9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (4) TMI 97 - AT - Income TaxDeduction u/s 80IB - Whether unit is a new undertaking and qualifies for deduction u/s 80IB as held by CIT(A) when the new machinery has not been installed in place of and the appellant has made substantial investment in the plant and machinery? - Held that - In the assessment order, the AO observed that none of the above conditions of Section 80IB of the Act stood fulfilled by the assessee. It was observed that the stone crusher/industrial unit under consideration has been set up way back in 1971 as is evident from the registration granted by Industries Department in the name of one Sh. Jatinder Kumar Sharma S/o Sh. Amar Nath R/o Birwah Bridge Dhanari Udhampur. The assessee has in fact purchased this old stone cursher in 2006 from Sh. Jatinder Kumar. The unit is not a new one and thus eligible for 80IB deduction. The assessee has not produced any satisfactory material on records to prove the newness of the unit in terms of the provisions of section 80IB. The undertaking is a reconstructed business unit already in existence and not a new one. The original business in this case has not ceased functioning and its identify is not lost. There has been some P&M installed in the old stone crusher and the assessee has not been able to give details of such P&M and continued to argue that the Old P&M was worth nothing but only a scrap. Sh. Jatinder Kumar has admitted to have made heavy repairs and renovation to the P&M few years back of the transfer which negates the claim of the assessee. The running of stone crusher is a business involving converting of boulders into smaller stones like bajri, etc which is not considered manufacturing for the purpose of 80IB. The case is squarely covered by the decision given by in the case of ITO Vs Jitendra Stone Crushing Co 2006 (3) TMI 210 - ITAT CHANDIGARH-A wherein held that breaking of boulders into small stones or bajri is not a manufacturing activity. In respect of new Industrial Unit, once completed and ready for production, a Certificate of Registration is grated by the district DIC authorities certifying the date of production etc. The registration granted by the DIC authorities in this case dates back to 1971 and the date of commencement of the production is to be treated some around 1971 in this case. The stone crusher has been in the name of Sh. Jatinder Kumar Sharma R/o Birwah Bridgem Dhanori Udhampur upto Mar,2006. In March, 2006, the assessee became a partner in the business concern and after a few days became the sole proprietor by shunting out Sh. Jatiner Kumar. No satisfactory documentary evidence has been furnished by the assessee regarding the sale/transfer of this working unit. No sale deed has been produced nor any disclosure of the purchase of the unit/stone crusher has been made, thereby casting a doubt on the genuineness of the transaction/purchase itself. Thus it is fairly a sham transaction in which an existing unit has been acquired/purchased in the guise of partnership. A sham transaction in no way can be eligible for deduction u/s 80IB. The ld. CIT(A), as correctly submitted by the ld. DR, has not considered any of the above said observations of the AO, muchless dealt with then. Therefore, the order under appeal is a non speaking order - remit this issue to the file of the ld. CIT(A), to be decided afresh. - Decided in favour of revenue for statistical purposes. Disallowance of carriage expenses,Wages, Machine Running & Maintenance., Tipper expenses, Staff welfare, Establishment, etc. - CIT(A) has reduced the disallowance - Held that - Evidently, no reason for reducing, the disallowance has been given by the ld. CIT(A), rendering the order under appeal an non-speaking order in this regard. Such an order is unsustainable in law, as it is well settled that all orders of quasi-judicial Authorities must be speaking and reasoned orders. Accordingly, this issue is also remanded to the file by the ld. CIT(A), to be decided afresh by passing an speaking order, on providing due opportunity of hearing to the assessee. - Decided in favour of revenue for statistical purposes.
Issues Involved:
1. Eligibility for deduction under Section 80IB of the Income Tax Act. 2. Reduction of disallowance on account of carriage expenses. 3. Reduction of disallowance on various expenses debited to the trading and profit and loss account. Detailed Analysis: 1. Eligibility for Deduction under Section 80IB: The primary issue was whether the unit qualified as a new undertaking eligible for deduction under Section 80IB of the Income Tax Act. The Assessing Officer (AO) contended that the stone crusher unit was not new, having been originally registered in 1971, and that the assessee merely reconstructed an existing business. The AO argued that the unit did not fulfill the conditions of Section 80IB, specifically that: - The unit was not new. - The business was reconstructed and not a fresh undertaking. - The machinery was not entirely new, with some parts being repaired and reused. - The activity of breaking stones did not qualify as manufacturing. - There was no clear date of commencement of production. - The transaction appeared to be a sham to claim deductions. The CIT(A) disagreed, stating that the assessee had made substantial investments in new machinery, significantly increasing the unit's capacity and modernizing its operations. The CIT(A) concluded that the changes were substantial enough to qualify the unit as a new undertaking, thus allowing the deduction under Section 80IB. However, the Tribunal found that the CIT(A) did not address the AO's detailed observations adequately. Therefore, the issue was remitted back to the CIT(A) for a fresh decision, considering all the AO's points and providing adequate opportunity for the assessee to be heard. 2. Reduction of Disallowance on Account of Carriage Expenses: The AO made a disallowance of Rs. 3,00,000 out of the carriage expenses claimed by the assessee, citing the absence of supporting bills and vouchers. The CIT(A) reduced this disallowance to Rs. 1,50,000, reasoning that an 8% profit margin on carriage receipts was reasonable. The Tribunal noted that the CIT(A) did not provide a clear rationale for reducing the disallowance from Rs. 3,00,000 to Rs. 1,50,000. As a result, this issue was also remanded to the CIT(A) to be decided afresh with a speaking order, ensuring due opportunity for the assessee to present their case. 3. Reduction of Disallowance on Various Expenses Debited to Trading and Profit and Loss Account: The AO made an ad hoc disallowance of Rs. 3,00,000 on various expenses, including wages, machine running and maintenance, tipper expenses, staff welfare, and establishment expenses, due to the lack of supporting vouchers. The CIT(A) reduced this disallowance to Rs. 1,00,000, stating that the original disallowance was on the higher side. The Tribunal observed that the CIT(A) did not provide specific reasons for reducing the disallowance. Consequently, this matter was also remitted to the CIT(A) for a fresh decision, requiring a detailed and reasoned order after providing the assessee with an adequate hearing. Conclusion: The Tribunal remitted all three issues back to the CIT(A) for fresh consideration and decision. The CIT(A) was directed to address all the observations made by the AO and to provide detailed, reasoned orders after giving the assessee a fair opportunity to present their case. The appeal was treated as allowed for statistical purposes.
|
