2018 (3) TMI 880 - AT - Income Tax

Tribunal upholds deductions for business profits including Excise Incentive

The Tribunal set aside the Principal Commissioner of Income Tax's order and upheld the Assessing Officer's decision to allow deductions for various ... Revision u/s 263 - whether PCIT(Central) has wrongly passed order u/s 263 on the issue already decided by the Assessing Officer in order passed under section 153A(1)(b) r.w.s 143(3) - excise incentive is not eligible for deduction - Held that:- We find that the companies availing the benefit of notification no. 56/2002 CE dt. 14/11/2002 to Central Excise which under a special procedure the manufacturers located in J&K first pay excise duty and cess and there after claim the refund of the same under Central Excise Tariff. Thus it makes an integral part of the profits of the business which would be eligible for deduction under section 80IB. The order of the Pr. CIT holds that the excise incentive is not eligible for deduction which is in contravention with the established judicial position as detailed above. Hence, the order of the Ld. Pr. CIT cannot be held to be valid under this head. Regarding the FDR's from the perusal of the record and submissions it was found that the FDR's have been made for the purpose of electricity connection for the Jammu Unit. Since the FDR's have been made out of business compulsion, the interest earned would be eligible for deduction under section 80IB. Reliance is placed on the judgment of Hon'ble Delhi High Court in the case of Pr. CIT Vs. Universal Precision Screws in ITA No. 392/2015 dt. 06/10/2015 and also on the judgment of Hon'ble Delhi High Court in the case of Riviera Home Furnishing Vs. Addl. CIT [2015 (11) TMI 1139 - DELHI HIGH COURT] The sale of scrap is an integral part of the manufacturing activity thus it would be directly related to business and eligible for deduction. Reliance is placed on the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Saadhu Forging Ltd. [2011 (6) TMI 9 - DELHI HIGH COURT]. Similarly the misc. income written off of ₹ 1,222/- is a part of the business income and would be eligible for deduction. Since the additions proposed by the Pr. CIT on account of excise incentives, sale of scrap, interest on FDR's are squarely covered by the judicial precedence's, it cannot be said that allowing of such deduction by the Assessing Officer is erroneous or prejudicial to the interest of Revenue. Hence we found no justification in invoking the provisions under section 263 - Decided in favour of assessee. Issues involved:Challenging order under section 263 of the Income Tax Act.Analysis:The appeal was filed against the order passed under section 263 by the Principal Commissioner of Income Tax (Pr. CIT), Central Gurgaon. The appellant contended that the Pr. CIT wrongly set aside the assessment order made by the Assessing Officer under section 263. The appellant also argued that the Pr. CIT passed the order on an issue already decided by the Assessing Officer under section 153A(1)(b) read with section 143(3) of the Act. The assessment was initially completed by the DCIT, Central Circle-2 Chandigarh, accepting the returned income. Subsequently, the Pr. CIT invoked powers under section 263 and set aside the assessment order, citing that the deduction under section 80IB was wrongly allowed on income not derived from an industrial undertaking. The Pr. CIT issued a show cause notice to the assessee, questioning the allowance of deductions. The assessee objected to the proceedings under section 263, arguing that the income in question should not be excluded for the purpose of deduction under section 80IB.The Pr. CIT's order highlighted that the income from Excise Incentive, Interest on FDR, Miscellaneous write off, and other miscellaneous income should not have been considered for deduction under section 80IB as they were not derived from an industrial undertaking. The order directed the Assessing Officer to recalculate the deduction by excluding this income. The appellant argued against this decision, citing various judgments in favor of allowing such deductions. The appellant relied on judgments from the Hon'ble Supreme Court and High Courts to support their case that excise incentives and other incomes should be eligible for deduction under section 80IB. The Pr. CIT and the Departmental Representative strongly supported the Pr. CIT's order.The Tribunal analyzed the judgments cited by the appellant and the order of the Pr. CIT. The Tribunal found that the excise incentives, interest on FDRs, and other incomes were integral parts of the business profits and should be eligible for deduction under section 80IB. The Tribunal disagreed with the Pr. CIT's decision to disallow these deductions, stating that they were covered by established judicial precedents. Therefore, the Tribunal concluded that the Assessing Officer's allowance of such deductions was not erroneous or prejudicial to the interest of revenue. Consequently, the Tribunal allowed all the grounds raised by the assessee and allowed the appeal.In conclusion, the Tribunal set aside the Pr. CIT's order and upheld the Assessing Officer's decision to allow deductions for the Excise Incentive, Interest on FDR, Miscellaneous write off, and other miscellaneous income under section 80IB. The Tribunal found no justification for invoking section 263 of the Income Tax Act in this case and allowed the appeal of the assessee.