2018 (10) TMI 1524 - AT - Income Tax

Deduction u/s. 80IB - CIT-A holding Unit No.47 as new Industrial Undertaking and allowing the deduction - industrial undertaking has more than one physical place for it s allied activities - Held that - The mere fact that an industrial undertaking has more than one physical place for it s allied activities, such as storage of raw material, final touches and packing of end products or other ancillary activities would not mean that all these physical places are to be treated as standalone unit and profits for each of these places are to be computed separately. CIT(A) rightly puts it, for setting up of new industrial undertaking, the number of building is wholly irrelevant. As all these units together constituted separate and distinct industrial undertaking eligible for deduction under section 80IB. There is no dispute that, vide registration dated 3rd June 2001, District Industries Centre has confirmed setting up of unit at No.47 New Grain Market, Opp. Anupam Talkies, Khokhra, Ahmedabad for production of Readymade garments for children . As for the statement made by the partners of the assessee firm, all that has been stated in the said statement is that the activities are carried out at other places as well but then none of these activities were independent activities on standalone basis or resulted in a distinct product. In any event, as is the settled legal position, statement recorded under section 131 has no evidentiary value, and there is nothing more than the statement which is put against the assessee in the present case. - Decided against revenue

Summary

Issues:
Challenge to correctness of order dated 19th December 2011 by Assessing Officer regarding assessment under section 143(3) r.w.s. 147 of the Income Tax Act 1961 for the assessment year 2003-04. Dispute over deduction under section 80IB for a new industrial undertaking.

Analysis:
The case involved a challenge by the Assessing Officer against the order of the CIT (A) regarding the assessment under section 143(3) r.w.s. 147 of the Income Tax Act 1961 for the assessment year 2003-04. The appellant contested the decision of the CIT (A) concerning the classification of Unit No.47 as a new Industrial Undertaking and the allowance of deduction under section 80IB of the Act. The dispute arose from a reopened assessment where the Assessing Officer noted that the deduction under section 80IB was granted based on the assumption that the assessee had started a new industrial undertaking at Plot No.47 but had not maintained separate books of accounts for the said unit. The Assessing Officer observed that various activities were carried out at different locations, and as no separate accounts were kept for each location, the assessee was deemed ineligible for the deduction. The CIT (A) reversed this decision, stating that all units together constituted a single industrial undertaking eligible for the deduction under section 80IB.

The Tribunal noted that an industrial undertaking may have multiple units for allied activities, but these units should not be considered standalone for profit computation. The number of buildings for an industrial undertaking is irrelevant, and all units together form a distinct industrial undertaking eligible for deduction under section 80IB. The registration confirmed the establishment of a unit at Plot No.47 for producing readymade garments for children. The statement by the partners of the assessee firm regarding activities at other places did not affect the eligibility for the deduction. The Tribunal referred to a Supreme Court judgment emphasizing that deduction under section 80IB can only be declined if the assessee ceases to be eligible for the deduction, which was not the case here. Therefore, the Tribunal upheld the CIT (A)'s decision and dismissed the appeal by the Assessing Officer.

In conclusion, the Tribunal affirmed that all units together constituted a single industrial undertaking eligible for deduction under section 80IB, dismissing the appeal by the Assessing Officer against the CIT (A)'s decision.