DCIT, New Delhi v. M/s. Advantec Coils Pvt. Ltd., New Delhi

ITA 655/DEL/2010 | 2005-2006
Pronouncement Date: 16-07-2010 | Result: Dismissed

Appeal Details

RSA Number 65520114 RSA 2010
Bench Delhi
Appeal Number ITA 655/DEL/2010
Duration Of Justice 5 month(s) 4 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Advantec Coils Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 16-07-2010
Date Of Final Hearing 13-04-2010
Next Hearing Date 13-04-2010
Assessment Year 2005-2006
Appeal Filed On 11-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA : VICE PRESIDENT AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 655/DEL/10 ASSTT. YR: 2005-06 DCIT CIRCLE 1(1) VS. M/S ADVANTEE COILS PVT. L TD. NEW DELHI. 54/C-1 RAMA ROAD MOTI NAGAR NEW DELHI-110015. PAN/ GIR NO. AAAC0907F ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : MRS. PRATIMA KAUSHIK SR. DR RESPONDENT BY : SHRI R.S. SINGHVI FCA O R D E R PER G.E. VEERABHADRAPPA V.P. : THIS APPEAL FILED BY THE REVENUE ARISES OUT O F THE ORDER DATED 1-12-2009 OF THE CIT(APPEALS)-IV NEW DELHI FOR A.Y. 2005-06 . 2. GROUNDS TAKEN BY THE REVENUE ARE AS UNDER: 1. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80-IC OF THE ACT TO THE TUNE OF RS. 1 36 05 896/- IN RESPECT OF NALAGARH UNIT IGNORING THAT (A) THE ASSESSEE COMPANY HAS NOT CARRIED OUT ANY MANUFA CTURING FROM THIS UNIT DURING THE YEAR UNDER CONSIDERATION AND HAD ONLY GOT JOB WORK DONE FROM OTHERS. (B) THE MACHINERIES WERE NEITHER PUT TO USE NOR WERE RE ADY FOR USE. 2. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS. 70 00 000/- ON ACCOUNT OF CAPITALIZATION OF INTEREST EXPENSES I GNORING THE FACT THAT INTEREST WAS PAID FOR MAINLY AVAILED FOR PROCU RING PLANT & MACHINERY FOR NALAGARH UNIT WHICH WERE RIGHTLY CAP ITALIZED BY THE 2 AO AS PLANT & MACHINERY WERE NOT PUT TO USE DURING THE YEAR UNDER CONSIDERATION. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE MANU FACTURING OF AIR- CONDITIONER AND ITS COMPONENTS. IT HAS GOT ITS UNIT AT BAHADURGARH (HARYANA) AND CLAIMED TO HAVE STARTED A NEW UNIT AT NALAGARH IN H IMACHAL PRADESH. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80-IC OF THE ACT IN RESPE CT OF NALAGARH UNIT ON THE GROUND THAT IT HAD STARTED COMMERCIAL PRODUCTION FR OM 8-3-2005 IN THAT UNIT. ACCORDING TO THE ASSESSING OFFICER THE MAIN FUNCTI ON ASSIGNED TO THE NALAGARH UNIT WAS THAT OF A PAINT SHOP FOR THE A.C. UNIT AND THE SAID UNIT HAD SHOWN PURCHASE OF RS. 11.64 CRORES AND SALE OF RS. 4.78 C RORES. OUT OF THE ABOVE SALE AN AMOUNT OF RS. 1.45 CRORE HAD BEEN SOLD TO A PROPRIE TORSHIP CONCERN OF A DIRECTOR WHO HELD 93% SHARES IN THE ASSESSEE COMPANY. ACCOR DING TO HIM THE ASSESSEE HAS NOT DONE ANY MANUFACTURING PROCESS FROM ITS NALAGAR H UNIT IN THE YEAR UNDER CONSIDERATION RATHER IT GOT JOB WORK DONE FROM OTH ER CONCERNS ON JOB WORK BASIS. DEPRECIATION ON THE ASSETS WAS DISALLOWED ON THE GR OUND THAT THE ASSESSEE COMPANY HAS NOT PUT ITS ASSETS INTO USE DURING THE YEAR UNDER CONSIDERATION. 4. AS REGARDS THE SECOND ISSUE IT WAS ALSO SEEN B Y THE ASSESSING OFFICER THAT THE ASSESSEE HAD TAKEN FRESH SECURED LOAN FROM CI TI BANK AND TERM LOAN FROM BANK OF INDIA. THE ENTIRE LOAN WAS FOR THE PURPOSE OF EXPANSION OF NALAGARH UNIT. THE ASSESSEE HAS CLAIMED RS. 1 05 25 008/- IN RES PECT OF BAHADURGARH UNIT AND RS. 6 82 352/- IN RESPECT OF NALAGARH UNIT AS INTER EST. FROM THE PERUSAL OF THE ACCOUNTS THE ASSESSING OFFICER WAS NOT CLEAR AS TO HOW MUCH INTEREST PERTAINED TO BAHADURGARH UNIT AND HOW MUCH PERTAINED TO NALAGARH UNIT. ON THE BASIS OF RATIO OF OUTSTANDING LOAN THE INTEREST BURDEN WAS APPORT IONED TO THE EXTENT OF RS. 70 LACS AND FOR THE SAME REASONS WHICH PROMPTED HIM TO DISALLOW THE CLAIM OF DEDUCTION U/S 80-IC HE DISALLOWED THE ENTIRE INTER EST AMOUNT OF RS. 70 LACS BY TREATING THE SAME AS CAPITAL EXPENDITURE. 5. THE CIT(APPEALS) HOWEVER AFTER HAVING GONE THR OUGH THE PURCHASES AND SALES DURING THE YEAR AND HAVING REGARD TO THE CERT IFICATE FROM THE DEPARTMENT OF 3 INDUSTRIES GOVT. OF HIMACHAL PRADESH WHEREIN IT I S STATED THAT THE COMMERCIAL PRODUCTION HAD STARTED ON 8-3-2005 AND HAVING REGAR D TO THE ELECTRICITY CONSUMPTION AND PAYMENT OF LABOURS WHICH IS DULY REFLECTED IN THE P&L A/C WAS OF THE VIEW THAT THE MANUFACTURING FROM THIS UN IT HAD TAKEN PLACE IN THE YEAR UNDER CONSIDERATION. HE AGREED WITH THE ASSESSEES CONTENTION THAT THE MANUFACTURING ACTIVITY IN FACT HAD TAKEN PLACE DURI NG THE YEAR UNDER CONSIDERATION. ACCORDINGLY HE DELETED THE DISALLOWANCE OF CLAIM U /S 80-IC. THE REVENUE IS AGGRIEVED. 6. THE ASSESSEE HAS FILED PAPER BOOK CONTAINING T HEREIN A COPY OF THE SUBMISSIONS THAT WERE MADE BEFORE THE CIT(A) AS ALS O COPIES OF THE AUDITED ACCOUNTS AND ALSO THE CERTIFICATE ISSUED BY THE GE NERAL MANAGER DISTT. INDUSTRIES CENTER SOLAN DISTT. SOLAN (HP) WHEREIN THEY HAVE CLEARLY CERTIFIED THAT THE ASSESSEES UNIT AT NALAGARH HAD STARTED COMMERCIAL PRODUCTION W.E.F. 8-3-2005. BASED ON THESE PAPERS IT WAS VEHEMENTLY ARGUED THAT CLAIM OF THE ASSESSEE WAS IN ACCORDANCE WITH LAW AND THE ASSESSING OFFICERS VIE W THAT THE SAME IS WRONGLY CLAIMED IS NOT BORNE FROM THE RECORD. 7. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPO RTED THE ORDER OF THE ASSESSING OFFICER IN THE LIGHT OF THE DISCUSSIONS M ADE THEREIN. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND GONE THROUGH THE RECORDS. IN OUR VIEW THE ORDER OF THE CIT(A) ON BOT H THE ISSUES IS FAIR AND REASONABLE AND IS ON THE BASIS OF MATERIALS THAT AR E BROUGHT ON RECORD BY THE CIT(A) IN HIS ORDER. THE ASSESSEE HAS PRODUCED CER TIFICATE FOR HAVING COMMENCED COMMERCIAL PRODUCTION FROM THE DEPARTMENT OF INDUST RIES GOVT. OF HIMACHAL PRADESH. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAD PAID SOME ELECTRICITY BILLS. IN FACT THE ASSESSEE IS STATED TO HAVE USED DIESEL GEN ERATOR WHEREIN SUBSTANTIAL EXPENDITURE WAS SPENT FOR RUNNING THE SAME AND THE ASSESSEE HAD PURCHASED SIGNIFICANT RAW MATERIAL AND HAS ALSO MADE THE SALE OF FINISHED GOODS. IN THE LIGHT OF THIS FACTUAL INFORMATION WHICH IS PROPERLY APPR ECIATED ON THE BASIS OF THE EVIDENCE ON RECORD IT CANNOT BE SAID THAT THE ASSE SSEE DID NOT COMMENCE ITS 4 MANUFACTURING ACTIVITY DURING THE YEAR UNDER CONSID ERATION. ALTHOUGH IT WAS ONLY FOR 22 DAYS THE ASSESSEE IS ENTITLED FOR CLAIMING DEDUCTION IN ACCORDANCE WITH LAW FOR THE WHOLE YEAR. THE ASSESSING OFFICERS REASONI NG THAT IT HAD NOT STARTED COMMERCIAL ACTIVITIES DURING THE YEAR UNDER CONSIDE RATION IS NOT BASED ON ANY MATERIAL. IT IS SIMPLY BASED ON SUSPICION AND SURMI SES. THE ASSESSING OFFICER HIMSELF AGREED THAT THE ASSESSEE HAD MADE SUBSTANTI AL INVESTMENT IN PLANT AND MACHINERY FOR UNDERTAKING MANUFACTURING ACTIVITIES AT NALAGARH UNIT IN HIMACHAL PRADESH. 9. AS REGARDS THE DISALLOWANCE OF INTEREST ON THE GROUND THAT THE SAME WAS CAPITAL IN NATURE SINCE THE SAME WAS INCURRED BEFO RE INSTALLATION CANNOT BE ACCEPTED. THE ASSESSING OFFICER REACHED THIS CONCLU SION ONLY ON THE BASIS OF THE VIEW HE HELD THAT THE COMMERCIAL PRODUCTION DID NOT START DURING THE PREVIOUS YEAR AT NALAGARH UNIT. AS DISCUSSED ABOVE WE DO NOT ACC EPT THE VIEW OF THE ASSESSING OFFICER AND AGREE WITH THE VIEW TAKEN BY THE CIT(A) THAT THE MANUFACTURING ACTIVITY OF NALAGARH UNIT STARTED ON 8-3-2005 AS C ERTIFIED BY THE DEPARTMENT OF INDUSTRIES GOVT. OF HIMACHAL PRADESH. WE AFFIRM HI S ORDER. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN ON 16-7-2010. SD/- SD/- (H.S. SIDHU ) ( G.E. VEERABHADRAPPA ) JUDICIAL MEMBER VICE PRESIDENT DATED: 16 TH JULY 2010. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 5