High Court affirms Tribunal decision on deduction under Section 80JJA for 2008-09. Revenue's late objection dismissed.

The High Court dismissed the revenue's appeal and affirmed the Tribunal's decision to allow the deduction under Section 80JJA for the assessment year 2008-09. The Court held that the revenue's objection raised in the fifth year, after allowing the deduction for four years, was unwarranted. The Court emphasized the principle that once a deduction is granted in the initial year, it cannot be denied in subsequent years unless the initial relief is withdrawn. The substantial question of law was decided in favor of the assessee against the revenue.

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Issues Involved:
1. Whether the Appellate Tribunal erred in law and on facts in deleting the disallowance of the claim under Section 80JJA of the Income Tax Act, 1961, for the eighth year of business operation.

Detailed Analysis:

1. Admissibility of Deduction under Section 80JJA:
The appellant-assessee filed an e-return of income on 28th September 2008, claiming deductions of Rs. 64,04,327 under Section 80JJA. The return was processed under Section 143(1) and finalized under Section 143(3) on 3rd May 2010. The case was reopened under Section 148 on 19th November 2012, with the notice highlighting that the deduction under Section 80JJA was only admissible for five years from the commencement of the business, which started in the previous year 1999-2000, making the eighth year of the claim inadmissible.

2. Objection to Reopening of Proceedings:
The appellant-assessee objected to the reopening under Section 147, arguing that the first year of the claim was the financial year 2003-04, relevant to the assessment year 2004-05, when they started manufacturing Enzyme qualifying for deduction under Section 80JJA. The assessee contended that the deduction was available for five consecutive years from the year in which such business commenced, thus making the assessment year 2008-09 the fifth and final year of the claim.

3. Assessing Officer's View:
The Assessing Officer disallowed the deduction, asserting that the business commenced in the financial year 1999-2000, making the assessment year 2004-05 the final year for the claim. The officer held that the deduction was allowable only for five years from the initial year of business commencement.

4. Commissioner of Income Tax (Appeals) Decision:
The CIT(A) affirmed the Assessing Officer's order, stating that the appellant started producing enzymes in the assessment year 2000-2001 and the change in the manufacturing process in 2003 did not alter the product nature. The CIT(A) concluded that the deduction under Section 80JJA was only available for five years from the initial year of production, i.e., from the assessment year 2000-2001.

5. Income Tax Appellate Tribunal's Decision:
The Tribunal allowed the appeal, noting that the first year of the Section 80JJA deduction was the assessment year 2004-05, as accepted by the Assessing Officer during scrutiny assessment proceedings. The Tribunal held that the current year's claim was the fifth and final year, and there was no infirmity in the claim. The Tribunal directed the Assessing Officer to delete the disallowance of Rs. 64,04,327 under Section 80JJA.

6. Revenue's Appeal to the High Court:
The revenue argued that the business commenced in the financial year 1999-2000, making the first year for the claim of deduction the assessment year 2000-2001. The revenue contended that the deduction under Section 80JJA was admissible for only five years from the year the business commenced.

7. Assessee's Argument:
The assessee argued that the manufacturing process changed in 2003, making the assessment year 2004-05 the first year for the deduction claim. The assessee also highlighted that the department allowed the deduction for four consecutive years before raising the issue in the fifth and final year.

8. High Court's Analysis and Decision:
The High Court noted that the revenue accepted the deduction for four consecutive years without objection. The Court referred to the principles established in previous judgments, emphasizing that once a deduction is granted in the initial year, it cannot be denied in subsequent years unless the initial year's relief is withdrawn. The Court held that the Appellate Tribunal committed no error in its decision, and there was no reason for the department to raise an objection in the fifth year after allowing the deduction for four years.

Conclusion:
The High Court dismissed the revenue's appeal, affirming the Tribunal's decision to allow the deduction under Section 80JJA for the assessment year 2008-09. The substantial question of law was answered in favor of the assessee and against the revenue.

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