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TMI Blog2017 (2) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... s disallowance - Held that:- CIT(A) was correct to restrict the impugned disallowance to 10% of the telephone and vehicle expenses only as per his order in assessment year 2005-06. Both the learned representatives thus indicate that the said findings on the very issue in preceding assessment year have attained finality for want of challenge. We appreciate this fair stand to confirm the ld. CIT(A)’s action under challenge in the instant ground raised at Revenue’s and assessee’s behest. Disallowing deduction claim raised u/s.80IB - the assessee filed its audit report/form 10CCB in course of the lower appellate proceedings than that with its return - Held that:- CIT vs. Punjab Financial Corporation [2001 (12) TMI 50 - PUNJAB AND HARYANA High Court] has overruled its former decision hereinabove to conclude that such an audit report need not be mandatorily filed with a return of income. There is admittedly no other objection on part of the CIT(A) to decline the impugned deduction claim. We accept assessee’s arguments accordingly to direct the Assessing Officer to delete the impugned disallowance. Disallowance of expenditure in the nature of consumption of stores and spares - Hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er reopened a regular assessment framed in the instant case solely for the reason that its cost of plant and machinery used in business was certified to be of ₹ 92,92,711/- (WDV) as per form 10CCB/3CD. He thus sought to treat it as a non small scale industrial undertaking on the ground that its corresponding investments exceeded threshold limit of ₹ 60lacs. He proceeded on the same reasoning in the impugned reassessment as well resulting in the disallowance in question. 4. The CIT(A) upholds Assessing Officer s action as follows: 4.2 have carefully considered the rival submissions. I have also perused the submissions made by the Ld. A.R. Since deduction u/s. 80IB has been disallowed by the Ld. A.O., it will be pertinent to consider the provisions of section 80IB. The provisions of section 80IB (1) are reproduced as under: Where the gross total income of an assessee includes any profits arid gains derived from any business referred to in sub-sections (3) to (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing u/s.80IB(3) of the Act in view of the fact that cost of its plant and machinery for the year under consideration comes to ₹ 92,92,711/- in excess of ₹ 60lacs. We find from the paper book that small scale industrial scheme comprised in pages 23 to 28 prescribe such an investment limit to be of ₹ 60lacs in the year 1991 as revised to ₹ 300lacs in December 1997. We also notice at page 14 of the paper book that assessee s concern M/s. Nandeshwari Packaging manufacturing HDPE / P.P. bags at Vatva has already been treated as a small scale industrial undertaking by the District Industries Centre, Ahmedabad Authority. Learned Departmental Representative fails to rebut all this factual position. We thus hold that the assessee s industrial undertaking in question is a small scale industry so as to be eligible for Section 80IB deduction in question. We accept assessee s instant substantive ground and direct the Assessing Officer to frame consequential assessment deleting the impugned disallowance. ITA No.323/Ahd/2012 partly succeeds. Assessment year 2006-07 (Revenue s appeal ITA No. 1380/Ahd/2011 + C.O. No.138/Ahd/2011) 6. The Revenue s first substantive g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have erred in disallowing 10% of miscellaneous expenses coming to ₹ 13,705/-. Learned counsel state herein as well that the CIT(A) has followed his action as in the preceding assessment year to arrive at the impugned disallowance @10% in identical set of circumstances. The same is also stated to have become final in the earlier assessment year. We thus find no reason to adopt a different approach in the impugned assessment year. This ground is accordingly rejected. 9. The assessee s last substantive ground assails correctness of both the lower authorities action in disallowing deduction claim of ₹ 38,50,685/- raised u/s.80IB of the Act. There is no dispute that ld. CIT(A) has upheld the impugned disallowance solely on the ground that the assessee filed its audit report/form 10CCB in course of the lower appellate proceedings than that with its return. He follows hon ble Punjab Haryana High Court s decision in CIT vs. Jaideep Industries 180 ITR 81 (P H) that the same is to be mandatorily filed with the return of income. We notice that the said hon ble high court s full bench decision in (2002) 254 ITR 6 (P H) CIT vs. Punjab Financial Corporation has overruled its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Lohia Starlinger Ltd. Cheese Winder 1840000 2147435 4 Met Lee Engineers M.S. Pipes 360000 420589 2702000 From the above it is clear out of four bills produced three bills are in the nature of plant and machinery. Even if it is a spare part it is embedded to a machinery. Regarding M.S. Pipes they are consumable nature which can be stored for utilization in manufacturing process. Thus, after excluding M.S. Pipes from the above list the other three items are utilized in the manufacturing process where in the part are spare or plant or machinery will give longevity more than one year and with the upkeep and maintenances of the said items of spare will generate and injuring benefit to the assessee in terms of its utilization in the business thus the cost of machinery claimed under consumption of stores/spares amounting to 27,02,2000/-are to be capitalized and the assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue will definitely give enduring benefit to the assessee, as longevity of a screw or barrel embedded to the machinery will continue and prolong the existence of the machinery. The Ld. Assessing Officer has relied on the judgement of Hon'ble Supreme Court in case of Empire Jute Corporation Ltd 124ITR1. (c) The contentions raised by the Ld. Assessing Officer are wholly illogical, unjustifiable and improper to the facts and circumstances of the appellant's case. The appellant incurred ₹ 72,23,025/- towards consumption of stores and spares. The Ld. Assessing officer vide para 5 held purchase of M.S.Pipes ₹ 3,60,000/- to be revenue expenditure. However, while considering disallowance, the same were treated as capital expenditure. (d) Even otherwise, the said stores and spares were consumed for smooth functioning of plant machinery in ordinary course of business. Neither it has resulted into being a new plant machinery, nor has its consumption resulted into providing long term enduring benefit to the appellant. These are the normal repairs and replacement of the parts. These are revenue expenditure. The said expenses were incurred in ordinary c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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