ACIT 5(3), MUMBAI v. UNIGLOBE PACKAGING P. LTD, MUMBAI

ITA 5387/MUM/2010 | 2007-2008
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 538719914 RSA 2010
Assessee PAN AAACO3694D
Bench Mumbai
Appeal Number ITA 5387/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 29 day(s)
Appellant ACIT 5(3), MUMBAI
Respondent UNIGLOBE PACKAGING P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 30-09-2011
Assessment Year 2007-2008
Appeal Filed On 01-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI P.M.JAGTAP (A.M) & SHRI N.V.VASUDEVAN (J.M) ITA NO.5387/MUM/2010(A.Y. 2007-08) THE ACIT RANGE 5(3) AAYKAR BHAVAN MK ROAD MUMBAI 20 . (APPELLANT0 VS. M/S. UNIGLOBE PACKAGING P. LTD. 403 ARUN CHAMBER TARDEO MUMBAI 34. PAN:AAACO 3694D (RESPONDENT) APPELLANT BY : SHRI PARTHASARTHI NAIK RESPONDENT BY : SHRI DEEPAK SHAH DATE OF HEARING : 28/09/2011 DATE OF PRONOUNCEMENT : 30/09/2011 ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R DATED 30/4/2010 OF CIT(A)-9 MUMBAI RELATING TO ASSESSMENT YEAR 2007-0 8. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE NEW UNIT I S ENTITLED TO DEDUCTION U/S. 80IB @ 100% WITHOUT APPRECIATING THE FACT THAT THE NEW UNIT IS NOTHING BUT THE EXTENSION OF OLD UNIT. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASS ESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SUP PLYING OF SUPERIOR QUALITY FLEXIBLE PACKAGING MATERIALS SUCH AS MONOLA YER FILMS AND VARIOUS TYPES OF LAMINATES. FOR THE MANUFACTURE OF THESE PR ODUCTS THE ASSESSEE HAD SET UP INDUSTRIAL UNDERTAKING IN THE A.Y.2000-01 AT DHIMPORA DAMAN WHICH ITA NO.5387/MUM/2010(A.Y. 2007-0) 2 WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 801B OF TH E INCOME TAX ACT. THE RATE OF DEDUCTION WAS @ 100% OF THE PROFIT OF THE U NDERTAKING UP TO A.Y.2004-05. THE PROFIT OF THIS UNIT IS ELIGIBLE FO R DEDUCTION @ 30% IN THE CURRENT YEAR I.E. AY 07-08. THE ASSESSEE HAD CLAIM ED THAT IN THE ASSESSMENT YEAR 2004-05 IT HAS SET UP ANOTHER UNDE RTAKING AND CLAIMED THAT THE PROFIT OF THE NEW UNDERTAKING IS INDEPENDE NTLY ELIGIBLE FOR DEDUCTION UNDER SECTION 801B OF THE INCOME TAX ACT. THE ASSES SEE CLAIMED THAT FOR THE NEW UNIT (TO BE REFERRED AS UNIT II) A.Y. 2004-05 IS THE FIRST ASSESSMENT YEAR FOR CLAIMING DEDUCTION UNDER SECTION 801B OF THE IN COME TAX ACT. IN THE RETURN OF INCOME FILED ON 23.10.2007 WHILE CLAIMIN G DEDUCTION UNDER SECTION 801B THE ASSESSEE CLAIMED DEDUCTION @ 30% ON THE PROFIT OF OLD UNITS AND DEDUCTION @ 100% ON THE PROFITS OF UNIT-I L. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HELD THAT UNIT II OF THE AS SESSEE IS NOT AN INDEPENDENT UNIT. IT IS ONLY AN EXTENSION OF THE EX ISTING UNIT. THE ASSESSING OFFICER COMPUTED THE DEDUCTION UNDER SECTION 801B @ 30% ON THE COMBINED PROFITS OF BOTH THE UNITS. THE ASSESSING OFFICER RE DUCED THE CLAIM OF THE ASSESSEE FOR DEDUCTION TO RS. 1 09 73 266/- . 3. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE IS SUE OF DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT 1961(THE ACT) IN RESPECT OF UNIT-II CAME UP FOR CONSIDERATION IN A.Y 2004-05 AND IN THA T YEAR THE CIT(A) HAS ALREADY ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT UNIT II WAS AN INDEPENDENT UNDERTAKING ELIGIBLE FOR DEDUCTION UNDE R SECTION 80 IB OF THE ACT ON ITS PROFIT INDEPENDENTLY OF OLD UNDERTAKING . IT WAS FURTHER SUBMITTED THAT SINCE THE ACTION OF AO WAS BASED ON THE FINDIN G IN A.Y 2004-05 THE SAME SHOULD BE HELD TO BE INCORRECT AND THE SAME SH OULD BE ALLOWED AS DEDUCTION UNDER SECTION 80 IB OF THE ACT ON PROFITS OF UNIT II AT 100%. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DIRECTED THE AO TO ALLOW DEDUCTION AS CLAIMED BY THE ASSESSE. ITA NO.5387/MUM/2010(A.Y. 2007-0) 3 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING OF THIS APPEAL IT WAS BRO UGHT TO OUR NOTICE THAT IN A.Y 2004-05 THERE WAS NO APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) SINCE THERE WAS NO TAX EFFECT. HOWEVER FOR A.Y 2005-06 AND 2006-07 ON AN IDENTICAL ISSUE IN THE CASE OF TH E ASSESSEE THE CIT(A) HAD FOLLOWED THE ORDER OF THE CIT(A) IN A.Y 2004-05 AND ALLOWED THE CLAIM OF THE ASSESSEE. AGAINST THE ORDERS OF THE CIT(A) FOR A.Y 2005-06 AND 2006-07 THE REVENUE HAD FILED APPEAL BEFORE THE TRIBUNAL IN IT A NO.2669/M/09 AND 5431/M/09 AND THIS TRIBUNAL WAS PLEASED TO UPHOLD T HE REASONING GIVEN BY THE CIT(A) IN THE ORDER FOR A.Y 2004-05 ON THE SAME ISSUE. FOLLOWING ARE THE RELEVANT OBSERVATION OF THE TRIBUNAL. 14.ON A CAREFUL CONSIDERATION OF THE FACTS AND THE RIVAL CONTENTIONS WE ARE SATISFIED THAT THE CIT(A) HAS RIGHTLY HELD THAT THE UNIT II WAS ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80-LB. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF SUPERIOR QUALITY FLEXIBLE PAC KAGING MATERIALS SUCH AS MONOLAYER FILMS MULTILAYER FILMS AND VARIO US TYPES OF LAMINATES WHICH ARE USED FOR PACKING A WIDE RANGE O F PRODUCTS SUCH AS DETERGENTS SHAMPOOS SOAPS AGRICULTURAL PRODUC E TEA FOOD PRODUCTS AGROCHEMICALS EDIBLE OIL CONSTRUCTION M ATERIAL CHEMICALS ETC. THE CIT(A) HAS RECORDED A FINDING IN HIS ORDE R FOR THE ASSESSMENT YEAR 2004-05 THAT IN THE YEAR ENDED 31.03.2003 THE ASSESSEE HAD STARTED INSTALLATION OF UNIT II AND IN THAT YEAR HA D MADE AN INVESTMENT OF 132 30 047/- IN PLANT AND MACHINERY. FOR THE PU RPOSE OF MAKING THE INVESTMENT THE ASSESSEE TOOK ADDITIONAL TERM LO AN OF 1 20 0O O00/-. THUS THE FUNDS OR ACCRUALS GENERATED IN UNIT I WERE NOT UTILIZED IN THE UNIT II WHICH WAS A FINANCIALL Y SEPARATE AND VIABLE PROPOSAL. THE CIT(A) HAS ALSO RECORDED TWO IMPORTAN T FINDINGS IN THE AFORESAID ORDER NAMELY (I) THAT IN THE NEW UNIT T HE ASSESSEE WAS MANUFACTURING FLEXIBLE LAMINATED PACKAGING MATERIAL WHEREAS IN THE OLD UNIT IT WAS MANUFACTURING MONOLEYER POLY FILM S AND (II) THAT THE PROCESS OF MANUFACTURING IN BOTH THE UNITS WAS DIFF ERENT AS EXPLAINED BY THE ASSESSEE WITH THE HELP OF A PROCESS FLOW CHA RT. IT ALSO APPEARS TO US FROM THE SPECIMEN INVOICES FLIED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US THAT THOUGH THE PRODUCTS MANUFAC TURED BY BOTH THE UNITS FELL UNDER THE SAME EXCISABLE GOODS NAME LY; PLASTIC PLAIN & ITA NO.5387/MUM/2010(A.Y. 2007-0) 4 PRINTED BAGS AND THE TARIFF WAS ALSO THE SAME THE QUALITY WAS DIFFERENT AS CAN BE SEEN FROM THE FACT THAT THE PRO DUCT MANUFACTURED BY UNIT I WAS PRICED AT 408.14 PER UNIT WHEREAS THE PRODUCT MANUFACTURED BY UNIT II WAS PRICED AT 696.89 PER UN IT. FT IS NOTEWORTHY THAT THE INVOICE RELATING TO UNIT I SHOW N BEFORE U IS. DATED L MARCH 2004 WHEREAS THE INVOICE OF UNIT II SHOWN BEF ORE US IS DATED 28TH DECEMBER 2003 AN EARLIER DATE. THUS IT SEEMS TO US THAT EVEN QUALITATIVELY THE ITEMS PRODUCED BY UNIT II WERE DI FFERENT OR SUPERIOR TO WHAT WAS PRODUCED IN UNIT I. WE MAY HASTEN TO ADD T HAT IT IS NOT NECESSARY THAT THE NEW UNIT SHOULD MANUFACTURE AN E NTIRELY DIFFERENT ITEM FROM WHAT WAS BEING MANUFACTURED BY THE OLD UN IT. THIS IS SO BECAUSE OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. (SUPRA) AS ALSO THE JUDG MENT OF THE SUPREME COURT IN THE CASE OF INDIAN ALUMINIUM CO. L TD. (SUPRA). A PERUSAL OF THE FACTS IN THESE CASES SHOWS THAT THE NEW UNITS WERE ALSO SET UP FOR THE PURPOSE OF PRODUCING THE SAME ITEMS WHICH WERE BEING PRODUCED IN THE OLD UNITS. FOR INSTANCE IN THE CAS E OF INDIAN ALUMINIUM CO. LTD. (SUPRA) THE MANUFACTURING CENTRE S AT BELUR KAIWA ALUPURAM AND HIRAKUD WERE MANUFACTURING ALUM INIUM INGOTS FROM ORE AND THE NEW UNIT SET UP AT MURI ALSO MANU FACTURED ALUMINIUM INGOTS FROM ORE. IN THE CASE OF TEXTILE M ACHINERY CORPORATION LTD. (SUPRA) THE NEW UNITS MANUFACTURED FORGINGS AND CASTINGS WHICH WERE SUPPLIED TO THE OLD UNIT WHICH WERE MANUFACTURING BOILERS WAGONS ETC. THUS IN THIS CA SE THE ASSESSEE WAS MANUFACTURING ITEMS WHICH CONSTITUTED COMPONENT PARTS OF ANOTHER ITEM MANUFACTURED IN THE OLD UNIT. THE SUPR EME COURT HELD THAT USE BY THE ASSESSEE OF THE ARTICLES PRODUCED I N ITS EXISTING BUSINESS OR THE CONCEPT OF EXPANSION ARE NOT DECISI VE TESTS IN CONSTRUING IN SECTION 1 5C OF THE 922 ACT. BOTH THE JUDGMENTS SHOW THAT THE DECISIVE TEST IS THAT THE INDUSTRIAL UNITS SET UP MUST BE NEW IN THE SENSE THAT NEW PLANT AND MACHINERY SHOULD BE IN STALLED FOR PRODUCING EITHER THE SAME COMMODITIES OR SOME DISTI NCT COMMODITIES. IT HAS FURTHER BEEN HELD THAT THE NEW UNDERTAKING S HOULD NOT BE FORMED BY THE RECONSTRUCTION OF THE OLD BUSINESS. I N THE PRESENT CASE WE HAVE ALREADY SEEN THAT EVEN THE ASSESSING OFFICE R HAS ACCEPTED THE ASSESSEES CLAIM THAT UNIT II WAS SET UP WITH THE H ELP OF NEW PLANT AND MACHINERY FOR ACQUIRING WHICH THE ASSESSEE HAD TO I NCUR ADDITIONAL TERM LOAN OF 1 2O OO OOOI-. THERE IS NO EVIDENCE T O SHOW THAT ANY PLANT OR MACHINERY USED IN UNIT I WAS DISMANTLED AN D INSTALLED IN UNIT II. THE ONLY ARGUMENT OF THE ASSESSING OFFICER WAS THAT THE PRODUCT TURNED OUT BY UNIT II WAS THE SAME PRODUCT WHICH WA S TURNED OUT BY UNIT I. AS WE HAVE ALREADY SEEN THIS IS NOT A DECI SIVE TEST AS HELD BY THE SUPREME COURT IN THE TWO JUDGMENTS CITED ABOVE. . ITA NO.5387/MUM/2010(A.Y. 2007-0) 5 15. IN THE LIGHT OF THE FACTUAL FINDINGS RECORDED B Y THE CIT(A) WITH WHICH WE AGREE AND IN THE ABSENCE OF ANY MATERIAL O R EVIDENCE CONTRARY TO THE SAME BEING PRODUCED BEFORE US WE A RE UNABLE TO SAY THAT THE CIT(A) WAS WRONG IN HOLDING THAT UNIT II W AS A SEPARATE AND INDEPENDENT UNIT ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80-LB. THE MUMBAI SPECIAL BENCH WAS CONCERNED WITH AN UNIT WHI CH WAS NOT FUNCTIONALLY INDEPENDENT WHEREAS THE KERALA HIGH CO URT (SUPRA) WAS CONCERNED WITH AN UNIT WHICH SHARED A COMMON PIPELI NE AND A COMMON BOILER HOUSE WITH THE OLD UNIT AND CONSEQUEN TLY THE CLOSURE OF THE OLD UNIT AUTOMATICALLY LED TO THE CLOSURE OF THE NEW UNIT. THE JUDGMENT OF THE DELHI HIGH COURT (SUPRA) AS POINTE D OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE HAS BEEN EXPRESSLY DISAPPROVED BY THE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. (SUPRA). 16. FOR THE ABOVE SAID REASONS WE ARE OF THE VIEW T HAT THE ORDERS OF THE CIT(A) FOR BOTH THE YEARS DO NOT REQUIRE ANY INTERF ERENCE. THEY ARE UPHELD AND THE APPEALS FILED BY THE REVENUE ARE DIS MISSED WITH NO ORDER AS TO COST. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE CIT(A). RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THIS APP EAL BY THE REVENUE. 6. IN THE RESULT THE APPEAL BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH DAY OF SEPT. 2011. SD/- SD/- (P.M.JAGTAP ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 30 TH SEPT.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RF BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.5387/MUM/2010(A.Y. 2007-0) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 28/9/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28/9/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER