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TMI Blog2019 (8) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... laring its total income of Rs. NIL after claiming deductions of Rs. 19,21,298/- and Rs. 64,04,327/- under Sections 80IB and 80JJA respectively. The return of income was processed under Section 143(1) of the Act. The scrutiny assessment under Section 143(3) of the Act was finalized on 3rd May, 2010, determining the total income at Rs. 6,17,217/- 4. The case was re-opened by issuing notice under Section 148 dated 19th November, 2012. The reasons recorded in the notice under Section 148 are as follows: "On perusal of the records, it is noticed that the assessee has claimed deduction under section 80JJA of the Act amounting to Rs. 64,04,327/-. The assessee had commenced its business in previous year 1999-2000 relevant to A.Y.2000-01. Thus, this was the eighth year of claim of deduction under section 80JJA of the Act. However, the deduction under section 80JJA of the Act was admissible for a period of five years only from the previous year in which the business commences. Hence the assessee is not entitled for deduction under section 80JJA 0f the Act in A.Y2008-09 as mentioned above. Further, the assessee has also claimed deduction under section 801B of the Act. The deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer (or producing bio fertilizers, bio pesticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure, there shall be allowed in computing the total income of the assessee, (a deduction of an amount equal to the whole of such profits and gains for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences)" 2.4 On going through words and language of section 80JJA of The Income Tax Act, 1961 it is specifically mentioned the words in a section "beginning with the assessment year relevant to the previous year in which business commences" In your show case notice your good self has pointed out that "Only from the previous year in which business commences." Here "SUCH" word is missing. Financial year 2003-04 relevant to Asst. Year 2004-05 was our first year of claim in which we have started our manufacturing of Enzyme which qualify for deduction u/s. 80JJA of The Income Tax Act, 1961. To get deduction u/s. 801B of The Income Tax Act, 1961 the section is clear. To avail benefit under this section "commencement of business" is there. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax. The Commissioner of Income Tax dismissed the appeal and thereby affirmed the order passed by the Assessing Officer. While dismissing the appeal, the CIT (A), observed as under: "On a careful consideration of entire facts of the case, it is noted that the appellant is in the business of manufacturing enzymes. It started production of enzymes from A.Y. 2000-2001. They are producing biological agents, biocatalyst which is used in various industries like textiles, leather, baking, brewing, alcohol, detergent, starch etc. The enzymes are produced by treating agricultural biodegradable waste i.e. wheat bran flax, maize grits, de-oil groundnut cake etc. which are chemically processed for producing the enzymes. The appellant has submitted that the process of manufacturing was changed in the year 2003 and it had adopted new state of art technique of solid State fermentation technology with the newly developed and isolated microorganisms from soil. The technology was received from the U.S. Company. The claim is of no help to the appellant as, the product nature, that is, enzyme remains the same. The claim of the appellant that since it had employed new process from 2003, this year sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is otherwise entitled for the claim considering the activity of production of biological agents but since five years from the commencement of business have elapsed it shall not be entitled for deduction under section 80JJA any further. The other judgements relied by the appellant are also respectfully distinguished as the facts and dispute involved are entirely different. The appellant has also disputed that all the details regarding the claim of deduction were given by it to the A0 in the first round of proceedings and therefore the reopening is without any basis. The claim of the appellant is not acceptable. The reopening was done on 09/11/2012 which is within four years from the end of the assessment year. The facts clearly show that the first year of commencement of manufacturing was A.Y. 2000- 2001 whereas, the claim was made in the present year which is after six years from the end of that year. The claim is therefore factually incorrect. The appellant has also not given any evidence to demonstrate that the allowability of deduction with reference to the year of production was examined by the AO during the course of scrutiny proceedings. Therefore, the reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is here before this Court with the present appeal. 12. Ms. Bhatt, the learned counsel appearing for the revenue vehemently submitted that the Appellate Tribunal committed an error in passing the impugned order. It is submitted that the business of the assessee had commenced in the F.Y. 1999- 2000 relevant to the A.Y.2000-2001. Therefore, the first year for the claim of deduction under Section 80JJA of the Act should be determined as the A.Y.2000.2001 and not A.Y. 2004- 05. Ms. Bhatt submitted that the deduction under Section 80JJA of the Act is admissible for the period of five year only from the year, in which, the business commenced. 13. In such circumstances, referred to above, Ms. Bhatt prays that there being merit in this appeal, the same be allowed and the substantial question of law, as framed by this Court, be answered in favour of the revenue and against the assessee. 14. On the other hand, Mr. B.S. Soparkar, the learned counsel appearing for the assessee has vehemently opposed this appeal. Mr. Soparkar submitted that no error, not to speak of any error of law, could be said to have been committed by the Appellate Tribunal in passing the impugned order. 15. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and product labels of these Enzymes for your reference. As regards to the technology for producing these Enzymes, we are treating agriculture biodegradable waste ; i.e. Wheat Bran Flex, Maize Grits, De-oil Groundnut cake, De-oil Soya cake, Rioe Bran Flex, Sorghum straw, ; etc. as substrate media using Solid State Fermentation by newly isolated micro-organisms like Bacillus Subtitles. Bacillus lichenifomis, Aspergillus Niger, Trichoderma Reseei, etc., from the year 2003. We inoculate these micro-organisms in the above agriculture biodegradable wastes with 40-50% moisture content for Solid State Fermentation. The following fermentation parameters maintained to produce Enzymes:' Temperature: 35-40'C Relative humidity: 85% Incubation/fermentation time: 48 to 64 hours After the end of incubation I fermentation, the biomass is dried and pulverised to get Crude Enzyme. This Crude Enzyme is then standardized with various diluents and tillers to make the final finished goods i.e. Enzyme powder and in this Crude Enzyme is timber extracted with buffer solution and filtrated to get final finished goods i.e. Enzyme liquid. Further, these Biological agents, Bio-catatyst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to the fifth and the last A.Y.2008-09 that this issue was raised by the department. According to Mr. Soparkar, having allowed the deduction under section 80JJA for four consecutive years, the department could not have raised the objection with respect to the last and the fifth year of the assessment i.e., 2008-09. Mr. Soparkar, in support of his aforesaid submission, has placed reliance on two orders. One order passed by this Court in the case of Principal Commissioner of Income Tax vs. Quality BPO Services Pvt. Ltd., Tax Appeal No.439 of 2016, decided on 14th June, 2016 and the judgment of the Bombay High Court in the case of Simple Food Products (P.) Ltd. vs. Commissioner of Income-Tax-II, Nagpur, reported in (2017) taxmann.com 239 (Bombay). 21. We take notice of the fact that the decision of this Court in the case of Quality BPO Services Pvt. Ltd. (supra) was one with respect to disallowance of deduction as claimed under Section 10B of the Act, 1961, whereas in the Bombay High Court decision in the case of Simple Food Products (P.) Ltd. (supra), the subject matter of deduction under Section 80IB of the Act. However, the ratio of both the decisions is that where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with regard to the performance in which the claim for deduction in initial year was allowed, the grant of deduction in the subsequent subject Assessment Year cannot be withheld. The other issue raised by Mr. Bhattad that merely because a claim was allowed in an earlier year would not prohibit the revenue from disallowing the claim in subsequent assessment years is no longer res-integra as this Court in Paul Brothers (supra) as it is categorically held that in absence of deduction granted in the initial Assessment Years being withdrawn, the relief for subsequent Assessment Years could not be withheld. The basis for the same is found in sub-clause (3) under Section 80lA/IB of the Act which gives deduction for 10 consecutive years to the profit and gains of an Industrial undertaking from initial year of assessment when the deduction was allowed. subject to the condition laid down therein. It is not the Revenue's contention that the condition in clause (3) of Section 8013 of the Act has not been fulfilled. Therefore, once deduction is granted in the initial Assessment Year, the same would continue for the period of 10 consecutive year unless the relief for initial year is also wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent-assessee's deduction of Rs. 67.08 lacs (rounded off) claimed under Section 10B of the Income Tax Act, 1961 ['the Act' for short]. The contention of the Revenue is that, the assessee had not produced the approval by the Board appointed for such purpose by the Central Government in exercise of powers conferred under Section 14 of the Industries (Development and Regulation) Act, 1951, as required under Explanation 2 Clause (iv) to Section 10B of the Act. 3. Learned counsel Mr. Patel for the Revenue vehemently contended that the assessee had obtained such approval certificate from the Director, Software Technology Park of India, which may be a Government of India Authority cannot substitute the authority prescribed in Clause (iv) to the said explanation. 4. This contention we are not inclined to examine in view of the fact that, admittedly, in the first year of claim of the assessee under Section 10B of the Act i.e. the assessment year 2007-08, such claim was granted. In the subsequent assessment years also, i.e. in the assessment years 2010-11 and 2011-12, such claim was made and accepted by the Department. We may notice that Section 10B pertains to special pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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