2014 (4) TMI 1127 - HC - Income Tax

High Court upholds Tribunal's decision on GP addition deletion, dismisses appeal on Section 80IB deduction

Commissioner of Income Tax-I, Ludhiana Versus. M/s Saimbhi Cycles & Auto Industries, Focal Point, Ludhiana

The Tribunal's decision to confirm the deletion of GP addition on sales to a sister concern was upheld by the High Court. The Tribunal found that the ... Entitlement for deduction under Section 80IB - Held that:- The CIT(A) as well as the Tribunal had recorded that the assessee concern was entitled for deduction under Section 80IB of the Act at the rate of 25% and therefore, the effective rate of taxation was 22.5%. It was further noticed that in the case of sister concern, the rate of taxation was 30%. It was also observed that in such circumstances, there was no incentive for the assessee to make sales to the sister concern M/s Darshan Udyog at lower rate. The said finding has not been shown to be perverse or erroneous in any manner being finding of fact and thus does not call for any interference by this Court under Section 260A of the Act. Reference to section 80IB of the Act shows that only requirement for its applicability is deriving of income from business referred to in sub sections (3) to (11), (11A) and (11B) of the Act, apart from other conditions with which we are not concerned. It is not the case of the revenue that the business of the assessee does not fall under sub sections (3) to (11), (11A) or (11B) of the Act. The assessee is at liberty to do manufacture for itself or for others, which makes no difference for purposes of section 80IB of the Act. See Commissioner of Income-tax Versus Impel Forge and Allied Industries Limited [2008 (12) TMI 370 - PUNJAB & HARYANA HIGH COURT ] Issues:1. Whether the Income Tax Appellate Tribunal was justified in confirming the deletion of GP addition on sales made to a sister concern.2. Whether the Income Tax Appellate Tribunal was justified in deleting the deduction claimed under Section 80IB on income from job work.Analysis:Issue 1:The appeal by the revenue challenged the Tribunal's order deleting the GP addition on sales to a sister concern. The Assessing Officer had made additions on sales to the sister concern at a lower rate compared to non-related parties. The CIT(A) partly allowed the appeal, deleting the additions. The Tribunal affirmed this decision. The CIT(A) found that the Assessing Officer wrongly applied rates of different parties and that the prices of raw materials had increased during the relevant period. The Tribunal agreed, noting that the effective tax rate for the assessee was lower than that of the sister concern, providing no incentive for lower sales. The Tribunal cited a Supreme Court case to support its decision. The High Court upheld the Tribunal's findings, stating that there was no error in the decision.Issue 2:Regarding the deduction claimed under Section 80IB on income from job work, the Tribunal relied on a previous judgment in a similar case. The High Court referenced the judgment, which clarified that the applicability of Section 80IB depended on deriving income from a specified business, regardless of whether the manufacturing was for the assessee or others. As the revenue failed to show why the judgment did not apply, the High Court found no substantial question of law. Therefore, the appeal was dismissed.This comprehensive analysis of the judgment highlights the key issues, arguments, and decisions made by the authorities involved in the case.