2019 (2) TMI 981

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.... appreciation the facts that the preparation of Ujala Supreme by diluting the raw material i.e. Acid Violet 49 Dye with water does not amount to manufacturer or produce of any article or thing with a different chemical composition or integral structure as envisaged u/s. 2(29)(BA) of the I.T. Act, and thereby not eligible for deduction u/s. 80IC of the Act. (2) On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the deduction u/s.80IB(4) of the I. T. Act without appreciating the facts that the preparation of Ujala Supreme by diluting the raw material i.e. Acid Violet Dye49 with a different chemical composition or integral structure as envisaged u/s.2(29)(BA) of the I.T. Act and thereby not eligible for deduction U/s. 80IB(5)(i) of the I.T. Act. (3) On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in restricting the disallowance u/s. 14A r.w.r. 8D to Rs. 8,84,988/- as against Rs. 34,15,155/- by holding that the disallowance cannot exceed the income earned without appreciating the facts that the disallowance is made as per rule 8D of Income Tax Act 1961 which does not prohibits the A.O....

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....e Assessing Officer denied the claim also on the ground that the finished product of the assessee was an article of thing which was specified in Schedule XIII of the Act and therefore not eligible for the claim of deduction. Thus deduction claimed under section 80IC of the Act to the extent of Rs. 42,78,27,294/- was denied. 5. So far as deduction claimed under section 80IB of the Act of Rs. 1,04,44,338/- is concerned, the same relates to two different units. Firstly, the claim of Rs. 37,06,189/- in respect of Ujala Detergent Unit in Kerala (hereinafter referred to as 'Wayanad Unit'); and, secondly Rs. 67,38,149/- in respect of Ujala Unit at Himachal (hereinafter referred to as 'Himachal Unit'). For the reasons ascribed by him to deny the deduction under section 80IC of the Act, the Assessing Officer denied the clam under section 80IB of the Act also, namely, that the activity of the assessee did not amount to 'manufacture' or 'production' of any article or thing. 6. In the assessment order, elaborate reasons have been brought out by the Assessing Officer, which are not been presently referred to since the appeal is being disposed off by adverting to the preliminary point brou....

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....ciate the preliminary point raised by the respondent assessee, the following factual position is relevant. In so far as the assessee's claim for deduction under section 80IC of the Act with respect to Uttranchal Unit is concerned, the first year of claim was Assessment Year 2009-10 and the instant year is the third year of claim. Similarly, the claim of deduction under section 80IB of the Act in respect of Wayanad Unit was made by the assessee for the first time in Assessment Year 2002-03 and the instant year is the eighth year of claim. In respect of Himachal Unit, the first year of claim of deduction under section 80IB of the Act was Assessment Year 2003-04, and thus the instant year is the seventh year of claim. Pertinently, the reliefs under sections 80IB and 80IC of the Act are available for ten consecutive years starting from the initial assessment year when the relevant undertaking of the assessee commences manufacture or production. Therefore, factually speaking, the instant assessment year is not the initial year of the claim, either for section 80IB or for section 80IC of the Act. At the time of hearing, the learned A.R. furnished a copy of the assessment year passed unde....

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....009-10 and the year of end of the benefit is 31.03.2018, meaning thereby Assessment Year 2018-19. As has been seen in the earlier part of this order, in the initial assessment years, i.e. Assessment Years 2002-03, 2003-04 and 2009-10, the respective deductions under Section 80IB and/or Section 80IC of the Act were allowed by the Assessing Officer. It has also been brought out before us, without any controversion from the other side, that the deductions have been allowed thereafter till the immediately preceding Assessment Year, i.e. Assessment Year 2010-11. It is only in the instant Assessment Year, i.e. Assessment Year 2011-12 that the claims have been denied. 12. In the context of the preliminary point raised by the respondent-assessee, the judgment of the Hon'ble Bombay High Court in the case of Simple Food Products (P) Ltd. (supra) squarely covers the controversy. In the said case, the issue related to claim of deduction under Section 80IB of the Act in relation to Assessment Years 1999-2000 to 2005-06. In Assessment Year 1999-2000, the Assessing Officer disallowed the claim of deduction under Section 80IB of the Act for the first time even when in the initial Assessment....

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....istinction. In absence of the Revenue being able to establish that for the subject Assessment Years, the facts with regard to the performance were different from facts with regard to the performance in which the claim for deduction in initial year was allowed, the grant of deduction in the subsequent subject Assessment Year cannot be withheld. The other issue raised by Mr. Bhattad that merely because a claim was allowed in an earlier year would not prohibit the revenue from disallowing the claim in subsequent assessment years is no longer res-integra as this Court in Paul Brothers (supra) as it is categorically held that in absence of deduction granted in the initial Assessment Years being withdrawn, the relief for subsequent Assessment Years could not be withheld. The basis for the same is found in sub-clause (3) under Section 80IA/IB of the Act which gives deduction for 10 consecutive years to the profit and gains of an Industrial undertaking from initial year of assessment when the deduction was allowed, subject to the condition laid down therein. It is not the Revenue's contention that the condition in clause (3) of Section 80IB of the Act has not been fulfilled. Therefore,....

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....od of 10 consecutive year unless the relief for initial year is also withdrawn at the time of withholding the relief under Section 80IA/IB of the Act." [underlined for emphasis by us] 16. As per the Hon'ble High Court, once the deduction is granted in the initial assessment year, the same would continue for the specified period unless the relief for initial year is also 'withdrawn at the time of withholding the relief under Section 80IA/80IB of the Act'. Clearly, in the instant year when the claim of deduction is rejected by the Assessing Officer, the relief allowed in the initial assessment year has not been withdrawn. Mere initiation of proceedings under Section 148 of the Act to reopen the assessment of the past year cannot be understood to mean that the 'claim is withdrawn'. Therefore, in our view, the Assessing Officer could not have rejected the claim for deduction under Sections 80IB as well as 80IC of the Act in the subject assessment order because the relief allowed in the initial assessment year was not withdrawn at the time of such rejection in the instant year. 17. In the above background, we, therefore, find merit in the preliminary point made out by....