D.A. Mehta, J.
1. The following two questions have been referred by Income Tax Appellate Tribunal, Ahmedabad Bench 'A' under Section 256(1) of the Income Tax Act, 1961 (the Act) at the instance of the Revenue:
1. Whether, the Appellate Tribunal is right in law and on facts in allowing the claim of the assessee for deduction under Section 80I of the Act ?
xxx xxx xxx xxx2. Whether, the Appellate Tribunal is right in law and on facts in holding that there was no justification for charging of interest under Section 234B and 234C of the Act ?
2. The Assessment Year is 1993-94, the relevant accounting period being Financial Year ended on 31.03.1993. The assessee, a Private Limited Company, claimed deduction under Section 80I of the Act amounting to Rs.67,10,045/-. The Assessing Officer rejected the said claim, holding that that the assessee did not fulfill the requisite conditions. The assessee carried the matter in appeal before Commissioner (Appeals), who for the reasons stated in the appellate order, agreed with the findings of the Assessing Officer dismissed the appeal on this count.
3. The assessee carried the matter in appeal before the Tribunal. The Tribunal allowed the appeal of the assessee by recording as under:
16. After hearing both the sides we agree with the contentions of the learned Counsel of the assessee that each unit of the assessee is distinguishable independent having separate existence of its own having separate and distinct excise number. In the absence of any evidence we do not agree with the contention of the learned D.R. that there is interlacing inter financing and interdependence of the different units. We have perused the details given by the assessee before the authorities below in respect of each unit and relied upon by the learned Counsel and reproduced in para 7 above from which it can be seen that each unit is independent capable of being run/close without effecting the other unit. In A.Y. 1995-96 the assessee closed scouring powder unit without effecting other units. Out of six products, only two products i.e tooth paste and detergent cake fall under Schedule XI. However, even detergent cake cannot be equivalent to soap in view of the decision of the Chandigarh Bench in the case of 52 ITD 55. Manufacturing process of each unit is also different. Raw material ratio of each unit is also different. Separate lists of plant and machinery were already on records since A.Y.1991-92. We accordingly hold that for allowing deduction u/s. 80I each unit is to be considered separate and independent one.
4. The Tribunal further observed that the objection of the revenue that the assessee did not fulfill condition of employing requisite number of workers could not be accepted as employment of labour through a contractor would fulfill the requirement of the provision.
5. Mr.B.B.Naik, learned Standing Counsel for the applicant-revenue contended that it was for the assessee to establish that the requisite conditions laid down in the statute are fulfilled. That the Assessing Officer had initiated action on the basis of perusal of the balance sheet which reflected value of plant and machinery as on 31.03.1993 at Rs. 78,41,733/-. That despite categorical notice to show cause that the assessee was entitled to the deduction as claimed the assessee had failed to establish its case. It was further submitted that the assessee was manufacturing at least two items which figured in the list in Eleventh Schedule and an industrial undertaking which manufactured a prohibited item was not entitled to relief under Section 80I of the Act, the only exception being an industrial undertaking which was a small scale industrial undertaking. That provisions of Section 80I(2)(iii) read with Second Proviso and Explanation 3 specifically exempted only Small Scale Industrial Undertaking and made it eligible for relief under Section 80I of the Act, even if such industrial undertaking produced prohibited items. That as per Explanation (b) appearing below Sub-section (8) of Section 80HHA of the Act, which by incorporation was forming part of Provisions of Section 80I of the Act, an industrial undertaking shall be deemed to be a small-scale industrial undertaking if the assessee could show that the industrial undertaking had the aggregate value of the machinery and the plant (other than tools, jigs, dies and moulds) installed as on the last day of the previous year which did not exceed Rs. 35 lakhs, and for this purpose actual cost had to be considered. That in the present case the assessee had failed to establish this requirement.
6. On behalf of the respondent-assessee Mr.J.P.Shah, learned Advocate supported the order of the Tribunal by pointing out that the assessee had categorically placed on record the evidence to show that each of the units of the assessee were having plant and machinery whose value in aggregate does not exceed the specified limit, but the revenue, instead of treating the assessee to be eligible, only for the purpose of denying the benefit, aggregated the value of each of the independent units and denied the relief. That the approach of the revenue itself indicated that claim of the assessee that each of the units does not have value of plant and machinery which exceeded the specified limit was not in dispute and that was the reason the revenue authorities wanted to club the value of plant and machinery of all the units and treat as one industrial undertaking. It was submitted that the assessee had placed enough evidence on record which had not been disputed by the other side and once the Tribunal had accepted the same there was no question of taking a different view of the matter considering that this was a finding of fact. Alternatively, the learned Advocate poleaded that in the event the Court was of the opinion that the Tribunal had not recorded correct findings of fact the matter may be restored to the file of the Tribunal for being decided afresh.
7. In relation to the second ground as to number of workers being employed, parties accepted the fact that the issue stood concluded by judgment rendered by this Court in the case of Commissioner of Income Tax v. Prithviraj Bhoorchand : [2006]280ITR94(Guj) and the said judgment confirmed the decision of the Tribunal in the case of Prithviraj Bhoorchand the Tribunal having followed its order.
8. Section 80I of the Act provides for granting a deduction from profits and gains at a specified percentage in a case where the gross total income of an assessee includes such profits and gains derived from an industrial undertaking which fulfills the conditions laid down in the section. Under Sub-section (2) of Section 80I of the Act four different conditions are stipulated. Condition vide Clause No. (iii) of Sub-section (2) of Section 80I of the Act stipulates that the industrial undertaking must manufacture or produce any article or thing, but the article or the thing must not be specified in the list in the Eleventh schedule. The Second Proviso thereunder carves out an exception by providing that condition in Clause No. (iii) shall not operate in relation to a small scale industrial undertaking even if such undertaking manufactures or produces any of the articles or things enumerated in the list in the Eleventh schedule. Explanation 3 provides that for the purposes of Sub-section (2) of Section 80I of the Act 'small-scale industrial undertaking' shall have the same meaning as in Clause (b) of the Explanation below Sub-section (8) of Section 80HHA of the Act.
9. Explanation (b) which defines small-scale industrial undertaking originally reads as under:
(b) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and paint (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of [the business of the undertaking does not exceed,-
(1) in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees;
(2) in a case where the previous year ends after the 31st day of July,1980 but before the 18th day of March,1985, twenty lakh rupees; and
(3) in a case where the previouis year ends after the 17th day of March, 1985, thirty-five lakh rupees,
and for this purpose the value of any machinery or plant shall be,-
(i) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee; and
(ii) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant
10. Subsequently, the Explanation underwent change by virtue of substitution by Finance Act, 1999 and the substituted Explanation (b) was made applicable with retrospective effect from 01.04.1978. The substituted Explanation (b) reads as under:
(b) an industrial undertaking shall be deemed to be a small-scale industrial undertaking which is, on the last day of the previous year, regarded as a small-scale industrial undertaking under Section 11B of the Industries Development and Regulation Act, 1951 (65 of 1951)
11. The Tribunal decided the Appeal on 20.03.1998 when amended Explanation (b) was not brought on statute book. However, during pendency of the present reference the substitution came about as noted hereinbefore which has become operational with retrospective effect from 01.04.1978. In the circumstances, it is apparent that the Tribunal will have to consider the amended provisions of Explanation (b) and the appropriate Notification issued by Government of India under Section 11B of the Industries Development and Regulations Act, 1951 for the purpose of determining whether the industrial undertaking, or more than one undertaking as contended by the assessee, fulfilled the requisite conditions, including the monetary limit, for being treated as 'Ssmall-scale industrial undertaking'.
12. However, it is necessary to note that even otherwise the present order of Tribunal on this count does not merit acceptance. As noted hereinbefore, the entire approach of the Tribunal is, to say the least, without taking into consideration the relevant provisions of the Act, more particularly the Explanation which requires that an industrial undertaking shall be deemed to be a small-scale industrial undertaking if on the last day of the previous year it fulfills the requisite criteria of having installed plant and machinery upto the specified monetary value. The present order of the Tribunal does not indicate that the Tribunal has considered this aspect of the matter. The phrase Slast day of the previous year would indicate that the exercise has to be carried out for every year by the authorities and the Tribunal, when called upon to decide such a controversy for each such year, and any evidence produced in earlier years cannot suffice for recording a decision in subsequent years unless and until it is shown by cogent evidence that there are no additions or subtractions qua plant and machinery.
13. In the circumstances, while holding that the approach of the Tribunal was not correct in law the first question referred for opinion of this Court is left unanswered in light of what is stated hereinbefore.
14. That leaves question No. 2. The Tribunal has deleted the interest charged under Sections 234B and 234C of the Act. The reason for such deletion is stated the facts stated this year before us are identical to those relating to Assessment Year 1989-
90 However, on a plain reading of the relevant extract of the earlier year's order of the Tribunal itself, which has been reproduced in paragraph No. 36 of the order, it becomes abundantly clear that there is total non application of mind on part of the Tribunal. Assessment Year 1989-90 was found to be a year in which the assessee having suffered a loss was not required to pay advance tax and hence the Tribunal held that there was no default. However, in so far as present year is concerned the first sentence of the Assessment Order itself shows that a return of income declaring total income of Rs. 1,94,10,324/- was filed by the assessee.
15. Thus on the face of it the order of the Tribunal in relation to question No. 2 is not sustainable, there being total non application of mind on part of the Tribunal. There is not only positive income returned by the assessee but there is no finding to the effect that in this year the assessee had incurred any loss. In fact, even while dealing with the ground relating to Section 80I deduction, the Tribunal itself has recorded that the First Appellate Authority had committed an error in holding that relief under Section 80I of the Act was not available because there was loss from the activity of the industrial undertaking. The Tribunal itself found that there were profits in relation to the activity of manufacturing carried on by the industrial undertaking. In these circumstances, the impugned order of Tribunal on this count cannot be permitted to stand. Question No. 2 is therefore answered in the Negative i.e. in favour of the Revenue and against the assessee.
16. The Reference stands disposed of accordingly with no order as to costs.