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TMI Blog2013 (8) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... or manufacture any article or thing other than any article or thing specified in the Eleventh Schedule. Exception to this third condition is that a SSIU can avail the 80IB benefit even if manufactures or produces articles or things specified in Eleventh Schedule. The fourth condition is that the industrial undertaking running with the aid of power must not have less than 10 employees and if it is run without power, the number of employees must be more than 20 employees. Thus all the four conditions narrated above must be fulfilled if the industrial undertaking desires to avail benefit u/s 80IB of I T Act. For a SSIU, there is also an extra condition i.e. it must be an SSI unit as per explanation (g) given in 80IB(14) of I T Act which refers to Section 11B of the IDR Act, 1951 which in turn prescribes a limit for investment in plant and machinery to designate the industrial undertaking as SSI unit. Thus, out of these give conditions; the first two conditions may be called formative or unchangeable. In other words, if in the initial year of manufacture or production, it is substantiated that it has fulfilled these two conditions, the Assessing Officer cannot on this ground in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly allowed deduction u/s 80IB (3) of the Act as claimed. For the reasons set out in his order u/s 263 of the Act dated 16.1.2009, the CIT had set aside the assessment order with a direction to decide the claim u/s 80IA/80IB accordingly. 3.1.2. Consequently, the AO, vide his order u/s 143(3) r. w. s. 263 of the Act dated 14.12.2009, as per the directions contained in the CIT s order u/s 263 of the Act (supra) and for the reasons recorded therein, disallowed the assessee s claim of Rs.75,81,910/- u/s 80IB (3) of the Act. 3.2. Aggrieved, the assessee took up the issue with the CIT (A) for reconsideration. After considering the elaborate contentions put-forth by the assessee s counsel, as recorded in his appellate order, the CIT (A) had, however, negated the assessee s claim. The relevant portions of the reasoning of the CIT(A) are extracted as under: 16. Summary: S. 80IB is an incentive provision. It stipulates deduction in respect of profits and gains from certain industrial undertakings. Within this section a plethora of industries and business types have been given the benefit of such deduction if they fulfil the conditions mentioned in the concerned sub-section of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions have not been violated. Such claims of the assessee have to face the analysis and scrutiny of the AO. Thus, since each AY is separate and independent, the revenue authorities had every power to examine and analyse the facts and figures as well as relevant law points of each year to find out whether all these three conditions are fulfilled or not. It is also the ratio of the cited in that case that the first two conditions have already been satisfied and it is assumed that the fourth condition has been fulfilled in that year and, hence, the relief. The same is also the ratio in the case of M/s. Nanak Dehydration (P) Limited v. Asst. CIT (2010) 134 TTJ Ahd D Tribl-1. The facts of that case was that the assessee was allowed deduction u/s 80IB from 1993-94 to 2002-03 but in the AY 2003-04 the claim was disallowed on the ground that in the initial year the industrial unit has been formed by reconstruction or splitting up of the existing unit. The ITAT held that it is not open to the AO to doubt the earlier acceptance of the Department in respect of reconstruction and splitting up to deny the claim in subsequent year because that violates the principles of consistency. But, it also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in (2011) 333 ITR 324 (Del). 5. We have carefully examined the rival submissions, perused the relevant case records and also the case laws on which the parties concerned have placed their reliance. 5.1. It was the stand of the AO that the assessee had invested in plant and machinery at the end of the previous year relevant to the assessment year under consideration which exceeded the prescribed limit for qualifying as a SSIU as per the relevant provisions of s. 80IB (3) of the Act and, thus, proposed to deny the claim of the assessee. This was contested by the assessee on the premise that nowhere in the section it is stated that the manufacturing unit should be in the small scale sector for the entire period of ten years or this is applicable for every previous year during the full tenure of ten years. [Source: Para 6 of the Asst. Order]. 5.1.1. Rejecting the assessee s assertion, the AO took a view that the value of plant and machinery had exceeded Rs.1 crore as per the depreciation schedule annexed to 3CD report, therefore, the assessee doesn t come under the purview of the definition of Small Scale Industry for the year under consideration. 5.1.2. The above stand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein, while considering the allow-ability or otherwise of deduction u/s 80J of the Act, it has been held, among others, that the eligibility stands determined in the initial assessment year and once an industrial undertaking is found eligible in the initial year of manufacture, such benefit could be availed of in any of the succeeding four years. With due respects, we would like to reiterate that the assessee cannot take support in the said ruling as the issue, before the Hon ble Court, was entirely on a different footing in the sense that ..the exemption would not be available if, in the initial assessment year, the proportion of old assets transferred or utilised for the new business is above 20% of the total investment Therefore, the Hon ble High Court was considering fulfilment of conditions in formative years of industrial undertaking and once it is found that the assessee had not fulfilled the conditions in the initial year of operation, it is not entitled to deduction in the later year, irrespective of position in those years. 5.3.1. In the instant case, the condition that is not complied with by the assessee is a condition which is to be fulfilled on an yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate and independent, the revenue authorities had every power to examine and analyse the facts and figures as well as relevant law points of each year to find out whether all these three conditions are fulfilled or not. 5.3.2. We have also perused the ruling of the Hon ble jurisdictional High Court in the case of Sami Labs Limited v. ACIT reported in (2011) 334 ITR 157 (Kar), in which the learned AR placed strong reliance. It has been ruled by the Hon ble Court that An assessee is eligible to claim benefit of s. 10B only if it is found eligible for the same in the initial year of manufacture; if the conditions of s. 10B (2)(iii) are not satisfied in the year of commencement of production, it cannot claim deduction in the subsequent years irrespective of the position in those years . 5.3.3. In this connection, we would like to point out that this ruling of the Hon ble jurisdictional High Court cannot also come to the rescue of the present assessee since the Hon ble High Court was considering fulfilment of a formative condition; whether the same has been complied with or not in the initial year of industrial undertaking operation. Whereas the assessee s claim is specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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