9911796707
TMI Blog2011 (12) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessment year 2006-07, return was filed on 13.10.2006 declaring nil income. The assessee has claimed deduction under sec. 80-IC(2) of the Act. Assessing Officer in both the assessment years did not examine the issue elaborately rather in assessment year 2005-06, it has reproduced the order of Learned CIT(Appeals) passed in assessment year 2004-05. Thereafter, he reproduced the submissions of the assessee and in concluding paragraph he observed that since this order has not been accepted and an appeal has been filed before the ITAT, therefore, assessee is not entitled for deduction under sec. 80-IC of the Act. He further observed that in case that deduction under sec. 80-IC is to be granted to the assessee then interest income on FDRs will be excluded. He restricted the amount on which deduction under sec. 80-IC would be allowed at ₹ 5,53,42,051 as against ₹ 5,60,17,456. Similarly, in assessment year 2006-07, he excluded the amount of fluctuation gain amounting to ₹ 3,96,655 from the eligible amount on which section 80-IC would be computed. 3. On appeal, Learned CIT(Appeals) has allowed the deduction to the assessee. 4. With the assistance of learned re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The undertaking or enterprise manufactures or produces any article or things specified in fourteenth schedule. (iii) An existing manufacturing unit should undertake substantial expansion beginning from 7.1.2003 and ending before 1.4.2012. 5.5 In the assessment for A.Y. 2004-05, the AO was satisfied about the first two conditions but not on the third condition that the appellant has undertaken substantial expansion during the period beginning 7.1.2003 and ending before 1.4.2012. The main reason for not accepting the appellant s plea that substantial expansion has actually taken place during A.Y. 2004-05, is that the appellant firm could not provide the book value of plant and machinery existing as on the first day of the financial year relevant to assessment year 2004-05. In fact the appellant firm provided the WDV of plant and machinery as on 31.3.1991 and addition made in plant and machinery thereafter. The appellant has taken the double of WDV as on 31.3.1991 as the book value of assets before depreciation and subsequent to that, the additions to plant and machinery have been added to arrive at the book value of plant and machinery as on the first day of financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansion, I find that the firm is a very old firm constituted in 1964 with only two partners, Shri Ved Prakash Windlass and Shri Vinay Kumar Windlass. Therefore, the firm has been reconstituted from time to time and it was in the year 1989 that land was purchased in Balawala and additions to the plant and machinery were made in the year 1990. The appellant furnished before the AO report of Malik CO. dated 16.6.2003 wherein the gross block of plant and machinery as on 1.4.1993 has been taken at `. 13,13,243/- (WDV `. 4,11,450/-). The appellant vide its letter dated 17.3.2004 informed the CIT, Dehradun and the DCIT, Circle-1, Dehradun about the certificate of the Chartered Accountant dated 16.6.2003 about the gross block of plant and machinery. The gross value of this machinery as on 1.4.1990 cannot be more than about `. 25.50 lakhs taking depreciation @ 20% in the year 1990 to 1993. Before 1989, the appellant s factory was situated at 11-A, Rajpur Road, Dehradun. The plant and machinery was merely in the form of Bhattis for casting the iron and buffing facility. I agree with the appellant that the value of such plant and machinery must have been in thousand in the year of investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t books of more than 6 years, the approach of the ld. CIT(A) was reasonable in determining this issue. Therefore, we do not find any such error in his order which requires any correction from our side. Thus, this ground is dismissed. 5.8 Having regard to the above finding of the ld. CIT(A) for A.Y. 2004- 05 and upholding the same by Hon ble ITAT, the issue regarding the fact that appellant has undertaken substantial expansion within the meaning of section 80-IC(8) (ix) stands settled in the first year of such claim of deduction u/s 80-IC of the I.T. Act i.e. for A.Y. 2004-05. It appears that the department has not agitated against this issue for further appeal before the Hon ble High Court of Uttaranchal and thus Hon ble ITAT being the last fact finding authority, the criteria of substantial expansion has been accepted to be fulfilled in the first year of such claim of deduction u/s 80IC in A.Y. 2004- 05. The instant assessment year is the second year of such claim of deduction u/s 80-IC and therefore such claim of deduction u/s 80IC cannot be denied on identical facts. 5.9 Coming to the question as to whether the appellant has been manufacturing or producing han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the remand report himself accepted that the product manufactured by the assessee i.e. handicraft items comes within the ambit of sec. 80IC of the Act. Learned First Appellate Authority has referred the conclusion drawn by the Assessing Officer in the remand proceedings. In this way, it is not justifiable at the end of the revenue to challenge the order of the Learned CIT(Appeals) in further appeal before the ITAT on this issue. In view of the above discussion, ground No.2 is rejected in both the years. 6. As far as the inclusion of interest income earned on the FDRs in the eligible profit for working out the deduction under sec. 80-IC is concerned, this ground has not been adjudicated by the Learned CIT(Appeals) in assessment year 2005-06, therefore, we remit this ground to the Learned First Appellate Authority for adjudication. 7. As far as the gain on account of exchange difference is concerned, we find that the Assessing Officer has assessed this amount under the head income from other sources . However, this amount has resulted to the assessee on the unrealized sales made by the assessee. It deserves to be treated at par with the sales realized by the assessee. Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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