9911796707
TMI Blog2013 (7) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) vide order dated 16.03.2009 granted partial relief to the assessee. Aggrieved by the aforesaid order of CIT(A), Assessee is now in appeal before us and has raised the following grounds. 1 The learned CIT(A) has grossly erred in law and on facts in confirming the action of Id. AO in disallowing deduction claimed by the Appellant u/s 80IB of the Act. 2 The learned CIT(A) has grossly erred in law and on facts in confirming the action of Id. AO in adding a sum of ₹ 2,03,158/- u/s 145A of the Act. 3 The learned CIT(A) has grossly erred in law and on facts in confirming action of Id. AO in disallowing ₹ 1,99,848/- u/s 40(a)(ia) of the Act. 4 Alternatively and without prejudice, Id. CIT(A) has erred in law and on facts in not giving enhanced deduction u/s 80IB of the Act to the extent of disallowance u/s 40(a)(ia) of the Act confirmed by him. 5 The learned CIT(A) has grossly erred in law and on facts in confirming the action of Id. AO to recalculate and add interest income on fixed deposit placed with Bank of Baroda. 6 The learned CIT(A) has grossly erred in law and on facts in confirmin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconstructed, extended, taken into use as a factory or part of a factory or any other extension of plant or machinery shall be carried out in a factory unless previous permission in writing is obtained Chief Inspector of the Factories . 2.3.2 Further, the Rule-4 of Goa, Daman Diu Factories Rules 1985 is as under:- 4. Prohibition of use of a premises as a factory without s valid licence ~ No occupies of a factory shall use any premises as a factory or carry on any manufacturing process in a factory except under a licence obtained or renewed in respect of such premises in accordance with the provisions of these rules. 2.3.3 Further as per Section 6(2) of the Factories Act, 1948, if no communication regarding any objection is communicated to the applicant within three months from the date of sending the application then the permission will be deemed to have been granted. 2.3.4 One thing is very clear and that is production/manufacturing had not started before 31.03.2004 and, therefore, no deduction u/s.80IB can be allowed or the appellant has violated the provisions of the Factory Act and had started the production/ manufacturing in violation of the Factory Act. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee had also purchased and sold goods which proves that it has actually stated manufacturing activity before the specified date. He further placed reliance on a decision of the Tribunal in the case of Jalaram Plast in ITA No. 1327/Ahd/2009 order dated 28.06.2013 and also placed on record the copy of the aforesaid order. The learned A.R. further submitted that in view of the aforesaid decision of Tribunal the matter of verification of the receipt of factory license may be remitted to the file of Assessing Officer. The learned D.R. on the other hand supported the order Assessing Officer and CIT(A). 10. We have heard the rival submissions and perused the material on record. The dispute in the present case is starting of commercial production. As per the Assessing Officer, since the Assessee was issued factory licence on 23.09.2004 it cannot be stated that Assessee has started production before that date. On the other hand the claim of the Assessee is that since it has started production on 13.02.2004, it is entitled to deduction u/s. 80IB. 11. In the case of CIT vs. Jolly Polymers reported in (2012) 342 ITR 87 the issue before the Hon. High Court was (A) Whether the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y manufacturing activity which is fundamentally unlawful or prohibited by law and against public policy, would snot be covered by the provision. 12. In the present case, from the records it is not clear as to when the Assessee had applied for factory licence and when it was received by Assessee. We are of the view that this issue needs to be examined in the light of decision of Hon. Gujarat High Court in the case of Jolly Polymers (supra) we therefore remit this issue to the file of Assessing Officer to decide issue in the light of the aforesaid decision of Gujarat High Court. Thus this ground of Assessee is allowed for statistical purposes. Ground No. 2 is with respect to addition of ₹ 2,03,158/- u/s. 145A:- 13. In the written submissions made by the Assessee, It is submitted that since CIT(A) has already directed to include the amount disallowed u/s. 145A for deduction under 80IB, this ground is not pressed. We therefore dismissed this ground as not pressed. Ground no. 3 4 are interconnected and therefore considered together. It is with respect to disallowance of ₹ 1,99,848/- u/s. 40(a) (ia). 14. During the course of assessment proceedings, Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(a) of the Act. The learned A.R. further submitted that the payees have already included the income in the respective returns and paid tax, hence there is no loss to Revenue. In the alternate, it was submitted that even if addition of ₹ 1,99,848/- u/s. 40(a)(ia) is added to the total income, the same has to be added to the gross total income and since the Assessee is eligible for deduction under 80IB the ultimate effect will not have any change in the taxable income. He further placed reliance the decision in the case of Jalaram Plast in ITA No. 1327/Ahd/2009 and Ramesh Industries vs. ITO ITA No. 3131/Ahd/2008. He also placed on record the copy of the aforesaid orders. The learned D.R. on the other hand relied on the order of Assessing Officer. 17. We have heard the rival submissions and perused the material on record. We find that the disallowance under 40(a)(ia) was made because the Assessee had deposited TDS after due dates. Further from the order it is not clear as to when the TDS was deposited by the assessee. We find that the Co-ordinate Bench in the case of Jalaram Plast Pack ITA No. 1327 (supra) on identical facts had allowed the claim of the Assessee by holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee u/s 80-IB, the increased income after making disallowance u/s 40(a)(ia) should be considered. Ground No.4 of the assessee is also allowed. 18. The Co-ordinate Bench in the case of Ramesh Industries ITA No. 3131 has also decided the issue in favour of Assessee by holding as under: 8. In Revenue's appeal the only issue involved is whether disallowance made under section 40a(ia) of the Act would be treated as business profit for the purpose of deduction under section 80IB. The AO disallowed a sum of ₹ 7,25,031/- on account of non-deduction of tax. The assessee had made the payments to various parties but had not deducted the tax thereon. The payment was disallowed as per provisions of section 40a(ia). He also disallowed the claim of deduction under section 80IB on such addition, arguing that the addition is not business profit and, therefore, assessee is not eligible for such deduction. 9. The Id. CIT(A) allowed the claim of the assessee holding it to be a business income. 10. We have heard the parties and carefully perused the material on record. The issue is directly covered in favour of the assessee by the decision of the Tribunal in the case of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). CIT(A) confirmed the addition made by the Assessing Officer. Aggrieved by the order of CIT(A), Assessee is now in appeal before us. 22. Before us, the learned A.R. submitted that the Assessee offers income from fixed deposit on cash basis. The income from the aforesaid fixed deposit has already been accounted for in subsequent years. He therefore urged that the same income cannot be tax twice once on accrual basis and the other on the receipt basis. He thus urged that if the order of Assessing Officer is sustained than suitable direction be given to exclude the same income in subsequent years. The learned D.R. on the other hand relied on the order of Assessing Officer. 23. We have heard the rival submissions and perused the material on record. We find that Assessing Officer has calculated the interest on the fixed deposit and considered the interest income on accrual basis. The learned A.R. on the other hand submitted that the Assessee has offered the income from fixed deposit in subsequent years as he follows the cash basis on accounting. It is a settled law that the same income cannot be taxed twice. Before us, the learned A.R. has submitted that interest income was offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that Assessee has explained the source of receipt of capital to be from the partners. He further submitted that addition if at all is to be made, the same has to be made in the hand of the partner and not in the hands of the firm and from this proposition he relied on the decision of Co-ordinate Bench in the case of Ramesh Ind. Vs. ITO (ITA No. 3131/Ahd/2008). In the alternative he submitted that if even the amount of income is added to the total income, the same will enhance the total income which in turn is eligible for deduction u/s. 80IB of the Act. The learned D.R. on the other hand relied on the order of Assessing Officer and CIT(A). 26. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the Assessee had introduced capital during the year and of which ₹ 1,25,000/- was deposited in cash, the source of which could not be explained by the Assessee. We find that the Co-ordinate Bench in the case of Ramesh Industries (supra) has held as under: 5. Before us the Id. AR submitted that the partner Shri Dipak Soni has admitted to have introduced capital in the firm. Therefore, the firm has discharged the onus and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the partners if he is not satisfied with the sources of investment of cash credits in the accounts of the partners. 6. The Id. DR on the other hand supported the orders of authorities below. 7. We have heard the rival submissions and perused the material on record. In our considered view the addition made by the AO and confirmed by the Id. CIT(A) cannot be sustained if partner has owned the money deposited by him in the firm. Action is required to be taken in his hands. So far as the firm is concerned, it is deemed to have discharged the onus. Similar view was taken by Hon. Rajasthan High Court in CIT vs. Kewal Krishnan Partners (2009) 18 DTR (Raj) 121, Hon. Patna High Court in the case of CIT vs. Md. Parwez Ahmed ors. (2004) 268 ITR 381 (Pat) and Hon. Madhya Pradesh High Court in the case of CIT vs. Metachem Industries (2000) 245 ITR 160 (M.P.) has also taken same view. Hon. Madhya Pradesh High Court in CIT vs. Metachem Industries (supra) has held as under :- According to section 68 of the Income-tax Act, 1961, the first burden is on the assesses to satisfactorily explain the credit entry in the books of account of the previous year. If the explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and after giving reasonable opportunity of hearing to the assessee. Thus this ground of Assessee is allowed for statistical purposes. Ground no. 8 9 are interconnected with respect to addition of ₹ 4 lacs u/s 68. 28. During the course of assessment proceedings, Assessing Officer noticed that assessee has taken unsecured loan of ₹ 4 lac from Shri Jayantibhai Shah. The Assessee was asked to furnish confirmation and proof of its receipt. From the copy of the loan confirmation submitted, Assessing Officer noticed that the depositor had stated that the loan was given out of his provident fund receipt on retirement and he had no PAN number as the income was below taxable limit. Assessing Officer did not accept the contention of the Assessee and accordingly considered the unsecured loan under Section 68 had added to the income. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) confirmed the action of Assessing Officer by holding as under: 6.3 I have considered the submission made by appellant and the observation of the A.O. Bank Passbook copy clearly shows ₹ 4 lacs being debited by cheque No.226678 on 03.05.2004. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on retirement and the lender did not have PAN number because his income was below taxable limit. CIT(A) has noted that ₹ 4 lacs was debited in the bank pass book on 3.05.2004 but as per the confirmation filed the loan is stated to have been given on 5.05.2004. He has thus noticed that when the cheque would have been given on or before 3.05.2004 and therefore the confirmation stating the amounting of loan on 5.05.2004 was not correct. Before us the learned A.R. could not controvert the finding of CIT(A) by bringing any contrary material on record. We therefore, find no reason to interfere with the order of Assessing Officer in making addition under 68. The learned A.R. has raised an alternative argument that the addition made under 68 be treated as part of profit eligible for deduction under 80IB. The submission of A.R. is not acceptable for the reason that the addition made under Section 68 is not falling under the head business income but is a deemed income. For availing the deduction under 80IB, the profits and gains should be from the business referred to in Section 80IB. In view of these facts the alternate claim of the Assessee is also not acceptable and, therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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