2022 (2) TMI 1209 - HC - Income Tax

High Court affirms decisions on deduction & disallowance, leaves jurisdiction issue open for assessment year. Stay application closed.

Principal Commissioner Of Income Tax, Central 1, Kolkata Versus M/s. Shalimar Pellet Feeds Ltd.

Principal Commissioner Of Income Tax, Central 1, Kolkata Versus M/s. Shalimar Pellet Feeds Ltd. - [2023] 453 ITR 547 (Cal) Issues Involved:1. Validity of jurisdiction under Section 153A/143(3) of the Income Tax Act, 19612. Claim for deduction under Section 80IB(5) of the Income Tax Act, 19613. Disallowance under Section 14A of the Income Tax Act, 1961Issue 1: Validity of Jurisdiction under Section 153A/143(3) of the Income Tax Act, 1961:The appeal raised questions on the jurisdiction of the assessing officer to make assessments under Section 153A/143(3) without incriminating documents. The High Court dismissed appeals for certain years due to low tax effect. The Court decided to first address the questions related to deductions under Section 80IB(5) and disallowance under Section 14A for multiple assessment years before considering the jurisdictional issue for the assessment year 2011-12.Issue 2: Claim for Deduction under Section 80IB(5) of the Income Tax Act, 1961:The dispute revolved around whether the activity of manufacturing poultry feed qualified for a deduction under Section 80IB. The assessing officer denied the deduction, but the CIT(A) and Tribunal granted it after examining the manufacturing process. The Court found that the process undertaken by the assessee involved more than mere mixing and amounted to manufacturing, as the final product had distinct characteristics and could not be reversed to its original ingredients. The Court relied on previous decisions and upheld the Tribunal's decision to grant the deduction.Issue 3: Disallowance under Section 14A of the Income Tax Act, 1961:The Tribunal directed the assessing officer to compute disallowance under Section 14A as per Rule 8D, considering only shares yielding dividend income. The Court agreed with the Tribunal's approach, noting that Rule 8D should apply only to shares generating dividend income in the relevant year. The Court upheld the Tribunal's decision on this issue, granting relief to the assessee.In conclusion, the High Court dismissed the revenue's appeal, affirming the decisions on the deduction under Section 80IB(5) and disallowance under Section 14A against the revenue. The Court left the jurisdictional issue open for the assessment year 2011-12, as it became academic in light of the decisions on the other issues. The stay application related to the appeal was closed with the dismissal of the appeal.