2014 (3) TMI 465 - AT - Income Tax

Tribunal upholds CIT(A)'s decision granting exemption under section 80IB for genuine manufacturing activities.

The Tribunal dismissed the revenue's appeals for AY 2005-06 and AY 2004-05, upholding the CIT(A)'s decision to allow exemption u/s. 80IB for the assessee. ... Allowability of exemption u/s. 80IB of the Act – Profit earned as taxable income u/s. 68 of the Act - Revenue was of the view that the firm is non-existent and also the manufacturing activities carried out are not genuine - Held that:- The assessee has complied with rules and regulations and obtained industrial license as SSI unit, Pollution Clearance Certificate from Pollution Control Board towards industrial undertaking, it is registered under Sales tax/VAT - The assessee also produced details of sales and purchase invoice during the course of original assessment proceedings, during the course of set aside proceedings and even before CIT(A) and which were verified by issuing notices u/s. 133(6) of the Act - The AO also verified the transactions of purchase of machinery and sales as well as manufacturing of goods have been accepted – thus, the CIT(A) has rightly allowed the claim of assessee u/s. 80IB of the Act to the assessee being a manufacturing unit and all rules and regulations and necessary permission also obtained on the same plot – Decided against Revenue. Issues:Appeal against order of CIT(A) allowing exemption u/s. 80IP of the Income-tax Act, 1961 for AY 2005-06 and AY 2004-05.Analysis:1. Delay in filing appeals:- Revenue filed appeals for AY 2005-06 and AY 2004-05 with a delay of 3 days and 11 days respectively. The condonation petition was filed, and since no objection was raised by the assessee, the delay was condoned, and the appeals were admitted for hearing.2. Common issue of exemption u/s. 80IB:- The appeals raised a common issue against the order of CIT(A) allowing exemption u/s. 80IB of the Act. The grounds in both years highlighted errors in allowing 100% exemption under this section, which was considered a substantial question of law.3. Assessee's stance and Tribunal's analysis:- The assessee argued that the issue of deduction u/s. 80IB was favorably decided in a previous Tribunal case. The AO disallowed the deduction, alleging non-existence of the firm and manufacturing activities. However, the CIT(A) allowed the deduction after considering various evidences submitted by the assessee, including licenses, registrations, and bills.4. CIT(A)'s decision and Tribunal's conclusion:- The CIT(A) found the AO's conclusions unsubstantiated and based on suspicion rather than fresh evidence. The Tribunal noted that the assessee had complied with regulations, obtained necessary licenses, and provided evidence of business operations. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had fulfilled requirements for the deduction u/s. 80IB, and dismissed the revenue's appeal for both AYs.5. Final verdict:- The Tribunal dismissed the revenue's appeals for AY 2005-06 and AY 2004-05, as the factual aspects supported the assessee's claim for exemption u/s. 80IB. The decision was based on the evidence presented by the assessee, demonstrating compliance with regulations and conducting genuine manufacturing activities.In conclusion, the Tribunal upheld the CIT(A)'s decision to allow the exemption u/s. 80IB for the assessee, dismissing the revenue's appeals for both assessment years based on the factual evidence and compliance demonstrated by the assessee.