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TMI Blog2018 (11) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... has also shown the details of the machinery for the purpose of manufacturing of the specified item. Such details are also furnished along with copies of bills etc. The amount of purchases from the related party are also very minuscule that is only of ₹ 5 9568/–. Even otherwise this is not the first year of the claim of the assessee but second-year of the Holiday period of 10 years. In view of this we confirm the finding of the learned CIT appeal in deleting the disallowance of deduction under section 80 IC - decided against revenue Allowing carry forward business losses and unabsorbed depreciation for the earlier years - Held that:- We find that production had commenced from the first year onwards and this is the second year of the operation. Even otherwise Commencement of production or not is not a criteria for allowing such losses. In any case in the AY 2012-13 b/f losses have to be allowed if the losses were claimed in the return of income and the returns were filed in time. It is not the allegation of the revenue that assessee has not claimed this in the return of income or the returns were filed late. Set off and carried forward of losses are governed by section 70 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was taken on rent on 01.03.2010/23.06.2011. (ii) Ld. CIT(A), on the facts and circumstances of the case, has erred in law in ignoring the factual discrepancies with regard to the production of article in one month's period prior to 31.03.2010 and F.Y. 2010-11. (iii) Ld. CIT(A), on the facts and circumstances of the case, has erred in law in ignoring the fact that the assessee has bought the major component from its sister concern Adit Infotech which shows that the unit of the assessee has not commenced manufacturing activities w.e.f. 31.03.2010 as has been clamined by assessee and infact, the documents have been prepared to show that unit become operational before the 1st Day of April, 2012 which is also a pre-condition as enumerated in sub-clause (ii) of clause (b) of sub-section (2) of section 80-IC of the Income-tax Act, 1961 for claiming deduction u/s 80-IC of the Income tax Act, 1961. 3. Ld. CIT(A), on the facts and circumstances of the case, has erred in law in deleting the addition of ₹ 69,20,378/- made by disallowing the deduction u/s 80-IC of I.T. Act, 1961. 4. Ld. CIT(A) on the facts and circumstance of the case, has erred in law in allowi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 26268 and unabsorbed depreciation of ₹ 1 86522/ 4. The assessee challenged the same before the learned commissioner of income tax appeals. He deleted the addition vide order dated 2/11/2015 and held that assessee is eligible for deduction under section 80IC of the income tax act. He also allowed the set off of the unabsorbed depreciation and carry forward of losses. Therefore the revenue has agreed with the order has preferred appeal before us. 5. The learned departmental representative vehemently supported the order of the learned AO and submitted that assessee is manufacturing the prohibited goods according to schedule 13 of the income tax act and therefore is not eligible for deduction under section 80I C of the income tax act. He extensively read the order of the learned assessing officer. 6. The learned authorised representative vehemently relied upon the order of the learned commissioner appeals and also his submissions before the learned assessing officer. It was stated by the learned authorised representative that assessee is not manufacturing the products specified under schedule 13 and it is not a prohibited goods. He stated that had that been the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory premises do not fall in the notified area is not correct. It is also submitted by the appellant that address given in the two lease agreements is the same as in the first agreement Khasra No.853/54 is mentioned and in the second agreement it is mentioned as 853/854. Both the addresses mentioned in the above cited lease deeds is one and the same. Therefore, it is held that the manufacturing activity of the appellant falls under the notified area issued by the Central Excise Department. Vide para 10 of the assessment order, the AO has mentioned that the appellant company has been established to claim deduction under Section 80 IC of the Act for manufacturing the same product as being manufactured by the present promoter of the company in his individual capacity. In this regard the appellant has submitted that present Director joined the company in November, 2010 arid the company was originally incorporated in July, 2009 and have applied for and obtained 80 IC registration prior to joining of the present Director. Therefore, the conclusion of the AO is not factually correct and irrelevant to the issue, so far as the claim of deduction under section 80 IC is concerned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of battery from different material is a highly technical job and it needs great deal of accuracy at each process. At the time of assessment proceedings the appellant had submitted a complete list of machine installed and used by the appellant. Such machines can be put to use as soon as they arrived at the premises and they do not need elaborate process of installation. In view of these facts, the observation of the AO that one month time is not enough to complete the production process was not justified and the same were made without understanding the manufacturing process. The appellant has further stated that appellant company has been registered with Central Excise Department, Pollution Control Board, VAT Department, Industries Department, Indian Customs, Electricity Board, Village Panchayat and others. All these registration process establish that appellant company had started production in the month of March, 2010. In support of its contention, the appellant has filed relevant documents in the form of paper book from page 1-67 before me as well as before the AO which is placed on the record. Vide para 12.1 of the assessment order, the AO has made observations about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test to ensure that it will be able to perform as needed in a mobile phone. A PCB tester is used to conduct this test on 100% lot. The PCB is then sent for welding a nickel strip on the terminals, to make it ready for the battery. This is done with the help of a resistance spot welding machine. After the PCM welding with the strip, it is sent to the next welding position to weld the nickel strip on the cell terminals. Thereafter, another QC check is conducted to ensure that during welding, no component of the PCB has failed, or the cell has failed, which does happen in a very rare case (mainly below 0.02%). Then, after this, the welded cells are sent to the injection molding section to encapsulate the PCB with the cell to give it a proper finish, apart from the exact shape as required in a mobile phone. The material used here is polyamide granule, which is a low temperature hotmelt, specifically made for high end electronic equipment which should not be exposed to high temperatures. On completion of the injection molding, the battery is first checked for physical appearance, and then sent for testing again, as at times, in rare cases (maybe only 1 in 25000) there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was covered under Schedule XIV and Assessing Officer proceeded on basis of doubts as to genuineness of claim rather than some concrete material, disallowance of deduction under section 80-IC was not justified - Held, yes [Para 9][ln favour of assessee] FACTS The assessee, engaged in the manufacturing of electronic goods, claimed deduction under section 80-IC. The Assessing Officer disallowed the claim of deduction under section 80-IC holding that assessee was engaged in the business of manufacture of electronic goods in the industrial area of Himachal Pradesh and business involved only trading under the brand name of the parent company and no adequate plant or machinery or infrastructure to carry out the manufacturing activities and, therefore, the LCD monitor claimed to be manufactured by the assessee was not covered under Schedule XIV. On appeal, the Commissioner (Appeals) deleted the disallowance holding that selling the product in the brand name was no bar to claim the benefit on account of manufacturing activity of assembling components. On revenue's appeal, the Tribunal upheld the order of the Commissioner (Appeals). On appeal: HELD The con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d various parts/components of air purification system from different vendors and assembled the same at the facility. The assessee claimed deduction under section 80-IC. The Assessing Officer denied deduction holding that the aforesaid activities would not qualify as 'manufacturing activity,' as the assessee was merely a assembler and did not have requisite tools or machinery. On appeal, the Commissioner (Appeals) allowed the assessee's claim. The Tribunal upheld the order of the Commissioner (Appeals). On revenue's appeal to the High Court: HELD The finding of the appellate authorities including the Tribunal is that the product produced and sold by the assessee was air puhfication system. For manufactuhng the said product, the assessee had purchased parts like base motors, filters, UV lights, etc., but the final product produced was entirely different from its constituents or parts. The product manufactured or produced, i.e., the air purifier or air purification system, was completely a new and an entirely different commodity having distinct name, character and use. The assessee had filed a flow chart of the manufacturing process. The manufactuh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a final product quite distinct from components used and had distinct usage too, assessee's claim for deduction was to be allowed - Held, yes [In favour of assessee] FACTS The assessee was engaged in manufacturing of 'air springs assembly and other metal parts' which were supplied to Indian Railways in its 'P' unit. The assessee filed its return claiming deduction under section 80-IC. The said deduction had been claimed in earlier assessment years as well. The revenue authorities had allowed assessee's claim in earlier year. However, during relevant assessment year, the Assessing Officer took a view that assessee was not engaged in manufacturing activity and, therefore, its claim for deduction could not be accepted. The Commissioner (Appeals) confirmed the order of the Assessing Officer. On second appeal: HELD The assessee had been granted deduction under section 80-IC in earlier years and that two in assessment under section 143(3). Now in the 3rd year the Revenue cannot suddently take up the ground that the assessee was not doing any manufacturing and therefore, was not entitled for deduction under section 80-IC. [Para 10] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness) - Assessment year 2008-09 - Assessee, engaged in business of manufacture of multifunction transducer, claimed deduction under section 80-IC - Assessing Officer restricted deduction to 50 per cent on an ad hoc estimation on ground of non submission of any proof of installation of machinery, etc. - On appeal, Commissioner (Appeals) granted relief for entire deduction based on findings that Deputy Director of Industries had issued a certificate of allocation of a registration number for small scale enterprise for manufacturing transducers and meter showed date of commencement of commercial production - Whether where assessee had produced positive proof that it was a manufacturing/assembling unit, it was entitled to The facts of the above cited judicial pronouncements are identical with the facts of appellant‟s case. Therefore, the ratio of the above cited judgments is squarely applicable in the case of appellant. Hence, disallowance of deduction made by the AO on the ground that there was no manufacturing activity carried out by the appellant and the factory was not situated in a notified area, was not justified and the same is deleted. The AO is directed to allow ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of the total income the assessee‟s has claimed this deduction. The learned assessing officer did not allow the set off of the brought forward losses and unabsorbed depreciation for the simple reason that assessee has not commenced production and AO was of the view that . Since, it is already held that till the end of A. Y. 2011-12, the unit of the assessee has not commenced production the set off of brought forward losses is not allowed and rejected. Accordingly, the net income of ₹ 76,33,168/- shown by assessee before set off shall be taken as income from business. 10. The Ld CIT (A) has deleted the addition holding as under :- In my decision vide ground no. 3 I have held that appellant had commenced production of mobile batteries, chargers and other accessories in the notified area in March. 2010 and for that appellant has filed all necessary evidences before AO as well as before me suggesting that appellant has commenced production in March, 2010. Therefore, the appellant is entitled to carry forward of business loss and unabsorbed depreciation of ₹ 5,26,268/- and of ₹ 1,86,522/- respectively. The AO is directed to allow the carry forw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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