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TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 842
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....Daman. Assessee filed its return of income for A.Y. 05-06 on 31.10.2005 declaring total income at Rs. Nil after claiming deduction u/s 80IB of the Act. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 19.12.2007 and the total income was determined at Rs. 10,03,540/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who vide order dated 20.07.2010 allowed the appeal of the Assessee. Aggrieved by the aforesaid order of CIT(A) Revenue is now in appeal before us and has raised the following grounds;- 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the deduction u/s.801B of the Act stating that disallowance of claim of deduction u/s.80IB of the Act on the sole ground that the assessee was not having factory license before it started manufacturing activities is without any merits. 2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not considering the point that the assessee has failed to prove that it has commenced the manufacturing activity on or before 31.03.2004, as stipulated in Section 801B of the Act. ....
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.... had failed to produce the workers or the records maintained to prove that more than 10 workers were working in the factory. He accordingly rejected the claim of deduction u/s 80IB of the Act. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A).CIT(A) after considering the submissions of the Assessee, the remand report held that Assessee was eligible for deduction u/s 80IB of the Act by holding as under:- 5.3 I have considered the Assessment Order, the observations in the RR by the AO and also the submissions made by the Id. AR carefully. The AO disallowed the claim of 80-IB deduction on mainly two reasons. First the third party evidence in the form of Factory License was obtained much later then 31.3.2004 and the second contention was the appellant had employed less than 10 employees during the relevant period. With regard to the Third Party evidence the matter has been decided by the Hon'ble ITAT, Ahmedabad in the case of Samarth Healthcare has held that Factory License is not the necessary conditions tor the eligibility of deduction u/s. 80-lB. Respectfully, following the decision of the Hon'ble ITAT, and also considering the evidences produced bef....
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....he issue. With respect to A.O's observation that only 3 workers were found working in the factory, he submitted that inspector visited the factory on a holiday (holiday on account of Ganapati Festival) and therefore other workers were on holiday. The ld. A.R. further submitted that the factory of the Assessee is located at Daman and its jurisdiction is under the Bombay High Court and for the aforesaid proposition, he relied on the decision of CIT vs. Packwell Packaging Tax Appeal NO. 866/AHD/2012 order dated 18.06.2013 wherein the Hon'ble Gujarat High Court has held that as per Section 269, in case of Assessee situated at Daman, the appeal would be maintainable before Bombay High Court. He further submitted that Hon'ble Bombay High Court on identical facts, in the case of CIT vs. Jolly Polymers in ITA(L) No. 1622/AHD/2012 order dated 21.02.2013 had upheld the order of Hon'ble Tribunal wherein the Hon'ble Tribunal relying upon the decision in the matter of ITO vs. Samarth Health Care had allowed the Assessee the claim of deduction u/s 80IB of the Act. He therefore submitted that since the Assessee is of Daman, the Jurisdictional High Court in the present case would be Hon'ble Bombay....
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....prior to cut off date 31st March, 2004. In the impugned order, the Tribunal relied upon its decision in the matter of ITO Vapi vs. Samarth Health Care in ITA No. 1006/AHD/2009 dated 5th June, 2012 and allowed the claim for deduction under section 80IB of the said Act. The Tribunal came to finding of fact in the above case that the Assessing Officer did not doubt about raw material consumption, power consumption, sales and employment of workers for the purposes of denying the benefit of section 80IB of the said Act. It was further held that for the purpose of Section 80IB of the said Act, what is essential is that the assessee should manufacture or produce an article or thing and if there is any violation of any provisions of any other statutes then the assessee has to explain the same to the authorities implementing those Acts/Statutes and the same cannot be the basis of denial of benefit under Section 80IB of the said Act. The Revenue has not been able to point out why and how the decision of the Tribunal in the matter of Samarth Health Care (supra) is inapplicable to the present facts. In any event, the CIT(A) while setting aside the order of the Assessing Officer, directs the As....
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....rdance with, the terms of the partnership deed." The learned assessing officer has incorporated the clause relating to remuneration from the partnership deed in the assessment order on Page 8 of the order. From the simple reading of this clause, it is evident that the clause is very vague and does not specify any amount payable or the way in which the amount payable as remuneration is to be computed. The assessing officer has himself calculated the amount of remuneration on the basis of the maximum limit of remuneration allowable under section 4(0b of the Income Tax Act. This is absolutely against the principle of natural justice and needs to be deleted. The issue of Interest on Capital and remuneration being thrust upon the assessee by the assessing officer in cases where the assessees' have claim deduction under Chapter VI-A has been set to rest by the decision of the Ahmedabad Tribunal in the case of Mundra Packaging Industries, Silvassa and Thermal Systems and Engineers, Silvassa, wherein the Tribunal has concluded that interest on capital and remuneration cannot be thrust upon the assessee when the assessee has neither credited interest or remuneration to capital account ....
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....Before us Revenue has not brought any contrary binding decision in its support nor has been able to distinguish the judgments relied upon by the CIT(A). In view of these facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. 4th ground is with respect to deletion of disallowance u/s 40(a)(ia) of the Act. 13.During the course of assessment proceedings, A.O noticed that Assessee had paid Rs. 4,94,953/- as labour charges to Shri Satyasai Printing and Rs. 1,82,159/- as transportation charges to Shri Balaji but did not deduct TDS on the aforesaid payments. He accordingly disallowed the aggregate payment of Rs. 6,77,112/- u/s 40(a)(ia) of the Act. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- 7.3 I have perused the Assessment Order and the submission before me by the Ld. AR of the appellant. The deduction U/s.80-IB was not granted to the appellant on the disallowance made on technical ground. I am of the opinion that the deduction U/s.80-IB has to be granted on the computed income derived from the industrial undertaking. Any addition / disallowance made durin....
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....IT (A) has erred in allowing the deduction u/s. 80IB of the Act. The extension for filing return of income was applicable to the assessee of Gujarat only, there is not mentioned that extension for filing return of income for the assessee of Daman. 4. On the facts and circumstances the case and in law the learned CIT (A) has erred in allowing the expenses of labour charges of Rs. 78,137/-which was disallowed u/s. 40A(2)(b) of the Act. 5. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in allowing the deduction u/s.80IB on disallowance of Rs. 6,35,918/- u/s. 40(a)(ia) of the Act , as the disallowance being technical in nature and assessee is entitled to deduction of such disallowance in next year on payment basis. This would lead to double benefit to the assessee. 19.Before us, both the parties submitted that the grounds no. 1 & 2 are identical to ground no. 1& 2 for A.Y. 05-06 except for the amounts and the submissions made by them while arguing the grounds for A.Y. 05-06 would equally apply to present grounds. 20.We have heard the rival submissions and perused the material on record. Before us, both the parties have admitted that the facts a....
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....red the rival submissions, perused the material on record and have gone through the orders of authorities below and the tribunal decision cited by the Ld. A.R. Before dealing with the various objections by the Ld. D.R., we feel it proper that we should first decide applicability of the Tribunal decision cited by the assessee. We find that in that case also, assessee was assessed by the ITO Vapi Ward 4, Daman as in the present case. In that case also, the return of income was filed by the assessee on 01.12.2006 and it was the case of the A.O. that the same is beyond the due date specified u/s 139(1) of the Income tax Act, 1961 and, therefore; the assessee is not eligible for deduction u/s 80-IB of the Act. Hence, it is seen that facts are identical in both the cases. In that case, the issue in dispute was decided by the Tribunal in favour of the assessee and the relevant para of the Tribunal decision is para 7 which is reproduced below: "We have considered the rival submissions and we do not find merit in the appeal of the revenue. The facts noted in the impugned order have not been disputed. It is not in dispute that the CBDT considering the reports on disruption caused due to hea....
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....r of the assessee and no contrary decision has been brought to our notice, we feel that no interference is called for in the order of Ld. CIT(A) on this issue. Regarding various arguments raised by the Ld. D.R., we would like to observe that the same are not relevant in view of this fact that the issue in dispute is squarely covered in favour of the assessee by the Tribunal decision noted above. We, therefore, reject this ground of the revenue. 24. Before us Revenue has not brought any contrary binding decision in its support nor has been able to distinguish the judgments relied upon by the CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. Ground no. 4 is with respect to the expenses of labour charges disallowed u/s 40A(2)(b). 23. During the course of assessment proceedings, A.O noticed that Assessee has paid labour charges to its sister concern, Twina Polymers at Rs. 4 per Kg. whereas to other concerns it was paid at Rs. 5 per Kg. A.O was of the view that by paying less labour charges, the Assessee has increased the profit and thereby has claimed excess deduction U/s. 80IB. He accordingl....