2013 (7) TMI 985 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of deduction u/s 80IB.
2. Addition u/s 145A.
3. Disallowance u/s 40(a)(ia).
4. Enhanced deduction u/s 80IB for disallowance u/s 40(a)(ia).
5. Recalculation and addition of interest income on fixed deposit.
6. Addition u/s 68.
7. Enhanced deduction u/s 80IB for addition u/s 68.

Summary:

1. Disallowance of Deduction u/s 80IB:
The Assessing Officer (AO) disallowed the deduction of Rs. 35,55,863/- claimed u/s 80IB on the grounds that the factory license was issued on 23.09.2004, post the stipulated date of 31.03.2004. The CIT(A) upheld this decision, referencing the Goa, Daman & Diu Factories Rules 1985 and the Factories Act, 1948, which mandate obtaining a license before commencing manufacturing. The Tribunal remitted the issue to the AO to verify the receipt date of the factory license per the Gujarat High Court's decision in the case of Jolly Polymers.

2. Addition u/s 145A:
The Assessee did not press this ground as the CIT(A) had already directed to include the amount disallowed u/s 145A for deduction under 80IB. Thus, this ground was dismissed as not pressed.

3. Disallowance u/s 40(a)(ia):
The AO disallowed Rs. 1,99,848/- u/s 40(a)(ia) due to late TDS deposit. The CIT(A) upheld this disallowance but denied the enhanced deduction u/s 80IB. The Tribunal, referencing the decisions in Jalaram Plast Pack and Ramesh Industries, held that the increased income after disallowance u/s 40(a)(ia) should be considered for deduction u/s 80IB, subject to verification of TDS payment.

4. Enhanced Deduction u/s 80IB for Disallowance u/s 40(a)(ia):
The Tribunal directed the AO to verify the TDS payment and allow the deduction u/s 80IB accordingly, following the precedent set in Jalaram Plast Pack and Ramesh Industries.

5. Recalculation and Addition of Interest Income on Fixed Deposit:
The AO added interest income on fixed deposits on an accrual basis. The Assessee claimed to follow the cash basis of accounting and offered the income in subsequent years. The Tribunal remitted the matter to the AO to verify the Assessee's claim and avoid double taxation.

6. Addition u/s 68:
The AO added Rs. 1,25,000/- as unexplained cash credit u/s 68. The CIT(A) upheld this addition, denying the deduction u/s 80IB. The Tribunal remitted the issue to the AO to verify if the addition was made in the partner's hands and decide accordingly, following the decision in Ramesh Industries.

7. Enhanced Deduction u/s 80IB for Addition u/s 68:
The Tribunal directed the AO to verify the addition in the partner's hands and decide based on the Ramesh Industries case, allowing the Assessee's ground for statistical purposes.

8. Addition of Rs. 4,00,000/- u/s 68:
The AO added Rs. 4,00,000/- as unexplained loan u/s 68. The CIT(A) confirmed this, noting discrepancies in the loan confirmation dates. The Tribunal upheld the addition, rejecting the Assessee's alternative claim for deduction u/s 80IB, as the addition did not fall under business income but deemed income.

Conclusion:
The appeal was partly allowed, with several issues remitted to the AO for further verification and reconsideration based on established precedents.