TaxTMI 
TaxTMI 
2020 (3) TMI 121
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....f benefit of deduction U/s 80IC. 2. The Ld. CIT (A) erred on facts and in law in deleting the addition of Rs. 2,59,58,108/- made u/s 801C not taking into consideration the fact that as per action point no. 5 mentioned in the rules the report in form 10CCB ought to have been accompanied with copy of agreement with any Central Government/State Governments/Local Authority for carrying an eligible business. 3. The Ld. CIT (A) ought to have considered the legal issue raised by the AO for the A. Y. 2010-11 while deciding the issue for the A. Y. 2011-12 as well, as the facts and legal position remains the same for both the years. The Ld CIT (A) has erred in deleting the addition which is unjustified against the facts of the case as well as against the provision of law. 4. The Ld. CIT (A) erred on facts and in law on account of violation of section 80-1C (7) r.w.s 80-IA (7) of Income-tax Act 1961 and simultaneous violation of Rule 18BBB of Income-tax Rule, 1962. 5. The Ld.CIT(A) is silent on sub Rule 4 of Rule 18BBB which requires that form no. 10CCB shall be accompanied with copy of agreement with any Central Government /State Government/Local Authority for carrying an eligible bu....
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....g with copy of the Excise Registration Certificate and the process flowchart. It was claimed by the assessee that it was contract manufacture and had entered into a MOU with the 'Glaxo' by way of written agreement dated 11/10/2004 for the processing of raw material supplied by the Glaxo by use of its own plant and machinery followed by packaging of the final products. The assessee claimed that product manufactured by the company were treated as manufacturing activities under the Central Excise Rules falling within chapter 19 of Central Excise Tariff Act. 2.2 The Assessing Officer perused the manufacturing expenses of the assessee and found that no significant material was being put to use in the process undertaken by the assessee in respect of the total job work receipts of Rs. 26,41,75,048/- for assessment year 2010-11 and Rs. 30,58,84,250/- for assessment year 2011-12, against which, the manufacturing expenses of only Rs. 7,87,48,768/-and Rs. 8,53,10,054/- had been claimed as incurred. The Assessing Officer noticed that, even out of those expenses, the majority of the expenses related to generator, electricity expenses. The Assessing Officer referred to the definition of the ma....
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....cts and circumstances of the case. He also relied on the decision of the Tribunal in the case of Zeon Life sciences Private Limited (59 taxmann.com 229) wherein the job work activity has been held to be tantamount to manufacturing. The CIT(A) concluded that the issue of manufacturing process involved in the case of the assessee was no longer res integra and had to be decided in favour of the assessee. 2.7 On the issue of possible application of the provision of section 80IC(7) the Ld. CIT(A) has given two findings; * Firstly, the Ld. CIT(A) observed that from the financial statements and the discussion with the Authorized Representative of the assessee, there was no other businesses, which was carried out by the assessee hence, there was no reason to go into the issue of deriving of more than ordinary profit, which might be expected to arise in the eligible business as enshrined in those subsection. * Secondly, the learned AO pointed out the issue of deficiency in the form No. 10CCB filed by the assessee. The Ld. CIT(A) held this to be a non-issue and agreed with the submission of the assessee and observed that said requirement of submitting details of approval/permission was ....
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....it was formed by splitting up or the reconstruction of the business already in existence. 5.6.4 In so far as the deficiencies in form 10CCB is concerned, which issue the AO has raised during the remand proceedings, this is found to be a non-issue. Form 10CCB is an omnibus form to be filled up by an assessee claiming deduction under the provisions of sections 801, 80IA, 80IB or 80IC, except for certain entities such as multiplex theatres [defined in section 80IB (7A)], convention centres [defined in section 80IB (7B)] and hospitals in rural areas [defined in section 80IB (11B)]. Sub Rule (3) of Rule 18BBB provides that only those enterprises carrying on the business for developing or operating and maintaining or developing, operating and maintaining an infrastructure facility (as per section 80IA (4)(b) would submit the form accompanied by a copy of the agreement of the enterprise with the Central Government or the local authority for carrying on the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility. This aspect has been clarified as per action point 6 mentioned in the Rules." 2.9 The other issues raised by th....
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....pplication of the provisions of section 80IC(7) was referred to the A.O. In her report dated 02.08.2016 the A.O. has mentioned that in accordance with the provisions of section 80IC(7) r.w.s. 80IA(7), the Audit Report was mandated as per Rule 18BBB of the I.T. Rules, 1962 in form 10CCB. The appellant was required to give details of the approval/permission issued by the Central Government/State Government/ Local Authority for carrying out the eligible business vide column 13 therein. Further the report in form 10CCB is not accompanied with the copy of the agreement with the Central Government/State Government/ Local Authority for carrying out the eligible business. Since the appellant had failed to comply with these provisions it was not entitled to deduction u/s 80IC." 4.1 Since the Revenue has challenged that provisions of Section 80-IC(7) have not been satisfied by the assessee, it is relevant to first reproduce the relevant provisions as under: "80-IC (7) The provisions contained in sub-section (5) and subsections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section." 4.2 We find that section 80-IC(7) of the....
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....as as defined in sub-section (11B) of section 80-IB], shall be in Form No. 10CCB. (2) A separate report is to be furnished by each undertaking or enterprise of the assessee claiming deduction under section 80-I or 80-IA or 80-IB [or 80-IC] and shall be accompanied by the Profit and Loss Account and Balance Sheet of the undertaking or enterprise as if the undertaking or the enterprise were a distinct entity. (3) In the case of an enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining an infrastructure facility, the form shall be accompanied by a copy of the agreement of the enterprise with the Central Government or the State Government or the local authority for carrying on the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility. (4) In any other case, the form shall be accompanied by a copy of the agreement, approval or permission, as the case may be, to carry on the activity signed or issued by the Central Government or the State Government or the local authority for carrying on the eligible business.]" 4.6 While examining the application of ....
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....al Government or the local authority for carrying on the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility. This aspect has been clarified as per action point 6 mentioned in the Rules." 4.8 Now before us, the Revenue has raised the grounds that the Ld. CIT(A) has found this to be a nonissue and not given any reasoned finding on violation of the subrule (4) of the Rule 18BBB of the Rules. 4.9 On perusal of the above finding of the learned CIT(A), we find that Ld. CIT(A) has not appreciated the requirement of the sub-rule (4) of the Rule 18BBB of the Rules. We have already reproduced Rule 18BBB in preceding paragraphs of this order. The sub-rule (3) is applicable in case of the enterprise carrying on the business of the developing or operating and maintaining or developing, operating and maintaining the infrastructure facility, whereas the sub-rule (4) is applicable on the any other case carrying on the eligible business. No doubt that the deduction under section 80IC is allowable to an undertaking or enterprises carrying on the business referred to in subsection 80IC(2), which are eligible business for said se....
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.... transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-section, "market value", in relation to any goods or services, means- (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. (9) Where any amount of profits and gains of an undertaking or of an enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any....