2019 (8) TMI 522 - HC - Income Tax

Deduction for Selling Meter Boxes under Section 80IB/IC Allowed

CIT, Pr. Commissioner Of Income Tax, Udaipur Versus M/s Secure Meters Ltd.

The High Court clarified that income from selling boxes for electric meters qualifies for deduction under Section 80IB/IC, even if not directly related to ... Deduction of certain amount u/s 80 IB/IC as part of trading profits for the bated unit - HELD THAT:- The record shows that the assessee derived this income from the sale of boxes manufactured by it to house electric meters. It is not disputed that the deduction under Section 80 IB/IC was for manufacture of electric meters. The manufacture and supply of boxes, which are essentially for housing electronics meters so as to make it convenient for use by the consumers is an activity intrinsically connected with the business qualifying for deduction. As a consequence, it is held that this question of law does not arise. Dis-allowance under Section 14 A - HELD THAT:- Decision of Godrej & Boyce Manufacturing company ltd. Vs. Deputy Commissioner of Income Tax & Anr. [2017 (5) TMI 403 - SUPREME COURT] covers the question of dis-allowance against the revenue under Section 14 A. ALP determination and adjustment, the question does not arise in view of the recent decision of this Court in Pr. Commissioner of Income Tax, Udaipur Vs. M/s Secure Meters Ltd., E-Class, Pratapnagar Industrial Area, Udaipur [ 2019 (8) TMI 512 - RAJASTHAN HIGH COURT ]. Adjustment on account of the corporate guarantee provided by the assessee to its A.E, does not arise. The reasoning is that such corporate guarantee is part of the commercial activity of the assessee and no cost was incurred by the assessee when it provided this benefit to its A.E. By all accounts it appears, therefore, to be book transaction. List the appeals for hearing on 03.09.2019. Issues:1. Whether other income should be included for computing deduction u/s 80IB/80IC disregarding it not being 'profit derived from industrial undertaking'Rs.2. Whether apportionment of depreciation on assets of Head Office used for different industrial activities is justified for computing deduction u/s 80IB/80ICRs.3. Whether apportionment of expenses on product development for different industrial activities is justified for computing deduction u/s 80IB/80ICRs.4. Whether certain amount under Section 80IB/IC as part of trading profits for the bated unit is justifiableRs.5. Whether deletion of apportionment of expenses on information system for different industrial activities is justifiedRs.6. Whether disallowance of deduction of certain amount in respect of service income is validRs.7. Whether adjustment of certain amount towards interest chargeable on credit facility for the extended period or delay in realization of debts is justifiedRs.8. Whether disallowance of certain amount under Section 14A of the Income Tax Act is appropriateRs.Analysis:1. The High Court admitted the case and considered the question of whether the ITAT was correct in including other income for deduction u/s 80IB/80IC, even if it is not 'profit derived from industrial undertaking.' The respondent accepted the notice. The court also noted other questions regarding deduction under Section 80IB/IC, apportionment of expenses, disallowance of deduction for service income, interest adjustment, and disallowance under Section 14A.2. The court clarified that questions related to ALP determination and disallowance under Section 14A are covered by Supreme Court decisions. It mentioned that the issue of ALP determination and adjustment does not arise due to a recent decision by the court. Regarding trading profits, the court found that the income from selling boxes for electric meters, although not directly related to manufacturing electric meters, qualifies for deduction under Section 80IB/IC.3. The court concluded that questions regarding service income and apportionment of expenses do not arise based on concurrent findings. It further stated that the adjustment on account of corporate guarantee provided by the assessee to its A.E. is not relevant as it is considered a book transaction without any cost incurred by the assessee.4. The court scheduled the appeals for hearing on a specific date and directed the parties to file brief synopses. The judgment provided a detailed analysis of each issue raised, addressing the legal aspects and relevant precedents to determine the applicability of deductions and allowances under the Income Tax Act.