2017 (8) TMI 331 - AT - Income Tax

Appeal allowed, Section 80IB deduction upheld, return validity and interest levy resolved.

The Tribunal allowed the appeal of the assessee, reversing the CIT(A)'s order. The deduction claim under Section 80IB of the Income Tax Act was deemed ... Eligibility for deduction u/s. 80IB - genuineness of revised return - as belated return filled therefore no claim u/s.80IB can be allowed - Held that:- AO himself admits that the return filed on 30th September, 2009 is a revised return. Secondly, nowhere authority below has raised a question that the return filed on 30.9.2009 is invalid return and the reliance has been placed on the case of R. Kasi Vishwanathan and brothers vs. ACIT, [2013 (10) TMI 1456 - ITAT COCHIN] where it has been held that the assessee filed a revised return in accordance with the provision of Section 139(5) of the Act. The Revenue authorities were not justified in rejecting the said return without following the procedure prescribed u/s.139(9) by merely taking a view that a revised return was afterthought and was filed only to reduce assessee’s tax liability. In the present case also no averment with regard to invalid return has been raised by any of the authorities below and in short the provision of Section 139(9) have not been invoked and in such circumstances the pleadings taken by learned DR relying upon the orders of both the authorities below cannot be upheld and the orders of both the authorities are reversed accordingly. - Decided in favour of assessee. Issues Involved:1. Disallowance of deduction claim under Section 80IB of the Income Tax Act.2. Levy of interest under Sections 234A and 234B of the Income Tax Act.3. Validity of the return filed and its impact on the deduction claim.Issue-Wise Detailed Analysis:1. Disallowance of Deduction Claim Under Section 80IB:The primary issue revolves around the assessee's claim for deduction of Rs. 5,80,225 under Section 80IB of the Income Tax Act, which was disallowed by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO disallowed the deduction on the grounds that the assessee's activity of blending and bottling of Indian Made Foreign Liquor (IMFL) does not constitute manufacturing or production, as required under Section 80IB. The CIT(A) supported this view by interpreting that the assessee's undertaking is engaged in activities listed in Part C of Schedule XIII, which disqualifies it from claiming the deduction.The assessee argued that their process involves significant steps that qualify as manufacturing, and provided supporting documentation and a High Court decision from Chennai, which was distinguished by the AO on the basis that it pertained to Pondicherry and not Jammu & Kashmir.2. Levy of Interest Under Sections 234A and 234B:The CIT(A) also upheld the levy of interest under Sections 234A and 234B of the Income Tax Act. The assessee contended that the interest levied was unjustified, given the circumstances of their case and the procedural aspects of filing returns.3. Validity of the Return Filed:The AO disallowed the deduction also on the basis that the return was filed after the statutory due date prescribed under Section 139(1). The AO noted discrepancies in the filing dates and the nature of the returns (original vs. revised). The assessee argued that the original return was filed on time and the revised return was a legitimate correction, supported by the acknowledgement and procedural compliance.Tribunal's Findings:On Disallowance of Deduction:The Tribunal noted that the assessee's claim under Section 80IB was allowed in earlier assessment years (2007-08 and 2008-09) by the Income Tax Appellate Tribunal (ITAT) and that these decisions were not overturned. The Tribunal cited the principle of finality in legal proceedings, referencing the Supreme Court's judgment in Shasun Chemicals and Drugs Ltd. v. CIT, which held that once a deduction is allowed in the initial year, it should be allowed in subsequent years unless the initial year's assessment is disturbed. The Tribunal found that the AO and CIT(A) erred in disallowing the deduction without altering the initial year's assessment.On Levy of Interest:The Tribunal did not provide a separate detailed analysis on the levy of interest under Sections 234A and 234B, as the primary issue of deduction under Section 80IB was resolved in favor of the assessee.On Validity of the Return:The Tribunal examined the procedural aspects and found that the AO's claim of the return being invalid was not substantiated by invoking Section 139(9). The Tribunal referenced the ITAT Cochin Bench's decision in R. Kasi Vishwanathan and Brothers vs. ACIT, which supported the validity of a revised return filed under Section 139(5). The Tribunal concluded that the return filed on 30th September 2009 was valid and the revised return on 30th December 2009 was appropriately filed.Conclusion:The Tribunal allowed the appeal of the assessee, reversing the CIT(A)'s order. The deduction under Section 80IB was deemed allowable, and the issues regarding the validity of the return and the levy of interest were resolved in favor of the assessee. The order was pronounced in the open court on 21st April 2017.