Tribunal grants deduction for supervision income under section 80IB, limits disallowance for certain charges.

The Tribunal allowed the assessee's appeal for deduction under section 80IB for supervision income, considering it part of manufacturing activities. For the disallowance of drawing charges and PLC programming charges, the Tribunal restricted the disallowance to 30% of the expenditure, applying the amended provision of section 40(a)(ia). The appeals for A.Y. 2009-10 and 2010-11 were partly allowed, while the appeal for A.Y. 2011-12 was fully allowed.

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Issues Involved:
1. Deduction under section 80IB for supervision income.
2. Disallowance of drawing charges and PLC programming charges due to non-deduction of TDS under section 194J.
3. Application of amended provisions of section 40(a)(ia) regarding disallowance of expenditure.

Issue-wise Detailed Analysis:

1. Deduction under section 80IB for supervision income:
The assessee filed a return for A.Y. 2011-12 declaring total income, including a deduction under section 80IB for supervision income. The Assessing Officer (AO) disallowed this deduction, considering supervision income as not attributable to manufacturing activities. The CIT(A) confirmed this disallowance. The assessee argued that supervision income is part of the manufacturing activities, relying on judgments from the Hon'ble Jurisdictional High Court and Bombay High Court. The Tribunal found that the supervision and maintenance are integral to the trading and supply of electric panels, thus eligible for deduction under section 80IB. The Tribunal allowed the assessee's appeal, stating that the income is attributable to manufacturing activities and deleted the addition.

2. Disallowance of drawing charges and PLC programming charges due to non-deduction of TDS under section 194J:
For A.Y. 2009-10, the assessee challenged the disallowance of drawing charges and PLC programming charges due to non-deduction of TDS under section 194J. The AO disallowed these charges, considering them as fees for technical services. The assessee contended that these charges were for semi-skilled labor, not technical services, and thus not subject to section 194J. The Tribunal noted that the assessee had a bona fide wrong impression regarding the applicability of section 194C or 194J. The Tribunal referred to the amended provision of section 40(a)(ia) by Finance (No. 2) Act, 2014, which restricts disallowance to 30% of the expenditure. Consequently, the Tribunal restricted the disallowance to 30% of the drawing charges and PLC programming charges.

3. Application of amended provisions of section 40(a)(ia) regarding disallowance of expenditure:
The Tribunal considered the amended provision of section 40(a)(ia) for disallowance of expenditure due to non-deduction of TDS. The amendment restricts disallowance to 30% of the expenditure. The Tribunal applied this amendment to the disallowance of drawing charges and PLC programming charges for A.Y. 2009-10 and 2010-11, reducing the disallowance to 30% of the claimed expenditure.

Conclusion:
The Tribunal allowed the assessee's appeal for deduction under section 80IB for supervision income, considering it part of manufacturing activities. For the disallowance of drawing charges and PLC programming charges, the Tribunal restricted the disallowance to 30% of the expenditure, applying the amended provision of section 40(a)(ia). The appeals for A.Y. 2009-10 and 2010-11 were partly allowed, while the appeal for A.Y. 2011-12 was fully allowed.

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