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TMI Blog2017 (9) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... xpansion as on 24.11.2005, the investment in plant and machinery was increased from ₹ 33.32 lakh to ₹ 52.36 lakh during the year under consideration. CIT(A) also granted relief to the assessee for AY 2007-08 by following its order for AY 2006-07 which cannot be said to be an unjust or improper approach rather the CIT(A) rightly followed rule of consistency in the proceedings by following its order for immediately preceding year. As referring to subsection 6 of section 80IC which restricts deduction under section 80IB, section 80IC or section 10C for a total period of 10 years and beyond that no deduction is allowed. The arguments of Ld. CIT(DR) cannot hold ground, and the assessee is eligible for deduction under section 80IC(6) of the Act for at least 5 years. Since both the issues of substantial expansion at ‘Parwanoo’ unit and the activity of the assessee as manufacturing, have already been decided in favour of the assessee by the orders of the Tribunal and no contrary decision of any higher court has been brought to our notice by the learned CIT(DR), respectfully following the decision of the Tribunal in assessee's own case , we find no infirmity in the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 10,46,93,829/- by ignoring the observation of the AO in the assessment order that the substantial expansion was not effected by the assessee company within the prescribed limit given in the Act and that the assessee was not engaged in the manufacturing activity for the purpose of which deduction u/s 80IC in allowable? 4. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 5. That the grounds of appeal are without prejudice to each other. 6. That the appellant craves leave to add. alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing. 3. The grounds raised by the assessee in ITA No. 6561/Del/2014 are as under: 1. That the CIT(A) erred on facts and in law in confirming the disallowance ofexpenses to the extent of ₹ 14,97,616/- made by the assessing officer under section 14A of the Income tax Act, 1961 ( the Act ) invoking Rule 8D of the Income Tax Rules, 1962 ( the Rules ) , holding the same to be expenditure incurred for earning exempt income 1.1. That the CIT(A) erred on facts in confirming the action of the assessing officer in mechanically invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IC the Act. The Ld. CIT-(A) has deleted the disallowance following the decision of his predecessor in assessment year 2006-07. In the grounds, the Revenue has raised the issue that substantial expansion of the unit was not effected within the prescribed limit given in the Act and the assessee was not engaged in the manufacturing activity for the purpose of deduction under section 80IC of the Act. 4. At the outset, the Ld. counsel of the assessee brought to our attention that the issues in dispute have already been decided in favour of the assessee by the orders of the Tribunal in assessee s own case for assessment year 2006-07, 2007-08 and 2008-09. 5. On the contrary, the Ld. CIT(DR) relied on the order of the Assessing Officer and submitted that Revenue has filed appeal against the said orders of the Tribunal. Further, the Ld. CIT(DR) submitted that the unit was established in the year 2000 and the assessee has already claimed deduction under section 80IB of the Act from assessment year 2001-02 to 2005-06 and, thus, it should not be allowed deduction under section 80IC of the Act for substantial expansion of the existing unit. 6. We have heard the rival submission and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Special Leave Petition filed by the Department before the Hon ble Supreme Court was also dismissed, vide order dated 13.05.2010 (SLP No. 764 of 2010). It is also pertinent to note that the Hon ble Tribunal had based its decision on the judgment of the Hon ble Delhi High Court in the case of CIT v. Oracle Software India Ltd. 293 ITR 353, which has been subsequently affirmed by the Hon ble Supreme Court in Civil Appeal No. 235 of 2010 reported at 228 CTR 433. In view of the above position, this issue is decided in favour of the appellant. 4.3.4 The next issue to be decided is whether the appellant actually carried out substantial expansion during the relevant previous year so as to become eligible for deduction u/s 80IC in the instant A.Y. 4.3.7 In view of the foregoing discussion on all the relevant issues and the findings thereon, it is held that the appellant has justified substantial expansion of its Parwanoo Unit which makes it eligible for deduction u/s 80IC as it is engaged in manufacture of an article or thing being ESRI software CDs which in not on the negative list of the Thirteenth Schedule. Ground No. 2 is thus decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of substantial expansion raring the relevant previous year even after disallowing other capitalized charges, the assessee has been able to justify the increase of plant and machinery to the tune of ₹ 18,35,423 (Rs.19,48,888 - ₹ 1,13,465) at Parwanoo unit. We are also in agreement with the conclusion of the CIT(A) that this amount of increase of plant and machinery during the year under consideration viz. ₹ 18,35,423 is more than 50% of the opening value of the plant and machinery for Parwanoo i.e. ₹ 34,63,220 (as on 1.4.2005) then the claim of expansion of Parwanoo unit was rightly held in favour of the assessee. We also note that the Director of Industries, H.P. also acknowledged the substantial expansion of Parwanoo unit as on 24.11.2005 by the certificate dated 8.2.2006 which has not been controverted by the AO which clarifies that after substantial expansion as on 24.11.2005, the investment in plant and machinery was increased from ₹ 33.32 lakh to ₹ 52.36 lakh during the year under consideration. 9. On the basis of foregoing discussion and facts and circumstances emerged and noted by us, we are inclined to hold that the CIT(A) dealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of assessee itself under similar set of facts followed by the Learned CIT(Appeals), we do not find reason to interfere with the First Appellate Order in this regard. The same is upheld. The grounds involving the issue are accordingly rejected. 9. As regard contention of the learned CIT(DR) that the assessee has already been allowed deduction under section 80IB of the Act for five years and therefore, it should not be allowed deduction under section 80IC of the Act, we may like to mention the subsection 6 of section 80IC which restricts deduction under section 80IB, section 80IC or section 10C for a total period of 10 years and beyond that no deduction is allowed.The relevant subsection read as under: 80-IC. ( 1) .. ( 2) .. ( 3) .. ( 4) . ( 5) . ( 6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to subsection (4) of section 80-IB or under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e already made by the assessee and sustained the balance addition of ₹ 14,97,616/-. 14. Before us, the Ld. counsel of the assessee submitted that the Assessing Officer has not complied with the prerequisite of dissatisfaction with the claim of the assessee of disallowance under section 14A of the Act. The learned counsel also submitted that assessee has already made disallowance of ₹ 2,65,537/- exceeding the exempted dividend income of ₹ 2,36,385/- and, therefore, no disallowance is required to be made in view of the decision of the Hon ble Delhi High Court in the case of Joint Investment Pvt. Ltd. Vs. CIT 372 ITR 694. 15. On the contrary, Ld. CIT(DR) submitted that the Assessing Officer has duly recorded his dissatisfaction with the working of the disallowance under section 14A by the assessee, and requested that disallowance under Rule 8D of the Act might be upheld. 16. We have heard the rival submission and perused the relevant material on record. In the case of Joint Investment Ltd Vs. CIT on Hon ble Delhi High Court is of the view that disallowance under section 14A of the Act should not exceed the exempted income claimed by the assessee. The relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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