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TMI Blog2016 (7) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case and in law: 1. The learned CIT(A) erred in confirming the invocation of provisions of sec. 153A when there was no material found during the course of the search leading to any additions/ disallowances. 2. a) The Id. CIT(A) erred in confirming the disallowance of claim ix] s.801A on Daman Units I & II. b) The Id. CIT(A) erred in holding that Unit 1 at Daman was formed with transfer of machinery from Aurangabad Unit and thus violated provisions of sec.801A while transfer of machinery was much within the limits laid down in Sec.801A. c) The Id. CIT(A) further erred in confirming that Unit No.2 at Daman was an extension of Unit No.1 while it was a separate and independent unit manufacturing a different product with new machinery and new labour and the portion of machinery that was transferred from the Aurangabad Unit was insignificant and within percentages laid out in the provisions of sec.801A. 4. The brief background of the case is that the appellant is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of manufacturing and trading of bulk drugs as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord that in the year 1998, assessee company set-up another manufacturing unit in Daman, termed as Unit-2. In Unit-2, the assessee company is undertaking manufacture of tablets and capsules but some oral liquids and B-lactam antibiotics. In so far as Unit-1 is concerned, notably it has availed the benefit under section 80IA of the Act from assessment year 1995-96 onwards. The claim under section 80IA of the Act with respect to Unit-2 is made for the first time in assessment year 1999-2000. 4.2 In the impugned assessment, the claim with respect to Unit-1 has been denied primarily on the ground that the value of machinery transferred to Unit-1 exceeds 20% of the total value of the machinery and plant used in the business of Unit-1. The aforesaid condition is contained in Explanation -2 r.w. clause (ii) of section 80IA(2) of the Act. The charge made against the assessee is that on the basis of the search and survey action it was found that old used machinery from Aurangabad Unit was transferred to Unit-1 at Daman which was in excess of the 20% of the total value of the plant and machinery used in the business of Unit-. The aforesaid objection is the sum and substance of the dispute b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96. It is also an established position that assessee has been allowed benefit of section 80IA of the Act right from assessment year 1995-96 in relation to Daman Unit-1. Therefore, on a prima-facie basis, the action of the Assessing Officer in denying the deduction in assessment year 1999-2000 is legally untenable and unwarranted as it seeks to disturb an accepted position, and that too based on a condition which is required to be evaluated in the initial year only. Be that as it may, we have also considered the factual matrix of the case because the Assessing Officer has attempted to make out a case that the documents/ information found in the course of search and survey carried out on the group on 18/11/2004 has revealed non-compliance with the aforesaid condition. 4.5 A perusal of the assessment order reveals that as per the Assessing Officer the transferred plant and machinery in Daman Unit-1 constitutes 29% of the total value of plant and machinery. Furthermore, the Assessing Officer also says in para 9.2 of his order that after discussion with one Mr. Anil Bhoot, General Manager(Finance), the correct percentage of old used machinery vis-à-vis the total plant and machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld facility using plain S.S Tanks without top and without any jacket for manufacturing of syrups, whereas for its Daman Unit-1, assessee acquired Jacketed Tanks, which were totally closed with top dish. Thus, the allegation by the Assessing Officer that tanks from Aurangabad Unit were transferred was untenable. The assessee also pointed out that its Aurangabad Unit was working till 1997, whereas Daman Unit-1 had commenced production in 1994 itself, therefore, the Daman Unit-1 could not have been started by transferring the said tanks from Aurangabad unit. 5.2 All these factors have been considered by the CIT(Appeals), so however, he has ultimately upheld the stand of the Assessing Officer. In para 3.4.9 of his order, the CIT(Appeals) records that all plant and machinery from Aurangabad unit could not be considered to have been transferred to Daman Unit-1, but atleast two tanks were transferred from Aurangabad unit and two from another concern. The CIT(Appeals) has also referred to the statement given by Mr. Sahir Khatib in the course of search action. The failure of the assesse to produce delivery challans of certain machineries before the Assessing Officer also led the CIT(Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made out that even if the total value of the new plant and machinery be taken as Rs. 19,29,266/-, as adopted by the CIT(Appeals), yet the value of old asset transferred is less than 20% as it is merely 68,633/-. In any case, it is sought to be asserted that the total value of the plant and machinery of Daman Unit-1 is Rs. 31,41,563/- and considering the old transferred machinery of Rs. 68,633/-, it constitutes only 2.1% of the total machinery. In support, assessee has furnished extract of the annual financial statement as also the ledger account of the fixed assets of Daman Unit-1 for the period from 31/3/1993 to 31/3/1995. In particular, the following was submitted and referred to:- 1. Summary of fixed assets as on 31/03/1993 - A-1 2. Summary of fixed assets as on 31/04/1993 - A-2 3. Summary of fixed assets as on 31/3/1995 - A-3 to A-7 4. List of additions to Plant and Machinery of Unit 1 during 1993-94 for Rs. 25,64,307/- as on 1/4/94 - A-8 toA-10 5. List of additions to Plant & Machinery of Unit 1 during 1993-94 for Rs. 5,77,256/- - A-11 to A-13 6. Accounts entries passed while capitalizing to accounts. - A-14 to A-32 6.3 The aforesaid submissions put-forth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.1993, the total machinery shown is Rs. 36,26,956/-. As on 31.03.1994(Pg A-2) total machinery shown is Rs. 31,75,090/- and at the bottom is Capital WIP of Rs. 101,04362/-. The said Capital WIP was capitalized to Accounts as on 01.04.1994 (Page A-4 to A-7). The value of Machinery capitalized as on 01.04.1994 to Unit I at Daman is Rs. 25,64,307/-. List of Machinery is at page A-8 to A-10. Further Machinery valued at Rs. 5,77,256/- was capitalized during the period 01.04.1994 to 31.03.1995 for Daman Unit I, list of which is at pg A-11 to A-12. Thus machinery purchased for operations of Daman Unit I is valued at Rs. 31,41,563/- as on 31.03.1995. The revenue has not given details of value of machinery for Daman Unit I being Rs. 19,29,266/- (pg 19 of CIT(A) Order). Further CIT(A) has considered the value of machinery at Rs. 19,29,266/-(pg 43 of the order). At 466 is list of machinery transferred from Aurangabad to Daman Unit I. The cost of value machinery transferred from Aurangabad is Rs. 3,07,000/- while WDV of all such machinery is Rs. 68,633/-. Thus, the denominator of value of machinery should be taken at Rs. 31,41,563/- in place of Rs. 19,29,266/- as considered by CIT(A). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year 1998-99; and, Rs. 6,754/- in the financial year 1999-2000. In this detail, it has also been pointed out that the transfer of Rs. 6,754/- in financial year 1999- 2000 included the WDV of two tanks of 1000 litres and 2000 litres. On the contrary, it has also been asserted that the CIT(Appeals) in Para 3.4.7 has wrongly considered the value of machinery transferred at Rs. 5,61,600/-, being 3 S.S. Jacketed Tanks of Rs. 1,87,200/- each. On this aspect the Ld. Representative for the assessee vehemently pointed out that Rs. 5,61,600/- was the cost of three new S.S. Jacketed Tanks purchased by the assessee and that same does not reflect any transfer of old machinery from Aurangabad Unit to Daman Unit-I. The aforesaid point made out by the assessee is liable to be upheld because we find that even in the remand report furnished by the Assessing Officer before us, there is no substantiation as to how the figure of Rs. 5,61,600/- has been arrived at although assessee has consistently pointed out that the same reflects the purchase price of new S.S. Jacketed Tanks. As a consequence, we have no reason to distract from the position that old machinery to the extent of Rs. 68,633/- only have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer held that Daman Unit-2 could not be considered as a new unit and the benefits of section 80IB could not be separately available to Daman Unit-2 and it should run concurrently with Daman Unit-1 itself. 11. On the other hand, the stand of the assessee before lower authorities as well as before us is to the effect that the Daman Unit-2 is separate and distinct unit which is engaged in the business of manufacture of tablets, capsules and B-lactum antibiotics; the products which are different from the products being manufactured at Daman Unit-1. It has been pointed out that merely because the central excise, sales tax registration, etc. are common cannot be considered as a good ground to say that Daman Unit-2 was a part and parcel of Daman Unit- 1. Ld. Representative for the assessee pointed out that Daman Unit-1 was set-up in the year 1994, whereas the Daman Unit-2 has been set-up on an adjacent piece of land in 1998. It was pointed out that the said land was purchased subsequently and separate building was constructed and the manufacturing unit was set-up with purchase of new machinery, new loans were raised and separate labour force was employed. It has been explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for exemption under section 80IA and 80IB of the Act has come up for the first time in this year. The claim of exemption for Daman Unit-2 is sought to be defeated by the Revenue on the ground that it was merely an extension of Daman Unit- 1. In this context, Page-480 of the Paper Book clearly establishes that the products being manufactured in Daman Unit-2 are different from those being manufactured in Daman Unit-1, although the common genre of the product is in the pharmaceutical line of business. In fact, in Daman Unit-1, assessee is undertaking manufacture of oral liquids only, whereas in Daman Unit-2 assessee company is undertaking manufacture of tablets and capsules as also some oral liquids and Blactum antibiotics. These factual assertions have not been negated by either of the lower authorities and in fact even before us there is no material led by the Revenue which would negate the same. At this point, we may also add that we are not professing that it is imperative for the new unit to manufacture an entirely different item from what was being manufactured by the old unit in order to claim exemption under section 80IA and 80IB of the Act. Reference can be made to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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