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TMI Blog2015 (9) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... icate from VAT department, Test report from electricity department, Order of assessment under Central Sales-tax Act. The Assessing Officer was not justified to disbelieve the same on the basis of surmises and conjectures. In view of the above factual and legal discussion the assessee is held to be eligible for deduction under section 80IB. Assessing Officer is directed accordingly. - Decided in favour of assessee. Addition on differences in balances of sundry creditors - Held that:- It is undisputed that the document was filed by the assessee as claimed and as evident from the details. This certificate was placed before the authorities below and in such situation it is not proper on the part of both the authorities below to negate the claim of assessee. In the interest of justice, we think it just and proper to restore the matter to the file of Assessing Officer with direction to adjudicate the issue afresh, after providing reasonable opportunity to the assessee of being heard. Since we restore this issue on technical ground, we refrain from commenting on merit on the issue. - Decided in favour of assessee for statistical purposes. Disallowance of rent expenses and freight ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the extent of the said disallowance of freight expenses since the eligible business income of the appellant would increase to the extent of the said disallowance. 7. The appellant craves leave to add, amend, alter, modify or delete any of the above grounds as well as to submit additional grounds at the time of hearing of the appeal. 2. The assessee is engaged in the business of manufacturing of electric control panels. During the course of assessment proceedings, the Assessing Officer found that as per form No.10CCB under rule 18BBB the assessee claimed to have started commercial production from March, 2004. The manufacturing unit of the assessee is situated in the backward area of Dadra Nagar Haveli and claimed to be eligible for deduction u/s 80IB of the Act @ 100% for initial 5 years from the date of commencement of its manufacturing activities. This being the 4th year from the stated date of commencement of its manufacturing activities, the assessee claimed to be eligible for deduction u/s 80IB @ 100% of profit derived from its manufacturing activities, and accordingly claimed deduction u/s 80IB amounting to ₹ 1,03,91,856/-. The Assessing Officer observed that v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IB was verified not only in the context of the fulfillment of the four conditions laid out in subsection (2) of section 80IB but also in the context of subsection (3) of section 80IB. On such verification the facts as contained in the show cause notice dated 21/12/2009 were noticed and the same were communicated to the assessee for its point of view in the matter. The first foremost contention of the assessee that since connection charges were paid on 16/03/2004, power had been provisionally released, is absolutely bereft of any concrete evidence or basis. On the contrary, the real picture in this regard is the opposite. Reference is once again made to the fact that the only documentary evidence in support of power connection is the letter of release of LT. Power. Such letter is found to have been issued only on 31/03/2004 which is clearly mentioned in the said document. There is no reference to any provisional release of power in such letter nor is their any separate document to show that power was released provisionally. The letter of release further clearly states that subject to the fulfillment of various conditions and also subject to the completion of various formaliti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven begin leave alone getting completed. The assessee has also contended that requirement of power arise only at a later stage. The contention itself deserves rejection because the welding of the sheets is part of the very initial process of manufacture, without which no manufacture could even begin. Of course, there is no possibility of welding machines being operated without power. Further, if only for the sake of this contention is considered, then, another aspect of this case is that as per the power bill, not a single unit was consumed at least up to July 2004. This fact alone proves that none of the mandatory processes involved in the manufacture of a control panel were done at least up to July 2004. At the risk of repetition, it is pointed out that the welding process is probably the most initial process even to begin the manufacture. The existence of a remote possibility that a few M.S. Sheets would have been cut manually, cannot satisfy the basic condition for deciding the fundamental eligibility of a business for deduction u/s SOIB as envisaged by the statute. The intention was never to recognize possibilities or even cosmetic processes of manufacturing activity car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorized Representative vehemently argued that the assessee was eligible for claiming deduction as per the provisions of section 80IB. Accordingly he submitted that the CIT(A) has wrongly confirmed the disallowance. The impugned order may be set aside. 5. On the other hand, the ld. Departmental Representative supported the orders of authorities below. He submitted that the CIT(A) was justified in confirming the action of Assessing Officer in disallowing ₹ 1,03,91,856/- under section 80IB, because the assessee claimed deduction without commencement of its manufacturing activities. The ld. Departmental Representative submitted that there was no electric connection and accordingly manufacturing activity did not commence on or before 31.03.2004 and thus the claim of deduction was disallowed and rightly confirmed by the CIT(A). The impugned order may be upheld. 6. After considering the rival submissions and carefully going through the material on record, we find that assessee was engaged in the business of manufacturing of electric control panels. The unit started manufacturing from March, 2004. The stand of the assessee has been that assessee is a small scale industrial reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pointed out that this bill is for low tension. At the same time energy has been consumed. In this regard we find a low tension power but as far as consumption of electricity is concerned it is contradictory information on the same document. In case there is contradiction in the document the benefit goes in favour of assessee because energy consumption has been shown as 8 units. Coming to the other bill assessee has placed reliance on the bill dated 11.11.2004 placed at page 70 of the Paper Book filed by the assessee when energy charges have been claimed to be ₹ 1015/-. Meter hire charges have been claimed to be ₹ 17/- which shows that energy has been consumed and this bill is pertaining to March, 2004 to September, 2004. This electric meter was installed on 29.3.2004. It shows that the unit of the assessee started functioning from March, 2004 itself as is evident from the bill as placed on page -76 of the Paper Book. The CIT(A) in his order has discussed about electricity bill of low tension connection to negate the claim of manufacturing of the assessee, while this connection has nothing to do with manufacturing activity of unit. Both are independent of each other. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is nothing on record that assessee has not sold its product on 31.3.2004 and sales-tax was NIL as per exemption certificate. It is further strengthened by the Assessment Order under Central Sales-tax as placed on pages 93 to 95 of the paper book. Accordingly, all the conditions of commencement of manufacturing unit are satisfied by the assessee and the Revenue authorities have not doubted the said assessment order Under Central Sales Tax provisions. The Central Sales-tax assessment can be done under the provisions of Central Sales-tax Act, 1956. So the conditions for the same have been fulfilled. Central Sales-tax assessment order is a quasi judicial order which cannot be ignored and in case we believe the story of Revenue authorities it will amount to disbelieve the Central Sales-tax Act which is not permissible because the order of is of a quasi judicial body. It should not be contradicted by other quasi judicial body under the Income-tax Act. In the facts and circumstances the Assessing Officer summoned the purchaser of good and the purchaser confirmed the purchase of goods. In response to the compliance placed at page 96 of the Paper Book the Assessing Officer was not ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering the submissions necessary relief be granted to the assessee. On the other hand, the ld. Departmental Representative relied on the orders of authorities below. 7.3 We have considered the rival submissions and carefully gone through the material on record. It is undisputed that this document was filed by the assessee as claimed and as evident from the details. This certificate was placed before the authorities below and in such situation it is not proper on the part of both the authorities below to negate the claim of assessee. In the interest of justice, we think it just and proper to restore the matter to the file of Assessing Officer with direction to adjudicate the issue afresh, after providing reasonable opportunity to the assessee of being heard. Since we restore this issue on technical ground, we refrain from commenting on merit on the issue. This ground is allowed for statistical purposes. 8. The next issue is regarding disallowance of rent expenses made by the Assessing Officer amounting to ₹ 1,26,000/- and freight expenses of ₹ 2,64,627/- on the ground of non-deduction of TDS u/s 40(a)(ia) of the Income-tax Act, 1961 and consequent claim of 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed on the ground that tax deductible at source at the time of making such payment was done by the assessee. Nevertheless no effect of such disallowance would be there on the assessee s profit from its construction activity since it would be increased to that extent. Nevertheless, such increased income would also qualify for deduction, even otherwise, available under the statute. 5. Before concluding however, we would like to make a small clarification with respect to the sum of ₹ 14,05,701/-. The Tribunal has merely confirmed the decision of CIT(A) holding that such disallowance of expenses would qualify for deduction under section 80IB(10) of the Income-tax Act. This ground is rightly viewed in the background of Tribunal s subsequent observation and the decision wherein the entire issue of assessee s claim of deduction under section 80IB(10) of Income-tax Act came to be remanded for fresh consideration. Only if the assessee succeeds, in establishing such claim, the question of granting deduction even for the said amount of ₹ 14,05,701/- would arise. This was the very intention of the Tribunal and we, in any case, make it explicit. Nothing contrary to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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