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TMI Blog2018 (6) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... e 100% deduction from sixth year onwards. (3) Whether on the facts & in the circumstances of the case & In law, Id. CIT(A) is justified in allowing 80lC exemption at 100% in eighth year on the basis of expansion of same unit in the fifth year after availing 100% exemption for first five years which means the unit will avail 100% exemption for 10 years and 25% exemption for next five years totaling exemption for 15 years which is against the provision of law which clearly says that any unit will claim exemption u/s 80lC for 10 years only from the initial assessment year as per provisions 80IC(3)(ii) as the unit is situated in Himachal Pradesh. (4) Whether on the facts & in the circumstances of the case & in law, CIT(A) is justified in ignoring the observation and reasoning given by Assessing Officer in disallowing the deduction u/s 80lC on the other grounds as per the provisions of Section 80IC(4) of the I.T. Act, 1961. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in accepting the additional evidence under Rule 46A of the I.T. Act without giving an opportunity to the AO for representing revenue's view on it. 6. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A), the Revenue is in appeal before the Tribunal. 4. Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal. He further stated that assessee is carrying on job work for HEINZ and has not carried out any manufacturing activity during the year under consideration and nor any substantial expansion u/s. 80IC has been carried out by the assessee in FY 2007-08 to claim the benefit of 100% tax exemption beginning from AY 2009-10 onwards. Therefore, the claim of the assessee u/s. 80IC of the Act was rightly rejected and amount of Rs. 6,71,37,497/- was added to the returned income of the assessee, which does not need any interference. 5. On the contrary, Ld. Counsel of the assessee relied upon the order of the Ld. CIT(A) and stated that he has passed a well reasoned order. He filed a copy of Paper Book containing pages 1 to 52 in which he has attached the copy of assessment order passed u/s. 143(3) dated 31.10.2011 in the case of the assessee for AY 2009-10; copy of CIT(A) order dated 18.7.2013 in the case of assessee for AY 2009-10; Copy of ITAT order dated 29.7.2016 in the case of assessee for AY 2009-10; copy of assessment order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nown as Glucon is sold in the market with its manufactured, individual ingredients lose their character to form a uniform product as it is clear manufacture name. Also it is not possible to separate these ingredients since this is not the case of simply mixing the raw material as has been erroneously presumed by the Ld. AO. The appellant has submitted that the nature of the activity of the manufacture and process of manufacturing of Glucon and other allied products remain same as in the preceding assessment years. The appellant has submitted that the manufacturing unit at Batamandi, Paonta Sahib, Himachal Pradesh is owned, controlled and managed by the appellant itself. The land and building, plant & Machinery is owned by the appellant and depreciation is being allowed on these assets by the AO right from the inception and starting of unit. The appellant has informed and submitted that right from the day. One appellant is registered as a manufacturer with various statutory and government bodies like Central sales tax department, Central Excise department, SSI registration with District Industries Centre and various authorities like Provident fund, Employees state Insurance, Weig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity of such kind of manufacturing activity taken by the appellant tantamount to manufacturing and therefore I do not find any reason of not allowing the benefit u/sec 80IC on the ground that it was not manufacturing. I also do not find any merit in the Ld. AO conclusion that the deduction u/sec 80lC could be denied because the appellant was doing job work for M/s Heinz. The appellant has strongly relied on the decision of the jurisdictional tribunal in the case of Gorawara Plastics and General Industries Pvt. Limited vs. DCIT 63 TT J 329 where the principle was exposited thus: "There is no distinction between the activity for manufacturing on own account as also for the third parties, because the same process was involved in the manufacturing of electron guns on the part of itself in the preceding year. The only requirement of section 80-1 is that the industrial undertaking should manufacture or produce articles or things. The provisions of section 80-1 also nowhere specifically provide that the industrial undertaking owned by the assessee should engage itself in the manufacture of its own goods and not the goods belonging to other parties. If the industrial undertaking is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f deduction made by the AO since the appellant has not set up a new unit as part of substantial expansion and there is no increased in the constructed factory area and staff employed. The facts of substantial expansion is borne out from submission made by the appellant and while going through the facts and papers placed on records, it was observed that during the F.Y. 2007-0S, the unit has made investment in the Plant & Machinery ofRs.11,442,802/- which is equal to 63.44% (more than 50%) of the book value of the plant & Machinery at the beginning of the previous year in which substantial expansion undertaken i.e. as at 01.04.2007 which in present case equal to Rs. 18,036,875/-. As per the provision of the section 80IC(8)(ix), it is a substantial expansion and for the purpose of this section, the A. Y. 2008-09 relevant to the F. Y. 2007-08 in which such substantial expansion completes becomes the initial assessment year. Once it becomes the initial assessment year consequently under sub section (3), the assessee would be entitled to 100% deduction of profits and gains for a period of 5 years commencing from such initial Assessment Year i.e. from A. Y. 2008-09 to A. Y. 2012-13. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial expansion either by the department or by the assessee is not permissible within the framework of Income Tax Law. In case the law makers has desired more detailed commentary or explanation or conditions attached with the concept of substantial expansion in that case the government would have come up with either specifically rules printed in Income Tax rules or CBDT would have issued a detailed circular to its effect. But neither the CBDT has issued any circular nor any specifically any rules have been printed. Hence the definition of substantial expansion as printed in the above section has to be read in line with the intention of the law makers. With due respect we would like to submit before your honour that the meaning of substantial expansion has been crystallized and specifically mentioned by the law makers in the statue book itself, then neither the assessee nor the department got any right to interpret the concept of the substantial expansion based on illogically reasoning and irrelevant points. The Ld. AO has gone beyond its jurisdiction and has tried to mould the definition of substantial expansion as suitable." The appellant has also relied on the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansion. We have made an investment of Rs. 103.23 lacs in increasing the constructed area of the building. There has been increased in the power load also from 175 KW to 375 KW Also there has been increased in average numbers of employees deployed per day. Prior to the substantial expansion i.e. in A. Y 2006-07, on an average per day we have deployed 55 Nos of employees which were increased to 93 Nos. in F. Y 2007-08. There is 69.09 % increased in the employment during the F.Y. 2007-08 as compare to F. Y 2006-07. Although all these points are not to be debated or discussed to come out to the conclusion whether or not the substantial expansion has taken place. But still we are giving the facts on records. " It is believed that the appellant is correct in view of section 80lC. The concept of substantial expansion in terms of its specific meaning as mentioned in clause (ix) of sub section (8) of the section 80lC, it is crystal clear and there is no ambiguity in the law relating to the allowance of claim of 100% tax benefit on account of substantial expansion. In response to the view taken by the AO in support of See 80lC(4)(i) that the unit was formed by splitting up or recons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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