Tonira Pharma Ltd.,, Baroda v. The Income tax Officer, Ward-4(4), Baroda

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND T.K. SHARMA JUDICIAL MEMBER) ITA.NO.3636/AHD/2007 ASSTT.YEAR : 2004-2005 TONIRA PHARMA LTD. 301 YOGI COMPLEX 44 SAMPAT RAO COLONY ALKAPURI BARODA. VS. ITO WARD-4(4) BARODA. ITA.NO.3788/AHD/2007 ASSTT.YEAR : 2004-2005 ITO WARD-4(4) BARODA. VS. TONIRA PHARMA LTD. 301 YOGI COMPLEX 44 SAMPAT RAO COLONY ALKAPUR BARODA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.V.AGARWAL REVENUE BY : SHRI SHELLY JINDAL O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THESE ARE TWO APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-III BARODA BOTH DATED 19-6-2007. THESE TWO APPEALS AR E DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.3636/AHD/2007 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE DISALLOWANCE OF DEDUCTION UNDER SECTION 35D OF THE INCOME TAX ACT 1961. AT THE TIME OF HEARING BEFORE US IT IS SUBMITTED BY T HE LEARNED COUNSEL THAT THIS ISSUE IS COVERED BY THE DECISION OF THE ITAT IN ASS ESSEES OWN CASE FOR A.Y.1998-99 2000-01 AND 2001-02 VIDE ITA NO.3883 3884 & 3885/AHD/2004 DATED 22-3-2007. HE SUBMITTED THAT I N THE ABOVE DECISION THE ITA.NO.3636 AND 3788/AHD/2007 -2- ITAT SET ASIDE THE IMPUGNED ORDER BACK TO THE FILE OF THE AO FOR RE- EXAMINATION. 3. THE LEARNED DR POINTED OUT THAT BEFORE THE CIT(A ) THE ASSESSEE HAS NOT PRESSED THE GROUND RELATING TO THE DISALLOWANCE UND ER SECTION 35D OF THE ACT. ONCE THE ASSESSEE HAS NOT PRESSED THIS GROUND HE CA NNOT HAVE ANY GRIEVANCE AGAINST THE ORDER OF THE CIT(A). IN THE REJOINDER IT IS STATED BY THE LEARNED COUNSEL THAT IT IS TRUE THAT THE ASSESSEE HAS NOT P RESSED THIS GROUND AGAINST THE DISALLOWANCE UNDER SECTION 35D HOWEVER SINCE THE MATTER IS NOW CONCLUDED BY THE DECISION OF THE ITAT IT WOULD BE IN THE INT EREST OF JUSTICE TO SET ASIDE THE MATTER BACK TO THE FILE OF THE AO. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED MATERIAL PLACED BEFORE US. WE FIND THAT IN PARA-5 THE CIT( A) HAS RECORDED THE FOLLOWING FINDINGS: 5. GROUND NO.3 RELATES TO DISALLOWANCE OF RS.2 78 912/- U/S.35D. THIS GROUND HAS NOT BEEN PRESSED IN APPEAL AND IS A CCORDINGLY DISMISSED. THE LEARNED COUNSEL HAS ALSO NOT DISPUTED THAT THIS GROUND OF APPEAL WAS NOT PRESSED BEFORE THE CIT(A). AS PER SECTION 253(3) O F THE ACT ANY ASSESSEE AGGRIEVED BY THE ORDER OF THE CIT(A) MAY FILE APPEA L BEFORE THE ITAT. HOWEVER WHEN ANY GROUND OF APPEAL IS NOT PRESSED B EFORE THE CIT(A) AND THE CIT(A) DISMISSED THE GROUND BECAUSE IT WAS NOT PRES SED THE ASSESSEE CANNOT BE AGGRIEVED WITH SUCH ORDER OF THE CIT(A). THEREF ORE IN OUR OPINION THE ASSESSEE IS NOT ENTITLED TO FILE THE APPEAL AGAINST SUCH GROUND OF APPEAL BEFORE THE ITAT. IN VIEW OF THE ABOVE WE REJECT THE ASSE SSEES APPEAL. ITA NO.3788/AHD/2007 : (REVENUES APPEAL) 5. IN THIS APPEAL THE ONLY GROUND IS AGAINST THE D IRECTION OF THE CIT(A) TO ALLOW THE DEDUCTION UNDER SECTION 10B OF THE ACT TO THE ASSESSEE IN RESPECT OF ITA.NO.3636 AND 3788/AHD/2007 -3- THIRD NEWLY ESTABLISHED UNDERTAKING SET UP AT PLOT NO.47312 GIDC ANKLESHWAR. 6. AT THE TIME OF HEARING BEFORE US BOTH THE PARTI ES FAIRLY ADMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE ITAT IN VARIOUS YEARS. WE FIND THAT IN A.Y.2000-2001 AND 2 001-2002 THE ITAT IN ITS ORDER IN ITA NO.3760 AND 3761/AHD/2004 DATED 11-1-2 008: 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE DEVELOPMENT COMMISSIONER KONDALA HAS GIVEN PERMISSION TO MANUF ACTURE BULK DRUGS. THE DEVELOPMENT COMMISSIONER HAS ALSO APPRO VED THE MANUFACTURING OF DRUGS IN THE UNIT ON PLOT NO.4731 GIDC ANKLESWAR. WE FIND THAT THE EXEMPTION UNDER SECTION 10B IS A S PECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED EXPORT ORIENTED UNDERT AKING WHEREBY EXEMPTION IS ADMISSIBLE ON FULFILLMENT OF CERTAIN C ONDITIONS PRESCRIBED IN SECTION 10B(E) OF THE INCOME TAX ACT 1961 THE ASSESSEE COMPANY IS MANUFACTURING DRUGS FROM THREE UNITS BUT THE ASSESS EE HAS CLAIMED DEDUCTION U/S.10B ONLY FOR THE UNIT IN PLOT NO.4733 . THE ASSESSEE WAS GRANTED REGISTRATION AS EOU BY THE DEVELOPMENT KON DALA FREE TRADE ZONE. THE GOODS WERE MANUFACTURED AND CERTIFICATE WAS ISSUED BY FOOD & DRUGS CONTROL DEPARTMENT GANDHINAGAR. THE ASSE SSEE HAS ALSO GIVEN THE CLASSIFICATION OF THE SALES WHICH WAS DON E BY THE ASSESSEE IN RESPECT OF THE ASSESSMENT YEARS IN THE RESPECTIVE P &L ACCOUNT OF EXISTING UNITS AS WELL AS NEW UNIT. THE ASSESSEE H AS NOT OBTAINED NEW GEB CONNECTION HOWEVER PERMISSION INCREASING THE LOAD WAS OBTAINED. THE ASSESSEE HAD NO NEW AFFLUENT TREATMENT PLANT BE CAUSE THE COMPANY HAS ENOUGH CAPACITY TO DISCHARGE THE AFFLUENT TREAT MENT PLANT BECAUSE THE COMPANY HAS ENOUGH CAPACITY TO DISCHARGE THE AF FLUENT AND TREATMENT OF WASTES. THE ASSESSEE HAS PRODUCED NE W PRODUCTS AND DETAILS OF THE DRUGS MANUFACTURED BY EXISTING UNITS AS WELL AS NEW UNITS HAVE BEEN FURNISHED. THE ASSESSEE COMPANY HAS FULF ILL ALL THE CONDITIONS STIPULATED IN SECTION 10B OF THE I.T.ACT. WE FIND THAT DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESSEE RELIED U PON MANY DECISIONS. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN TH E CASE OF CIT V. INDIA ALUMINIMUM CO. LTD. (108 ITR 367) HAS HELD T HAT ESTABLISHMENT OF A NEW INDUSTRIAL UNIT AS PART OF ALREADY EXISTIN G INDUSTRIAL ESTABLISHMENT MAY RESULT IN EXPANSION OF INDUSTRY O R THE FACTORY BUT IF THE NEW ESTABLISHED UNIT ITSELF AS INTEGRATED AND I NDEPENDENT UNIT IN WHICH NEW PLANT AND MACHINERY IS PUT UP AND ITSELF INDEPENDENT OF THE OLD UNIT CAPABLE OF PRODUCTION OF GOODS THEN IT W AS CLASSIFIED AS NEW ESTABLISHED INDUSTRIAL UNDERTAKING. IN THE CASE OF CIT V. HINDUSTAN ITA.NO.3636 AND 3788/AHD/2007 -4- MALLEABLES & FORGINGS LTD. (191 ITR 70) HONBLE PA TNA HIGH COURT HAS LAID DOWN THE TESTS FOR ESTABLISHMENT OF NEW UN ITS AND IT HAS BEEN HELD THAT COMMON SOURCE OF POWER AND COMMON BOOKS O F ACCOUNT IS NOT RELEVANT. THE ASSESSEE HAS TO ESTABLISH THAT THE I NVESTMENT OF SUBSTANTIAL FRESH CAPITAL IN THE NEW INDUSTRIAL UNDERTAKING SET UP EMPLOYMENT OF REQUISITE LABOUR THEREIN MANUFACTURE OR PRODUCTION OF ARTICLES IN THE SAID UNDERTAKING EARNING PROFIT CLEARLY ATTRIBUTAB LE TO TH4E SAID NEW UNDERTAKING AND ABOVE ALL A SEPARATE AND DISTINCT IDENTITY OF THE INDUSTRIAL UNIT SET UP THE FACT THAT THERE WAS COM MON MANAGEMENT OR THE ACT THAT SEPARATE ACCOUNTS HAD NOT BEEN MAINTAI NED OR THAT THERE WAS A COMMON SOURCE OF POWER WOULD NOT MEAN THAT IT WAS NOT A NEW UNDERTAKING. MOREOVER HONBLE DELHI HIGH COURT HA S ALSO LAID DOWN SIMILAR TESTS. THEREFORE CONSIDERING THE FACTS AN D CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE ABOVE MENTIONED TESTS AS L AID DOWN BY DIFFERENT HIGH COURTS AND ALSO THE APEX COURT WE ARE OF THE VIEW THAT THE CIT(A) IS PERFECTLY JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. THUS WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THIS REGARD. THEREFORE WE UPHOLD THE IMPUGNED ORDERS O F THE CIT(A) IN THIS REGARD AND DISMISS BOTH THE APPEALS OF THE REVENUE. THIS DECISION WAS FOLLOWED BY THE ITAT IN ITA NO.36 39/AHD/2008 FOR A.Y.2003-2004 AND FOR A.Y. 2006-2007 IN ITA NO.1245 6/AHD/2009. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE IT AT IN ASSESSEES OWN CASE WE UPHOLD THE ORDER OF THE CIT(A) ON THIS POINT AND REJECT THE REVENUES APPEAL. 7. IN THE RESULT THE ASSESSEES APPEAL AS WELL AS REVENUES APPEAL ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14 TH MAY 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 14-05-2010 ITA.NO.3636 AND 3788/AHD/2007 -5- VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD