ACIT, CHENNAI v. M/s. Sri Aurobindo Packagers (P) Ltd., CHENNAI

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER] I.T.A.NOS.1913 TO 1915/MDS/2010 ASSESSMENT YEARS : 2004-05 2005-06 & 2006-07 THE ACIT COMPANY CIRCLE VI(4) CHENNAI VS M/S SRI AUROBINDO PACKAGERS PVT. LTD. 163/1A & 1B GIRUGAMBAKKAM MANGADU POST CHENNAI 602 101 [PAN AAECS9520Q] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B. SRINIVAS RESPONDENT BY : SHRI S. SRIDHAR O R D E R PER BENCH: THESE THREE APPEALS OF THE REVENUE FOR AS SESSMENT YEARS 2004-05 TO 2006-07 CAN BE DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. I.T.A.NOS.1914 & 1915/MDS/2010 2. THESE TWO APPEALS ARE THE QUANTUM APPEALS FILED BY THE REVENUE IN RELATION TO ASSESSMENT YEARS 2005-06 AND 2006-07. IN BOTH THESE APPEALS COMMON ISSUE AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE INCOME-TAX A CT 1961 OR NOT IS ITA 1913 TO 1915/10 :- 2 -: INVOLVED. THE ASSESSEE-COMPANY IS ENGAGED IN THE B USINESS OF MANUFACTURE OF PLASTIC BAGS AND TUBES HAVING ITS MA NUFACTURING UNITS AT CHENNAI AND PONDICHERRY. THE PONDICHERRY UNIT C LAIMED DEDUCTION U/S 80IB OF THE ACT. THE ASSESSING OFFICER VIDE H IS ORDER DATED 24.12.2007 DISALLOWED THE CLAIM AFTER VERIFICATION OF THE RECORDS. THE ELECTRICITY BILL SUBMITTED IN CONNECTION WITH PONDI CHERRY UNIT WAS FOUND TOO LOW TO MATCH WITH THE TOTAL CONSUMPTION CLAIMED AS PER THE PROFIT & LOSS ACCOUNT. SO THE ASSESSING OFFICER WAS NOT AGREEABLE WITH THIS CLAIM OF THE ASSESSEE AND DISALLOWED THE SAME. T HE ASSESSEE WAS SUCCESSFUL IN GETTING THE DISALLOWANCE SO MADE DELE TED; OR TO SAY IN OTHER WORDS ITS CLAIM OF DEDUCTION U/S 80IB WAS AL LOWED BY HOLDING THE COMPANY TO BE ELIGIBLE FOR SUCH DEDUCTION. THE LD. CIT(A) HOWEVER FOLLOWED THE TRIBUNAL ORDER DATED 30.7.201 0 FOR ASSESSMENT YEAR 2004-05 IN ASSESSEES OWN CASE RENDERED IN I .T.A.NO. 1270/MDS/2009 IN WHICH CASE ON EXACTLY IDENTICAL FACTS THE TRIBUNAL HAS HELD THAT CONSUMPTION OF ELECTRICITY CANNOT BE A CRITERIA FOR HOLDING WHETHER A UNIT IS DOING MANUFACTURING ACTIVITIES OR NOT. THE REVENUE IS NOW AGGRIEVED AND HAS FILED THESE TWO APPEALS FO R BOTH THE YEARS SEPARATELY. 3. AT THE TIME OF HEARING IT WAS FOUND FOR A FACT THAT THE FACTS IN ALL THESE YEARS INCLUDING THE YEAR 2004-05 ARE EXACTLY IDENTICAL AND THE ITA 1913 TO 1915/10 :- 3 -: ASSESSING OFFICER HAD DENIED THE CLAIM OF DEDUCTION U/S 80IB TO THE ASSESSEE IN ASSESSMENT YEAR 2004-05 ONLY WITH REFER ENCE TO LOW CONSUMPTION OF ELECTRIC POWER. IT WAS ALSO FOUND W ITH REFERENCE TO THE TRIBUNAL ORDER RENDERED FOR ASSESSMENT YEAR 2004-05 THAT THE TRIBUNAL HAS TAKEN A VIEW IN THE GIVEN FACTS AND THE CIRCUMS TANCES OF THE CASE THAT THE ASSESSEE IS DOING MANUFACTURING ACTIVITIES AND THUS HELD IT TO BE AN ELIGIBLE UNIT FOR DEDUCTION U/S 80IB. FOR RE ADY REFERENCE WE EXTRACT PARA 5 OF THE TRIBUNAL ORDER DATED 30.7.201 0(SUPRA) HEREIN AS BELOW: ' WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE APPELLANT SHOWS THAT THE FIGURES AS DISCLOSED B Y THE ASSESSEE TO THE COMMERCIAL TAXES DEPARTMENT AND CENTRAL EXCISE AUTHORITIES TALLY WITH THE FIGURES A S SHOWN IN THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET. THE C ENTRAL EXCISE AUTHORITIES WOULD NORMALLY BEFORE GRANTING C ENVAT CREDIT VERIFY THE RG REGISTERS. FURTHER THE SISTE R DEPARTMENT OF THE REVENUE BEING COMMERCIAL TAXES DEPARTMENT HAD CATEGORICALLY RECORDED THE FINDING T HAT THE ASSESSEE IS DOING THE BUSINESS OF MANUFACTURE AND T HAT THE ASSESSEE IS REGISTERED AS AN SSI AND THE DIRECT ORATE OF INDUSTRIES PONDICHERRY HAS CERTIFIED THAT THE ASSE SSEE HAS ALSO STARTED PRODUCTION. NOW THESE ARE GOVERNMENT DOCUMENTS ISSUED BY DIFFERENT AUTHORITIES UNDER DI FFERENT LEGAL REQUIREMENTS IN RESPECT OF THE MANUFACTURING ACTIVITY. THE TURNOVER AS DECLARED BY THE ASSESSEE IN RESPECT OF THE ITA 1913 TO 1915/10 :- 4 -: PONDICHERRY UNIT HAS ALSO BEEN ACCEPTED. THE EXEMPT ION CLAIMED BY THE ASSESSEE IN RESPECT OF PONDICHERRY U NIT ON ACCOUNT OF THE COMMERCIAL TAXES HAS ALSO BEEN GRANT ED TO THE ASSESSEE. THE CENVAT CREDIT CLAIMED BY THE ASSE SSEE HAS BEEN GRANTED BY THE EXCISE DEPARTMENT THAT TOO IN RESPECT OF THE PONDICHERRY UNIT. THERE IS NO EVIDEN CE AVAILABLE WITH THE REVENUE TO DISPROVE THESE GOVERN MENT DOCUMENTS. THE ASSESSEE HAS ALSO EXPLAINED WHY THE POWER CONSUMPTION IS SO LOW. IT IS NOTICED FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS DEN IED THE ASSESSEE THE BENEFIT OF DEDUCTION U/S.80IB ONLY ON PRESUMPTION THAT THE ELECTRICITY CONSUMED IS NOT AD EQUATE. PRESUMPTIONS WOULD NOT AND CANNOT TAKE THE PLACE OF SUBSTANTIVE EVIDENCE. FURTHER THE SISTER DEPARTMEN T OF THE REVENUE MORE SO THE COMMERCIAL TAX DEPARTMENT AS A LSO THE EXCISE DEPARTMENT HAVE ACCEPTED THE FACTUM OF MANUFACTURE AND TURN OVER DECLARED BY THE ASSESSEE. THE DIRECTOR OF INDUSTRIES PONDICHERRY HAS ALSO ACCEPT ED THE FACTUM OF MANUFACTURE BY THE ASSESSEE AND HAS ALSO RECOGNIZED THE ASSESSEE UNIT IN PONDICHERRY AS AN S SI AND REGISTERED AS SUCH. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE AO WAS WRONG IN DISALLOWING THE ASSES SEE'S CLAIM FOR DEDUCTION U/S.80IB. A PERUSAL OF THE ORDE R OF THE LEARNED CIT(A) ALSO SHOWS THAT HE HAS CONFIRMED THE ORDER OF THE AO ON THE GROUND THAT THE AO HAD COME TO THE PRIMA FACIE BELIEF THAT NO PRODUCTION OR MANUFACTURE HAD TAKEN PLACE AT THE PONDICHERRY UNIT. WHEN SISTER DEPARTME NTS OF THE REVENUE HAS ACCEPTED THE FACTUM OF MANUFACTURE AND THE AO ONLY HAS A PRIMA FACIE BELIEF THAT THERE IS NO ITA 1913 TO 1915/10 :- 5 -: MANUFACTURE IT WOULD NOT BE ADEQUATE ENOUGH TO DIS LODGE THE ASSESSEE'S CLAIM FOR DEDUCTION U/S.80-LB. IN TH E CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) IS NOT SUSTAINABLE ON THE FACTS OF T HE CASE CONSEQUENTLY THE SAME IS REVERSED AND THE AO IS DI RECTED TO GRANT THE DEDUCTION U/S.80-IB IN RESPECT OF THE PONDICHERRY UNIT.' 4. THEREFORE BY FOLLOWING THE TRIBUNAL ORDER (SUPRA) WE MAINTAIN CONSISTENCY ON THE ISSUE AND CANNOT ALLOW THESE AP PEALS OF THE REVENUE FOR ASSESSMENT YEARS 2005-06 AND 2006-07. ACCORDINGLY WE DISMISS BOTH THESE APPEALS. I.T.A.NO. 1913/MDS/2010 5. THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 31.8.2010 WHICH FURTHER EMANATES F ROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT DATED 12.11 .2009. THE PENALTY WAS LEVIED BECAUSE THE ASSESSEE HAD CLAIMED DEDUCTI ON U/S 80IB WHICH WAS DENIED BY THE ASSESSING OFFICER. THEREAF TER SINCE THE TRIBUNAL HAS DELETED THE ENTIRE DISALLOWANCE THE L D. CIT(A) HAS CANCELLED THE PENALTY IN QUESTION. THE REVENUE HAS RAISED THIS ISSUE IN SECOND APPEAL CONCEIVABLY TO KEEP THE ISSUE ALIVE AS THE APPEAL BEFORE THE HON'BLE HIGH COURT HAS BEEN PREFERRED BY IT. SINCE THE ITA 1913 TO 1915/10 :- 6 -: TRIBUNAL HAS DELETED THE ENTIRE QUANTUM ON THE BASI S OF WHICH PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED THERE CAN BE N O QUESTION OF SURVIVAL OF THE IMPUGNED PENALTY. THE LD. CIT(A) H AS CORRECTLY CANCELLED THE SAME. ACCORDINGLY WE CONFIRM THE AP PELLATE FINDINGS AND DISMISS THE APPEAL OF THE REVENUE. 6. TO SUMMARIZE THE RESULT ALL THE THREE APPEALS FILE D BY THE REVENUE STAND DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT O N 4.2.2011 SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 4 TH FEBRUARY 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR