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TMI Blog2013 (11) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs.5,68,19,369/- The assessment was completed under sec.143(3) of the Act on 14.12.2011 by the Assessing Officer determining total income of the assessee at Rs.19,01,41,030/-. While completing he assessment the Assessing Officer denied deduction claimed by the assessee under sec.80IB of the Act. While denying deduction claimed by the assessee, the Assessing Officer held that the assessee is manufacturing ophthalmic equipment, an item included in the XI Schedule of the Act. According to the Assessing Officer, in order to classify an industry as a small scale industry, the assessee should be engaged in manufacturing the items listed in Schedule III of Industries (Development and Regulation Act, 1951 as specified in Licensing Notification S.O.477(E) dated 25.7.1991. Since the assessee is manufacturing item of ophthalmic equipment which is not included in Schedule III of Industries (Development and Regulation Act, 1951, the assessee could not be treated as small scale industry. Therefore, the Assessing Officer felt that the assessee is not covered within the definition of SSI and hence not eligible for deduction under sec.80IB of the Act. 4. On appeal, the Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :- (i) It is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) It begins to manufacture or produce, articles or things or to operate such plant or plants at any time during the period beginning from the 1st day of April, 1991 and ending on the 31st day of March, 1995 or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular undertaking; (ii) Where it is an industrial undertaking being a small scale industrial undertaking, it begins to manufacture or produce articles or things or to operate its cold storage plant not specified in sub-section (4) or sub-section (5) at any time during the period beginning on the 1st day of April, 1995 and ending on the 31st day of March, 2000. (4) The amount of deduction in the case of an industrial undertaking in an industrially backward State specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter twenty-five per cent (or thirty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; (ii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : (iv) In a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. The fulfilment of the conditions mentioned at clauses (i), (ii) and (Iv) above, are not under dispute. The only dispute is regarding the fulfilment of condition in clause (iii) above, wherein the Assessing Officer held that the item "ophthalmic instruments and equipments" manufactured by the assessee is the thing or an article specified in Schedule 11 of the IT Act and hence not eligible for deduction under section 80-Ib of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as under : Sec.80-IB : (4) The amount of deduction in the case of an industrial undertaking in an industrially backward State specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from such industrial undertaking : Now, let us examine the assessee case. The assessee's manufacturing unit is located in the State of Pondicherry, which is an "industrially backward State" as notified in 8th Schedule (at Sl.No.16). There is no dispute regarding this position. Therefore, the assessee's case is covered by the second limb of proviso to clause (iii) of sub-section (2) of sec.80-IB of the Act. Hence, the words "not being any article or thing specified in the list in the Eleventh Schedule" stands omitted from the language of clause (iii) of the Act. Manufacturing of any article or thing (including those specified in 11th Schedule) is sufficient for claiming de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the assessee is located in the State o Pondicherry which is in an industrially backward State. There is no dispute regarding this. Hence, the assessee is eligible for deduction under the sub-section (4) of sec.8O-lB of the Act, On all the article/things (including those mentioned in 11th Schedule) manufactured by it. In also make no difference whether the undertaking is a SSI or not. Once, the industrial undertaking is located in an industrially backward State the assessee is eligible for deduction is] s.80-IB(4) of the Act. In such a situation there is no need to fulfill the requirements of 'SSI' nature. If the assessee wants to claim deduction u/s.80-IB of the Act, being in the nature of 'SSI' (i.e. if wants to claim exception as per the first limb of proviso to clause(iii)), then only the assessee has to prove that it is recognised as a SSI and all the relevant conditions are fulfilled. In the instant case, as the assessee's industrial undertaking is 'located in an industrially backward State' of Pondicherry, there is no need to fulfil the requirements of SSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zing the provisions of the Act held that the assessees, whose industrial undertakings are recognized as "Small Scale Industries" or located in an industrially back-ward state are eligible for deduction under sec.80IB of the Act even if they manufacture articles or things specified in the list in XI Schedule. The Revenue could not rebut any of the findings of Commissioner of Income Tax (Appeals) with any supporting material. In the circumstances, we feel that there is no good and valid reason to interfere with the reasoning of the Commissioner of Income Tax (Appeals) in allowing the claim of the assessee under sec.80IB of the Act. Therefore, we confirm the order of the Commissioner of Income Tax (Appeals) on this issue. The grounds taken by the Revenue on this issue are rejected. 9. The next issue in the grounds of appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in deleting the disallowance made under sec.40(a)(1a)of the Act. 10. At the time of hearing, the Counsel for the Assessee submits that the Assessing Officer made disallowance under sec.40(a)(1a) on the ground that the assessee has not deducted TDS on certain payments made to various parties. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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