Delhi HC upholds Section 80IC deductions and immunity, sets aside share capital addition of INR 11.26 crores

Delhi HC upheld ITSC order granting Section 80IC deductions and immunity from penalty/prosecution, finding no evidence to doubt claims and noting prior AO approvals for similar years. However, HC set aside ITSC's addition of INR 11.26 crores regarding share capital from one investor, as the same funds were already taxed in that entity's hands. HC also rejected ITSC's denial of 80IC benefits on unsubstantiated share capital, ruling Section 115BBE was inapplicable as it didn't exist during relevant assessment years. Petitioner granted consequential reliefs.

---

---

Issues Involved:

1. Genuineness of share capital infusion by M/s Amit Goods and Supplier Private Ltd.
2. Claim of deduction u/s 80IC of the Income Tax Act, 1961.

Summary:

1. Genuineness of Share Capital Infusion by M/s Amit Goods and Supplier Private Ltd.:

The petitioner-assessee challenged the ITSC's order dated 28 February 2017, particularly the addition of INR 11,26,60,000/- as unexplained share capital infusion by M/s Amit Goods and Supplier Private Ltd. The ITSC had previously considered the share capital infusion from various entities, verifying some and rejecting others. It concluded that the share capital infusion by M/s Amit Goods and Supplier Pvt. Ltd. was unsubstantiated due to non-compliance with enquiry letters u/s 133(6) and lack of bank statement verification. The ITSC relied on Supreme Court decisions in Jamuna Prasad Kanaihaya Lal (130 ITR 244) and Radhey Shyam Tibrewal Vs CIT (145 ITR 186) to support its decision. However, the High Court found merit in the petitioner-assessee's argument that the amount had already been taxed in the hands of M/s Amit Goods and Supplier Pvt. Ltd. and thus could not be added again in the assessee's hands. Consequently, the High Court set aside the ITSC's addition of INR 11,26,60,000/-.

2. Claim of Deduction u/s 80IC of the Income Tax Act, 1961:

The ITSC had denied the benefit of deductions u/s 80IC on the income of INR 24.99 crores, citing unverified purchases and substantial expansion issues. The petitioner-assessee argued that there was an arithmetical error in the report, which inflated unverified purchases. The ITSC acknowledged this error and noted that the correct figure of unverified purchases was significantly lower, allowing the petitioner to meet the substantial expansion requirement. The ITSC also considered the Director of Industries' certificate and previous assessments u/s 143(3) that had allowed the 80IC claim. The High Court upheld the ITSC's decision to allow the deduction u/s 80IC, finding no material evidence to contradict the claim and noting the Department's acceptance of the claim in prior assessments.

Conclusion:

The High Court dismissed the Department's WP(C) 7834/2017 and allowed the petitioner-assessee's WP(C) 5081/2017. It set aside the ITSC's order regarding the addition of INR 11,26,60,000/- from M/s Amit Goods and Supplier Pvt. Ltd. and para 11.1, which disqualified the addition from 80IC benefits. The petitioner-assessee was granted consequential reliefs.

---