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TMI Blog2015 (7) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... wo reports which contained that the assessee visited Germany to negotiate supply of spares for the company’s machines and also understand certain technical issues related to the operations of the machines. In view of these facts, the assessee incurred this foreign traveling expenditure. We find no evidence that these tour expenditures are not for the purpose of the business rather it is for negotiating for spares and purchases of manufacturing machinery of tooth brushes, the visit was undertaken by the Managing Director. We find that the tour expenditure incurred by the assessee company was for the purpose of business wholly and exclusively. CIT(A) was justified in deleting the addition - Decided in favour of assessee. Addition of repairs for excavation of pond, purchase of wood shaft, ply, Burma teak wood, tiles etc. - revenue v/s capital expenditure - CIT(A) deleted the addition - Held that:- Some important principles have been culled out on the issue on the basis of various judicial pronouncements. An expenditure which involves mere replacement of a part of the machine and not the entire machine, or does not result in the creation of any new asset, cannot be termed as capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re incurred had an enduring benefit. 3. In ITA No.2674/Ahd/2010 for AY 2000-01. Ground No.1 is regarding of addition of ₹ 58,12,248/- u/s 2(22)(e) considering the same to be deemed dividend. Assessing Officer observed that assessee company had received loans from M/s Baroda Precimound (P) Ltd., M/s Pearl Bristlers (P) Ltd., M/s Opal Bristlers Pvt. Ltd. M/s Daisy Packers Pvt. Ltd. It was further noted that Smt. Geeta Goradia had share holding in excess of 20% in the assessee company as well as more than 20% in each of the above companies. He also further observed that each of the above companies had accumulated profits as on the first date of the accounting period. Hence it was held that the provisions of section 2(22)(e) were attracted and the advances/loans as under were brought to tax as deemed dividend :- a) Baroda Precimould Pvt. Ltd. Rs.41,00,000/- b) Pearl Bristlers Pvt. Ltd. Rs.8,92,00/- c) Opal Bristlers Pvt. Ltd. Rs.4,20,248/- d) Daisy Packers Pvt. Ltd. Rs.4,00,000/- Total Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short 'the Act') and income of the assessee was declared under Section 115JA of the Act. Thereafter the case was reopened under Section 147 of the Act which was served on the assessee. The case of the department was that the Amigo Brushes Pvt. Ltd. had a total surplus of ₹ 70 lacs as on 31st March 1999 and it has advanced a loan to the assessee to the tune of ₹ 25 lacs. Whereas the assessee contended that he received deposit from Amigo Brushes Pvt. Ltd. and Daisy Packers Pvt. Ltd. was not a shareholder in Amigo Brushes Pvt. Ltd. The Assessing Officer by his order dated 30th September 2004 rejected the claim of the assessee and treated the deposits as loan and consequently deemed to be a deemed dividend under Section 2(22)(e) of the Act and accordingly computed the tax. The assessee filed appeal which was dismissed by CIT(A) on 11th May 2006. The assessee filed Second Appeal which has been allowed by the Tribunal on 5th June 2009 and the Tribunal has hold that it was not the case of the deemed dividend and it was the case of the deposits. The Tribunal further recorded finding that it was not a loan given by Amigo Brushes Pvt Ltd. to the assessee company and it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted the order of AO and submitted that CIT(A) has wrongly deleted the addition. So his order may be set aside and that of the AO be restored. On the other hand, the ld. AR supported the order of ld. CIT(A) and contended that similar issue came up before the Tribunal in the case of Jewel Consumer Care Pvt. Ltd. vs. ACIT in ITA No.158/Ahd/2008 for AY 2004-05 and the issue has been decided in favour of assessee. Copy of order placed on record. 4.3 After considering the rival submissions and going through the material on record, we find force in the submissions of ld. AR. We find that the Tribunal in the case of Jewel Consumer Care (P) Ltd. (supra) has decided the issue with the following observation:- 5. We find from the facts of the case that the assessee is in the business of manufacturing of tooth brushes and the assessee s MD Shri Amit Goradia, who is an IIT Mechanical Engineer visited M/s Anton Zaharonsky, a leading tooth brush machinery manufacturing company in Germany. The assessee company manufactures tooth brushes using bristling machines and moulds and other accessories supplied by M/s Anton Zaharonsky. According to the assessee, these machines and moulds are high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2 Being aggrieved by this order the Revenue is in appeal before us. The ld. DR relied on the order of Assessing Officer whereas the ld. AR supported the order of CIT(A). 5.3 After considering the rival submissions and going through the material we find that some important principles have been culled out on the issue on the basis of various judicial pronouncements. An expenditure which involves mere replacement of a part of the machine and not the entire machine, or does not result in the creation of any new asset, cannot be termed as capital expenditure. Therefore, the impugned repair expenditure would amount to a revenue expense and it would qualify for deduction as repairs and maintenance. In view of this, we find no infirmity in the order of CIT(A). We uphold the same. 6. In the result, the appeal of Revenue is dismissed. 7. Now we take ITA No.2617/Ahd/2010 for AY 2000-01 filed by Revenue on following grounds: 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 20,00,000 considering the same as deemed dividend without appreciating the fact that the director of the assessee company had share hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering the rival submissions and going through the material on record, we find that the issue is identical to the issue raised in ITA No.2674/Ahd/2010 for AY 2000-01 in the case of Amigo Brushes (P) Ltd. which has been decided by us after detailed discussion vide para No.3.3 of this order. Facts being similar so same reasoning we uphold the finding of CIT(A) on this issue. 8. The next ground of the appeal is regarding allowing deduction under section 80IA of the Act claimed by the assessee after considering the report of Chartered Engineer without appreciating the fact the assessee had not produced SSI certificate issued by the District Industries Commissioner especially because the assessee had plant and machinery worth ₹ 3 crores at the beginning of the year. Brief facts of the case are that the company was engaged in manufacturing toothbrush handles on job work basis for its associate companies who were manufacturers of toothbrushes. The company had claimed deduction under section 80IA on the ground that it was a small scale industrial undertaking. During the course of assessment proceedings, the Assessing Officer observed that the assessee was not registered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11B of IDRA provides as follows :- Power of Central Government to specify the requirements which shall be complied with by the small scale industrial undertakings. 11B(1) The Central Government may with a view to ascertaining which ancillary and small scale industrial undertakings need supportive measures, exemption or other favourable treatment under this Act to enable them to maintain their viability and strength so as to be effective in. (a) Promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and (b) Securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. Specify, having regard to the factors mentioned in sub-section (2) by notified order, the requirements which shall be complied with by an industrial undertaking to enable it to be regarded for the purposes of this Act, as an ancillary or small scale industrial undertaking and different requirements may be so specified for different purposes or with respect to industrial undertakings engaged in the manufacture or production of different articles. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring, bus bars, electrical control panels (not those mounted on individual machines), oil circuit breakers/miniature circuit breakers etc. which are necessarily to be used for providing electrical power to the plant and machinery from the place of manufacturing/safety measures. vii) The cost of gas producer plant, viii) Transportation charges (excluding of taxes i.e. sales tax, excise etc.), ix) Charges paid for technical know-how for erection of plant and machinery, x) Cost of such storage tanks which store raw materials finished products only and are linked with the manufacturing process, xi) Cost of five fighting equipment. Thus it was found that (a) the value of plant and machinery should not exceed ₹ 3 crores for an undertaking to be considered as SSIU; and (b) the method of calculating the value of investment in plant and machinery has been clearly laid down, which permits exclusion of certain items from consideration for the purpose of valuation. From perusal of the valuation certificate issued by Shanti Consulting Engineers, being Government approved valuers, the value of investment in plant and machinery after exclusion as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative also submitted that the is covered in favour of assessee by the decision of the Tribunal in assessee s own case for Asst. Year 2001-02 and in other cases. He submitted a copies of orders which are placed on record. 8.3 After considering the rival submissions and going through the material on record, we find the issue is covered in favour of assessee by the decision of the Tribunal in assessee s own case. The Tribunal has allowed the claim of assessee in ITA No.1094/Ahd/2008 for AY 2001-02 by observing as under :- 4. Now before us, an order of the respective co-ordinate Bench C of the ITAT, Ahmedabad in the case of KHS Machinery Pvt. Ltd. Vs. ITO, ITA No.2278/Ahd/2006 dated 19-12-2008 is placed on record wherein vide para-9, an observation has been made that the registration is not a precondition to avail the benefit of deduction under Section 80IB of the Act. The relevant portion is reproduced below: 9. We have heard both the parties and gone through the facts of the case. At the outset, we may advert to the contention of the ld. DR that registration of an industrial undertaking as an SSI is necessary for conferring the benefit u/s.80IB of the Act. We do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on which claim under Section 80IA has been allowed. In view thereof, we find no infirmity in the order of CIT(A) allowing similar claim. Though from the side of the Revenue, the learned DR has tried to explain that as per the said scheme, it was necessary to obtain registration but we are not examining the claim of registration of SSI unit as per the Govt. of Gujarat, Industries and Mines Department. Rather, we are examining the proviso of section 80IA wherein vide clause (f) of sub-section 12 of Section 80IA has defined the definition of small scale undertaking as follows: (f) small-scale industrial undertaking means an industrial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951). 5. If we carefully examine this sub-clause, as emphasized by the learned AR, the term industrial undertaking is to be regarded as an SSI under Section 11B of the Industrial (Development and Regulation) Act. The qualifying word is not registered , but the word is regarded . Therefore, the learned AR vehemently argued that it was an a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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