The ACIT, Vapi Circle,, Vapi v. M/s. Computer Force, Daman

ITA 2441/AHD/2007 | 2003-2004
Pronouncement Date: 30-07-2010 | Result: Dismissed

Appeal Details

RSA Number 244120514 RSA 2007
Assessee PAN AACFC6893K
Bench Ahmedabad
Appeal Number ITA 2441/AHD/2007
Duration Of Justice 3 year(s) 1 month(s) 23 day(s)
Appellant The ACIT, Vapi Circle,, Vapi
Respondent M/s. Computer Force, Daman
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-07-2010
Date Of Final Hearing 07-07-2010
Next Hearing Date 07-07-2010
Assessment Year 2003-2004
Appeal Filed On 07-06-2007
Judgment Text
FIT FOR PUBLICATION (ONLY GR.1 PARAS-1 TO 11 MARKED) SD/- SD/- ( A.M. ) ( J.M.) IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER DATE OF HEARING : 07/07/2010 DRAFTED ON: 08 /07/2009 APPEAL(S) : SL. NO(S). ITA NO(S) ASSESSMENT YEAR(S) APPELLANT RESPONDENT 1. 1636/AHD/2009 2002-03 ITO VAPI WARD-4 DAMAN M/S.COMPUTER FORCE PLOT NO.376/2-14 JARI CAUSEWAY KACHIGAM DAMAN PAN : AACFC 6893K 2. 2441/AHD/2007 2003-04 ASST.CIT VAPI CIRCLE VAPI -DO- 3. 2442/AHD/2007 2004-05 -DO- -DO- 4. 1637/AHD/2009 2006-07 ITO VAPI WARD-4 DAMAN -DO- REVENUE BY : SHRI K.MADHUSUDAN SR. D.R. ASSESSEE BY: S/SHRI MEHUL K.PATEL ADV. AND GOPAL KRISHNA IYER C.A. O R D E R PER BENCH: ALL THESE FOUR APPEALS HAVE BEEN FILED BY THE REVE NUE WHICH HAVE BEEN DIRECTED AGAINST THE TWO SEPARATE SETS OF ORDE RS OF THE LEARNED CIT(APPEALS)-VALSAD DATED 28/02/2007 FOR AYS 2003-0 4 & 2004-05 AND DATED 26/02/2009 FOR AYS 2002-03 & 2006-07 RESPECTI VELY. ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 2 - 2. ALL THESE APPEALS HAVE BEEN CONSOLIDATED BECAUSE ONE OF THE MAIN GROUNDS STATED TO BE IN RESPECT OF A CLAIM OF DEDUC TION U/S.80IB OF THE I.T. ACT 1961 HAPPENED TO BE A COMMON GROUND FO R ALL THE YEARS. IT HAS ALSO BEEN MENTIONED BY LEARNED AUTHORISED REPRE SENTATIVE OF THE ASSESSEE THAT THE LEAD YEAR IS AY 2003-04 AND ON TH AT BASIS LATER ON THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 HAVE BEEN R EOPENED U/S.147 OF THE ACT . IT HAS ALSO BEEN MENTIONED THAT ASSE SSMENT YEAR 2002-03 WAS THE FIRST YEAR OF THE CLAIM OF DEDUCTION U/S.80 IB OF THE I.T. ACT 1961. WITH THIS BRIEF BACKGROUND NOW WE SHALL DISCUSS TH E MERITS AS WELL AS THE LEGAL ASPECT OF THE ISSUE IN HAND. FACTS :- 3. DURING THE COURSE OF ASSESSMENT PROCEE;DINGS FOR THE ASSESSMENT YEAR 2003-04 U/S.143(3) OF THE I.T. ACT 1961 VIDE ORDER DATED 28/03/2006 IT WAS NOTED BY THE ASSESSING OFFICER T HAT THE ASSESSEE-FIRM HAS ONE UNIT WHICH WAS SAID TO BE LOCATED IN THE UN ION TERRITORY OF DAMAN. THE PLACE WAS SITUATED IN THE BACKWARD ARE A WHICH WAS CLAIMED TO BE SPECIFIED IN VIITH SCHEDULE OF THE I.T. ACT 1961. FOR THE PURPOSE OF RECORD THE SAID UNIT WAS LOCATED AT PLOT NO.37 6/2 AT KACHIGAM DAMAN. IT HAS ALSO BEEN NOTED THAT THE ASSESSEE WA S ENGAGED IN THE BUSINESS OF MANUFACTURING OF TELEPHONE CALL MONITORS AND COIN PAY PHONES . IT IS ALSO WORTH TO MENTION THAT THE ASSESSING OFFICER HAS ALSO RECORDED THAT ORIGINALLY THE ASSESSEE WAS CARRYING ON THE SAME BUSINESS FROM 397/3 AT MOGARWADA DAMAN. RATHER THIS WAS TH E ALLEGATION OF THE A.O. WHICH WE SHALL DISCUSS HEREINBELOW THAT THE BUSINESS WHICH WAS BEING CARRIED OUT EARLIER AT MOGARWADA DAMAN WAS THE SAME BUSINESS ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 3 - WHICH WAS ALLEGED TO HAVE BEEN SHIFTED TO THE NEW PLACE AT KACHIGAM DAMAN. FURTHER THE ABOUT THE BACKGROUND OF THE CLAIM O F DEDUCTION U/S.80IB OF THE I.T. ACT 1961 AS MENTION ED BY THE ASSESSING OFFICER WAS THAT THE DEDUCTION FOR THE FIRST TIME WAS MADE IN ASSESSMENT YEAR 1994-95. THE ASSESSEE HAD CARRIED THE SAID BU SINESS ACTIVITY AT 397/3 AT MOGARWADA DAMAN TILL ASSESSMENT YEAR 1998- 99. THE ASSESSING OFFICER HAS ALSO MENTIONED THAT THE ASSES SEE HAD CLOSED DOWN ITS BUSINESS AT THE SAID PLACE. IN ASSESSING OFFI CERS WORDS SUDDENLY IN THAT YEAR THE ASSESSEE HAD CLOSED DOWN ITS BUSIN ESS WHICH WAS DOING WELL. IT WAS NOTED BY HIM THAT FOR ASSESSMENT YE AR 1998-99 THERE WAS A PROFIT OF ABOUT RS.19 44 978/-. IN THE SUBSEQUE NT YEARS I.E. FOR ASSESSMENT YEARS 1999-2000 TO 2001-02 THERE WAS NO BUSINESS ACTIVITY AND THE ASSESSEE HAS FURNISHED NIL INCOME LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE AT THIS JUNCTURE HAS MENTIONED THAT THE REQUISITE EVIDENCES WERE PLACED IN THE PAPER-BOOK TO DEMONSTRATE THE BUSINESS RESULTS OF THE ASSESSEE OF THESE YRARS. I T HAS ALSO BEEN RECORDED BY THE ASSESSING OFFICER THAT THEREAFTER WITH EFFEC T FROM 20/03/2002 THE ASSESSEE HAS RECONSTITUTED ITS BUSINESS AT 376/2 AT KACHIGAM DAMAN. FOR THE FINANCIAL YEAR 2001-02 (ASSESSMENT YEAR 2002-03 ) THE PROFIT FOR 10 DAYS WAS COMPUTED AT RS.5 21 208/- ON THE TURNOVER OF RS.18 60 100/- AND THAT PROFIT WAS CLAIMED AS DEDUCTION. NEXT FO R ASSESSMENT YEAR 2003-04 THE TURNOVER WAS AT RS.4 95 10 527/- AND TH EREFROM THE DEDUCTION U/S.80IB OF THE I.T. ACT 1961 WAS COMPUT ED AT RS.1 78 73 773/-. THE ALLEGATION OF THE ASSESSING OFFICER WAS THAT ONE OF THE BASIC CONDITION FOR ALLOWANCE OF DEDUCTION U /S.80IB OF THE I.T. ACT ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 4 - 1961 WAS THAT AN INDUSTRIAL UNDERTAKING HAS NOT TO BE FORMED BY SPLITTING UP OR THE RE-CONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. THE RELEVANT OBSERVATION OF THE ASSESSING OFFICER I S WORTH REPRODUCTION: IN THIS CASE DEDUCTION U/S.80IB FOR THE FIRST FIVE YEARS WAS AVAILABLE @ 100% TO THE ASSESSEE AND THERE AFTER IN THE SIXT H YEAR IT CLOSED DOWN ITS UNIT AT 397/3 MOGARWADA MOTI DAMAN. WHEN THE TIME CAME TO PAY TAXES DUE TO THE GOVERNMENT THE ASSESSEE CLOSED DOW N ITS UNIT. THE INTENTION BEHIND IT IS VERY CLEAR THE ASSESSEE DID NOT WANT TO PAY TAXES. SUDDENLY ONE DAY THE ASSESSEE CLOSED DOWN ITS OLD BUSINESS WHICH WAS GOING WELL WITHOUT ANY REASON. THOUGH THE ASSESSEE HAS CONSTRUCTED NEW BUILDING AND INSTALLED NEW PLANT & MACHINERIES AT NEW PLACE THE FACT IS THAT IT SHIFTED ITS BUSINESS FROM ONE PLACE TO ANOTHER . HENCE THE ASSESSEE HAS NOT STARTED A NEW BUSINESS BY RECO NSTRUCTING ITS EXISTING BUSINESS. HENCE THE CONDITION LAID DOWN U /S.80IB(20(II) READ WITH EXPLANATION 2 IS NOT FULFILLED. 3.1. IN RESPONSE TO SHOW-CAUSE NOTICE A DETAILED SU BMISSION WAS MADE BY THE ASSESSEE AND THE SALIENT FEATURES OF THE REP LY OF THE SHOW-CAUSE NOTICE CAN BE SUMMARIZED AS UNDER:- (A) THE INDUSTRIAL UNDERTAKING AT KACHINGAM DAMAN IS A NEW UNDERTAKING HENCE CLAIMED U/S.80IB OF THE I.T. ACT 1961. (B) THE INDUSTRIAL UNDERTAKING AT KACHINGAM DAMAN WAS NOT FORMED BY THE TRANSFER OF MACHINERY OR PLANT FROM T HE OLD UNIT AT MOGARWADA MOTI DAMAN. (C) THE INDUSTRIAL UNDERTAKING WAS NOT FORMED OUT OF THE SPLITTING UP OR RE-CONSTRUCTION OF THE BUSINESS AL READY IN EXISTENCE. ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 5 - (D) THE INDUSTRIAL UNDERTAKING WAS ENGAGED IN MANUFAC TURING ACTIVITY. (E) THE INDUSTRIAL UNDERTAKING HAD CARRIED OUT THE MANUFACTURING ACTIVITY WITH THE AID OF POWER AND WI TH THE EMPLOYMENT OF MORE THAN 10 WORKERS. (F) THE INDUSTRIAL UNDERTAKING IS A SMALL SCALE INDUS TRIAL UNDERTAKING. (G) THAT THE INVESTMENT WAS MADE FOR NEW FACTORY PREMI SES AND ENTIRELY A NEW BUILDING WAS CONSTRUCTED AS PER THE DETAILS FURNISHED. (H) THAT ENTIRELY A NEW SET OF PLANT & MACHINERY WAS I NSTALLED AS PER THE STATEMENT OF INSTALLMENT OF PLANT AND MACHI NERY FURNISHED. (I) THAT MORE THAN 20 WORKERS WERE EMPLOYED. (J) THAT LICENCES AND CERTIFICATES FROM SEVERAL GOVERN MENT AGENCIES SUCH AS CENTRAL EXCISE SALES TAX AND DI C HAVE BEEN OBTAINED. (K) THAT FRESH CAPITAL WAS GENERATED AND THEN THE INV ESTMENT WAS MADE. (L) THAT THE OLD UNIT SITUATED AT MOGARWADA DAMAN WAS CLOSED DOWN IN THE YEAR 1998 AND THE NEW UNIT WAS STARTED IN THE YEAR 2002 AT KACHIGAM DAMAN ALMOST AFTER THE LAPSE OF FOUR YEARS. (M) THAT DUE TO ADVANCED AND CHANGED TECHNOLOGY INTROD UCED BY DEPARTMENT OF TELECOMMUNICATION (DOT) THE OLD UNIT WAS ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 6 - CLOSED AND A NEW UNIT WAS FORMED AS PER THE CHANGED ENVIRONMENT OF THE BUSINESS. (N) THAT THE TECHNOLOGY USED AND THE PRODUCT MANUFACTU RED AT THE NEW UNIT WAS DIFFERENT FROM THE OLD ONE. (O) THAT AT THE NEW UNIT THE ASSESSEE HAS MANUFACTURED TELEPHONE CELL MONITOR AND PAY PHONES. 3.2. THE ASSESSING OFFICER WAS NOT CONVINCED .IN HI S OPINION IT WAS SIMPLY A RE-CONSTRUCTION OF AN ALREADY EXISTING IN DUSTRIAL UNDERTAKING. BY CITING THE PROVISIONS OF SECTION 80IB(2)(II) OF THE I.T. ACT 1961 THE ASSESSING OFFICER HAS EMPHASIZED THAT THE LAW PRESC RIBES THAT THERE SHOULD NOT BE SPLITTING UP OR RE-CONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. IN HIS WORDS WHEN ALL THE CONSEQUENCE S SUCH AS DEBTORS CREDITORS HUMAN RESOURCES PLANT AND MACHINERY BU ILDING GOOD-WILL ETC. ARE PUT TOGETHER THEN A BUSINESS COMES INTO E XISTENCE. HE HAS CONCLUDED THAT IN COMMON PARLANCE A RE-CONSTRUCTION DOES NOT MEAN SIMPLY A TRANSFER OF THE PLANT AND MACHINERY FROM ONE PLACE OF BUSINESS TO SOME OTHER PLACE OF BUSINESS BUT TRANSFER OF A SSETS AND LIABILITIES AND BUSINESS ACTIVITIES AS A WHOLE SHALL ALSO AMOUNT TO RE-CONSTRUCTION. SO HE HAS CONCLUDED THAT IN THE PRESENT CASE THE ASSESSEE HAS TRANSFERRED THE BUSINESS ACTIVITY FROM OLD UNIT TO THE EXISTING UNIT HENCE NOT ENTITLED FOR CLAIM OF DEDUCTION U/S.80IB OF THE I.T. ACT 19 61. IN SUPPORT OF HIS VIEW THE ASSESSING OFFICER HAS TOOK THE HELP OF A DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GAEKWAR FO RM AND RUBBER COMPANY LTD. REPORTED AS 35 ITR 662) (BOM.) WHE REIN THE TERM AS ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 7 - RE-CONSTRUCTION WAS DEFINED. IN HIS OPINION AN OLD UNIT WAS CLOSED DOWN WHICH HAD GIVEN BIRTH TO A NEW UNIT AT A DIFFE RENT PLACE BY SHIFTING THE BUSINESS FROM ONE PLACE TO ANOTHER. FOR THIS PROPOSITION RELIANCE WAS ALSO PLACED ON THE DECISION(S) OF HON'BLE KARNA TAKA HIGH COURT IN THE CASE OF CANARA WIRE AND WIRE PRODUCTS LTD. VS. CIT REPORTED AS 196 ITR 420(KAR.) AND OF HON'BLE KERALA HIGH COURT IN THE CASE OF KERALA STATE CASHEW DEVELOPMENT CORPORATION VS. CI T REPORTED AS 205 ITR 19 (KER.) . FINALLY AT THE END DISALLOWANCE O F 80IB OF THE I.T. ACT 1961 OF RS.1 78 73 773/- WAS MADE. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 4. THE FIRST APPELLATE AUTHORITY HAS LIKEWISE DISCU SSED THE ISSUE AT LENGTH. HE HAS EXAMINED FACTS OF THE CASE PROVIS IONS OF THE ACT AND THE CASE LAWS CITED. FROM THE SIDE OF THE ASSESSEE FACTS HAVE FURTHER BEEN ELABORATED IN THE FOLLOWING MANNER FEW RELEVANT IM PORTANT POINTS ARE REPRODUCED BELOW:- 1. OUR FIRM M/S.COMPUTER FORCE IS ENGAGED IN THE MANUFACTURING OF TELEPHONE CALL MONITORS AND COIN PAY PHONES . OUR MANUFACTURING UNIT IS LOCATED AT PLOT NO.376/2(4) KACHIGAM DAMAN IN THE UNION TERRITORY OF DAMAN & DIU WHICH IS A BACKWARD AREA AS SPECIFIED IN THE VIITH SCHEDULE T O THE INCOME TAX ACT. OUR FIRM HAS STARTED ITS MANUFACTURING AC TIVITY DURING THE ACCOUNTING PERIOD RELEVANT TO ASSESSMENT YEAR 2 002-03. THE YEAR UNDER APPEAL BEFORE YOUR HONOR IS THE 2 ND YEAR OF MANUFACTURING ACTIVITY. 2. THE ASSESSMENT WAS COMPLETED BY THE LEARNED ASSE SSING OFFICER WITHOUT GRANTING DEDUCTION U/S.80IB. THE DEDUCTION WAS NOT GRANTED ON THE ALLEGED GROUND THAT OUR UNIT AT PLOT NO.376/2(14) ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 8 - KACHIGAM DAMAN IS FORMED BY RECONSTRUCTION OF OUR OLD UNIT AT 397/3 MOGARWADA MOTI DAMAN WHICH WAS CLOSED DOWN . 3. OUR FIRM M/S.COMPUTER FORCE WAS STARTED IN THE YEAR 1992 HAVING ITS FACTORY AT PLOT NO.397/3 MOGARWADA MOT I DAMAN. THE TECHNOLOGY AVAILABLE WITH US BECAME OBSOLETE AN D OUR PRODUCT COULD NOT COMPETE WITH OTHER MANUFACTURERS. THE MONOPOLY POLICY OF DEPARTMENT OF TECHNOLOGY AND ABS ENCE OF PRIVATE PLAYERS HINDERED THE GROWTH OF INDUSTRY AND LED TO A DECREASE IN SALES. ULTIMATELY THE SAID BUSINESS HA S BEEN CLOSED IN THE YEAR 1997-1998. WE HAVE CLAIMED DEDUCTION U /S.80IB FROM A.Y. 1994-1995 TILL A.Y. 1998-1999. 4. FROM A.Y. 1999-2000 TO A.Y. 2001-2002 WE WERE NOT D OING ANY BUSINESS ACTIVITIES AND HAVE NO SOURCE OF BUSINESS INCOME DURING THAT PERIOD. 5. THERE AFTER PRIVATIZATION OF TELECOM INDUSTRY HAS COME INTO EFFECT AND WITH THE CHANGED POLICY OF DEPARTMENT OF TELECOMMUNICATION WE STARTED A NEW UNIT AT PLOT NO. 376/2(14) KACHIGAM DAMAN IN THE UNION TERRITORY OF DAMAN & D IU W.E.F. 20.03.2002 IN THE ASSESSMENT YEAR 2002-2003. 6. IN MOGARWADA UNIT WE WERE MANUFACTURING CALCULATOR BILLING MACHINES . IN KACHIGAM UNIT WE ARE MANUFACTURING LOCAL PAY PHONES AND 16KZ STD PCO BILLING MACHINE . WE HAVE ACTUALLY CREATED A NEW INFRASTRUCTURE FOR MANUFACTU RING TELEPHONE CALL MONITOR AND PAY PHONES AND THE UNIT SO CREATED IS INDEPENDENT AND IS A VIABLE UNIT BY ITSELF AND DOES NOT NEED RECOURSE FROM ANY OTHER UNIT. THE INDUSTRIAL UNDER TAKING SO FORMED IS AN INDEPENDENT UNDERTAKING AND IS SEPARAT ELY IDENTIFIABLE AND DISTINCT UNDERTAKING. 7. . 8. WE HAVE INVESTED IN AN ENTIRELY NEW BUILDING NEW SET OF PLANT AND MACHINERY A SUBSTANTIAL AMOUNT OF FRESH CAPITAL AND HAVE GIVEN EMPLOYMENT TO NEW WORKERS. ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 9 - 5. AFTER AN ELABORATE DISCUSSION AND ON DUE CONSIDE RATION OF THE CASE LAWS CITED THE LEARNED CIT(APPEALS) HAS UPHELD TH E ASSESSEES CLAIM BY REVERSING THE FINDINGS OF THE ASSESSING OFFICER AND HELD THAT FACTUALLY THE APPELLANT HAS ESTABLISHED AN ALTOGETHER NEW UNIT WH ICH WAS ELIGIBLE FOR DEDUCTION U/S.80IB OF THE I.T. ACT 1961. ARGUMENTS :- 6. WITH THIS AFORESAID BACKGROUND WE HAVE HEARD BO TH THE SIDES. ON ONE HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE H AS PLACED RELIANCE ON THE FINDINGS OF THE ASSESSING OFFICER HOWEVER ON THE OTHER HAND LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS PLACED RELIANCE ON THE FINDINGS OF THE LEARNED CIT(APPEALS). IT IS WO RTH TO MENTION THAT IN ADDITION TO THE EVIDENCES IN RESPECT OF CREATION OF NEW INDUSTRIAL UNDERTAKING AT 376/2 AT KACHIGAM DAMAN AS APPRECI ATED BY THE LEARNED CIT(APPEALS) AND PLACED IN FORM OF A PAPER-BOOK BEF ORE US ON ENQUIRY LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS ALSO DEMONSTRATED THROUGH A STATEMENT DEPICTING THEREIN THE CLAIM OF DEPRECIATION WHEREIN UNDER THE BLOCK OF IMMOVABLE ASSETS; BOTH THE AS SETS I.E. FACTORY PREMISES AT PLOT NO.376/2 AND AT THE PREMISES AT PL OT NO.397/3 HAVE SEPARATELY BEEN MENTIONED. IN RESPECT OF THE NEW FACTORY PREMISES AS PER THAT CHART FOR ASSESSMENT YEAR 2002-03 THERE W AS AN ADDITION OF RS.8 58 000/-. HOWEVER IN RESPECT OF THE OLD FAC TORY PREMISES THERE WAS NO NEW ADDITION AND THE OLD BALANCE OF RS.1 48 617/- WAS THE WRITTEN DOWN VALUE(W.D.V.). LIKEWISE UNDER THE H EAD PLANT AND MACHINERY THERE WAS SUBSTANTIAL ADDITION PERTAINI NG TO DYES AND MOULDS ELECTRICAL INSTALLATIONS TOOLS AND EQUIPME NT GENERATOR FURNITURE ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 10 - ETC. TO THE TUNE OF RS.12 04 388/-. HOWEVER THER E WAS ONLY THE OPENING WDV OF OLD PLANT AND MACHINERY OF A SUM OF RS.1 45 327/-AND THERE WAS NO CHANGE IN THAT FIGURE . THEREFORE THROUGH THI S CHART INTER ALIA LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS VEHEMENTLY ARGUED THAT THOSE FACTS AND FIGURES WERE SELF-EXPL ANATORY THAT ALTOGETHER A NEW UNIT DID COME INTO EXISTENCE IN THE ASSESSMEN T YEAR 2002-03. THEN HE HAS REFERRED THE DEPRECIATION CHART FOR ASSESSMENT YEAR 2003- 04 TO DEMONSTRATE THAT IN RESPECT OF OLD UNIT NO DEPRECIATION WAS CLAIMED AS THE SAME WAS LYING UNUSED. ON THE OTHER HAND CERTAIN ADDITIONS WERE MADE IN THE NEW UNIT AT THE FACTORY PREMISES OF 376/2 KACHIGAM DAMAN AMOUNTING TO RS.8 26 310/-. THE A DDITIONS IN THE BLOCK OF ASSETS HAVE FALLEN IN THE CATEGORY OF PLAN T AND MACHINERY. SAME WAS THE SITUATION FOR ASSESSMENT YEAR 2004-05 AS PE R THE SAID CHART. IT WAS VEHEMENTLY EMPHASIZED THAT FOR ASSESSMENT YEAR 2004-05 AGAIN THERE WAS SUBSTANTIAL NEW ADDITION IN PLANT AND MACHINERY AMOUNTING TO RS.64 48 941/ -. 7. FURTHERMORE IN RESPECT OF THE CONSTRUCTION AND ESTABLISHMENT OF THE UNIT AT 376/2 AT KACHIGAM DAMAN AS ALSO IN RE SPECT OF THE PURCHASE OF NEW PLANT AND MACHINERY THE LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE HAS DRAWN OUR ATTENTION ON THE EVIDENC ES AND THE SUBMISSIONS PLACED ON RECORD THROUGH SEVERAL PAPER- BOOKS AND COMPILATIONS. IN FACT THE ASSESSING OFFICER HAS ALSO NOT DENIED THE CREATION OF NEW INDUSTRIAL UNIT AND THE INVESTMENT MADE THEREIN FOR CONSTRUCTION OF THE BUILDING AND PURCHASE OF NEW PL ANT AND MACHINERY. ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 11 - BASICALLY THE ASSESSING OFFICER HAS RAISED A VERY TECHNICAL OBJECTION THAT IN A SITUATION WHEN AN ASSESSEE IS RUNNING A BUSINE SS OF THE LIKE NATURE IN THE PAST AND IF A NEW UNIT HAS BEEN ESTABLISHED BY THE SAME ASSESSEE FOR MANUFACTURING AN IDENTICAL ITEM THEN SUCH A CREATI ON OF NEW UNIT IS NOTHING BUT TRANSFER OF BUSINESS FROM ONE PLACE TO ANOTHER. IN THIS REGARD IT WAS VEHEMENTLY OBJECTED THAT THE ASSESSI NG OFFICER HAS MISINTERPRETED THE PROVISIONS OF SECTION 80IB OF TH E I.T. ACT 1961. IT WAS ARGUED THAT SECTION 80IB OF THE I.T. ACT 1961 CLAUSE(2) PRESCRIBES THAT THE DEDUCTION APPLIES TO ANY INDUSTRIAL UNDER TAKING WHICH FULFILS THE CONDITIONS AS LAID DOWN THEREIN AND ONE OF THEM IS THAT THE INDUSTRIAL UNDERTAKING IS NOT FORMED BY SPLITTING UP OR THE RE-CONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. THERE IS ONE MORE R EQUIREMENT THAT THE INDUSTRIAL UNDERTAKING IS NOT FORMED BY THE TRANS FER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. SO THE ARGU MENT BEFORE US WAS THAT NEITHER IT WAS A CASE OF SPLITTING UP OF THE B USINESS NOR IT WAS THE CASE OF THE RE-CONSTRUCTION OF AN ALREADY EXISTED BUSINE SS. AS FAR AS THE TERM RE-CONSTRUCTION OF BUSINESS WAS CONCERNED RELIAN CE WAS PLACED ON THE FOLLOWING DECISIONS:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN 1. TEXTILE MACHINERY CORPORATION LTD. VS. CIT 107 ITR 195 (SC) 2. CIT VS. GANGA SUGAR CORPORATION LTD. 92 ITR 173 (DEL.) 3. CIT VS. HINDUSTAN GENERAL INDUSTRIES LTD. 137 ITR 851 (DEL.) 4. CIT VS. ROHTAS INDUSTRIES LTD. 120 ITR 110 (CAL.) ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 12 - 5. CIT VS. SHREE DIGVIJAY CEMENT CO.LTD. 144 ITR 532 (GUJ.) 6. INTERNATIONAL INSTRUMENTS P.LTD. VS. CIT 123 ITR 11 (KAR.) 7. CIT VS. GEDORE TOOLS INDIA PVT.LTD. 126 ITR 673 (DEL.) FINDING :- 8. THOUGH THE ISSUE ON FACTS CAN EASILY BE DECID ED IN FAVOUR OF THE ASSESSEE BECAUSE ON THE FACE OF IT THIS IS NEITH ER A CASE OF RE-CONSTRUCTION NOR A SPLITTING UP OF AN ALREADY E XISTING BUSINESS BUT FORMATION OF AN ALTOGETHER NEW INDUSTRIAL UNIT HOW EVER DUE TO A TECHNICAL QUESTION BEING RAISED BY THE A.O. HENCE AN ELABORATE DISCUSSION IS REQUIRED. ON CAREFUL APPRAISAL OF T HE FACTS OF THE CASE IT IS A CLEAR-CUT CASE OF A NEW BUSINESS UNDERTAKING WHIC H WAS SET UP DURING THE YEAR UNDER CONSIDERATION. BUT BEFORE APPRECIAT ING THOSE FACTUAL MATRIX WE HAVE TO DEAL WITH THE REASONS OF THE ASS ESSING OFFICER WHICH APPEARS TO BE INNOVATIVE AND IN OUR HUMBLE UNDERSTA NDING OF STATUTE CANNOT BE SUSTAINED IN THE EYES OF LAW. WORDS AND EXPRESSIONS USED IN THE STATUTE HAVE LEGAL MEANING. WORDS WHICH EXPRE SSED A LEGAL CONCEPT MUST HAVE ATTRIBUTED TO THEIR LEGAL MEANING. MEANI NG THEREBY; A TECHNICAL WORD USED IN A STATUTE MUST HAVE A TECHNI CAL SENSE PRECISELY ASCRIBED TO THEM AND THOSE TECHNICAL WORDS SHOULD N OT BE GIVEN A MEANING IN POPULAR SENSE. WE TAKE SUPPORT OF MAXIM UTI LOQUITOR VULGUS .(SOURCE..35 ITR 662) SO THE PRINCIPLE OF COGEN CY LOGIC COHERENCE ETC. IS TO APPLY WHEN THE WORDS IN QUESTI ON REPRESENT LEGAL CONCEPTION. THE DIFFICULTY WITH THE ASSESSING OFFI CER WAS THAT HE HAS HELD THAT THE ASSESSEE IN QUESTION HAS TRANSFERRED ITS BUSINESS ACTIVITY ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 13 - FROM OLD UNIT TO THE NEW UNIT. IS IT THE TECHNICAL TERM USED IN THIS SECTION? ANSWER TO THIS QUESTION IS IN NEGATIVE. HOWEVER THE ENTIRE ORDER OF THE ASSESSING OFFICER REVOLVE AROUND THE GENERAL MEANI NG OF TRANSFER OF THE BUSINESS ACTIVITY BUT CONTRARY TO THIS THE SUB-SE CTION(2) OF SECTION 80IB IS PRESCRIBING SOME OTHER TECHNICAL TERMS SUCH AS THE INDUSTRIAL UNDERTAKING SHOULD NOT BE FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. LIKEWISE SUB - CLAUSE(II) OF SUB-SECTION(2) OF SECTION 80IB OF THE I.T. ACT 1961 PRESCRIBES THAT THE INDUSTRIAL UNDERTAKING SHOULD NOT BE FORMED BY THE TRANSFER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. THE ASSESSING OFFICER HAS NOT DECIDED THE ISSUE WITHIN THE SCOPE OF THESE LEGAL TERMINOLOGIES AND MISCONCEIV ED THE SAME BY SUBSTITUTING THE WORD TRANSFERRED THE BUSINESS ACT IVITY. FOR THAT REASONING THE ASSESSING OFFICER HAS PLACED RELIANC E ON GAEKWAR FORM AND RUBBER COMPANY LTD. REPORTED AS 35 ITR 662) (BO M.). BUT IN THAT CASE THE ASSESSEE-COMPANY HAD TAKEN OVER ALL THE A SSETS OF THE BUSINESS OF A PARTNERSHIP INCLUDING ITS GOOD-WILL. IN LIEU OF THE CONSIDERATION FACTS OF THAT CASE HAVE REVEALED THAT SHARES WERE ALLOTTED. THEREFORE THE SAID DECISION OF THE HON'BLE BOMBAY HIGH COURT WAS IN RESPECT OF A BUSINESS WHICH WAS TRANSFERRED LOCK STOCK AND BARREL FROM ONE CONCERN TO ANOTHER CONCERN. CONTRARY TO THAT AT PRESENT T HE FACTS ARE ALTOGETHER DIFFERENT BECAUSE ADMITTEDLY A NEW PLACE WAS ALLOCA TED AT KACHIGAM DAMAN ONN WHICH A NEW TECHNOLOGY WAS DEPLOYED FOR M ANUFACTURING NEW INSTRUMENTS NAMELY TELEPHONE CALL MONITORS AND COIN PAY PHONES UNDER THE ROOF OF A NEWLY CONSTRUCTED BUSINESS PR EMISES. FACTS ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 14 - HAVE UNDISPUTEDLY DEMONSTRATED THAT BUSINESS AS A W HOLE WAS NOT TRANSFERRED FROM OLD UNIT TO NEW UNIT. ASSETS AND LIABILITIES OF THE OLD UNIT REMAINED UNDISTURBED AS FOUND FROM THE POSITIO N OF THE DEPRECIATION CHART. EVEN THE ALLEGATION OF TRANSFER OF BUSINESS ACTIVITY WAS ILL- FOUNDED BECAUSE OF THE REASON THAT THE BUSINESS ACT IVITY I.E. MANUFACTURING OF TELEPHONE INSTRUMENTS WAS BASED UP ON AN ALTOGETHER NEW TECHNOLOGY. 9. AN ANOTHER FACT HAS ALSO BEEN CONSIDERED BY THE ASSESSING OFFICER BUT IN A DIFFERENT MANNER. THE FACT WAS THAT THE OLD UNIT AT MOGARWADA DAMAN WAS CLOSED DOWN IN THE YEAR-1998. THIS FACT WAS MOULDED BY THE ASSESSING OFFICER IN THE FORM THAT THE SAID OLD UNIT WAS CLOSED DOWN WHICH HAD GIVEN BIRTH TO A NEW UNIT AT A DIFFERENT PLACE BY SHIFTING THE BUSINESS FROM ONE PLACE TO ANOTHER. EVEN THIS REAS ONING OF THE ASSESSING OFFICER CANNOT BE APPROVED BECAUSE THE PRESUMPTION THAT THE OLD UNIT HAD GIVEN A BIRTH TO NEW UNIT HAD NO LEGAL BASIS N O LEGAL SANCTITY AND ABOVE ALL WITHOUT ANY COGENT EVIDENCE. UNDISPUTED LY THE NEW UNIT CAME INTO EXISTENCE AFTER THE GAP OF FEW YEARS. IT WAS UNDISPUTEDLY STARTED IN THE YEAR-2002. SURPRISINGLY THE ASSESSING OFFICER HAS CITED THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CANA RA WIRE AND WIRE PRODUCTS LTD. VS. CIT REPORTED AS 196 ITR 426(KAR .). IT IS IN RESPECT OF THE CLAIM OF DEDUCTION U/S.80-J OF THE I.T. ACT 19 61. THE HON'BLE COURT HAS FOUND THAT THE ASSESSEE HAD MERELY INVESTED LAR GE AMOUNT IN AN ALREADY EXISTING UNIT. BECAUSE OF THE NEW INSTALLA TIONS THERE WAS SUBSTANTIAL INCREASE IN PRODUCTION CAPACITY. HOWEV ER THE COURT HAS ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 15 - CLARIFIED THAT A NEW UNIT MUST COME INTO EXISTENCE WHICH INDEPENDENTLY PRODUCES ARTICLES EITHER SAME OR DISTINCT AND THE N EW UNIT MUST NOT BE DEPENDENT UPON EXISTING UNIT. EVEN THIS CONDITION OF COMING UP OF A NEW UNIT AS DESCRIBED BY THE HON'BLE COURT HAS DULY BEE N FULFILLED BY THIS ASSESSEE. THE ASSESSING OFFICER HAS ALSO TAKEN TH E SHELTER OF A DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF KERAL A STATE CASHEW DEVELOPMENT CORPORATION VS. CIT REPORTED AS 205 I TR 19 (KER.) HOWEVER IN THAT CASE THE IMPUGNED COMPANY WAS FORM ED TO TAKE OVER A SICK CASHEW FACTORY. IN THAT CASE THE COMPANY HAD ACQUIRED THE ASSETS AND IT WAS FOUND THAT NO NEW INDUSTRIAL UNDERTAKIN G HAD BEEN FORMED. 10. ON THE OTHER HAND THERE ARE SEVERAL DECISIONS IN FAVOUR OF THE ASSESSEE WHERE THESE TERMINOLOGIES NAMELY RE-CON STRUCTION OF BUSINESS OR SPLITTING UP OF BUSINESS OR EVEN T RANSFER OF BUSINESS HAVE DULY BEEN DELIBERATED UPON WHICH NEEDS NO DETA ILED DISCUSSION HOWEVER THE LIST OF THOSE DECISIONS ARE ALREADY ME NTIONED HEREINABOBVE IN PARAGRAPH NO.7 OF THIS ORDER. ON FACTS IN ADDI TION TO WHATEVER STATED HEREINABOVE FEW IMPORTANT THINGS CAN BE SUMMARIZED THAT THERE WAS NO EVIDENCE WITH THE ASSESSING OFFICER THROUGH WHICH I T COULD BE DEMONSTRATED THAT THE MACHINERY WAS TRANSFERRED FRO M OLD UNIT TO NEW UNIT. THERE WAS NO IOTA OF EVIDENCE TO SAY THAT I T WAS A CASE OF SPLITTING UP OF THE OLD BUSINESS. THE OLD UNIT WAS CLOSED DO WN WAY BACK IN THE YEAR-1998 AND THE NEW UNIT HAD COME UP IN THE YEAR- 2002 AND AN ENTIRELY NEW BUILDING WAS CONSTRUCTED WITH THE DEPLOYMENT OF NEW TECHNOLOGY TO MANUFACTURE NEW TYPE OF TELEPHONE INSTRUMENT. THE ASSESSEE HAS ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 16 - SUCCESSFULLY DEMONSTRATED THAT THE NEW UNIT WAS SET UP WITH THE SUBSTANTIAL INVESTMENT IN PLANT & MACHINERY. ON A CCOUNT OF THESE FACTS AS WELL AS ON ACCOUNT OF THE LEGAL POSITION AS DISC USSED HEREINABOVE WE FIND NO FORCE IN THE GROUNDS OF THE REVENUE HENCE DISMISSED. 11. IN THIS MANNER FOR ASSESSMENT YEARS 2002-03 2 003-04 & 2004- 05 & 2006-07 IN ALL FOUR YEARS GROUND NO.1 OF THE R EVENUE IS HEREBY DISMISSED. 12. FOR ASSESSMENT YEAR 2002-03 THERE WAS AN ANOTH ER GROUND I.E. GROUND NO.2 READS AS FOLLOWS:- (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.5 14 790/- MADE ON ACCOUNT OF CREDITORS. 12.1. IN SHORT VIDE ORDER U/S.143 R.W.S. 147 OF TH E I.T. ACT 1961 DATED 08/12/2008 FOR ASSESSMENT YEAR 2002-03 THE ASSESSI NG OFFICER HAS ASKED TO FURNISH THE CONFIRMATION IN RESPECT OF THE CREDITORS VIZ. SAHYOG INDUSTRIES OF RS.2 91 780/- AND SHOGINI TECHNOARTS PVT.LTD. OF RS.2 23 010/-. ACCORDING TO ASSESSING OFFICER THE ASSESSEE HAD FAILED TO FURNISH CONFIRMATIONS THEREFORE THE TOTAL OF THE TWO I.E. RS.5 14 790/- WAS TAXED. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY THE FINDING WAS AS UNDER:- 10.1. I HAVE PERUSED THE ASSESSMENT ORDER. IT SEEMS THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER IN THE ABSEN CE OF CONFIRMATIONS FROM THE CREDITORS. ON THE OTHER HAND THE APPELLA NT SUBMITTED BEFORE ME THAT THE PAYMENT HAS BEEN ALREADY MADE TO THE SA ID CREDITORS IN THE ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 17 - SUBSEQUENT YEARS AND COPY OF LEDGER ACCOUNT HAS BEE N SUBMITTED TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AND HE HAD NOT CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT. THE APPELLANT ALSO SUBMITTED BEFORE ME THAT THE PARTIES ARE TRACEABLE AND THAT IS WHY THE APPELLANT WAS NOT ABLE TO SUBMIT CO NFIRMATION AS SOUGHT FOR BY THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS. 10.2. I HAVE PERUSED THE FACTS OF THE CASE. BEFORE ME THE APPELLANT PRODUCED COPY OF LEDGER ACCOUNT OF THE CREDITORS FO R THE SUBSEQUENT YEAR AND SUBMITTED THAT THE PAYMENT HAS BEEN ALREAD Y MADE TO THE SAID CREDITORS. SINCE THE APPELLANT HAS ALREADY MADE P AYMENTS TO THE CREDITORS IN DISPUTE THE ADDITION MADE ON THIS ACCO UNT IS DIRECTED TO BE DELETED. THE APPELLANT SUCCEEDS IN THIS GROUND OF APPEAL. 13. FROM THE SIDE OF THE REVENUE LD.DR HAS PLACED RELIANCE ON THE ASSESSMENT ORDER. LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS PLACED ON RECORD ACCOUNTS OF BOTH THE PARTIES T HROUGH WHICH IT WAS DEMONSTRATED THAT THEIR ACCOUNTS WERE REFLECTING TH E PURCHASES AS WELL AS PAYMENTS MADE DURING THE YEAR. SINCE THE PAYMENTS HAVE BEEN MADE THROUGH PROPER BANKING CHANNEL THEREFORE THE ACCO UNTS HAVE BEEN SQUARED UP IN ONE OF THE CASE BY MAKING THE PAYMENT S . IN RESPECT OF THE OTHER PARTY A VERY NOMINAL BALANCE WAS LEFT AFTER M AKING THE PAYMENT. LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ALSO CLARIFIED THAT IN THE YEAR WHEN THE ASSESSMENT PROCEEDINGS WERE GO ING ON THOSE PARTIES WERE NOT TRACEABLE AT THAT ADDRESS HOWEVER IT WAS N OT THE CASE OF A SIMPLE CASH CREDITOR BUT A CASE OF A TRADE CREDITOR TO WHO M THE PAYMENTS WERE MADE THROUGH PROPER BANKING CHANNEL THEREFORE THERE WAS NO SCOPE OF ANY DOUBT AND IF THERE WAS ANY THE AO COULD HAV E VERIFIED THROUGH HIS OWN RESOURCES. ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 18 - 14. ON HEARING THE RIVAL SUBMISSIONS ONCE THE ADMIT TED FACTUAL POSITION IS THAT IN THE SUBSEQUENT YEARS THE PAYME NTS HAVE BEEN MADE TO THOSE CREDITORS AND THE LEDGER ACCOUNT HAS AFFIRMED THE SAME WHICH WAS VERIFIED BY THE FIRST APPELLATE AUTHORITY THEREFOR E IN THE ABSENCE OF ANY CONTRARY MATERIAL WE HAVE NO REASON TO DOUBT THE F INDINGS ON FACTS OF THE FIRST APPELLATE AUTHORITY. WE HEREBY AFFIRM THOSE FINDINGS AND DISMISS THIS GROUND OF THE REVENUE. 15. FOR ASSESSMENT YEAR 2002-03 THERE IS ONE MORE GROUND I.E. GROUND NO.3 REPRODUCED BELOW:- (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.1 00 000/- MADE ON ACCOUNT OF CAPITAL INTRODUCED BY THE PARTNE R. 14.1. ON PERUSAL OF CAPITAL ACCOUNT OF ONE OF THE P ARTNERS NAMELY SHRI MANJIT SINGH IT WAS NOTICED BY THE ASSESSING OFFIC ER THAT A SUM OF RS.1 LAC WAS INTRODUCED AS CASH ON 14/12/2001. I N THE ABSENCE OF PROPER REPLY THE SAID AMOUNT WAS TAXED BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT 1961. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY HE HAS GIVEN A FINDING T HAT THE SAID PARTNER OF THE FIRM IN WHOSE ACCOUNT A CASH OF RS.1 LAC WAS FOUND INTRODUCED AS A CAPITAL HAPPENED TO BE ASSESSED TO TAX HAVING INDE PENDENT SUFFICIENT SOURCE OF INCOME THEREFORE THERE WAS NO OCCASION TO TAX THE SAME IN THE HANDS OF THE ASSESSEE-FIRM. ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 19 - 15. ON HEARING BOTH THE SIDES IT IS WORTH TO COMM ENT THAT THE BASIC FACT ABOUT THE INTRODUCTION OF THE CAPITAL BY THE PARTNER IN HIS CAPITAL ACCOUNTS IN THE BOOKS OF THE ASSESSEE-FIRM IS NOT I N QUESTION. THE ONLY QUESTION IS ABOUT THE APPLICABILITY OF THE CASE LAW S CITED FROM THE RIVAL SIDES. AS FAR AS THE DECISIONS CITED FROM THE SIDE OF THE REVENUE ARE CONCERNED WE HAVE EXAMINED EACH OF THEM AND HAVE N OTICED THAT THEY ARE NOT RELATED WITH THE ISSUE IN HAND. THE DECISI ON OF HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF SHIV SHAKTI TIMBE RS REPORTED AS 229 ITR 505 (M.P.) IS ON THE ISSUE THAT WHETHER THE CAS H CREDIT ENTRY IN THE BOOKS OF THE FIRM IN THE NAME OF THE PARTNER IS SUB JECT TO TAX EITHER U/S.68 OR U/S.69 OF THE I.T. ACT 1961. THE HON'BLE HIGH COURT HAS PRONOUNCED THAT THERE IS A DISTINCTION BETWEEN THE TWO SECTION S I.E. SECTION 68 WHICH APPLIES WHERE A SUM IS FOUND CREDITED IN THE BOOKS; WHEREAS SECTION 69 APPLIES TO UNEXPLAINED INVESTMENT FOUND TO BE RECO RDED IN THE BOOKS OF ACCOUNT. SO IT IS APPARENT THAT THE ISSUE AS SETTL ED BY THE HON'BLE HIGH COURT HAS NOTHING TO DO WITH THE ISSUE NOW RAKED UP IN THIS APPEAL. LIKEWISE IN THE CASE OF ANAND RAM RAITANI REPORTED AS 223 ITR 544 (GAUHATI) IT WAS HELD THAT THE EXISTENCE OF BOOKS O F ACCOUNT IS A CONDITION PRECEDENT FOR AN ADDITION U/S.68 OF THE I.T. ACT 1 961. FOR BEING A SEPARATE ASSESSABLE ENTITY THEN THE BOOKS OF ACCOUN T OF THE FIRM CANNOT CONSTITUTE THE BOOKS OF ACCOUNT OF THE PARTNERS FO R THE PURPOSE OF SECTION 68 OF THE I.T. ACT 1961. IT WAS HELD THAT SINCE N O SUCH BOOKS OF ACCOUNT HAVING MAINTAINED BY THE PARTNER THEREFORE ADDITI ON U/S.68 OF THE I.T. ACT 1961 COULD NOT BE MADE. LIKEWISE REST OF TH E DECISIONS; NAMELY BASANTIPUR TEA COMPANY PVT.LTD. REPORTED AS 180 ITR 261(CAL.) AND THE ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 20 - DECISION OF ASHOK TIMBER INDUSTRIES REPORTED AS 125 ITR 336 (CAL.) BOTH ARE ALSO NOT ON THE ISSUE IN HAND BECAUSE DETAILS IN RESPECT OF THE CASH CREDIT FOUND ON THE VERY FIRST DAY OF THE ACCOUNTIN G YEAR. IN ALL THEREFORE THE DECISIONS AS CITED BY THE SIDE OF T HE REVENUE CAN BE SAID TO BE MISPLACED AND DO NOT COVER EXACTLY THE ISSUE IN HAND. ON THE OTHER HAND THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES(SUPRA) IS DIRECTLY ON THE ISSU E WHEREIN THE HON'BLE COURT HAS HELD QUOTE ONCE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN THE INCO ME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AN D ASSESS THE SAME IN THEIR HANDS IF THEIR EXPLANATION IS NOT FOUND SATI SFACTORY. UNQUOTE. 15.1. SINCE LEARNED CIT(APPEALS) BEING UNDER THE TE RRITORIAL JURISDICTION OF THE HON'BLE GUJARAT HIGH COURT HAS ALSO DIRECTED THE ASSESSING OFFICER TO TAKE DUE LEGAL ACTION IN THE HANDS OF THE PARTNE R CONSIDERING THE CAPITAL INTRODUCED BY HIM IN HIS RESPECTIVE CAPITAL ACCOUNT THEREFORE IN OUR CONSIDERED OPINION BEING WITHIN THE JURISDICTION O F THE GUJARAT HIGH COURT THE DIRECTIONS GIVEN BY THE LEARNED CIT(APPE ALS) DESERVES TO BE UPHELD AND THE DELETION OF ADDITION IN THE HANDS OF THE ASSESSEE-FIRM IS HEREBY CONFIRMED. WITH THE RESULT GROUND OF THE R EVENUE IS DISMISSED. 16. FOR ASSESSMENT YEAR 2006-07 THE REVENUE HAS ALSO RAISED AN ANOTHER GROUND I.E. GROUND NO.2 REPRODUCED BELOW:- ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 21 - (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB OF THE I.T. ACT 1961 ON DISALLOWANCE OF RS.3 71 896/- MAD U/S.40A(IA). 16.1. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE APPELLANT HAD FAILED TO DEDUCT THE TDS AMOUNT IN RESPECT OF THE F OLLOWING PAYMENTS:- SPEED AGE EXPRESS CARGO - RS.1 22 500/- TRANSPORT AND COURIER EXPENSE - RS. 64 7 44/- XPS CARGO SERVICES - RS.1 84 602/- 16.2. BECAUSE OF THE SAID REASON A DISALLOWANCE U/S .40A(IA) WAS MADE. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY THE ONLY PLEA WAS THAT IF AT ALL THE SAID DISALLOWANCE WAS T O BE CONFIRMED THEN THE SAID DISALLOWANCE WOULD INCREASE THE CLAIM OF DEDUC TION U/S.80IB OF THE I.T. ACT 1961. FOR THIS LEGAL PROPOSITION IT WA S FURTHER CLARIFIED THAT IN VIEW OF THE LANGUAGE OF SECTION 40A(IA) OF THE I.T. ACT 1961 THE DISALLOWANCE IF ANY MADE UNDER THE SECTION IS TO BE ADDED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION . THE LEARNED CIT(APPEALS) WAS CONVINCED THEREFORE HE HAS DIREC TED THAT THE DISALLOWANCE WAS CONFIRMED HOWEVER THE SAME QUALI FIES FOR THE DEDUCTION U/S.80IB OF THE I.T. ACT 1961. 17. ON HEARING THE RIVAL SUBMISSIONS WE FIND NO F ALLACY IN THE SAID DIRECTIONS OF LEARNED CIT(APPEALS) BECAUSE THE PROV ISIONS OF SECTION ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 22 - 40A(IA) OF THE I.T. ACT 1961 ARE WORDED IN THE MAN NER THAT IN SPITE OF ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38 CERTA IN AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER T HE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IN THE CASE OF ANY ASSESSEE IF ON PAYMENT OF INTEREST COMMISSION BROKERAGE RENT R OYALTY PROFESSIONAL FEES ETC. NO TAX IS DEDUCTED AT SOURCE THOUGH ON WHICH TAX IS LIABLE TO BE DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B OF THE I. T. ACT 1961. SINCE THE LANGUAGE ITSELF SAYS THAT IN CASE OF DISALLOWAN CE THE SAID DISALLOWANCE SHOULD FALL UNDER THE CATEGORY OF INCO ME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION THEREFORE THE IMPUGNED DISALLOWANCE HAS TO BE TREATED AS PART OF THE BUSINESS INCOME OF THE ASSESSEE AND THEREUPON TO BE TAXED AS PER TH E OTHER PROVISIONS OF THE ACT. WITH THE RESULT WE HEREBY AFFIRM THE DIR ECTIONS OF LEARNED CIT(APPEALS). THIS GROUND OF THE REVENUE IS DISMI SSED. 18. AS FAR AS GROUND NO.3 IS CONCERNED THE SAME IS CONSEQUENTIAL IN NATURE BECAUSE OF THE BASIC REASON THAT ONCE A DEDU CTION IS ALLOWED U/S.80IB OF THE I.T. ACT 1961 FOR THE YEAR UNDER C ONSIDERATION DUE TO THE DISALLOWANCE FOR ASSESSMENT YEAR 2006-07 THEN NATU RALLY THE ASSESSEE SHOULD NOT BE ENTITLED FOR ANY OTHER BENEFIT IN THE SUBSEQUENT YEAR AS ALLEGED IN THE GROUND. THE STATUTE DO NOT PERMIT T O ALLOW DOUBLE BENEFIT TO A TAXPAYER HE4NCE THE APPREHENSION RAISED IN T HIS GROUND APPEARS TO BE ILL-FOUNDED. IN OUR OPINION THE ASSESSING OFFI CER IS COMPETENT ENOUGH TO TAKE CARE OF THE INTEREST OF THE REVENUE BY NOT COMMITTING ITA NOS.1636/AH D/09 2441 & 2442/AHD/07 AND 1637/AHD/09 ASST.YEARS - 2002-03 2003-04 2004-05 & 2006-07 (RESPECTIVELY) - 23 - SUCH A MISTAKE OF GRANTING DOUBLE BENEFIT TO THIS T AXPAYER IN ANY OF THE SUBSEQUENT YEAR. WE ORDER ACCORDINGLY. 19. IN THE RESULT ALL THE FOUR APPEALS OF THE REVE NUE ARE DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 30/ 07 /2010. SD/- SD/- ( N.S. SAINI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 30 / 07 /2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VALSAD 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD