2014 (1) TMI 911 - AT - Income Tax

Tribunal grants Revenue's appeal, remits deduction issues for further examination under Income Tax Act

The Tribunal allowed the Revenue's appeal for statistical purposes, remitting issues regarding deduction u/s. 80 IB and scrap sales income back to the ... Deduction u/s 80IB of the Act allowed – Merits of factory license challenged – Failure to prove commencement of manufacturing activity on or before 31.03.2004 – Held that:- The Assessing Officer in his order has noted that the licence was issued by the Chief Inspector of Factory on 12.10.2004 - there is nothing on record to show as to when the application for factory licence was made by the Assessee and when the same was received – Relying upon CIT vs. Jolly Polymers [2012 (4) TMI 398 - GUJARAT HIGH COURT] - lapse must be viewed as one which is purely technical even without accepting the contention of the counsel for the Assessee that grant of license subsequently would relate back to the original date of application- thus, the date of making an application for factory licence and its date of issue needs to be examined by the Assessing Officer – the matter remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Scrap sales allowable as deduction u/s 80IB of the Act – Held that:- The Assessing Officer has noted that the Assessee has not filed details of the scrap generated during the year - These details have also not been filed either before CIT(A) or before the Tribunal - the matter needs to be examined at the end of Assessing Officer for verification the nature of scrap generated by Assessee the matter remitted back to the AO for verification and give a finding as to whether the scrap has been generated during the course of manufacturing activity – Decided in favour of Revenue. Issues:1. Allowance of deduction u/s. 80 IB2. Commencement of manufacturing activity before the prescribed date3. Treatment of scrap sales income for deduction u/s. 80 IBIssue 1: Allowance of deduction u/s. 80 IB:The appeal was filed by the Revenue against the order of CIT(A) for assessment year 2009-10. The Assessing Officer rejected the Assessee's claim of deduction u/s 80 IB, citing that the factory licence was issued after the prescribed date. However, CIT(A) allowed the appeal based on previous decisions in favor of the appellant. The Revenue challenged this decision, arguing that the manufacturing activity was unlawful due to the timing of the factory licence issuance. The High Court's decision in a similar case was cited. The Tribunal remitted the matter to the Assessing Officer for verification of the factory licence application date and issuance. The ground of appeal was allowed for statistical purposes.Issue 2: Commencement of manufacturing activity before the prescribed date:The Assessing Officer noted discrepancies in the dates related to the commencement of manufacturing activity and the issuance of the factory licence. The High Court's decision emphasized technicalities in cases where the licence application was made before the prescribed date. The Tribunal directed the Assessing Officer to examine the application date and issuance of the factory licence, following the High Court's decision. The matter was remitted for further verification.Issue 3: Treatment of scrap sales income for deduction u/s. 80 IB:The Assessing Officer excluded the profit from the sale of scrap from the deduction under 80IB, citing lack of details provided by the Assessee. However, CIT(A) allowed the appeal, considering scrap sales as income derived from the industrial undertaking. The Revenue challenged this decision, arguing that the nature of scrap generated was not disclosed. The Tribunal remitted the matter to the Assessing Officer for verification of the nature of scrap generated during manufacturing activity. The Assessee was directed to provide necessary evidence for assessment. The ground of appeal was allowed for statistical purposes.In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, remitting both issues related to deduction u/s. 80 IB and scrap sales income back to the Assessing Officer for further examination and verification. The judgment emphasized the importance of verifying the dates and nature of activities to determine the eligibility for deductions under the Income Tax Act.