T.R. Sood, Accountant Member - This appeal is directed against the order passed by the ld. CIT(A), Shimla dated 31.10.2011.

2. In this appeal the assessee has raised the following grounds:

"1 On the facts and circumstances of the case, the ld. CIT(A) has grossly erred in concurring with the ITO in rejecting the valid claim of the assessee u/s 80IC of the Act.

2. On the facts and circumstances of the case, the ld. CIT(A) has grossly erred in upholding the rejection of claim of Rs. 1,12,94,962/- in concurrence with the ITO by holding that there is no distinction between a "Flour Mill" and a "Roller Flour Mill".

3. Brief facts of the case are that the assessee filed return declaring income of Rs. 82,760/-. This income was after claim of deduction amounting to Rs. 1,12,94,962/- u/s 80IC of the Act. Earlier the assessee was claiming deduction u/s 80IB of the Act and in the present year it was claimed that the assessee had made substantial expansion and therefore, was entitled to deduction u/s 80IC of the Act. During the assessment proceedings the Assessing Officer noticed that the assessee has claimed deduction u/s 80IC on the basis of expansion in Flour Mill. He further noticed that deduction u/s 80IC is not available in view of sub-section (8) of section 80IC which prescribed that deduction is not available under this provision on manufacture of article or thing specified in Schedule XIII, Part B. Since part B of Schedule XIII specifically mentioned Floor Mill at Item 8, the deduction was not available. The assessee was confronted with this situation by way of show cause notice vide order sheet dated 26.11.2010 and following points were raised:

(i) "Being 6th year of production deduction u/s 80IB is allowable 25% instead of 100% claimed by you.

(ii) As per thirteenth schedule, deduction u/s 80IC is not allowable to flour mills.

(iii) In nutshell,, you are requested to explain why deduction claimed at 100% may not be reduced to 25% of total profits."

The assessee submitted detailed reply in which it was contended that substantial expansion has been carried out as investment in the plant and machinery during the year was more than 50% of the book value. Further the assessee was running a "Roller Flour Mill" which is distinct from the "Flour Mill" and in this regard reference was made to the sales tax exemption given by the Government of Himachal Pradesh wherein it was clarified that "Roller Flour Mills" is different from "Flour Mill" vide letter No. Ind (A)(F) 6-16/94 darted 1.7.1994. Since "Roller Flour Mill" is not mentioned in part B of Schedule XIII, therefore, the assessee was eligible for deduction u/s 80IC. The Assessing Officer after considering the reply rejected the same because the assessee was running basically a Flour Mill and the main item manufactured was Atta/Flour. He also observed that interpretation by the Government of Himachal Pradesh under Sales tax Laws could not be applied to the income-tax. However, he allowed the deduction u/s 80IB (4) @ 25%.

4. On appeal before the ld. CIT(A) the submissions made before the Assessing Officer were reiterated. It was again emphasized that the Roller Flour Mill is different from Flour Mill and in this regard reference was also made to the Registration Certificate issued by the Department of Industries. It was further submitted that in a Flour Mill only atta and chokkar are the end products whereas in Roller Flour Mill in addition to atta and chokkar, maida and suzi are also produced. The Flour Mill is practically a "Chakki" made out of stone wheels whereas Roller Flour Mill is made of Roll Bodies which is entirely different from a flour mill. The clarification given by the Government of Himachal Pradesh regarding exemption in sales-tax was also reiterated.

5. The ld. CIT(A) after considering the submissions did not find force in the same and rejected the claim of the assessee.

6. Before us, the ld. counsel of the assessee reiterated the submissions made before the lower authoritie