKERS N A MANUFACTURING PROCESS CARRIED ON WITH T HE AID OF POWER OR EMPLOYS TWENTY OR MORE WORKERS IN A MANUFACTURIN G PROCESS CARRIED ON WITHOUT THE AID OF POWER. 14. FOR THE PURPOSES OF THIS SECTION -- (G) SMALL-SCALE INDUSTRIAL UNDERTAKING MANS AN IN DUSTRIAL UNDERTAKING WHICH IS AS ON THE LAST DAY OF THE PREVIOUS YEAR REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING UNDER SECTION 11 B OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT 1951 ( 65 OF 1951). 7. SECTION 80-IB PRESCRIBES DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGS. AS PER SUB-SECTION (1) OF SECTION 80IB WHERE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS PRESCRIBED IN THE SUB-SE CTIONS THEREOF THERE SHALL BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASS ESSEE DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH P ERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS IN ACCORDANCE WITH AND A S SPECIFIED IN THE SAID SECTION. SUB-SECTION (2) OF SECTION 80-IB WHICH IS THE SOURCE OF CONTROVERSY BEFORE US PRESCRIBES THAT THE SECTION APPLIES TO A NY INDUSTRIAL UNDERTAKING WHICH FULFILLS ALL THE CONDITIONS STATED THEREIN. CLAUSES (I) TO (IV) OF SECTION 80- IB(2) PRESCRIBE THE CONDITIONS REQUIRED TO BE FULFI LLED BY AN INDUSTRIAL UNDERTAKING TO CLAIM A DEDUCTION UNDER SECTION 80-I B. CLAUSE (I) PRESCRIBES THAT THE ELIGIBLE INDUSTRIAL UNDERTAKING IS NOT FOR MED BY SPLITTING UP OR THE RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE; CLAUSE (II) PRESCRIBES THAT THE INDUSTRIAL UNDERTAKING IS NOT FORMED BY THE TRA NSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE; CLAUSE (III) PROVIDES THAT THE INDUSTRIAL UNDERTAKING MANUFACTURES OR PRODUCES ANY ARTICLE OR THING NOT ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 9 BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDULE TO THE ACT A PROVISO TO THIS CLAUSE CLARIFIES THAT SUCH P ROHIBITION OF NOT MANUFACTURING OR PRODUCING ANY ARTICLE OR THING SPE CIFIED IN ELEVENTH SCHEDULE SHALL NOT APPLY IN RELATION TO A SMALL SC ALE INDUSTRIAL UNDERTAKING. EXPLANATIONS 1 AND 2 BELOW CLAUSE (III) ARE NOT RE LEVANT FOR OUR PURPOSE AND THEREFORE ARE NOT BEING REFERRED TO. CLAUSE (IV) PR ESCRIBES A CONDITION THAT WHERE THE INDUSTRIAL UNDERTAKING MANUFACTURES OR PR ODUCES ARTICLES OR THINGS IT SHALL EMPLOY TEN OR MORE WORKERS IN A MANUFACTUR ING PROCESS CARRIED ON WITH THE AID OF POWER; OR TWENTY OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITHOUT THE AID OF POWER. THE OTHER SUB -SECTIONS ARE NOT QUITE RELEVANT FOR OUR PURPOSE AND ARE NOT BEING REFERRED TO. IN ANY CASE WE MAY REFER TO SUB-SECTION (14) CLAUSE (G) WHICH PRESCRI BES THE MEANING OF SMALL SCALE INDUSTRIAL UNDERTAKING AS AN INDUSTRIAL UNDE RTAKING WHICH IS AS ON THE LAST DAY OF THE PREVIOUS YEAR REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING UNDER SECTION 11B OF THE INDUSTRIES (DE VELOPMENT & REGULATION) ACT 1951 (65 OF 1951) (HEREINAFTER REFERRED TO AS IDR ACT). 8. IT IS NOT IN DISPUTE THAT THE INDUSTRIAL UNDERTA KING OF THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF PLASTIC PRODUCTS WHIC H IS ONE OF THE ITEMS IN THE ELEVENTH SCHEDULE. THEREFORE IN TERMS OF PROV ISO TO CLAUSE (III) OF SECTION 80-IB ASSESSEE COULD ENJOY THE BENEFIT OF DEDUCTION UNDER SECTION 80-IB ONLY IN CASE IT IS A SMALL SCALE INDUSTRIAL U NDERTAKING WITHIN THE MEANING OF SECTION 80-IB(14)(G) OF THE ACT. IT IS NOT DISPU TED THAT IN THE INITIAL ASSESSMENT YEAR I.E. THE YEAR IN WHICH THE INDUSTR IAL UNDERTAKING BEGAN TO MANUFACTURE OR PRODUCE ARTICLE OR THING THE SAID U NIT QUALIFIED TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING. THE FACTUM OF THE ASS ESSEE BEING ALLOWED THE CLAIM UNDER SECTION 80-IB IN THE INITIAL YEAR IS NO T DISPUTED. FACTUALLY DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE DOES NOT QUALIFY TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF SECTION 11B OF THE IDR ACT ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 10 AND THUS IT DOES NOT COMPLY WITH THE PROVISO TO CLA USE (III) OF SUB-SECTION (2) OF SECTION 80-IB OF THE ACT. THE FACTUAL MATRIX TIL L NOW IS UNDISPUTED. THE DIFFERENCE BETWEEN THE REVENUE AND THE ASSESSEE STA RTS FROM HERE. AS PER THE REVENUE SINCE THE ASSESSEE NO LONGER REMAINS A SMALL SCALE INDUSTRIAL UNDERTAKING AND IT BEING ENGAGED IN THE MANUFACTUR E OF AN ARTICLE LISTED IN ELEVENTH SCHEDULE ITS CLAIM FOR DEDUCTION UNDER SE CTION 80-IB HAS TO FAIL. IN OTHER WORDS AS PER THE REVENUE ASSESSEE DOES NOT FULFILL THE CONDITION PRESCRIBED IN CLAUSE (III) OF SUB-SECTION (2) OF SE CTION 80-IB AND THEREFORE THE CLAIM OF DEDUCTION UNDER SECTION 80-IB IS LIABLE TO BE DENIED. ON THE OTHER HAND AS PER THE APPELLANT THE CLAIM CANNOT BE DENI ED EVEN IF THE SAID CONDITION IS NOT FULFILLED IN THIS YEAR BECAUSE TH E ASSESSEE HAS FULFILLED THE CONDITION IN THE INITIAL YEAR. AS PER THE APPELLANT THE CONDITIONS OF SECTION 80- IB ARE REQUIRED TO BE EXAMINED ONLY IN THE INITIAL ASSESSMENT YEAR AND THE SAME HAVING BEEN EXAMINED AND ACCEPTED IT COULD NO T BE EXAMINED AGAIN BY THE ASSESSING OFFICER DURING THE YEAR UNDER CONS IDERATION. 9. WE HAVE CAREFULLY EXAMINED THE RIVAL CONTENTIONS AND FIND OURSELVES UNABLE TO ACQUIESCE TO THE PLEA OF THE ASSESSEE COM PANY. NO DOUBT THE CONDITIONS PRESCRIBED IN SUB-SECTION (2) OF SECTION 80-IB ARE REQUIRED TO BE EXAMINED IN THE INITIAL ASSESSMENT YEAR HOWEVER T HERE IS NOTHING IN THE PHRASEOLOGY OF SUB-SECTION (2) TO SUGGEST THAT THE CONDITION IN CLAUSE (III) THEREOF HAS TO BE EXAMINED ONLY IN THE INITIAL ASSE SSMENT YEAR. WE ARE IN AGREEMENT WITH THE POSITION OF THE APPELLANT THAT I N SO FAR AS CONDITIONS PRESCRIBED IN CLAUSES (I) AND (II) ARE CONCERNED T HE SAME RELATE TO A POINT OF TIME WHICH CAN ONLY BE EXAMINED IN THE COURSE OF TH E INITIAL ASSESSMENT YEAR. CLAUSE (I) REQUIRES AN EXAMINATION AS TO WHETHER TH E INDUSTRIAL UNDERTAKING IS FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSIN ESS ALREADY IN EXISTENCE. CLAUSE (II) RELATES TO EXAMINING WHETHER THE INDUST RIAL UNDERTAKING IS FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR P LANT ALREADY USED IN ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 11 BUSINESS. EVIDENTLY THE CONDITIONS IN CLAUSES (I) AND (II) CAN ONLY BE EXAMINED AT THE TIME OF FORMATION OF A UNIT WHICH IS THE INITIAL YEAR. CLAUSE (III) WHICH IS UNDER CONSIDERATION DOES NOT IMPLY ANY SUCH INTERPRETATION. IN OUR CONSIDERED OPINION THE IMPORT OF THE CONDITION PRESCRIBED IN CLAUSE (III) IS THAT THE INDUSTRIAL UNDERTAKING OUGHT TO BE A SMALL SCALE UNDERTAKING IN THE YEAR OF CLAIM OF DEDUCTION BE IT BE THE INITIAL YE AR OR ANY OF THE SUBSEQUENT YEARS SO LONG AS IT MANUFACTURES PRODUCTS LISTED I N THE ELEVENTH SCHEDULE. QUITE CLEARLY IN THIS CASE ADMITTEDLY THE ASSESSEE IS MANUFACTURING ARTICLES OR THINGS STATED IN THE ELEVENTH SCHEDULE AND IT DO ES NOT QUALITY TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING IN THE INSTANT YEAR AN D THUS THE SAID CONDITION IS NOT FULFILLED. 10. MUCH HAS BEEN ARGUED BY THE APPELLANT TO THE EF FECT THAT THE CONDITIONS ARE TO BE VERIFIED ONLY IN THE INITIAL Y EAR AND SUCH EXAMINATION IS NOT INTENDED BY THE LEGISLATURE TO BE CARRIED OUT I N THE SUBSEQUENT YEARS BY THE ASSESSING OFFICER. FOR THIS PROPOSITION HEAVY RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD (SUPRA). WE HAVE P ERUSED THE SAID DECISION. IN THE CASE OF SAURASHTRA CEMENT & CHEMIC AL INDUSTRIES LTD. (SUPRA) THE FACTS WERE AS FOLLOWS. THE ASSESSEE WA S CARRYING ON BUSINESS OF MANUFACTURING CEMENT AND THE CAPACITY OF THE FIRST CEMENT PLANT WAS 600 TONS PER DAY. IN THE YEAR RELEVANT TO THE ASSESSME NT YEAR 1968-69 THE CAPACITY WAS EXPANDED AND IT WAS RAISED TO 1600 TON S PER DAY. THE ASSESSEE COMPANY THEREFORE MADE A CLAIM FOR RELIEF UNDER SECTION 80J OF THE ACT WITH REFERENCE TO THE CAPITAL EMPLOYED IN THE E XPANSION OF THE PLANT AND MACHINERY. THE ASSESSING OFFICER ALLOWED THE SAID C LAIM FOR THE ASSESSMENT YEAR 1968-69. HOWEVER IN THE ASSESSMENT YEAR 1969- 70 THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM AS IN HIS OPINION THE EXPANSION OF CEMENT MANUFACTURING UNIT DID NOT AMOUNT TO SETTING UP A NEW INDUSTRIAL ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 12 UNDERTAKING INASMUCH AS THE ACTIVITIES OF THE EXPA NDED PART OF THE UNIT AS WELL AS THOSE OF THE ORIGINAL UNITS WERE MUCH INTER -CONNECTED. THUS HE DISALLOWED THE CLAIM ON THE GROUND THAT NO NEW UNIT CAN BE SAID TO HAVE BEEN SET UP SEPARATE FROM THE EXISTING UNIT ON ACCOUNT O F MERE EXPANSION. THE APPELLATE COMMISSIONER IN APPEAL HELD THAT IN THE ABSENCE OF THERE BEING ANY SPECIFIC PROVISION IN THE ACT THAT THE NEW UNIT SHOULD BE ALTOGETHER DISTINCT AND EVEN PHYSICALLY AT A DISTANCE FROM THE OLD UNIT AND THAT IF THE RELIEF WAS ADMISSIBLE FOR ASSESSMENT YEAR 1968-69 IN RESPECT OF THE EXPANDED UNIT OF THE ASSESSEE COMPANY THAT RELIEF WOULD CONTINUE TO BE AVAILABLE TO THE ASSESSEE FOR THE SUBSEQUENT PERIOD OF FOUR YEARS. THE TRIBUNAL ALSO UPHELD THE ORDER OF THE APPELLATE COM MISSIONER GRANTING RELIEF TO THE ASSESSEE SINCE IN THE OPINION OF THE TRIBUNA L UNLESS THE ASSESSMENT FOR THE ASSESSMENT YEAR 1968-69 WAS DISTURBED BY WI THDRAWAL OF THE RELIEF THERE COULD BE NO SUBSTANCE OR JUSTIFICATION IN THE REVENUES ATTEMPT TO WITHDRAW THE CLAIM UNDER SECTION 80J OF THE ACT FOR THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 1969-70. THE HONBLE HIGH COURT HE LD THAT IF THE RELIEF OF TAX HOLIDAY WAS GRANTED TO THE ASSESSEE FOR THE ASS ESSMENT YEAR 1968-69 THE ASSESSEE WAS ENTITLED TO CONTINUANCE OF THAT RE LIEF FOR THE SUBSEQUENT FOUR YEARS AND THE ASSESSING OFFICER WOULD NOT BE J USTIFIED IN REFUSING TO CONTINUE THE ALLOWANCE FOR THE ASSESSMENT YEAR 1969 -70 WITHOUT DISTURBING THE RELIEF FOR THE INITIAL YEAR. IN THE WORDS OF T HE HONBLE HIGH COURT -- NO DOUBT THE RELIEF OF TAX HOLIDAY UNDER SECTION 80J CAN BE WITHHELD OR DISCONTINUED PROVIDED THE RELIEF GRANTED IN THE INI TIAL YEAR OF ASSESSMENT IS DISTURBED OR CHANGED ON VALID GROUNDS. BUT WITHOUT DISTURBING THE RELIEF GRANTED IN THE INITIAL YEAR THE ITO CANNOT EXAMINE THE QUESTION AGAIN AND DECIDE TO WITHHOLD OR WITHDRAW THE RELIEF WHICH HAS BEEN ALREADY ONCE GRANTED. ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 13 11. AS THE AFORESAID DISCUSSION SHOWS THE MATRIX O F THE DISPUTE IN SAURASHTRA CEMENT & CHEMICALS LTD. (SUPRA) STOOD ON AN ALTOGETHER DIFFERENT FOOTING. THE ASSESSMENT YEAR IN DISPUTE WAS 1969-70 WHICH WAS THE SECOND YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80J OF THE ACT. IN THE INITIAL ASSESSMENT YEAR OF 1968-69 THE CLAIM WAS ALLOWED BY TREATING THE EXPANSION IN CAPACITY AS FORMATION OF A NEW INDUSTRIAL UNDERT AKING. WHETHER EXPANSION IN CAPACITY AMOUNTED TO FORMATION OF A NEW INDUSTRI AL UNDERTAKING WAS A CONDITION REQUIRED TO BE EXAMINED ONLY IN THE INITI AL YEAR AND WHICH WAS DONE IN THE COURSE OF ASSESSMENT FOR THE ASSESSMENT YEAR 1968-69 BEING THE INITIAL YEAR. IN THE ASSESSMENT YEAR 1969-70 T HE ASSESSING OFFICER SOUGHT TO DENY THE DEDUCTION ON THE GROUND THAT EXP ANSION OF MANUFACTURING CAPACITY DID NOT AMOUNT TO SETTING UP OF A NEW INDU STRIAL UNDERTAKING . IN OTHER WORDS A CONDITION WHICH WAS RELEVANT ONLY AT THE T IME OF FORMATION OF UNIT WAS EXAMINED AND ACCEPTED IN THE ASSESSMENT YEAR 19 68-69 AND THE SAME WAS SOUGHT TO BE REVIEWED BY THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT FOR THE SUBSEQUENT ASSESSMENT YEAR 1969- 70 AND ARRIVE AT A DIFFERENT CONCLUSION. THIS ACTION WAS NEGATED BY TH E HONBLE HIGH COURT WITH AFORESAID OBSERVATIONS THAT WITHOUT DISTURBING THE RELIEF GRANTED IN THE INITIAL YEAR THE REVENUE CANNOT EXAMINE THE QUESTION AGAIN TO DENY THE RELIEF IN SUBSEQUENT YEAR. IN OUR CONSIDERED OPINION IN THE INSTANT CASE MATRIX STANDS DIFFERENTLY INASMUCH IN THE INSTANT CASE THE ASSES SING OFFICER IS NOT ATTEMPTING TO REVIEW A POSITION ACCEPTED WITH REFER ENCE TO THE INITIAL YEAR. IN FACT IN THE PRESENT CASE ON ACCOUNT OF CHANGED CON DITION NAMELY THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE LOOSING THE STATUS OF A SMALL SCALE INDUSTRIAL UNDERTAKING UNDER THE IDR ACT THE ASSES SING OFFICER SEEKS TO HOLD THAT THE SAID CONDITION IS NOT SATISFIED DURING THE YEAR UNDER CONSIDERATION. THE SAID ACTION CANNOT BE INTERPRETED TO MEAN THAT THERE IS AN ATTEMPT BY THE REVENUE TO REVIEW AN ACCEPTED POSITION OF THE INIT IAL ASSESSMENT YEAR WHICH ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 14 WAS THE CASE BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (SUPRA ). IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. (SUPRA ) ONCE HAVING ACCEPTED IN THE INITIAL ASSESSMENT YEAR THAT THE EXPANSION I N CAPACITY AMOUNTED TO SETTING UP OF A NEW UNIT THE SAME WAS SOUGHT TO BE REVIEWED IN THE SUBSEQUENT YEAR BY HOLDING DIFFERENTLY. IN FACT TH E HONBLE GUJARAT HIGH COURT ITSELF ENVISAGED THAT THE RELIEF OF TAX HOLID AY UNDER SECTION 80J CAN BE WITHHELD PROVIDED THE RELIEF GRANTED IN THE INITIA L YEAR IS DISTURBED OR CHANGED ON VALID GROUND. IN THE PRESENT CASE IT IS QUITE C LEAR THAT ON ACCOUNT OF EVENTS SUBSEQUENT TO THE INITIAL ASSESSMENT YEAR TH E ASSESSEE FAILS TO FULFILL THE IMPUGNED CONDITION AND THEREFORE IT IS INELIG IBLE FOR THE CLAIM OF DEDUCTION IN THIS YEAR. IN OUR CONSIDERED OPINION THE RATIO OF THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAURA SHTRA CEMENT & CHEMICALS LTD. (SUPRA) DOES NOT HELP THE ASSESSEE I N THE PRESENT CASE. 12. THE NEXT DECISION RELIED UPON BY THE APPELLANT IS IN THE CASE OF PAUL BROTHERS (SUPRA) WHEREIN THE FACTS WERE AS FOLLOWS. IN THE CASE OF PAUL BROTHERS (SUPRA) THE ISSUE RELATED TO JURISDICTION ASSUMED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT FOR ASSES SMENT YEARS 1981-82 AND 1982-83 WHICH WAS QUASHED BY THE TRIBUNAL WHIC H WAS APPEALED BY THE REVENUE BEFORE THE HONBLE HIGH COURT. THE FACTS WE RE THAT THE ASSESSEE FIRM HAD BRANCHES IN BACKWARD AREAS CARRYING ON THE BUSINESS OF CONSTRUCTION OF BUILDINGS TRANSPORTATION AND MANUF ACTURE AND SUPPLY OF BRICKS. FOR THE USE IN CONSTRUCTION ACTIVITY ASSES SEE ALSO MANUFACTURED WINDOWS CONCRETE SLABS ETC. FOR ASSESSMENT YEARS 1 980-81 AND 1981-82 IT CLAIMED DEDUCTION UNDER SECTION 80HH OF THE ACT WH ICH WAS ALLOWED FOR THE ASSESSMENT YEAR 1980-81 BY THE ASSESSING OFFICER WI THOUT DISCUSSION AND SUCH ASSESSMENT HAD BECOME FINAL. IN THE ASSESSMENT YEAR 1981-82 ALSO THE DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER AND WHILE ALLOWING ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 15 DEDUCTION RELIANCE WAS PLACED ON THE JUDGMENT OF T HE HONBLE ORISSA HIGH COURT IN THE CASE OF CIT V N.C. BUDHARAJA & CO 121 ITR 212 (ORI) WHICH WAS THE ONLY DECISION THEN OPERATING IN THE FIELD. FOR THE ASSESSMENT YEAR 1981- 82 THE ASSESSEE HAD PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) ON CERTAIN OTHER ISSUES. AGAIN FOR ASSESSMENT YEAR 1982-83 THE ASSESSING OFFICER ALLOWED DEDUCTION UND ER SECTION 80HH OF THE ACT. THE COMMISSIONER EXERCISING JURISDICTION UNDE R SECTION 263 OF THE ACT QUASHED THE ORDERS OF THE ASSESSING OFFICER FOR ASS ESSMENT YEARS 1981-82 AND 1982-83. AS PER THE TRIBUNAL (I) SINCE THE AS SESSMENT ORDER FOR ASSESSMENT YEAR 1981-82 WAS MERGED IN THE APPELLATE ORDER SECTION 263 JURISDICTION COULD NOT BE EXERCISED BY THE COMMISSI ONER; (II) SINCE THE ASSESSMENT WAS BASED ON A BINDING DECISION OF THE H IGH COURT IT COULD NOT BE INTERFERED UNDER SECTION 263 OF THE ACT; (III) U NLESS DEDUCTION ALLOWED IN THE ASSESSMENT YEAR 1980-81 ON THE SAME GROUND WAS WITHDRAWN THEY COULD NOT BE DENIED FOR THE SUBSEQUENT YEARS. THE HONBLE HIGH COURT AFFIRMED THE APPROACH OF THE TRIBUNAL ON ALL THE TH REE COUNTS. BEFORE US THE LEARNED COUNSEL FOR THE APPELLANT POINTED OUT THAT THE PARITY OF REASONING APPROVED BY THE HIGH COURT TO THE EFFECT THAT UNLES S DEDUCTION ALLOWED IN A PRECEDING YEAR ON THE SAME GROUND IS WITHDRAWN SIM ILAR RELIEF FOR THE SUBSEQUENT YEARS COULD NOT BE WITHHELD. SECONDLY T HE LEARNED COUNSEL ALSO REFERRED TO THE OBSERVATIONS OF THE HONBLE HIGH CO URT THAT IN SECTIONS 80HH OR SECTION 80J THERE IS NO PROVISION FOR WITHDRAWAL OF SPECIAL DEDUCTION FOR THE SUBSEQUENT YEARS FOR BREACH OF CONDITIONS. IT WAS P OINTED OUT THAT SIMILAR IS THE SITUATION WITH REGARD TO THE PROVISIONS OF SECT ION 80-IB AND THEREFORE IN THE INSTANT CASE THE RELIEF UNDER SECTION 80-IB COU LD NOT BE DENIED IN THIS YEAR. 13. IN OUR CONSIDERED OPINION THE RATIO OF THE AF ORESAID JUDGMENT ALSO DOES NOT HELP THE ASSESSEE IN THE INSTANT CASE. THE FACTUAL MATRIX IN THE ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 16 AFORESAID CASE WAS THAT IN EARLIER YEAR THE BENEFIT STOOD ALLOWED TO THE ASSESSEE AND WITHOUT ANY CHANGED CIRCUMSTANCES THE SAID CLAIM WAS SOUGHT TO BE DENIED IN A SUBSEQUENT YEAR AND SUCH AN ATTEMPT WAS NEGATED BY THE HONBLE HIGH COURT. IN THE INSTANT CASE AS WE HAVE NOTED EARLIER THE CIRCUMSTANCES HAVE CHANGED AFTER THE INITIAL ASSESS MENT YEAR AND THEREFORE THE CLAIM IS SOUGHT TO BE DENIED ON VALID GROUNDS A ND WITHOUT DISTURBING THE CLAIM IN THE INITIAL YEAR BECAUSE THE CIRCUMSTANCES IN THE INITIAL YEAR HAVE NOT UNDERGONE ANY CHANGE. THEREFORE THE DECISION IS IN APPLICABLE TO THE INSTANT CASE. 14. IN THE RESULT WE HEREBY AFFIRM THE ORDERS OF T HE AUTHORITIES BELOW DENYING RELIEF TO THE ASSESSEE UNDER SECTION 80-IB OF THE ACT. THE ASSESSEE FAILS. 15. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO T HE DISALLOWANCE OF RS 2 90 104/- MADE OUT OF PAYMENTS TO TRANSPORTERS UND ER SECTION 40A(3) OF THE ACT. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS ) THE ASSESSEE ADMITTED THAT IN SOME CASES PAYMENT IN CASH EXCEEDI NG RS 20 000/- HAD BEEN MADE AS THE CONCERNED PARTIES REFUSED TO ACCEP T PAYMENTS BY CHEQUES AND THAT THE PAYMENTS WERE MADE TO TRANSPORTERS UND ER EXCEPTIONAL CIRCUMSTANCES. AS THE ASSESSEE COULD NOT GIVE ANY C ONVINCING REASON AS TO WHY THE PROVISIONS OF SECTION 40A(3) ARE NOT ATTRAC TED IN THE CASE OF PAYMENTS TO TRANSPORTERS ABOVE RS 20 000/- THE COM MISSIONER OF INCOME- TAX (APPEALS) CONFIRMED THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER. AGGRIEVED ASSESSEE HAS TAKEN UP GROUND NO. 3 BEFOR E US. 16. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE ALSO C AREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) THE ASSESSEE ADMITTED THAT IN SOME CASES PAYMENTS IN CASH EXCEEDING RS 20 000/- HAD BEEN MADE TO TRAN SPORTERS AS THEY ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 17 DECLINED TO ACCEPT PAYMENT BY CHEQUE. EVEN BEFORE U S THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH WITH EVIDENCE THAT THE P AYMENTS EXCEEDING RS 20 000/- WERE MADE UNDER EXCEPTIONAL AND UNAVOIDABL E CIRCUMSTANCES. IN OUR CONSIDERED OPINION THE AUTHORITIES BELOW WERE JUSTIFIED IN HOLDING THAT PROVISIONS OF SECTION 40A(3) WERE ATTRACTED IN THE ASSESSEES CASE. WE ACCORDINGLY CONFIRM THE DISALLOWANCE OF RS 2 90 104 /- MADE UNDER SECTION 40A(3) OF THE ACT. THE ASSESSEE FAILS ON THIS GROUN D. 17. GROUND NO. 4 RELATES TO THE DISPUTE WITH REGARD TO THE AMOUNT OF RS 61 079/- PAID BY THE ASSESSEE TO SAI HYDRAULIC MOTO RS FOR PURCHASE OF HYDRAULIC MOTOR M-3-800. THE ASSESSING OFFICER DISA LLOWED THE AMOUNT UNDER SECTION 37(I) AND TREATED THE SAME AS CAPITAL EXPENDITURE THUS ALLOWING DEPRECIATION @ 15%. IN APPEAL THE COMMISS IONER OF INCOME-TAX (APPEALS) HELD THAT THE EXPENDITURE ON PURCHASE OF NEW MOTOR SHOULD ORDINARILY BE TREATED AS CAPITAL EXPENDITURE HOWEV ER IF SUCH MOTOR WHEN IS A PART OF MACHINE STOPS FUNCTIONING AND IS REPLACED W ITHOUT THERE BEING ANY ENHANCEMENT IN THE OVERALL EFFICIENCY OF THE MACHIN E THE RESULT OF REPLACEMENT BEING ONLY TO BRING THE MACHINE TO ITS ORIGINAL EFFICIENCY THE EXPENDITURE SHOULD BE TREATED AS REVENUE EXPENDITUR E. AS ASSESSEE HOWEVER DID NOT FURNISH ANY DETAILS TO PROVE THE A BOVE REASONING THE COMMISSIONER OF INCOME-TAX (APPEALS) UPHELD THE DIS ALLOWANCE MADE BY THE ASSESSEE AGAINST WHICH THE ASSESSEE HAS PREFERRED GROUND NO. 4 OF APPEAL. 18. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE COMPANY HAS BEEN OPERATING FOR THE LAST MANY YEARS AND MINOR REPLACEMENT OF PARTS IN VARIOUS MACHINES HAVE TO BE MADE YEAR A FTER YEAR. THE EXPENDITURE WAS IN THE MANNER OF REPLACEMENT OF A P ART OF A MACHINE AND THEREFORE IT WAS REVENUE EXPENDITURE. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 18 19. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. W E FIND FORCE IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE COMPANY HAS BEEN OPERATING FOR THE LAST MANY YEARS AND MINOR RE PLACEMENT OF PARTS IN VARIOUS MACHINES HAVE TO BE MADE YEAR AFTER YEAR. T HEREFORE WE HOLD THAT THE EXPENDITURE WAS IN THE MANNER OF REPLACEMENT OF A PART OF A MACHINE AND WAS ALLOWABLE AS REVENUE EXPENDITURE. WE ACCORDINGL Y SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. THE ASSESSEE SU CCEEDS ON THIS GROUND. 20. THE NEXT ISSUE RAISED IN THE APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT AN AMOUN T OF RS 11 005/- SPENT BY THE ASSESSEE FOR PURCHASE OF CURTAIN RODS AND PV C CARPET CONSTITUTED CAPITAL EXPENDITURE. 21. ON A PERUSAL OF THE ORDER OF THE COMMISSIONER O F INCOME-TAX (APPEALS) WE FIND THAT THIS GROUND DOES NOT ARISE OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND AS SUCH W E REFRAIN FROM ADJUDICATING THE SAME. 22. THE NEXT GROUND OF APPEAL IS THAT THE COMMISSIO NER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS 28 500/- UNDER SECTION 40A(IA) OF THE ACT OUT OF TRANSPORT PAYMENT S MADE. 23. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER DISALLOWED A SUM OF RS 73 500/- BEING TRANSPORT PAY MENTS UNDER SECTION 40A(IA) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD NOT DEDUCTED TDS WHILE MAKING THE ABOVE PAYMENTS. IN APPEAL BEFORE T HE COMMISSIONER OF INCOME-TAX (APPEALS) IT WAS SUBMITTED BY THE ASSES SEE THAT THE IMPUGNED PAYMENTS WERE MADE TO DEV ROADLINES AND THAT THE AS SESSING OFFICER FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 194C W ERE NOT APPLICABLE IN RESPECT OF PAYMENT MADE UPTO RS 15 000/- DURING THE YEAR UNDER ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 19 CONSIDERATION. IT WAS ALSO CONTENDED THAT THE DISAL LOWANCE SHOULD AT-LEAST HAVE BEEN RESTRICTED TO RS 28 500/- BEING THE LAST 3 PAYMENTS. THE COMMISSIONER OF INCOME-TAX (APPEALS) ACCEPTED THE C ONTENTION OF THE ASSESSEE AND HELD THAT TDS SHOULD BE DEDUCTED FOR T HE LAST 3 PAYMENTS WHERE THE TOTAL OF SUCH PAYMENTS EXCEEDED RS 50 000 /-. ACCORDINGLY HE DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISA LLOWANCE TO THE LAST 3 PAYMENTS AMOUNTING TO RS 28 500/-. STILL AGGRIEVED THE ASSESSEE HAS TAKEN THE IMPUGNED GROUND IN APPEAL BEFORE US. 24. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AFORESAID ISSUE STANDS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF OUR CO-ORDINATE BENCH IN THE CASE OF SHRI JAGANNATH R KALANTRI (HUF) NASHIK VIDE ITA NO 315/PN/2009 ORDER DATED 27.08.2 010. ON THE CONTRARY THE LEARNED DEPARTMENTAL REPRESENTATIVE DEFENDED TH E ORDERS OF THE AUTHORITIES BELOW. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. WE HAVE PERUSED THE DECISION OF OUR CO-ORDINATE BENCH IN THE CASE O F SHRI JANNATH R KALANTRI (HUF) NASHIK (SUPRA) AND FIND THAT THE ISSUE RAISE D IN THIS APPEAL BEFORE US STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFO RESAID DECISION. FOLLOWING THE SAME WE SET ASIDE THE ORDER OF THE C OMMISSIONER OF INCOME- TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO D ELETE THE DISALLOWANCE OF RS 28 500/- MADE UNDER SECTION 40A(IA) OF THE ACT. ASSESSEE SUCCEEDS ON THIS GROUND. 26. IN THE LAST GROUND OF APPEAL IT IS STATED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN ADJUDICATING THE ALTERNATE CLAIM OF THE ASSESSEE IN RESPECT OF DISALLOWANCE OF INTEREST OF RS 1 58 932/- AND RS 1 10 872/- UNDER PROVISO TO SECTION 36(1)(III) OF T HE ACT WITHOUT ADJUDICATING THE MAIN CLAIM THAT THE SAID DISALLOWANCE WAS ARBIT RARY PERVERSE AND LEGALLY ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 20 UNSUSTAINABLE. THE ASSESSING OFFICER STATED IN THE ASSESSMENT ORDER THAT THE INTEREST ON PURCHASE OF MACHINERY TILL THE DATE THE MACHINERY WAS PUT TO USE HAD NOT BEEN CAPITALIZED. THE ASSESSING OFFICER ALS O FOUND THAT THE ASSESSEE HAD MADE CERTAIN ADVANCES TO SEVEN PARTIES AGGREGAT ING TO RS 1 33 00 000/- THE ASSESSEE WAS NOT ABLE TO GIVE ANY SATISFACTORY EXPLANATION AS TO WHY THE ADVANCES HAD BEEN MADE AND WHETHER THE SAME HAD BEE N MADE OUT OF ITS OWN FUNDS. THE ASSESSING OFFICER NOTICED THAT ONE O F THE PARTIES I.E. WINDSOR MACHINES P. LTD. TO WHOM ADVANCE HAD BEEN MADE AMOU NTING TO RS 48 LAKHS DURING THE YEAR WAS A SUPPLIER OF PLANT AND M ACHINERY TO THE ASSESSEE. THE OTHER ADVANCE ALSO APPEARED TO BE FOR ACQUISITI ON OF PLANT AND MACHINERY. THE ASSESSEE HAD DEBITED INTEREST AMOUNT ING TO RS 97 02 685/- TO THE PROFIT AND LOSS ACCOUNT ON LOANS FOR ACQUISI TION OF CAPITAL ASSETS. THE PROPORTIONATE AMOUNT OF INTEREST ON THE ABOVE ADVAN CES GIVEN TO SUPPLIERS AGGREGATING TO RS 133 LAKHS WAS DISALLOWABLE AS NO INTEREST HAD BEEN CHARGED ON THE ADVANCES GIVEN TO THOSE PARTIES. IT WAS SUBMITTED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE ASSES SING OFFICER ERRED IN MAKING THE DISALLOWANCE AND ALTERNATIVELY THE ASSES SING OFFICER BE DIRECTED TO ALLOW DEPRECIATION ON THE CAPITALIZATION OF THE INTEREST AS PER THE PROVISIONS OF THE ACT. ACCORDINGLY ACCEPTING THE ALTERNATIVE CLAIM OF THE ASSESSEE THE COMMISSIONER OF INCOME-TAX (APPEALS) DIRECTED THE A SSESSING OFFICER TO ALLOW DEPRECIATION AT THE RATES PRESCRIBED UNDER TH E ACT ON THE AMOUNT OF INTEREST CAPITALIZED UNDER THE BLOCK OF PLANT AND M ACHINERY. BEING AGGRIEVED ASSESSEE HAS TAKEN THE IMPUGNED GROUND O F APPEAL BEFORE US. 27. ON THIS GROUND WE FIND THAT THE CIT(A) HAS NOT ADJUDICATED ON THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE THAT NO DISAL LOWANCE OF INTEREST IS MERITED U/S 36(1)(III) OF THE ACT AS MANIFESTED B Y GROUND NOS. 5.1 AND 5.2 OF THE MEMO OF APPEAL FILED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). INSTEAD THE COMMISSIONER OF INCOME-TAX (APPEALS) H AS ADJUDICATED THE ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 21 ALTERNATIVE GROUND RAISED BY THE ASSESSEE BY WAY OF GROUND NO. 5.3 SEEKING DIRECTIONS TO THE ASSESSING OFFICER FOR THE CLAIM O F DEPRECIATION IN CASE CAPITALIZATION OF EXPENDITURE IS UPHELD. IN THIS VI EW OF THE MATTER WE DEEM IT FIT AND PROPER TO REMIT THIS ASPECT BACK TO THE FIL E OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WHO SHALL DEAL THE GROUND OF T HE ASSESSEE DE NOVO. THE COMMISSIONER OF INCOME-TAX (APPEALS) SHALL PROV IDE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THEN DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 28. RESULTANTLY APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 31ST DAY OF MARCH 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 31ST MARCH 2011 B COPY OF THE ORDER FORWARDED TO : 1. SAMRUDDHI INDUSTRIES LTD SANGLI 2. THE JT. CIT R-1 SANGLI 3. THE CIT(A) KOLHAPUR 4. THE CIT-I KOLHAPUR 5. THE D.R A BENCH PUNE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT PUNE BENCHES PUNE ITA NO 1002/PN/09 SAMRUDDHI INDUSTRIES LTD. SANGLI 22