2017 (8) TMI 848 - AT - Income Tax

Tribunal upholds CIT(A) decisions, allows deductions under 80IB and 80IC, and deletes disallowance under 40(a)(ia).

ACIT Circle-II, Faridabad Versus Sunil Parkash, Prop. M/s. Cromewell Industries And Vice-Versa

ACIT Circle-II, Faridabad Versus Sunil Parkash, Prop. M/s. Cromewell Industries And Vice-Versa - Tmi Issues Involved:1. Admission of new additional evidence/documents by CIT(A) in violation of Rule 46A of Income Tax Rules 1962.2. Deduction claims under sections 80IB and 80IC of the Income Tax Act.3. Disallowance under section 40(a)(ia) of the Income Tax Act.4. Allocation of expenses among different units of the assessee.Issue-wise Detailed Analysis:1. Admission of New Additional Evidence/Documents:The Revenue contended that the CIT(A) erred in admitting new additional evidence/documents without considering their reasonableness, genuineness, and reliability, violating Rule 46A of Income Tax Rules 1962. The CIT(A) directed the AO to examine the additional evidence under Rule 46A, but the AO failed to submit the report within the stipulated time. The CIT(A) admitted the additional evidence and verified it, concluding that the assessee was indeed manufacturing DG sets and pre-fabricated shelters. The Tribunal upheld the CIT(A)'s decision, noting that the CIT(A) acted judiciously and did not violate Rule 46A, as the CIT(A) has the power to call for information and examine evidence independently.2. Deduction Claims under Sections 80IB and 80IC:For A.Y. 2006-07, the AO denied the assessee’s claim of deduction under section 80IB, arguing that the assessee was not manufacturing DG sets at the Jammu unit. The CIT(A) allowed the deduction, stating that the assessee conclusively proved manufacturing activities through various evidences, including registration with statutory authorities and third-party certificates. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was engaged in manufacturing and entitled to the deduction under section 80IB.For A.Y. 2007-08, the CIT(A) allowed the deduction under section 80IB, and the Tribunal upheld this decision. Additionally, the Tribunal agreed with the CIT(A) that no TDS liability under section 194C(1) was attracted, thus deleting the disallowance under section 40(a)(ia).For A.Y. 2008-09, the CIT(A) allowed deductions under sections 80IB and 80IC, based on the earlier years' findings. The Tribunal upheld the CIT(A)'s decision, confirming that the business activities remained the same, involving manufacturing of DG sets and pre-fabricated shelters.For A.Y. 2009-10, the CIT(A) allowed the deductions under sections 80IB and 80IC, and the Tribunal upheld this decision. The Tribunal also confirmed the CIT(A)'s allocation of common expenses in proportion to the turnover of various units.3. Disallowance under Section 40(a)(ia):For A.Y. 2007-08, the AO made an addition under section 40(a)(ia), which the CIT(A) deleted, stating that no TDS liability under section 194C(1) was attracted. The Tribunal upheld the CIT(A)'s decision, confirming that the disallowance was unwarranted.4. Allocation of Expenses:The AO allocated certain expenses to the exempt units, reducing their profits and the consequential claim of deductions under sections 80IB and 80IC. The CIT(A) upheld the allocation, and the Tribunal agreed, stating that the establishment expenses could not be attributed solely to the head office, as the assessee coordinated business affairs across all units.Conclusion:The Tribunal dismissed the Revenue's appeals and the assessee's cross-objection, upholding the CIT(A)'s decisions across all issues. The Tribunal confirmed that the CIT(A) acted judiciously, correctly admitted additional evidence, and rightly allowed the deductions under sections 80IB and 80IC, along with the appropriate allocation of expenses. The Tribunal also upheld the deletion of disallowance under section 40(a)(ia), confirming that no TDS liability was attracted in the given circumstances.