2015 (1) TMI 1339 - AT - Income Tax

Appellate Tribunal rules on ITA No.6631/Mum/2011: deductions allowed under section 80 IB, verification for other income.

The Appellate Tribunal ITAT Mumbai dismissed Ground No.2 in ITA No.6631/Mum/2011, related to transactions between arms of the same business under section ... Deduction under section 80IB - application of section 80IB(13) read with 80IA(8) - transfer between businesses of the same assessee at market value - job work as part of manufacturing eligible for deduction - verification of sundry balances written back for eligibility - adjudication completeness by recording consideration of non-issue salesApplication of section 80IB(13) read with 80IA(8) - transfer between businesses of the same assessee at market value - Whether transactions with M/s. Yogesh Perfumery And Essential Oil and M/s. Sachin Perfumery Cosmetics fall within the ambit of section 80IB(13) and are eligible for deduction. - HELD THAT: - The Tribunal examined whether the transfers between the assessee and the two proprietary concerns were hit by the provision which requires computation of profits as if transfers were at market value where the consideration recorded does not correspond to market value. The Revenue did not contend that the consideration recorded in the eligible business accounts did not correspond to market value. In absence of any such case by the Revenue, the transactions are covered by the provisions of section 80IB(13) and the deduction claim stands on that basis. [Paras 11]Transactions with the two concerns are covered by section 80IB(13); ground No.2 is dismissed.Deduction under section 80IB - job work as part of manufacturing eligible for deduction - verification of sundry balances written back for eligibility - Whether job work income and other income (sundry balances written back) for the assessment year are eligible for deduction under section 80IB, and whether the written back amounts require verification. - HELD THAT: - The Tribunal found that job work charges are directly related to the assessee's business and therefore eligible for deduction under section 80IB. However, amounts described as sundry balances written back appear to relate to purchases/expenses of earlier years; that factual nexus was not conclusively established on record. The matter of written back balances was therefore restored to the Assessing Officer for limited verification of whether such amounts indeed relate to earlier years' purchases/expenses, and if so, to be treated as eligible for deduction under section 80IB.Job work income allowed as eligible for deduction under section 80IB; other income (sundry balances written back) remanded to the AO for limited verification.Genuineness of sales to related concerns - adjudication completeness by recording consideration of non-issue sales - Whether the Tribunal's order should record that it considered sales to certain parties notwithstanding that the Revenue's ground related only to alleged intra-group (same-assessee) bogus transactions. - HELD THAT: - The Tribunal's order had accepted the genuineness of sales to named parties although the Revenue's ground of appeal concerned alleged fabricated purchases/sales between two arms of the same business. To complete adjudication and to clarify the scope of its findings, the Tribunal directed that an additional paragraph be inserted noting that the sales to the identified parties were considered though those sales were not the issue raised by the Revenue. [Paras 17]Tribunal's order is amended by inserting para-17(a) recording that sales to the specified parties were considered though not the Revenue's issue; the miscellaneous applications are allowed.Final Conclusion: Miscellaneous Applications MA Nos.284, 282 & 283/Mum/2014 are allowed; MA No.366/Mum/2014 is allowed for statistical purposes for the limited verification directed. The Tribunal's order is accordingly amended to record the additional findings and to remit the limited factual issue to the Assessing Officer where indicated. Issues:1. Disposal of Ground No.2 in ITA No.6631/Mum/2011.2. Deduction under section 80IB for job work income and other income for AY 2002-03.3. Findings on Ground No.2 of Revenue's appeal for AY 2000-01 and 2002-03.Analysis:1. Disposal of Ground No.2 in ITA No.6631/Mum/2011:The Tribunal did not dispose of Ground No.2 in ITA No.6631/Mum/2011, which raised concerns about transactions between two arms of the same business of the assessee. The issue was related to the provisions of section 80 IB(13) of the Act. The Tribunal found that the transactions with specific entities were covered by section 80 IB(13), and as the Revenue did not dispute the consideration for these transactions, Ground No.2 raised by the Revenue was dismissed. The Miscellaneous Application No.284/Mum/2014 was allowed with this amendment to the Tribunal's order.2. Deduction under section 80IB for job work income and other income for AY 2002-03:In the case of MA No.366/Mum/2014 arising out of ITA No.5082/Mum/2012, the Tribunal considered the deduction under section 80 IB for job work charges and other income for AY 2002-03. The Tribunal found that job work charges were directly related to the business of the assessee and hence eligible for deduction under section 80 IB. However, regarding the claim of other income related to sundry balances written back, the Tribunal directed the AO to verify if these amounts were related to purchases/expenses of earlier years. If verified, the same was to be treated as eligible for deduction under section 80IB. The Miscellaneous Application No.366/Mum/2014 was treated as allowed for statistical purposes with these modifications.3. Findings on Ground No.2 of Revenue's appeal for AY 2000-01 and 2002-03:The Tribunal addressed the common grievance raised by MA No.282 & 283/Mum/2014 regarding the findings given for Ground No.2 of the Revenue's appeal for AY 2000-01 and 2002-03. The Tribunal acknowledged that the Revenue's concern was related to sales made by one concern of the assessee to another concern of the assessee. After careful consideration, the Tribunal found no dispute regarding third-party sales and accepted the genuineness of sales made to specific entities. An additional para was inserted to complete the adjudication, allowing MA Nos.282 & 283/Mum/2014.In conclusion, the Appellate Tribunal ITAT Mumbai provided detailed analysis and rulings on various issues related to deductions under section 80IB and the disposal of specific grounds in different assessment years, ensuring a comprehensive and fair adjudication of the matters at hand.