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TMI Blog2013 (9) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... without proper reasons, invalid and also bad in law. 2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii) a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the findings of the AO that the industrial undertaking of the appellant was formed by the transfer of plant and machinery previously used by SPIL and accordingly the conditions laid down u/s 80IB(2)(ii) have not been satisfied. b) The Ld.CIT(A) has not appreciated the facts in the proper perspective and erred in not appreciating the legal position that, for the purpose of section 80-IB, the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. 3. Re: Invoking the provisions of S.80IB(13) r.w.s.80IA(10): On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the invoking of the provisions of S.80IB(13) r.w.s.80IA(10) for the purpose of computing the deduction u/s 80IB. 4. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA - Rs.14,21,110/- due to purchase of materials from SPIL. On the facts and in the circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. aggregating to Rs.4,96,67,120/-. 4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act amounting to Rs.15,75,55,218/-. 5. Whether the ld. CIT(A) was right in granting higher deduction u/s 80IB of the Act on account of disallowance u/s 43B of the Act amounting to Rs.12,92,626/-." 4. In ITA No.346(Asr)/2010, the assessee has raised following grounds of appeal: "1. The orders of the lower authorities are arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law. 2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii) a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the findings of the AO that the industrial undertaking of the appellant was formed by the transfer of plant and machinery previously used by SPIL and accordingly the conditions laid down u/s 80IB(2)(ii) have not been satisfied. b) The Ld.CIT(A) has not appreciated the facts in the proper perspective and erred in not appreciating the legal position that, for the purpose of section 80-IB, the initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'industrial undertaking' and hence eligible for deduction u/s 80IB. b) The Ld. CIT(A) also erred in not appreciating that the section 80IB grants deduction in respect of 'any profits from any business' of the industrial undertaking. c) Alternatively and without prejudice to the above, on the facts and circumstances of the case and in law, the AO and CIT(A) failed to appreciate that the Central Excise Duty refund is a capital receipt as, according to Central Government's Notifications, the said benefit is granted for promoting industrialization/setting up of the industries in the State of Jammu & Kashmir. 7. Reg: Disallowance of deduction u/s 80IB in respect of interest income - Rs.9,39,496/-. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.9,39,496/- holding them to be not derived from the industrial undertaking. b) The Ld. CIT(A) also erred in not appreciating that the section 80IB grants deduction in respect of 'any profits from any business' of the industrial undertaking. 8. Reg: I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 80IB(4) to 25% of profit from industrial undertaking at Dadra by considering the previous year as 6th year of operation as against te assesse's claim of 100% deduction considering the previous year as 4th year of operation. b) The Ld.CIT(A) has not appreciated the facts in the proper perspective and erred in not appreciating the legal position that, for the purpose of section 80-IB, the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. Holding the year under appeal as the 6th year for claiming deduction u/s 80IB(4) of the Act being bad in law the claim of the appellant treating the year as the 4th assessment year from the beginning with the initial assessment year needs to be allowed/accepted. 3. Re: Invoking the provisions of S.80IB(13) r.w.s.80IA(10): On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the invoking of the provisions of S.80IB(13) r.w.s.80IA(10) for the purpose of computing the deduction u/s 80IB. 4. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA - Rs.14,21,110/- due to purchase of materials from SPIL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61/-. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.55,461/- holding them to be not derived from the industrial undertaking. b) The Ld. CIT(A) also erred in not appreciating that the section 80IB grants deduction in respect of 'any profits from any business' of the industrial undertaking. 8. Reg: Initiation of penalty proceedings u/s 271(1)(c) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not striking down the initiation of penalty proceedings u/s 271(1)(c) of the Act." 7. In ITA No.18(Asr)/2010, the Revenue has raised following grounds of appeal: 1. Regarding disallowance of deduction u/s 80IB of the Income Tax Act, 1961 of Rs.72,88,47,291/-. a) Whether the Ld. CIT(A) was right in holding that the industrial undertaking of the assessee firm at Dadra was not formed by the splitting up or reconstruction of the existing business of M/s. Sun Phamaceuticals Industries Ltd. b) Whether the Ld. CIT(A) was right in holding that the assessee firm is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar for claiming deduction u/s 80IB(4) of the Act being bad in law the claim of the appellant treating the year as the 5th assessment year from the beginning with the initial assessment year needs to be allowed/accepted. 3. Re: Invoking the provisions of S.80IB(13) r.w.s.80IA(10): On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the invoking of the provisions of S.80IB(13) r.w.s.80IA(10) for the purpose of computing the deduction u/s 80IB. 4. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA(10) - due to alleged selling and distribution expenses. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in invoking the provisions of S.80IB(3) r.w.s.80IA(10) and thereby erred in giving direction to the AO to make the disallowance of deduction u/s 80IB(4) of Rs.45,91,02,595/- corresponding to the disallowance made by the AO of SPIL in respect of alleged selling and distribution expenses incurred by SPIL on behalf of the appellant. 5. Reg: Disallowance of deduction u/s 80IB in respect of interest income - Rs.64,963/-. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act amounting to Rs.40,12,76,441/-. 5. Whether the ld. CIT(A) was right in granting higher deduction u/s 80IB of the Act on account of disallowance u/s 43B of the Act amounting to Rs.5,37,09,230/-." 6. Regarding disallowance of deduction u/s 80IB on account of Central Excise Duty Refund: "a) Whether the Ld. CIT(A) was right in allowing relief on account of deduction u/s 80IB on Central Excise Duty refund by relying upon orders of Hon'ble High Court if J&K, Jammu which has been delivered not on merits of the issue but holding the receipt to be a capital receipt only because the policy under which the same was paid envisaged tackling the unemployment in the State which cannot be said to be a good test for deciding whether a receipt is a trading receipt or a capital receipt. b) Whether the Ld. CIT(A) was right in facts and circumstances and in law in not appreciating the judgments of Hon'ble Supreme Court of India in the case of Ponni Sugar & Sawhney Steel and press works Ltd, wherein the Hon'ble Supreme Court had held such rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B(13) r.w.s.80IA(10) - due to alleged selling and distribution expenses. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in invoking the provisions of S.80IB(3) r.w.s.80IA(10) and thereby erred in giving direction to the AO to make the disallowance of deduction u/s 80IB(4) of Rs.97,02,11,623/- corresponding to the disallowance made by the AO of SPIL in respect of alleged selling and distribution expenses incurred by SPIL on behalf of the appellant. 5. Reg: Disallowance of deduction u/s 80IB in respect of interest income - Rs.1,17,624/- on loan to employees. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.1,17,624/- holding them to be not derived from the industrial undertaking. b) The Ld. CIT(A) also erred in not appreciating that the section 80IB grants deduction in respect of 'any profits from any business' of the industrial undertaking. 6. Reg: Disallowance of deduction u/s 80IB in respect of interest income Rs. 3,27,599/- on bank FDR of Jammu u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee firm is entitled to deduction u/s 80IB(4) of the Income tax Act on the profits of its industrial undertaking at Dadra for the unexpired period in view of CBDT Circula F.No.15/5/63-IT(AI) dated 13.12.1963. 2. Regarding disallowance of deduction u/s 80IB read with sec. 80IA(10) of the Income Tax Act, 1961 of Rs.96,75,25,719/-. (a) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was right in deleting the disallowance made by the AO on account of deduction u/s 80IB(4) of the Act by applying the provisions of section 80-IB(13) read with section 80IA(10) of the Act. (b) The Ld. CIT(A) has erred in not considering the fact that no royalty or management fee has been charged by M/s. Sun Pharmaceutical Industries Limited from the assessee firm and major expenses on account of Selling and Distribution expenses of M/s. Sun Pharmaceuticals Industries are actually borne by M/s. Sun Pharmaceuticals Industries Limited. 3. Regarding disallowance of deduction u/s 80IB of the Act in respect of interest on delayed payments. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 in respect of interest on delayed payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue, the brief facts are that the AO made a disallowance of deduction u/s 80IB(4) in respect of profit of Dadra unit by holding tat conditions laid down under section 80IB(2) of the Act are not complied with. The Ld. CIT(A) followed the order of the ITAT, Amritsar Bench, dated 11.06.2010 in assessee's own case for the assessment year 2005-06 and allowed the deduction under section 80IB of the Act. However, he considered the assessment year 2004- 05 as 3rd year of operation instead of assessee's claim of 1st year of operation. 12. We have heard the rival contentions and perused the facts of the case. We observe that the ITAT, Amritsar Bench, Amritsar in assessee's own case vide its order dated 11.06.2010 in ITA No. 184(Asr)/2009 adjudicated the identical issue and allowed deduction under section 80IB of the Act in respect of Dadra unit by considering the assessment year 2002-03 as the 1st year vide para 17 to 43.3 (pages 54 to 78) in its order. Following the above decision of the Tribunal, we hold that Dadra undertaking is qualified for deduction u/s 80IB for the assessment year 2004-05 being the 3rd year of operation. Accordingly ground No.2 of the assessee is partly allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration that in that case, the amount of disallowance is varied by the ITAT Ahmedabad Benches, then the same amount will be considered in the case of the assessee. Accordingly ground Nos. 3 & 4 are dismissed, with us above observations. 15. As regards ground No.5 with respect to selling and distribution expenses, the brief facts are that the AO has considered 4.13% of turnover as the selling and distribution expenses, which according to AO should have been incurred by the assessee. He has arrived at this percentage from the return of income of SPIL as discussed by the AO at pages 84 to 92 of assessee's AO's order. By applying said percentage and after reducing the actual expenses incurred by the assessee, the AO ultimately disallowed Rs.6,84,95,290/-. The Ld. CIT(A) reduced the said disallowance to Rs.85,51,772/- relying upon the order of the CIT(A) Ahmedabad Bench in the case of SPIL. 15.1 The Ld. counsel for the assessee argued that the assessee has incurred selling and distribution expenses in two components: i) Expenses incurred directly which is debited to selling and distribution expenditure in the profit & loss account. ii) Remuneration paid to working partner (SPIL) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) in the case of SPIL especially para 26 at pages 114 to 118 of assessee's paper book and therefore, pleaded that the disallowance at least to the extent was confirmed by the CIT(A) in the case of SPIL needs to be confirmed. 16. We have heard the rival contentions and perused the facts of the case. We observe from the perusal of the order of the ITAT, Amritsar Bench, dated 11.06.2010 passed in assessee's own case for the assessment year 2005-06 on identical facts at para 30 to 36 (Pages 63 to 67 ) which is placed at PB 186 to 190. The ITAT especially vide para 36 had concluded that no disallowance u/s 80IB(13) read with section 80IA(10) of the Act, can be made except difference of Rs.28,37,619/- as computed by the assessee itself, in respect of excessive profit on account of assessee's dealings with the SPIL for buying raw material at a confessional rate, for taking services of distribution net work of SPIL as also for taking technical assistance from SPIL including advantage of use of brand. These findings of ITAT in its order dated 11.06.2010 are there though was no specific and separate disallowance in the assessment year 2005-06 on account of selling and distribution. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is dismissed. 18. As regards ground Nos. 4 & 5 of the Revenue regarding granting of higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) of the Act amounting to Rs.15,75,55,218/- and on account of disallowance of deduction u/s 43B amounting to Rs.12,92,626/-, it is observed that the issue is covered by the decision of the ITAT, Amritsar Bench, vide its order dated 11.06.2010 in ITA No.184(Asr)/2009 in assessee's own case vide paras 37 to 40 at pages 67 to 69 (pages 190 to 192 PB), wherein ITAT, Amritsar Bench, has allowed the claim of the assessee on the consequential higher amount eligible for deduction under section 80IB of the Act. Following the said order of the Tribunal, dated 11.06.2010, these grounds of the Revenue are dismissed. 19. As regards ground No.6 of the assessee regarding initiation of penalty under section 271(1)(c) of the Act is concerned, we are of the considered view that this issue does not arise from the impugned order of the ld. CIT(A). Hence, this ground of the assessee is dismissed. 20. In the result, the appeal of the assessee in ITA No.345(Asr)/2010 is partly allowed and that of the Revenue in ITA no.391(Asr)/2010 is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 26. As regards ground No.6 of the assessee relating to disallowance of deduction u/s 80IB in respect of Central Excise Duty Refund of Rs.50,12,45,460/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the assessee is allowed. 27. As regards ground No.7 of the assessee with respect to the disallowance of deduction u/s 80IB in respect of interest income of to the extent of interest on statutory deposits, bank and loan to employees aggregating to Rs.9,39,496/-, the facts of the issue in dispute being identical to the facts decided by the Tribunal in assessee's own case dated 11.06.2010 in ITA No.184(Asr)/2009 for the assessment year 2005-06 para 41.7 pages 75-76 ( PB 247 -248). Following the same, this ground of the assessees is dismissed. 28. As regards ground No.8 of the assessee regarding initiation of penalty proceedings u/s 271(1)(c) of the Act, this issue does nor arise from the impugned order of the ld. CIT(A). Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uneration u/s 40(b) amounting to Rs.29,79,26,967/- and on account of disallowance of deduction u/s 43B amounting to Rs.19,73,329/- 34.1. Since the facts relating to these issues are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 35. As regards ground No.6 of the assessee relating to disallowance of deduction u/s 80IB in respect of Central Excise Duty Refund of Rs.80,72,19,118/-, the facts of the issue in dispute are identical to the facts in assessee's own case for the assessment year 2005-06 decided by us vide order dated 07.06.2012 in ITA No.184(Asr)/2009. Following the same, this ground of the assessee is allowed. 36. As regards ground No.7 of the assessee with respect to the disallowance of deduction u/s 80IB in respect of interest income of to the extent of interest on statutory deposits, bank and on loan to employees aggregating to Rs.55,461/-, the facts of the issue in dispute being identical to the facts decided by the Tribunal in assessee's own case dated 11.06.2010 in ITA No.184(Asr)/2009 for the assessment year 2005-06 . Following the same, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by us hereinabove. Following the same, this ground of the Revenue is dismissed. 43. As regards ground No. 4 & 5 of the Revenue's appeal regarding higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) amounting to Rs.40,12,76,441/- and on account of disallowance of deduction u/s 43B amounting to Rs.5,37,09,230/- 43.1. Since the facts relating to these issues are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 44. As regards ground No.6 of the assessee relating to disallowance of deduction u/s 80IB in respect of Central Excise Duty Refund , the facts of the issue in dispute are identical to the facts in assessee's own case for the assessment year 2005-06 decided by us vide order dated 07.06.2012 in ITA No.184(Asr)/2009. Following the same, this ground of the assessee is allowed. 45. As regards ground No.5 of the assessee with respect to the disallowance of deduction u/s 80IB in respect of interest income of to the extent of interest on statutory deposits, bank and on loan to employees aggregating to Rs.64,963/-, the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue is dismissed. 52. As regards ground No. 4 & 5 of the Revenue's appeal regarding higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) amounting to Rs.57,22,21,001/- and on account of disallowance of deduction u/s 43B. 52.1. Since the facts relating to these issues are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 53. As regards ground No.6 of the assessee relating to disallowance of deduction u/s 80IB in respect of Central Excise Duty Refund, the facts of the issue in dispute are identical to the facts in assessee's own case for the assessment year 2005-06 decided by us vide order dated 07.06.2012 in ITA No.184(Asr)/2009. Following the same, this ground of the assessee is allowed. 54. As regards ground Nos. 5 & 6 of the assessee with respect interest on FDR amounting to RS.3,27,599/- (correct figure Rs.2,27,599/-) and loan to employees with regard to disallowance of deduction u/s 80IB, the facts of the issues in hand are identical to the facts decided by the Tribunal in assessee's own case dated 11.06.2010 in ITA No.184(A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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