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2016 DIGILAW 598 (JK)

Commissioner of Income Tax v. Bansi Lal Gupta

2016-11-21

N.PAUL VASANTHAKUMAR, TASHI RABSTAN

body2016
JUDGMENT : N. Paul Vasantha Kumar, J. 1. This appeal is preferred by the Commissioner of Income Tax, Jammu challenging the order of Income Tax Appellate Tribunal, Amritsar Bench made in ITA No.250(Asr)/2012 dated 19.03.2013 for the assessment year 2009-10. The facts leading to the filing of this appeal are that the assessee filed his E-Return of income on 29.09.2009 declaring income of Rs.11,11,400/- after claiming deduction of Rs.55,49,643/- under Section 80-IB of Income Tax Act, 1961. The assessee is doing business of publishing and printing of newspapers along with several other business ventures. He started his business of publication of newspaper as an editor in the year 2002, getting it printed from outside. In the year 2006, the assessee established a printing press and printing was carried out in the said unit on which deduction under Section 80-IB of the Income Tax Act, 1961 was claimed, which was allowed in respect of assessment years 2007-08 and 2008-09 by the respective assessing officer. For the assessment year 2009-10, the assessing officer changed his opinion stating that the act of setting up of printing press was only an expansion of the existing business, as such, he did not allow various claims of the assessee and completed the assessment on 29.12.2011. Aggrieved by the said assessment order, the assessee filed an appeal before the 1st appellate Authority, who by order dated 20.03.2012 partly allowed the appeal and granted deduction under Section 80-IB of the Act and also upheld the deduction claimed under Section 80-IB. The Revenue being aggrieved by the said order, filed appeal before the Income Tax Appellate Authority by contending that the appellate authority had not appreciated the records of the assessee and wrongly allowed the appeal as the case of setting up of new business and not of expansion of the existing business and the Commissioner of Income Tax (Appeals) treated the unit as a new unit which was splitting or re-organization of the existing unit. The said plea was opposed by the assessee by contending that the deductions in dispute has already been allowed by the Revenue for the assessment year 2007-08 and 2008-09 in the assessment made under Section 143(3) of the Act and therefore, for subsequent year also the appellate authority allowed the deductions and treated the income from advertising in the newspaper as derived from eligible business by following the rule of consistency. 2. 2. While deciding the said issue, the Income Tax Appellate Tribunal noticed the finding of fact recorded by the Ist Appellate Authority in paragraph No. 4.2 and dismissed the appeal of the Revenue, against which this appeal is filed, which was admitted on the following substantial questions of law:- "i. Whether on the facts and in the circumstances of the case, the ITAT was right in law in dismissing the appeal of revenue and upholding the order of learned CIT(Appeals) without taking into consideration the fact that the change in the title of the business or mere installing a printing machine did not create or setup a new business but was an expansion of the business of publishing already in existence. ii. Whether the ITAT did not err in law in relying upon the order of CIT(Appeals) as much as CIT (Appeals had not appreciated the records of the assessee which showed that it was clear a case of expansion of business and not a case of setting up of new business." 3. Both the authorities, namely Ist appellate authority and the Income Tax Appellate Tribunal, on appreciation of facts recorded finding to the effect that the unit was a new one and not expansion of the existing business by following the rule of consistency for the assessment years 2007-08 and 2008-09 because for these years similar deductions have been granted by the assessing officer to the assessee. 4. Hon'ble the Supreme Court in the decision, relied on by the Commissioner of Income Tax (Appeals) reported in 1977 (2) SCC 368 (Textile Machinery Corporation Limited v. The Commissioner of Income Tax) dealt with a similar issue under the old Section and held that substantial investment of fresh capital is imperative to decide whether the industrial undertaking is an expansion of the old existing business or a new business. For treating the undertaking as a new undertaking substantial investment of fresh capital must be made in order to gain profit attributable to the new capital. In paragraph No. 26, it is made clear, which reads thus :- "If any undertaking is not formed by reconstruction of the old business that undertaking will not be denied the benefit of section 15-C simply because it goes to expand the general business of the assessee on some directions. In paragraph No. 26, it is made clear, which reads thus :- "If any undertaking is not formed by reconstruction of the old business that undertaking will not be denied the benefit of section 15-C simply because it goes to expand the general business of the assessee on some directions. As in the instant case, once the new industrial undertakings are separate and independent production units' in the sense that the commodities produced or the results achieved are commercially tangible products and the undertakings can be carried on separately without complete absorption and losing their identity in the old business, they are not to be treated as being formed by reconstruction of the old business." A Division Bench of Allahabad High Court in Commissioner of Income Tax v. Quality Steel Tubes P. Ltd. (2006) 280 ITR 254 ), [which is also relied on by the Commissioner of Income Tax (Appeals)], considered the similar issue of claiming deduction under Section 80-HH of the Income Tax Act and held that while considering the unit as a new unit or expansion of existing unit, apart from the investment even if it is using some of the facilities of the old unit, cannot be treated an expansion of the old unit. In that case, the contention was that the new plant was only a moulding plant set up parallel to the original plant which manufactured steel tubes upto 2 inches diameter, which was established in the same compound, same factory building and there was only one composite structure. The Income Tax officer based on the said facts and taking note of the common use of the two projects of the land, building, splitting machine, galvanised plant, threading machine, store room, workshop, generating set and factory office, held that it was a case of splitting up of the old business. This finding of the Income Tax Officer was upheld by the Commissioner of Income Tax (Appeals). The Income Tax Appellate Tribunal held that the unit is a new industrial unit, which is separate physically from the old one, the capital of which and the profit thereon are ascertainable and merely because some of the processes for the manufacturing of new tubes are carried on with the help of the old machines or there is common store room and common factory office, same are not fatal to treat it as expansion of the old unit. The said order of the Tribunal was upheld by Division Bench of the Allahabad High Court. 5. On facts of this case, Commissioner of Income Tax (Appeals) as well as ITAT found that the assessee started its business of "Early Times" newspaper as owner, editor and publisher and its printing was being done by outside printers, which practice continued till June, 2006. In the year 2006-07, the assessee established an industrial unit for publication of the newspaper, which was also registered as a small scale industrial unit with DIC, Jammu provisionally on 04.05.2005 and permanently on 07.04.2006. The commercial production started from 06.07.2006 and the assessee also obtained new sales tax registration as per law for the purposes of acquiring new plant and machinery after purchase. Complete detail of new machinery installed in the printing unit was submitted during the assessment proceedings by letter dated 28.12.2011. The appellate authority gave a finding that combine reading of conditions laid down by the Income Tax Act, 1961 to claim deduction under Section 80IB, the Act does not require that the business should be a new business and there is no splitting or reconstruction of the business already in existence. The publication business of Early Times never indulged in printing activities of any kind. The Early Times printing press is neither formed by splitting up of Early Times nor it is a case of re-construction of Early Times. The amount of additions, fixed assets on account of machinery amounting to Rs. 44,35,107/- was invested. Thus, it is a new industrial unit and not the expansion of the existing industry. 6. The Income Tax Appellate Tribunal also appreciated the fact that as regards to income from advertising, publishing and printing of public notices and advertisements, which is an integral part of business of newspaper and magazine, the assessee is entitled to get deduction under Section 80-IB of the Income Tax Act. As concurrent finding of fact was recorded while dismissing the appeals preferred by the Revenue and there being no substantial question of law arises for consideration as the said questions were already answered in the above cited judgments. There is no merit in the appeal and same is dismissed. No costs.