2009 (12) TMI 707 - AT - Income Tax

Summary

Issues involved: Appeal against disallowance of deduction u/s 80-IB and depreciation, interpretation of Factories Act rules.

Deduction u/s 80-IB:
- Assessee claimed deduction under section 80-IB for the assessment year 2005-06.
- Disallowed by Assessing Officer due to factory licence issued after the claimed start of manufacturing activity.
- Commissioner of Income-tax (Appeals) upheld disallowance citing violation of Factories Act rules.
- Tribunal referred to previous cases where deduction allowed if manufacturing activity commenced before licence obtained.
- Tribunal held that actual start of production before specified date is crucial, not just licence issue date.
- SSI registration certificate showed production started before claimed date, supporting assessee's case.
- Tribunal directed Assessing Officer to allow deduction u/s 80-IB.

Depreciation:
- Assessee also challenged disallowance of depreciation.
- Tribunal directed Assessing Officer to recompute deduction under section 80-IB after deducting unabsorbed and current year depreciation.
- Citing precedent from Full Bench of Bombay High Court, Tribunal emphasized the importance of including depreciation in profit calculation for deduction under section 80-IB.

Interpretation of Factories Act rules:
- Tribunal highlighted the significance of actual start of production over licence issue date in determining eligibility for deduction u/s 80-IB.
- Commissioner of Income-tax (Appeals) misinterpreted rules by focusing on licence issue date rather than actual production start date.
- Tribunal's decision aligned with previous rulings, emphasizing the factual commencement of manufacturing activity for deduction eligibility.