2024 (10) TMI 34

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....deduction under section 80IC? 2.2 Whether the ld. ITAT erred in upholding the decision of ld. CIT(A) in deleting the disallowance of Rs. 64,23,771/- for the purpose of calculating deduction under section 80IC, ignoring the fact that income disallowed by the Assessing officer for the purpose of calculating deduction under section 80IC include interest on loan to employees, foreign exchange gain, tooling income and sale of scrap and these income don't have direct nexus to the export business? 2.3 Whether on the facts and in the circumstances of the case, ld. ITAT has erred in upholding the decision of ld. CIT(A) in deleting the disallowance of Rs. 1,25,45,326/- under section 35, 35AC and 35DDA ignoring the fact that expenses had been incurred by the amalgamating company and not by the Assessee? 2.4 Whether on the facts and in the circumstances of the case. ld. ITAT has erred in further restricting disallowance restricted by ld. CIT(A) under section 14A read with Rule 8D to Rs.20,995/- as against Rs.88,577/- restricted by ld. CIT(A) ignoring the fact that even if no exempted income is earned in the particular year, the expenses incurred towards the investment is proportional....

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....me of Amalgamation of Company Petition No. 53/2008 connected with Company Application No. 172/2007. Subsequently, the name of M/s Purolator India Ltd was changed to M/s Mahle Filter Systems [India] Ltd. 24. According to the Id. DR, this is nothing but a sham transaction to take the benefit of section 80IC of the Act. We do not find any force in this contention of the ld. DR. The Scheme of Amalgamation has been approved by the Hon'ble High Court of Delhi and, therefore, by no stretch of imagination, the transaction of amalgamation can be can be considered as a colourable device or a sham transaction. There is no dispute that the manufacturing unit at Parwanoo was eligible for deduction u/s 80IC of the Act the same always belonged to the assessee, previously known as M/s Purolator India Ltd. 25. Provisions of section 80IA(12) of the Act have been wrongly applied by the Assessing Officer because the said provision is applicable where any undertaking which is entitled to the deduction u/s 80IA is transferred before expiry of the period specified therein to another India company in a scheme of amalgamation or demerger, whereas the facts of the case in hand show that the manufact....

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....,070 Cash discount given to buyers Rs. 21,09,398 Tooling income Rs. 7,30,233 Sale of scrap Rs. 7,56,631 Rental income Rs. 6,10,800 Rent recovery from employees against rent expenses Rs. 2,97,447 Other Income - Common Income Allocation (Rs. 2,50,689) Interest received on fixed deposits-Common Income Allocation (netted off in Interest expenses) (Rs. 2,119) Total Rs. 64,23,771 29. Out of the above, rental income and income on fixed deposits was offered to tax under the head 'Income from other sources'. Other items of income are inevitably linked and have direct nexus to the industrial undertaking. Therefore, these incomes are eligible for benefit of deduction u/s 80IC of the Act. We, therefore, do not find any reason to interfere with the findings of the CIT(A). Ground No.2 is dismissed." We do not find any infirmity in the findings of the Tribunal. In view of the aforesaid, question 2.2 fails to give rise to any substantial issue. 5. In so far as Question 2.3 is concerned, we find that the Tribunal has upheld the findings of the CIT(A). The CIT(A) in its order had observed as follows:- "5.3 I have considered facts of the case, the findings of A....

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.... the demerger takes place, restrictions of sub-section (12A) have only been introduced in respect of section 80IA of the Act and not in other incentive sections like S. 80IB, S.80IC, While the provisions of Section 80IC (7) requires application of Section 80IA (7) to Section 80IA (12) in the context of units availing benefit under Section 80IC, it does not cover the application of S. 80IA (12A). Hence, going by recognized tax principle that restrictive provisions are to be strictly construed, it is lucid that the provisions of section 80IA (12A) have to be applied only with respect to units/businesses availing incentives under Section 80IA. This is also supported by the wordings contained in the CBDT Circular no. 3 of 2008 dated 12 March 2008. The Hon'ble High Court in the case of Mega Packages (supra) held that section 80IC of the Act bestows the deduction under the Act upon the undertaking and not the owner. Once the same is to be allowed to undertaking, the change in ownership of the undertaking would not disentitle the benefits of deduction for unexpired period to the successor. Therefore, provisions of section 80IC(4) shall not apply in such as case. In view of the abo....