DCIT vs. Ace Multi Axes Systems Ltd (Supreme Court)-7 Dec 2017
Some useful pointers of the case (for easy reference):
1- The assessment order dated 14th December, 2009, disallowing the deduction is as follows :
“The same is not acceptable on the ground that the value of plant and machinery has exceeded Rs.1 crores as per the depreciation schedule annexed to the 3CD report which do not come under the purview of the definition of small scale industry for the year ending 04-05 (A.Y.05-06). In view of the above, I am constrained to hold that the assessee company is not eligible for claim of 80IB(3) deduction amounting to Rs.75,81,910/- and hence same is disallowed.”
2- The Commissioner of Income Tax (Appeals) in order dated 15th February, 2011 observed :
“I agree with the learned CIT who while passing the order u/s 263 has pointed out that the industrial undertaking, here initially SSI unit, has to fulfil all conditions in each of the block years of its entitlement or otherwise such claim has to be denied. He rightly points out that Section 80 IB(3) only forms the basis of entitlement and its scope. The first condition is that it must be a SSI unit in the year of claim and entitlement Section 80 IB (14)(g) defines what is a SSI and an exact date has been prescribed therein so that AO can examine whether on that date it is an SSI or not. The date is the last day of the relevant previous year in this case 31.03.2005 and such date is exclusively for the purpose of this section only. Admittedly the investment in plant and machinery on 31.03.2005 was i.e., Rs.4,05,21,730/- which was more than the prescribed limit of that year i.e., 1 crore. Hence it no longer remains a SSI and hence the disallowance has to be held justified"
3-Section 80 IB is an incentive provision. It stipulates deduction in respect of profits and gains from certain industrial undertakings. Within this section a plethora of industries and business types have been given the benefit of such deduction if they fulfill the conditions mentioned in the concerned sub section of Section 80IB of the Act. Some of such concerns/industries are ship, hotel multiplex, theatres, housing projects etc. Sub-Section (2) of Section 80IB provides such conditions for industrial undertakings including cold storage and cold chain facility and also Small Scale Industrial undertakings (in short henceforth SSIU). All the four conditions mentioned in Section 80IB (2) must be fulfilled to make the industrial undertaking eligible for the benefit of the claim u/s 80IB of the I.T. Act. Condition No.1 is that the industrial undertaking must not have been formed by splitting up or reconstruction of a business already in existence with an exception that in case of units specified u/s 33B of the I.T. Act this condition will not apply. The second condition is that such undertaking must not have been formed by transfer of machinery or plant previously used with the exception that the value of such machinery and plant previously used must not exceed 20% of the value of the total cost of the plant and machinery of such industrial undertaking. The third condition is that the industrial undertaking must produce or manufacture any article or thing other than any article or thing specified in the Eleventh Schedule. Exception to this third condition is that an SSIU can avail the 80IB benefit even if manufactures or produces articles or things specified in Eleventh Schedule. The fourth condition is that the industrial undertaking running with the aid of power must not have less than 10 employees and if it is run without power, the number of employees must be more than 20 employees
the first two conditions may be called static or unchangeable. In other words if in the initial year of manufacture or production it is substantiated that it has fulfilled these two conditions the A.O. cannot on this ground in subsequent eligible years of the block period deny the benefit u/s 80IB. The rest three conditions are volatile and unstable. The industrial undertaking must show in each subsequent year of claim that these three conditions have not been violated
" On examination of the scheme of the provision, there is no manner of doubt that incentive meant for small scale industrial undertakings cannot be availed by industrial undertakings which do not continue as small scale industrial undertakings during the relevant period. Needless to say, each assessment year is a different assessment year, except for block assessment...
For reading full text of the case please refer link - http://itatonline.org/archives/dcit-vs-ace-multi-axes-systems-ltd-supreme-court-s-80-ib-the-incentive-meant-for-small-scale-industrial-undertakings-cannot-be-availed-by-undertakings-which-do-not-continue-as-small-scale-industrial/ace-multi-axes-80-ib-eligible-undertaking/
Some useful pointers of the case (for easy reference):
1- The assessment order dated 14th December, 2009, disallowing the deduction is as follows :
“The same is not acceptable on the ground that the value of plant and machinery has exceeded Rs.1 crores as per the depreciation schedule annexed to the 3CD report which do not come under the purview of the definition of small scale industry for the year ending 04-05 (A.Y.05-06). In view of the above, I am constrained to hold that the assessee company is not eligible for claim of 80IB(3) deduction amounting to Rs.75,81,910/- and hence same is disallowed.”
2- The Commissioner of Income Tax (Appeals) in order dated 15th February, 2011 observed :
“I agree with the learned CIT who while passing the order u/s 263 has pointed out that the industrial undertaking, here initially SSI unit, has to fulfil all conditions in each of the block years of its entitlement or otherwise such claim has to be denied. He rightly points out that Section 80 IB(3) only forms the basis of entitlement and its scope. The first condition is that it must be a SSI unit in the year of claim and entitlement Section 80 IB (14)(g) defines what is a SSI and an exact date has been prescribed therein so that AO can examine whether on that date it is an SSI or not. The date is the last day of the relevant previous year in this case 31.03.2005 and such date is exclusively for the purpose of this section only. Admittedly the investment in plant and machinery on 31.03.2005 was i.e., Rs.4,05,21,730/- which was more than the prescribed limit of that year i.e., 1 crore. Hence it no longer remains a SSI and hence the disallowance has to be held justified"
3-Section 80 IB is an incentive provision. It stipulates deduction in respect of profits and gains from certain industrial undertakings. Within this section a plethora of industries and business types have been given the benefit of such deduction if they fulfill the conditions mentioned in the concerned sub section of Section 80IB of the Act. Some of such concerns/industries are ship, hotel multiplex, theatres, housing projects etc. Sub-Section (2) of Section 80IB provides such conditions for industrial undertakings including cold storage and cold chain facility and also Small Scale Industrial undertakings (in short henceforth SSIU). All the four conditions mentioned in Section 80IB (2) must be fulfilled to make the industrial undertaking eligible for the benefit of the claim u/s 80IB of the I.T. Act. Condition No.1 is that the industrial undertaking must not have been formed by splitting up or reconstruction of a business already in existence with an exception that in case of units specified u/s 33B of the I.T. Act this condition will not apply. The second condition is that such undertaking must not have been formed by transfer of machinery or plant previously used with the exception that the value of such machinery and plant previously used must not exceed 20% of the value of the total cost of the plant and machinery of such industrial undertaking. The third condition is that the industrial undertaking must produce or manufacture any article or thing other than any article or thing specified in the Eleventh Schedule. Exception to this third condition is that an SSIU can avail the 80IB benefit even if manufactures or produces articles or things specified in Eleventh Schedule. The fourth condition is that the industrial undertaking running with the aid of power must not have less than 10 employees and if it is run without power, the number of employees must be more than 20 employees
the first two conditions may be called static or unchangeable. In other words if in the initial year of manufacture or production it is substantiated that it has fulfilled these two conditions the A.O. cannot on this ground in subsequent eligible years of the block period deny the benefit u/s 80IB. The rest three conditions are volatile and unstable. The industrial undertaking must show in each subsequent year of claim that these three conditions have not been violated
" On examination of the scheme of the provision, there is no manner of doubt that incentive meant for small scale industrial undertakings cannot be availed by industrial undertakings which do not continue as small scale industrial undertakings during the relevant period. Needless to say, each assessment year is a different assessment year, except for block assessment...
For reading full text of the case please refer link - http://itatonline.org/archives/dcit-vs-ace-multi-axes-systems-ltd-supreme-court-s-80-ib-the-incentive-meant-for-small-scale-industrial-undertakings-cannot-be-availed-by-undertakings-which-do-not-continue-as-small-scale-industrial/ace-multi-axes-80-ib-eligible-undertaking/
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