2014 (10) TMI 826 - AT - Income Tax

Deduction under section 80-IC - CIT (Appeals) allowing 50 per cent. of the claim - Held that - Reasoning of the Assessing Officer that the assessee had not furnished any proof of installation of machinery has since been controverted, inter alia, by the Commissioner of Income-tax (Appeals) in her findings that the Deputy Director, Industries, Department of Industries, Baddi, Himachal Pradesh has issued a certificate of allocation of registration number for small scale enterprise for manufacturing of transducers, meters etc., showing date of commencement of commercial production on April 11, 2007. Ostensibly, the finding of the Commissioner of Income-tax (Appeals) has not been dispelled by the Revenue by placing any document or material on record. The finding of the Commissioner of Income-tax (Appeals) that the appellant explained that the time recorded on the invoice issued by M/s. SML was subsequent to the despatch of the material on the basis of challan. The appellant has correlated the entry of goods as per delivery challan and the despatch of the finished material from its gate register. The time required for assembly and testing of the product varies between two to six hours and the items purchased from M/s. SML are circuit card assembly which are the basic raw material for mounting of variable components based on customer requirements has also not been challenged as incorrect by placing any material/document on record by the Revenue. On the contrary, the assessee had produced positive proof that it was a manufacturing/assembling unit. Therefore, we uphold the order of the Commissioner of Income-tax (Appeals) which is in accordance with law and that no interference is called for. - Decided against revenue.

Summary

Issues:
- Whether the Commissioner of Income-tax (Appeals) was justified in allowing 50% of the claim of deduction under section 80-IC of the Act which was denied by the Assessing Officer?

Analysis:
1. Background: The appeal by the Revenue concerns the order of the Commissioner of Income-tax (Appeals) regarding the deduction under section 80-IC for the assessment year 2008-09.

2. Facts of the Case: The assessee, a partnership firm, claimed exemption under section 80-IC as a manufacturer in Himachal Pradesh. The Assessing Officer restricted the deduction to 50% due to perceived lack of manufacturing activity.

3. Commissioner's Findings: The Commissioner noted various documents proving the manufacturing setup, including technical agreements, certificates, and approvals. She rejected the Assessing Officer's doubts on the turnover and origin of capital, emphasizing the manufacturing nature of the business.

4. Grounds of Appeal: The Revenue challenged the Commissioner's decision, arguing that the Assessing Officer's concerns were valid, such as lack of machinery installation proof and direct sales to a buyer without manufacturing.

5. Judicial Review: The Tribunal examined the Assessing Officer's reasoning and the Commissioner's findings. The Tribunal noted the proof provided by the assessee regarding manufacturing processes and materials sourcing.

6. Decision: The Tribunal upheld the Commissioner's order, emphasizing the lack of evidence from the Revenue to dispute the manufacturing activities. The Tribunal found no reason to interfere with the Commissioner's decision, dismissing the Revenue's appeal.

7. Conclusion: The Tribunal's decision affirms the Commissioner's ruling, recognizing the manufacturing nature of the business and rejecting the Revenue's challenge to the deduction under section 80-IC. The judgment highlights the importance of substantiating claims with sufficient evidence in tax matters.