$~ 3
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 12.01.2015
+ ITA 2/2015
CIT-XI ..... Appellant
Through: Mr. N.P.Sahni, Sr. Standing Counsel,
Mr.Nitin Gulati & Mr.Juoy James, Jr.
Standing Counsel
versus
SH. TEJ PAL SINGH KOHLI ..... Respondent
Through: Mr. Rajesh Mahna and Mr.Manu
K.Giri, Advs.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.K.GAUBA
MR. JUSTICE R.K.GAUBA
%
1. This appeal by the Revenue prays that the order dated 11.07.2014 of
Income Tax Tribunal (ITAT) passed in appeal No.362/DEL/2013 respecting
the respondent/assessee for the Assessment Year 2009-10 be set aside. The
impugned order was passed by ITAT dismissing the appeal of the Revenue
against the order dated 31.10.2012 rendered by the Commissioner of Income
Tax (Appeals) [CIT(A)] allowing the appeal of the respondent/assessee
thereby setting aside the order dated 28.11.2011 passed by the Assessing
Officer (A.O) under Section 143(3) of Income Tax Act 1961 assessing the
ITA 2/2015 Page 1
income of the respondent at 71,99,590/- charging interest under Sections
234-B and 234-C of Income Tax Act and initiating penalty proceedings
under Section 271-IC of the Income Tax Act.
2. The assessee is proprietor of entity carrying on the business in the
name and style of M/s Concept Industries engaged in the manufacturing of
electronic goods. The assessee had claimed deduction under Section 80-IC
in the return filed for the relevant year. A notice under Section 143(2) was
issued and served on him. The assessment order was passed by the A.O.
under Section 143(3). The A.O. had deleted the claim of deduction in the
sum of 71,99,594/- under Section 80-IC of the Income Tax Act on the
ground that assessee was engaged in the business of manufacture of
electronic goods in the industrial area of Himachal Pradesh. The A.O.
recorded the view that no manufacturing activities are being carried out and
in fact the business involves only trading under the brand name of the parent
company " NACVOX". The A.O. found that there was no adequate plant or
machinery or infrastructure to carry out the manufacturing activities. In his
view, the LCD Monitor claimed to be manufactured by the assessee is not
covered under Schedule XIV to the Income Tax Act.
3. It may be mentioned here that reference has been made in above
context to Sl.No. 13 in part (C) of the Schedule XIV relevant for purposes of
Section 80-IC (2), the activity or article or operation having been described
therein as "information and communication technology industry, computer
hardware, call centres". It has been the contention of the assessee that the
item produced (LCD Monitors) falls under the category of information and
communication technology devices.
ITA 2/2015 Page 2
4. The A.O. further observed in his order that the assessee had not
employed adequate number of local workers as was requisite under the
relevant permission by the local authorities.
5. In the appeal preferred by the assessee, the CIT (A), inter alia, noted
the facts as under:-
"5.2 On perusal of the material on record, it is
found that the appellant is engaged in the
manufacture of electronic goods specifically
various models LCD monitors. In order to carry
on this business, he entered into a technical
collaboration with M/s. Punch Video Inc (Taiwan).
As per the terms of collaboration ,the appellant
was allowed to manufacture and sell its products
under the brand name "NOCVOX". For this
purpose, he imported different components from
various sellers in Singapore, Taiwan, Hongkong
etc. and then assembled them in the factory located
in Himachal Pradesh. In support of such activity
the appellant submitted bills of import, airway bill,
entry bill and other related documents. On
perusal of these bills, it is noted that various parts
like casing part, metal plate, fuseboard, cable
connector, control PCB, switch assembling etc.
which are the components used in electronic
industry are being imported. The appellant also
furnished flow chart showing the various stages of
assembling of components' and also the work
instructions. These are also on record but the
Assessing Officer did not consider them, but
reproduced, the process of manufacture in this
order......................."
ITA 2/2015 Page 3
6. The CIT (A) did not accept the conclusion reached by the A.O. as to
there being no manufacturing process undertaken on the ground that product
was sold under the brand name of the parent company. He observed, and
rightly so, that selling the product in the brand name is no bar to claim the
benefit on account of manufacturing activity of assembling components.
The adverse conclusions reached on the basis of work force employed, the
wages paid, or the electricity expenditure incurred were also repelled as
untenable. The CIT(A) concluded that the appellant had shown that he has
been running a unit in a notified area which was periodically inspected by
the various statutory authorities of the State Government, who had not
pointed out any discrepancy. It also observed that the A.O. had checked the
books of accounts but had not pointed out any defect or discrepancy therein.
7. Summing up its conclusions, the CIT(A) further observed that the
assessee had filed the return under Section 139(1) of Income Tax Act within
the specified time alongwith audit report in the appropriate form under
Section 44 AB of Income Tax Act. In the views of the CIT(A), the
assessment had been made merely on doubts or surmises, which was not
permissible as no adverse material contrary to the claim of the assessee had
been brought on record by the A.O. Thus, the appeal was allowed and the
assessment order was set aside.
8. In second appeal by the Revenue before the ITAT, the same very
contentions were reiterated but without any success. The ITAT concurred
with the findings of the CIT(A) that the assessee was eligible to claim
deduction under Section 80-IC but the same had been wrongly denied by the
A.O. Consequently, order accepting the claim of the assessee was upheld.
ITA 2/2015 Page 4
9. Having heard both sides we are not persuaded to accept the
contentions raised by the Revenue in this third appeal which are nothing but
reiteration of what have already been agitated and correctly rejected by the
two appellate authorities below. Aside from the reasons cited by the ITAT
affirming the conclusions reached by the CIT (A), which we uphold, we
must add that the plea that the LCD Monitor would not fall within the
description of items at sl. No. 13 in part (c) of XIV Schedule is also not
correct. The LCD Monitors do subscribe to the description of information
and communication technology devices and, therefore, would attract,
provided other statutory conditions are fulfilled, the benefit of exemption
under Section 80-IC of Income Tax. We concur with the conclusion that
A.O. had proceeded more on the basis of doubts entertained by him as to the
genuineness of the claim rather than some concrete material. If he had any
reasons to disbelieve the correctness of the claim about the manufacturing
activity (on the basis of considerations such as wages paid, electricity bills
generated, the nature of the plant and machinery etc.,), the least that could
have been done by him was to have the manufacturing unit of the assessee
inspected. For such purposes, he only had to take recourse to his statutory
powers under the law. Without having undertaken any such exercise, as
observed by the authorities below or rejecting the accuracy of the books of
accounts, adverse conclusions on facts as reached could not have been
drawn.
10. In the facts and circumstances, we do not find any question of law
arising for consideration.
ITA 2/2015 Page 5
11. For the foregoing reasons, the appeal under Section 260-A of Income
Tax does not deserve to be entertained. It is, therefore, dismissed.
R.K.GAUBA
(JUDGE)
S. RAVINDRA BHAT
(JUDGE)
JANUARY 12, 2015
mr
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