2015 (6) TMI 725 - ITAT CHANDIGARH

Deduction u/s 80-IC - CIT(A) restricting deduction to 25%i instead of 100% claimed by the appellant in the sixth year of operation of new industrial undertaking - Held that:- Before the introduction of section 80IC which is before us for consideration, the deduction to the backward states was available in terms of section 80IB(4). The third proviso makes it clear that after 31.3.2004, this deduction will be available only u/s 80IC. The sub section further makes it clear that deduction would be @ 100% for the first five years and thereafter @ 25%. Further, the first proviso makes it clear that deduction will not exceed 10 consecutive assessment years. The second proviso further makes it clear that in the case of states of North-Eastern regions, the deduction would be @ 100% for all the 10 years. Thus, even in the earlier provision only in case of North-Easter states, the deduction of 100% was allowable for 10 years whereas in the case of states of Himachal Pradesh, the deduction was allowable @ 100% for first five years and 25% for next five years.

The careful reading of the form in a serial order would clearly show that the assessee is required to inform the location of the Industry and column (c) specifically ask the assessee to state whether business is a new business? Column (d) clearly ask the assessee whether existing business has undertaken substantial expansion, therefore, there are two categories of business and substantial expansion is possible only in case of existing business. In our opinion, the Ld. CIT(A) has correctly adjudicated this issue. In view of the above detailed discussion we hold that the assessee before us i.e. M/s Hycron Electronics is entitled to only 25% of deduction during the present year because the assessee has already availed the period of full deduction @ 100% in the earlier five years i.e. from assessment years 2004-05 to 2008-09. In this background, we find nothing wrong with the order of Ld. CIT(A) and we uphold the same. - Decided against assessee.

Entitlement to deduction u/s 80IC - Held that:- Expression 'derived from' has been used in section 80IC also, therefore, as far as interest received on margin money and interest received on other amounting re not entitled for deduction u/s 80IC and accordingly we confirm the action of the Assessing Of ficer and CIT(A) in this respect .

As far as the amount received on foreign exchange fluctuation is concerned, though in case of M/s Ansysco Vs. ACIT(2015 (6) TMI 704 - ITAT CHANDIGARH) it was held that gain from Foreign Exchange Fluctuat ions was directly related to the business activity therefore assessee was entitled to deduction. However the details are not incorporated in the assessment order or in the impugned order, therefore, we set aside the order of Ld. CIT(A) and remit the matter back to the file of Assessing Officer with a direction that if the same relates to the business transact ion on Revenue account, then deduct ion may be allowed on this amount, otherwise the issue may be decided in accordance with law. As far as the issue regarding misc. income and sundry credit balance written back is concerned, this issue was not seriously pressed before us, therefore, action of the Ld. CIT(A) in respect of these two items are also confirmed.

Late deposit to Provident Fund and ESIC - Held that:- As in case of CIT Vs. Nuchem [2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT] learly held that if amount have been paid before the due date of filing of return then such dues are allowable. However, we further find that dates of deposits are not available on record therefore we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to verify that if amount have been paid before due date of filing of return then the same may be allowed otherwise the issue should be decided in accordance with the law. We may also like to point out that if ultimately disallowance is made on this account then the profit of the assessee would increase and assessee would be entitled to increased deduction under section 80IC as consequences.

Disallowance on interest has not been charged from partners - Held that:- Firstly there is no provision for charging of interest in the partnership deed and therefore assessee's firm was not bound to charge interest. Secondly since no interest have been allowed to the partners therefore overall balance of all the partners should have been examined and if such examinations is made then the overall balances in the capital account would be credit balance. Thirdly in any case assessee has already disallowed the sum of ₹ 12,00,000/- on this account. Therefore in our opinion there is no justification for this disallowance and accordingly we set aside the order of Ld. CIT(A) and delete the same. - Decided in favour of assessee.

Eligible for deduction u/s 80IC on account technological know-how services - Held that:- The A.O. has also agreed and considered the sum of ₹ 15,00,000/- as not eligible for deduction u/s 80IC on account technological know-how services as agreed by the appellant subject to no penal action. The appellant also agreed for the said addition as income from other sources before the A.O. Since the offer for deduction of ₹ 15,00,000/- from eligible profits u/s 80IC was itself agreed by the appellant subject to no penal provision which the A.O. also agreed, therefore I do not find any defect in the addition made by the A.O. - Decided against assessee.