2015 (10) TMI 2110 - AT - Income Tax

ITAT upholds eligibility for SEZ deduction under Section 10B, stresses tax compliance

Assistant Commissioner of Income Tax, Central Circle-5, hyderabad Versus M/s. Shiva Shankar Minerals Pvt. Ltd. and Vica-Versa

The ITAT upheld the CIT(A)'s decision, affirming the eligibility of the company in SEZ for deduction under Section 10B and rejecting the disallowance of ... Entitlement to eduction U/s. 10B on the unit established in SEZ - manufacture - in earlier years, the deduction claimed U/s. 10B was not allowed - disallowance of 25% of expenditure on earth development expenses taking into account the non-verifiable nature of the expenditure. - Held that:- Explanation 4 of section 10B makes it clear that the term ‘manufacture and produce’ as contemplated under section 10B is inclusive and not exhaustive. Therefore, considering the facts of the assessee’s case in the context of provision contained u/s 10B as well as in the light of ratio laid down by the Hon’ble Supreme Court in the case of Sesa Goa Ltd. (2004 (11) TMI 14 - SUPREME Court) and Instruction issued by the CBDT, we are of the opinion that the CIT(A) was correct in allowing the claim of deduction u/s 10B of the Act. - Decided in favour of assessee. Issues Involved:1. Eligibility of deduction U/s. 10B for a company in SEZ.2. Disallowance of expenditure on earth development expenses.Analysis:Issue 1: Eligibility of deduction U/s. 10BThe case involved a Revenue's appeal against the order of the Commissioner of Income Tax (Appeals) regarding the eligibility of the assessee, a company in SEZ, for claiming deduction U/s. 10B. The Assessing Officer disallowed the deduction based on the non-acceptance of earlier years' deductions by the department. However, the CIT(A) allowed the deduction, considering the eligibility criteria and the assessee's engagement in manufacturing activities. The ITAT upheld the CIT(A)'s decision, citing the assessee's status as an approved 100% EOU, compliance with Development Commissioner's certification, and engagement in mining and processing activities. The judgment referenced legal precedents to establish that mining activities qualify as production, thereby entitling the assessee to the deduction. The ITAT dismissed the Revenue's ground on this issue, affirming the eligibility of the assessee for deduction U/s. 10B.Issue 2: Disallowance of Expenditure on Earth DevelopmentThe second issue pertained to the disallowance of an expenditure on earth development expenses by the Assessing Officer. The CIT(A) allowed the claim after examining the documents furnished by the assessee and the sub-contract agreement with GVPR Engineers Ltd. The CIT(A) found no additional evidence submitted during the appeal process and concluded that the information presented before them was consistent with the details provided to the AO. As the expenditure was accounted for by both parties and assessed by the same officer, the ITAT rejected the Revenue's ground on this issue. Consequently, the ITAT dismissed the Revenue's appeal and the Cross Objection filed by the assessee in support of the CIT(A)'s order.In conclusion, the ITAT upheld the CIT(A)'s decision on both issues, affirming the eligibility of the assessee for deduction U/s. 10B and rejecting the disallowance of expenditure on earth development expenses. The judgment emphasized the importance of consistency in decision-making and adherence to legal provisions and precedents in determining tax liabilities and deductions.