Aadi Plastic Industries P.Ltd,, ... vs Department Of Income Tax

Dy.CIT, Circle-2, Kolhapur .. Appellant

Vs.

Aadi Plastic Industries Pvt. Ltd., Plot No.791, Kalani Complex, Shahupuri, 4th Lane, Kolhapur .. Respondent PAN No.AACCA3325K

Assessee by : Shri Kishor Phadke Respondent by : Shri B.C. Malakar Date of Hearing : 12-01-2015 Date of Pronouncement : 18-02-2015

ORDER

PER G.S. PANNU, AM:

This appeal by the Revenue is against the order of the CIT(A),

Kolhapur dated 24-09-2012 which in turn has arisen from the order passed

by the Assessing Officer u/s.143(3) of the Act dated 29-12-2011 pertaining

to A.Y. 2009-10. In this appeal of the Revenue, the only dispute is with

regard to assessee's claim for deduction u/s.80IB of the Act of a sum of

Rs.48,78,682/-.

2. In brief, the facts are that before the Assessing Officer assessee

claimed the benefit of section 80IB(3) on the ground that it was a small

scale industrial undertaking. The claim was made in terms of section

80IB(3)(ii) of the Act. In this connection, assessee submitted that its

investment in plant and machinery was Rs.4,70,62,283/- as on 31-03-2009

and hence the provisions of section 7(1) of Micro, Small and Medium

Enterprise Development Act, 2006 was applicable in this case. The 2

Assessing Officer has disagreed with the assessee, the relevant portion of

the discussion in the assessment order reads as under :

"6.4 . . . . . . . . . . . . . . . . . .Notification S.O.1642(E) dated 29.09.2006 reproduced above which classifies a small enterprise as the one whose investment in equipment (plant and machinery) is more than 10 lakh rupees but does not exceed 2 crores rupees. Since the assessee's investment in plant and machinery, admittedly and even after excluding the value of electric fittings claimed by the assessee, far exceeds Rs. 2 crores (it is Rs.4,70,62,283/-), it cannot in any way be regarded as a small enterprise even under the Micro, Small and Medium Enterprise Development Act, 2006 on which the assessee has placed reliance. It is also pertinent to mention here that although it is abundantly clear from section 7(1) of the Micro, Small and Medium Enterprise Development Act 2006 that the classification as a small enterprise could be provided only by the notification of the Central Government yet the assessee refrained from filing a copy of the relevant Notification reproduced above since the same negatives the claim of the assessee. It may also be mentioned here that on the Webpage/website of the Development Commissioner (MSME), Ministry of Micro, Small & Medium Enterprises of the Government of India, no other Notification enhancing the limits of investments for the classification of industrial enterprises has been found."

3. As per the Assessing Officer, section 80IB(14) of the Act does not

refer to Micro, Small and Medium Enterprise Development Act, 2006 and

that even if assessee's plea was to be accepted, the provisions of section

7(1) of the Micro, Small and Medium Enterprise Development Act, 2006 do

not apply to the present case because as per the relevant Notification

issued in the said section the upper limit of investment in plant and

machinery was Rs.2 crores only. In this context, he has referred to the

Notification in respect of section 7(1) in S.O.1642(E) dated 29-09-2006

issued by the Government of India. The CIT(A), however, noted that the

Assessing Officer had erroneously applied the conditions of the

Notification dated 29-09-2006 (Supra). As per the CIT(A), the present

case shall be governed by clause (i)(b) of the Notification dated 29-09-

2006 (Supra). The following discussion in the order of the CIT(A) is

relevant in this regard :

"7. I have gone through the assessment order. It appears that the assessing officer has erroneously read the notification in the manner it has been quoted in the assessment order. The Gazette Notification pertaining to Micro, Small and Medium Enterprise Development Act, 2006 is as under :

3 MINISTRY OF SMALL SCALE INDUSTRIES NOTIFICATION New Delhi, the 29th September, 20O6

S.O. 1642(E).-- The Central Government, in exercise of the powers conferred by Sub-section (1) of Section 7 of the Micro, Small and Medium Enterprise Development Act, 2006, after having obtained the recommendations of the Advisory Committee under Sub-section (4) of Section 7 of the Act in this regard, hereby notifies the following enterprises, whether proprietorship, Hindu undivided family, association of persons, co-operative society, partnership or undertaking or any other legal entity, by whatever name called :--

(i) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, as --

(a) a micro enterprise, where the investment in plant and machinery does not exceed twenty five lakh rupees;

(b) a small enterprise, where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees; or

(c) a medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees;

(ii) in the case of the enterprises engaged in providing or rendering of services, as --

(a) a micro enterprise, where the investment in equipment does not exceed ten lakh rupees;

(b) a small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or

(c) a medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.

(F.No.4(l)/2006-MSME Policy] JAWAHAR SIRCAR, Addl. Secy.

8. It appears that the assessing officer has erroneously applied the contents of Clause (ii)(b) of the Notification dated 29/09/2006 which is in relation to an enterprise engaged in providing or rendering of services. In fact, in the instant case, the contents of Clause (i)(b) of this Notification will be applicable, which is applied in the cases of a MSME engaged in manufacture or production of goods. To such MSMEs, the provisions of Clause (i)(b) wherein the outer limit of capital investment is Rs. 5 crores, will be relevant. Therefore, the claim of the appellant is correct because it qualifies as a MSME to whom clause (i)(b) of Notification dated 29/09/2006 applies and is therefore, entitled to deduction under section 80IB(3)(ii). Accordingly, the disallowance made is vacated and this ground of appeal is allowed".

4

4. At the time of hearing, no infirmity in the aforesaid finding of the

CIT(A) have been brought out by the Revenue and therefore we find no

reasons to interfere with the conclusion of the CIT(A), which we hereby

affirm.

5. In the result, appeal of the Revenue is dismissed.

Order pronounced on 18th February, 2015.

Sd/- Sd/- (R.S.PADVEKAR ) ( G.S.PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER

satish/sujeet Pune, dated 18th February, 2015

Copy of the order is forwarded to:

1. The Assessee 2. The Department 3. The CIT(A), Kolhapur. 4. The CIT, Kolhapur. 5. The DR "B" Bench, Pune. 6. Guard File By Order

//True Copy// Assistant Registrar, ITAT, Pune Benches, Pune