M/S. Amigo Brushes Pvt.Ltd., Baroda vs Department Of Income Tax

Appellant by : Shri B. L. Yadav, Sr. DR Respondent by : Shri S. N. Soparkar, AR ITA Nos. 2617 & 2674/Ahd/2010 2 Asst. Year 2000-01

Date of hearing : 10/06/2015 Date of pronouncement :29/06/2015

ORDER

PER Shailendra Kumar Yadav, Judicial Member.

Both these appeals of Revenue pertain to the same group of companies and the issues being similar, these were heard together and are being disposed of by this common order for the sake of convenience.

2. First we take up ITA No. 2674/Ahd/2010 for AY 2000-01 wherein the following grounds have been raised:-

1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.58,12,248/- made u/s 2(22)(e) of the Act on account of advance received from sister concern without appreciating the deeming provisions u/s 2(22)(e) of the Act.

2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.10,91,373/- on account of disallowance of foreign travel expenditure without appreciating the fact that the assessee had failed to establish that the expenditure was incurred wholly and exclusively for business purpose.

3. On the facts and in the circumstances of the case the ld.

CIT(A) erred in deleting the addition of Rs.1,01,804/- made ITA Nos. 2617 & 2674/Ahd/2010 3 Asst. Year 2000-01

on account of repairs for excavation of pond, purchase of wood shaft, ply, Burma teak wood, tiles etc. treating the same as capital in nature. The ld. CIT(A) erred in not appreciating the fact that the expenditure incurred had an enduring benefit.

3. In ITA No.2674/Ahd/2010 for AY 2000-01. Ground No.1 is regarding of addition of Rs.58,12,248/- u/s 2(22)(e) considering the same to be deemed dividend. Assessing Officer observed that assessee company had received loans from M/s Baroda Precimound (P) Ltd., M/s Pearl Bristlers (P) Ltd., M/s Opal Bristlers Pvt. Ltd. & M/s Daisy Packers Pvt. Ltd. It was further noted that Smt. Geeta Goradia had share holding in excess of 20% in the assessee company as well as more than 20% in each of the above companies. He also further observed that each of the above companies had accumulated profits as on the first date of the accounting period. Hence it was held that the provisions of section 2(22)(e) were attracted and the advances/loans as under were brought to tax as deemed dividend :-

a) Baroda Precimould Pvt. Ltd. Rs.41,00,000/-

b) Pearl Bristlers Pvt. Ltd. Rs.8,92,00/- c) Opal Bristlers Pvt. Ltd. Rs.4,20,248/- d) Daisy Packers Pvt. Ltd. Rs.4,00,000/- Total Rs.58,12,248/- ITA Nos. 2617 & 2674/Ahd/2010 4 Asst. Year 2000-01

3.1. The matter was carried in appeal before the first appellate authority wherein it was submitted that identical issue has been decided by the Hon'ble ITAT in favour of assessee, in case of assessee's group companies i.e. Daisy Packers Pvt. Ltd. vs. ACIT and Denta Brushes Pvt. Ltd. vs. ACIT for AY 2000-01 (ITA No.1747 & 1086/Ahd/2006), M/s Jewel Brushes Pvt. Ltd. vs. ACIT for AY 2003-04 (ITA No.157/Ahd/2008), Garodia Innovative Technologies Pvt. Ltd. for AY 2000-01 (ITA No.1655/Ahd/2006). It was prayed that since the issue was identical, the Tribunal's orders indicated may be followed. In this background, the ld. CIT(A) observed that in the case of assessee's group companies, in three separate orders, the Tribunal has held that the provisions of section 2(22)(e) would not be attracted in the case where the loan was made to a person who was not a shareholder or beneficial owner of shares of the lender company.

In the instant case also the assessee did not have even a single share in the lender company. Hence following the decision of the ITAT, Mumbai Special Bench in ACIT vs. Bhaumik Colour Pvt. Ltd. (2009) 313 ITR (AT) 146 as well as in the case of assessee's group companies as mentioned above, the addition of Rs.58,12,248/- was deleted by CIT(A). The same has been opposed by the Revenue before us.

ITA Nos. 2617 & 2674/Ahd/2010 5 Asst. Year 2000-01

3.2 The ld. DR supported the order of Assessing Officer and stated that ld. CIT(A) has wrongly deleted the addition. So, the impugned order may be set aside and that of the Assessing Officer be restored. On the other hand, the ld. AR supported the order of ld. CIT(A) and submitted that the issue is now covered in favour of assessee by the decisions of Hon'ble Gujarat High Court in the case of CIT vs. Daisy Packers Pvt. Ltd. vide order dated 18/07/2012 (copy of order has been submitted which is placed on record).

3.3 After considering the rival submissions and going through material on record, we find that Hon'ble Gujarat High Court in the case of CIT vs. Daisy Packers Pvt. Ltd. vide order dated 18/07/2012 in Tax Appeal No.212 of 2010, has decided the issue in favour of assessee by observing as under:-

2.0 The brief facts are that the assessee filed return of income for the Assessment Year 200001 declaring a loss of Rs.4,22,792/. The return was processed under Section 143(1)(a) of the Income Tax Act, 1961 (for short 'the Act') and income of the assessee was declared under Section 115JA of the Act. Thereafter the case was reopened under Section 147 of the Act which was served on the assessee. The case of the department was that the Amigo Brushes Pvt. Ltd. had a total surplus of Rs.70 lacs as on 31st March 1999 and it has advanced a loan to the assessee to the tune of Rs.25 lacs. Whereas the assessee contended that he received deposit from Amigo Brushes Pvt. Ltd. and Daisy Packers Pvt. Ltd. was not a shareholder in Amigo Brushes Pvt. Ltd. The Assessing Officer by his order dated 30th September 2004 rejected the claim of the assessee and treated the deposits as loan and consequently deemed to be a deemed dividend under Section 2(22)(e) of the Act and accordingly computed the tax. The assessee filed appeal which was dismissed by CIT(A) on 11th ITA Nos. 2617 & 2674/Ahd/2010 6 Asst. Year 2000-01 May 2006. The assessee filed Second Appeal which has been allowed by the Tribunal on 5th June 2009 and the Tribunal has hold that it was not the case of the deemed dividend and it was the case of the deposits.

The Tribunal further recorded finding that it was not a loan given by Amigo Brushes Pvt Ltd. to the assessee company and it was intercorporate deposits. However, we need not go into various questions raised by learned counsel for the parties as admittedly the assessee was not shareholder in the Amigo Brushes Pvt. Ltd. The Division Bench of this Court inCommissioner of Income Tax vs. Ankitach(P) Ltd. [(2012) 340 ITR 14]. The Delhi High Court has held that if the assessee company does not hold a share in other company from which it had received deposit then it cannot be treated tobe a deemed dividend under Section 2(22)(e)of the Act. In view of this admitted position that assessee is not a shareholder in Amigo Brushes Pvt. Ltd. and therefore, the deposit received by the assessee of Rs.25 lacs from Amigo Brushes Pvt Ltd. was an intercorporate deposit and not a deemed dividend and, therefore, though this aspect has not been considered by the Tribunal but since the order of the Tribunal can be supported by another legal reason on the admitted facts, we need not send the matter back.

3.0 For the aforesaid reasons, we are of the considered opinion that substantial question of law formulated by the Division Bench is to be answered in affirmative against the assessee in favour of the department.

Nothing contrary was brought to our notice in this regard. Facts being similar so following same reasoning, we are not inclined to interfere in the order of ld. CIT(A) who has deleted the impugned addition of Rs.58,12,248/- made u/s 2(22)(e) on account of advance received from sister concern. The assessee company does not hold a share in lender company from which it had received deposit then it cannot be treated to be a deemed dividend under section 2(22)(e) of the Act. It is an undisputed fact that assessee is not a shareholder of lender company, therefore, the deposit received by the assessee from said lender companies was an inter-

ITA Nos. 2617 & 2674/Ahd/2010 7 Asst. Year 2000-01

corporate deposit and not a deemed dividend, therefore, CIT(A) was justified in deleting the addition. We uphold the same.

4. Ground No.2 relates to disallowance of foreign travel expenses of Rs.10,97,373/- on the ground that the same were not established to be for business purposes.

4.1 The matter was carried in appeal before the ld. CIT(A) and having considered the submissions of assessee the ld. CIT(A) deleted the impugned addition. The Revenue being aggrieved by the order of CIT(A) has come in appeal before us.

4.2 The ld. DR supported the order of AO and submitted that CIT(A) has wrongly deleted the addition. So his order may be set aside and that of the AO be restored. On the other hand, the ld. AR supported the order of ld. CIT(A) and contended that similar issue came up before the Tribunal in the case of Jewel Consumer Care Pvt. Ltd. vs. ACIT in ITA No.158/Ahd/2008 for AY 2004-05 and the issue has been decided in favour of assessee. Copy of order placed on record.

4.3 After considering the rival submissions and going through the material on record, we find force in the submissions of ld. AR.

ITA Nos. 2617 & 2674/Ahd/2010 8 Asst. Year 2000-01

We find that the Tribunal in the case of Jewel Consumer Care (P) Ltd. (supra) has decided the issue with the following observation:-

''5. We find from the facts of the case that the assessee is in the business of manufacturing of tooth brushes and the assessee's MD Shri Amit Goradia, who is an IIT Mechanical Engineer visited M/s Anton Zaharonsky, a leading tooth brush machinery manufacturing company in Germany. The assessee company manufactures tooth brushes using bristling machines and moulds and other accessories supplied by M/s Anton Zaharonsky. According to the assessee, these machines and moulds are highly technical and precision items and require frequent changes and repairs of spares and required to be imported from Germany. We find from the facts of the case that the assessee submitted two reports which contained that the assessee visited Germany to negotiate supply of spares for the company's machines and also understand certain technical issues related to the operations of the machines. In view of these facts, the assessee incurred this foreign traveling expenditure. We find no evidence that these tour expenditures are not for the purpose of the business rather it is for negotiating for spares and purchases of manufacturing machinery of tooth brushes, the visit was undertaken by the Managing Director. We find that the tour expenditure incurred by the assessee company was for the purpose of business wholly and exclusively. Accordingly, we delete the disallowance and allow this issue of the assessee's appeal.''

Nothing contrary was brought to our notice by the Revenue. Facts being similar so following same reasoning we find no infirmity in the order of ld. CIT(A). We uphold the same.

ITA Nos. 2617 & 2674/Ahd/2010 9 Asst. Year 2000-01

5. Next ground is regarding deletion of addition of Rs.1,01,804/- made on account of repairs for excavation of pond, purchase of wood shaft, ply, Burma teak wood, tiles etc. treating the same as capital in nature. The facts of the case are that the Assessing Officer noted that the assessee had claimed expenditure on account of repairs for excavation of pond, purchase of wood shaft, ply, Burma teak wood, tiles, door, etc. aggregating to Rs.1,13,116/-. He held the same to be of capital nature. The net expenditure of Rs.1,01,804/- was disallowed after allowing depreciation amounting to Rs.11,311/-.

5.1 Aggrieved with the action of Assessing Officer the assessee went in appeal before the first appellate authority. It was submitted by the assessee that the expenditure was incurred for repairing of pond and similarly for replacement of various parts of doors/windows of the building and hence was allowable. The expenditure incurred amounts to current repair and not capital expenditure. The same is allowable. The CIT(A) after considering the submissions of assessee allowed the impugned amount of Rs.1,01,804/- observing that the expenditure was on account of repairs and replacement and hence lay in the revenue field and not in the capital field.

ITA Nos. 2617 & 2674/Ahd/2010 10 Asst. Year 2000-01

5.2 Being aggrieved by this order the Revenue is in appeal before us. The ld. DR relied on the order of Assessing Officer whereas the ld. AR supported the order of CIT(A).

5.3 After considering the rival submissions and going through the material we find that some important principles have been culled out on the issue on the basis of various judicial pronouncements. An expenditure which involves mere replacement of a part of the machine and not the entire machine, or does not result in the creation of any new asset, cannot be termed as capital expenditure. Therefore, the impugned repair expenditure would amount to a revenue expense and it would qualify for deduction as repairs and maintenance. In view of this, we find no infirmity in the order of CIT(A). We uphold the same.

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

7. Now we take ITA No.2617/Ahd/2010 for AY 2000-01 filed by Revenue on following grounds:

1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.20,00,000 considering the same as deemed dividend without appreciating the fact that the director of the assessee company had share holding to the extent of 75.98% in the ITA Nos. 2617 & 2674/Ahd/2010 11 Asst. Year 2000-01

assessee company as well as more than 20% share in Amigo Brushes.

2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the deduction under section 80IA of the Act claimed by the assessee after considering the report of the Chartered Engineer without appreciating the fact the assessee had not produced SSI certificate issued by the District Industries Commissioner especially because the assessee had plant and machinery worth Rs.3 crores at the beginning of the year.

7.1 The first issue of ITA No.2617/Ahd/2010 for AY 2000-01 is regarding deletion of addition of Rs.20,00,000/- being deemed dividend. The Assessing Officer observed that the assessee company had received loan of Rs.20 lakhs from M/s Amigo Brushes. It was further noted that a Director of the assessee company, M/s Geeta Goradia, had share holding to the extent of 75.98% in the assessee company as well as more than 20% in Amigo Brushes. It was also observed that the accumulated profits of Amigo Brushes as on the first day of accounting period stood at Rs.73,78,514/-. Hence it was held that the provisions of section 2(22)(e) were attracted and the advance/loan of Rs.20,00,000 was brought to tax as deemed dividend.

7.2 The matter was carried in appeal before the first appellate authority and various contentions were raised in support of its ITA Nos. 2617 & 2674/Ahd/2010 12 Asst. Year 2000-01

claim. The first appellate authority after considering the submissions of the assessee observed that indeed on the same facts in the case of assessee's group companies, in three separate orders, the ITAT has held that the provisions of section 2(22)(e) would not be attracted where the loan was made to a person who was not a shareholder or beneficial owner of shares of the lender company.

In the instant case also the assessee did not have even a single share in the lender company, i.e. Amigo Brushes. Hence following the decision of the Tribunal, Mumbai Special Bench in ACIT vs. Bhaumik Colour Pvt. Ltd. 313 ITR (AT) 146 as well as in the case of assessee's group companies addition of Rs.20,00,000 addition was directed to be deleted.

7.3 Being aggrieved with this order, the Revenue has come in appeal before us. The ld. DR supported the order of Assessing Officer, whereas the ld. counsel for the assessee relied on the order of CIT(A).

7.4 After considering the rival submissions and going through the material on record, we find that the issue is identical to the issue raised in ITA No.2674/Ahd/2010 for AY 2000-01 in the case of Amigo Brushes (P) Ltd. which has been decided by us after detailed discussion vide para No.3.3 of this order. Facts being ITA Nos. 2617 & 2674/Ahd/2010 13 Asst. Year 2000-01

similar so same reasoning we uphold the finding of CIT(A) on this issue.

8. The next ground of the appeal is regarding allowing deduction under section 80IA of the Act claimed by the assessee after considering the report of Chartered Engineer without appreciating the fact the assessee had not produced SSI certificate issued by the District Industries Commissioner especially because the assessee had plant and machinery worth Rs.3 crores at the beginning of the year. Brief facts of the case are that the company was engaged in manufacturing toothbrush handles on job work basis for its associate companies who were manufacturers of toothbrushes. The company had claimed deduction under section 80IA on the ground that it was a small scale industrial undertaking. During the course of assessment proceedings, the Assessing Officer observed that the assessee was not registered as a Small Scale Industrial undertaking with the District Industries Commissioner. The Assessing Officer hence concluded that on this aspect itself, the claim of the assessee for deduction u/s 80IA must fail. The Assessing Officer further observed that though the activity of manufacturing toothbrushes was reserved for the SSI sector, the same could not be said to cover the activity of manufacture of toothbrush handles. It was noted that under various ITA Nos. 2617 & 2674/Ahd/2010 14 Asst. Year 2000-01

notifications issued under the Industries (Development and Regulation) Act (IDRA), the limits for investment of an SSI unit in Plant & Machinery from 10/12/1997 was Rs.3 crores and the same was reduced to Rs.1 crore from 10/12/1999. The Assessing Officer found that investment of the assessee as at the beginning of the year itself was above Rs. 3 crores and hence the assessee could not be considered as an SSI unit. Therefore, the Assessing Officer, rejected the claim of assessee.

8.1 The matter was carried in appeal before the first appellate authority wherein the CIT(A) considered the submissions raised on behalf of the assessee, the remand reports of the Assessing Officer and the facts of the case. He observed that upto Asst. Year 1999- 2000, section 80IA(2)(iv)(d) entitled a small scale industrial undertaking to claim deduction u/s 80IA. However, w.e.f. 1.4.2000, i.e. Asst. Year 2000-01 and onwards, section 80IB came into the statute book. The provisions of section 80IB would be applicable to the assessee's case. As per section 80IB(ii), the same benefit continued to be extended to an industrial undertaking being a small scale industrial undertaking (SSIU). The assessee had claimed the deduction in its capacity as SSIU. The Assessing Officer had sought to disallow the deduction u/s 80IB treating the assessee as being an enterprise which did not fall within the ITA Nos. 2617 & 2674/Ahd/2010 15 Asst. Year 2000-01

definition of SSIU for the reason that the value of its assets exceeded the specified limit, i.e. Rs.3 crores and also on the ground that the unit was not registered as a small scale industrial undertaking with the Department of Industries. Small scale industrial undertaking has been defined in sub-section 14(g) of section 80IB to mean ''an industrial undertaking which is, as on the last day of the previous year, regarded as a small scale industrial undertaking u/s 11B of Industries Development and Regularation Act (IDRA), 1941''. Section 11B of IDRA provides as follows :-

''Power of Central Government to specify the requirements which shall be complied with by the small scale industrial undertakings.

11B(1) The Central Government may with a view to ascertaining which ancillary and small scale industrial undertakings need supportive measures, exemption or other favourable treatment under this Act to enable them to maintain their viability and strength so as to be effective in.

(a) Promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and

(b) Securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.

Specify, having regard to the factors mentioned in sub-section (2) by notified order, the requirements which shall be complied with by an industrial undertaking to enable it to be regarded for the purposes of this Act, as an ancillary or small scale industrial undertaking and different requirements may be so specified for different purposes or with respect to ITA Nos. 2617 & 2674/Ahd/2010 16 Asst. Year 2000-01 industrial undertakings engaged in the manufacture or production of different articles."

In exercise of the powers conferred by section 11B, the Central Government issued notification SO 857(E) dt.10.12.1997, which lays down the requirements to be complied with by industrial undertakings for being regarded as small scale ancillary industries. The relevant portion of the notification is reproduced below :-

''In exercise of the powers conferred by sub-section (1) of section 11B and sub-section (1) of section 29B of the said Act, and in suppression of the Notification of the Government of India in the Ministry of Industry (Department of Industrial Development) No.S.O. 232(E) dated the 2nd April, 1991, the Central Government hereby specifies the following factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of the said Act.

(1) Small Scale Industrial Undertaking - An industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees three crores."

8.1.1 It was found that earlier limit of Rs.1 crore in respect of the investment in fixed assets in plant and machinery notified vide SO 232 (E) dt. 2.4.1991 was revised upward to Rs.3 crores. Note 2(b) of the notification dt.10.12.1997 specifies the manner of calculating the value of plant and machinery for this purpose. The note reads as under :-

ITA Nos. 2617 & 2674/Ahd/2010 17 Asst. Year 2000-01 ''Note-2

a) In calculating the value of plant & machinery for the purpose of paragraphs (1) and (2) of this notification, the original price thereof irrespective of whether the plant and machinery are new or second shall be taken into account.

b) In calculating the value of plant and machinery following shall be excluded namely -

i) Cost of equipment such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores.

ii) Cost of installation of plant and machinery,

iii) Cost of research and development equipment and pollution control equipment,

iv) Cost of generation sets, extr transformers etc. installed by the undertaking as per the regulations of the State Electricity Board,

v) Bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation,

vi) The cost involved in procurement of cables, wiring, bus bars, electrical control panels (not those mounted on individual machines), oil circuit breakers/miniature circuit breakers etc. which are necessarily to be used for providing electrical power to the plant and machinery from the place of manufacturing/safety measures.

vii) The cost of gas producer plant,

viii) Transportation charges (excluding of taxes i.e. sales tax, excise etc.),

ix) Charges paid for technical know-how for erection of plant and machinery, ITA Nos. 2617 & 2674/Ahd/2010 18 Asst. Year 2000-01

x) Cost of such storage tanks which store raw materials finished products only and are linked with the manufacturing process,

xi) Cost of five fighting equipment.''

Thus it was found that

(a) the value of plant and machinery should not exceed Rs.3 crores for an undertaking to be considered as SSIU; and

(b) the method of calculating the value of investment in plant and machinery has been clearly laid down, which permits exclusion of certain items from consideration for the purpose of valuation. From perusal of the valuation certificate issued by Shanti Consulting Engineers, being Government approved valuers, the value of investment in plant and machinery after exclusion as per the above mentioned notification comes to Rs.2,87,32,967/-. Thus the assessee company was within the prescribed limit of investment of plant and machinery and deduction u/s 80IB of this amount, cannot be denied as observed by CIT(A).

8.1.2 So far as the other issue is concerned i.e. relating to omission on the part of the assessee to get itself registered as SSIU, the notification issued by the Department of Industry dt.10.12.1997 itself permits the assessee to exercise an opinion whether to get itself registered or not. The relevant portion of the notification is reproduced below :-

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''Every industrial undertaking which has been issued a certificate of registration under section 10 of the said Act or a licence under section 11, 11A and 13 of the said Act by the Central Government and are covered by the provisions of paragraphs (1) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered, at the discretion of the owner, as such, within a period of one hundred and eighty days from the date of publication of this notification in the Official Gazette.''

The CIT(A) observed that the assessee did in fact obtain temporary registration earlier but later on did not exercise its option to obtain the regular certificate of registration. However, this would not take away from the fact that assessee company continued to be ''regarded as'' a small scale undertaking for the purposes of section 11B of the IDRA. The only requirement as per the notification issued u/s 11B for being regarded as SSIU is that the value of investment in plant and machinery should not exceed Rs.3 crores, subject to its exclusions. Other conditions relating to ownership, control, etc. are not relevant to the instant case. The CIT(A) observed that the assessee has complied with the conditions prescribed vide notification dt.10.12.1997. The assessee was regarded as small scale industrial undertaking by the Department of Industries. Accordingly he held that the assessee had complied with all the requirements for being regarded as SSIU ITA Nos. 2617 & 2674/Ahd/2010 20 Asst. Year 2000-01

and the deduction u/s 80IB cannot be denied on this ground as a whole.

8.2 Being aggrieved the Revenue has come in appeal before us.

The DR supported the order of Assessing Officer whereas on the other hand the learned Authorized Representative relied on the order of CIT(A). Learned Authorized Representative also submitted that the is covered in favour of assessee by the decision of the Tribunal in assessee's own case for Asst. Year 2001-02 and in other cases. He submitted a copies of orders which are placed on record.

8.3 After considering the rival submissions and going through the material on record, we find the issue is covered in favour of assessee by the decision of the Tribunal in assessee's own case. The Tribunal has allowed the claim of assessee in ITA No.1094/Ahd/2008 for AY 2001-02 by observing as under :-

"4. Now before us, an order of the respective co-ordinate Bench 'C" of the ITAT, Ahmedabad in the case of KHS Machinery Pvt. Ltd. Vs. ITO, ITA No.2278/Ahd/2006 dated 19-12-2008 is placed on record wherein vide para-9, an observation has been made that the registration is not a pre- condition to avail the benefit of deduction under Section 80IB of the Act. The relevant portion is reproduced below:

ITA Nos. 2617 & 2674/Ahd/2010 21 Asst. Year 2000-01

"9. We have heard both the parties and gone through the facts of the case. At the outset, we may advert to the contention of the ld. DR that registration of an industrial undertaking as an SSI is necessary for conferring the benefit u/s.80IB of the Act. We do not find any such requirement i the section 80IB of the Act nor there is any finding on this aspect in the impugned order. The registration of an industrial undertaking as an SSI may entail certain benefits under the industrial and labour laws. There is no such precondition of registration to avail the benefit of deduction u/s.80IB of the Act. Therefore, the contention of the ld. DR being devoid of merits is rejected. The only dispute before us is as to whether the taxpayer is a small scale industrial undertaking within the meaning of proviso to sec. 80IB(2)(iii) read with clause (g) of sec.80IB(14) of the Act. The relevant clause (g) defines small scale industrial undertaking (SSI) in the following terms:

xxxxx

In addition to the above decision of the respective co-ordinate Bench, we have also been informed that in assessee's own case for the same assessment year, the Revenue has challenged certain findings of the first appellate authority passed in the first round of the appeal, as referred above, through which the matter was remanded back to the AO with certain directions. However, the Tribunal has confirmed all these findings in appeal in ITA No.3356/Ahd/2003 (A.Y.1999-2000) order dated 10-10-2006 (Bench 'B', Ahmedabad). The relevant portion is reproduced below:

"Learned counsel for the assessee, in reply contends that assessee is manufacturer of tooth brush handles from plastic granules, which is raw-material. These granules are put to manufacturing process and ITA Nos. 2617 & 2674/Ahd/2010 22 Asst. Year 2000-01 various types of handles manufactured which in turn are sold to various tooth brush manufacturing unit who put in different type of bristles to make tooth brushes. It was contended that similar issue arose in the case of sister concern of the assessee viz. Ruby Moulders Pvt. Ltd. CIT(A) held this to be manufacturing and allowed claim of deduction under Section 80IA. While deciding this appeal, CIT(A) has relied on the case of Ruby Moulders Pvt. Ltd. against which department has not filed any appeal.

Learned DR could not controvert arguments of learned counsel that in the case of Ruby Moulders Pvt.Ltd. department has not filed any appeal.

3. In the given facts and circumstances, it emerges from record that department has accepted findings of CIT(A) in sister concern case holding similar activity i.e. manufacture of tooth brush handles from granules as manufacturing activity, on which claim under Section 80IA has been allowed. In view thereof, we find no infirmity in the order of CIT(A) allowing similar claim."

Though from the side of the Revenue, the learned DR has tried to explain that as per the said scheme, it was necessary to obtain registration but we are not examining the claim of registration of SSI unit as per the Govt. of Gujarat, Industries and Mines Department. Rather, we are examining the proviso of section 80IA wherein vide clause (f) of sub-section 12 of Section 80IA has defined the definition of "small scale undertaking" as follows:

(f) "small-scale industrial undertaking" means an industrial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under ITA Nos. 2617 & 2674/Ahd/2010 23 Asst. Year 2000-01 section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951).

5. If we carefully examine this sub-clause, as emphasized by the learned AR, the term "industrial undertaking" is to be regarded as an SSI under Section 11B of the Industrial (Development and Regulation) Act. The qualifying word is not "registered", but the word is "regarded". Therefore, the learned AR vehemently argued that it was an admitted fact that the DIC has regarded this undertaking as a small industrial unit by issuing a provisional certificate, but somehow the final certificate of registration could not be issued by the department, nevertheless, the assessee had always been regarded as an SSI unit by all the departments, including excise department. We find force in the arguments of the learned AR and considering the view already taken by the respective co-ordinate Bench, as stated above, we hereby hold that the assessee must not be denied the claim of deduction under Section 80IA merely on this technical ground. We hereby direct the AO to allow the claim as per the law."

Since the facts of the year under consideration are identical, we respectfully following the above decision of the ITAT in assessee's own case, direct the AO to allow the claim of the assessee under Section 80IB in accordance with law.

5. In result, the assessees's appeal is allowed.''

We also find that on identical issue, similar view has been taken by the Tribunal in ITA No.1342/Ahd/2005 for AY 1999-2000 in the case of Baroda Precimould Pvt. Ltd. vs. ACIT vide its order dated 17th September, 2010. Nothing contrary has been brought to our ITA Nos. 2617 & 2674/Ahd/2010 24 Asst. Year 2000-01

notice by the Revenue. Facts being similar so following the above views, we are not inclined to interfere with the order of CIT(A) who has allowed the claim of deduction u/s 80IA of the Act, as discussed above.

9. In the result, both the appeals filed by the Revenue are dismissed.

Pronounced in the open Court on this the 29th day of June, 2015 Sd/- Sd/-

(Anil Chaturvedi) ( Shailendra Kumar Yadav) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated :_29/6/15

Mahata/-

Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File BY ORDER

Dy.Registrar,ITAT, Ahmedabad ITA Nos. 2617 & 2674/Ahd/2010 25 Asst. Year 2000-01

1. Date of dictation: 10/06/2015

2. Date on which the typed draft is placed before the Dictating Member: 26/6/2015 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk: 29/6/15

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: