2012 (3) TMI 152 - AT - Income Tax

Sales tax Incentives eligible for deduction under 80IB - Held That - In view of assessee own case for A/Y 05-06, AO not to exclude sales tax incentives from the profit of the units while calculating the deduction u/s 80IB of the Act. Interest Incentive eligible for deduction under 80IB - Held That - When in immediately preceding assessment year assessee didnot raised the ground related to denial of deduction under 80IB on interest received, we reject the claim of assessee on principle of consistency.

Summary

Issues:
1. Disallowance of deduction u/s 80IB on interest and sales tax incentive.
2. Disallowance of addition u/s 40A(2)(b) for excess commission paid.

Issue 1: Disallowance of deduction u/s 80IB on interest and sales tax incentive:
The appellant, engaged in the manufacturing business, filed a return declaring income. The assessment resulted in disallowances under various sections, including deduction u/s 80IB on interest and sales tax incentive. The AO disallowed these amounts, citing precedents. The ld. CIT(A) upheld the disallowances. The appellant argued that a Tribunal decision favored their case for a previous assessment year. The Tribunal, in a detailed analysis, referred to relevant legal precedents and held in favor of the appellant, directing the AO not to exclude sales tax incentives while calculating the deduction u/s 80IB. However, the Tribunal rejected the appellant's claim regarding the interest disallowance, citing consistency with a previous decision.

Issue 2: Disallowance of addition u/s 40A(2)(b) for excess commission paid:
The AO disallowed an amount of commission paid in excess of 2.5% to a related party, adding it to the appellant's income. The ld. CIT(A) confirmed this disallowance. The appellant contended that a Tribunal decision in a similar case supported their claim. The Tribunal noted the similarity with a previous assessment year and found the payment of 3% commission to the related party reasonable, contrary to the AO's decision of 2.5%. The Tribunal analyzed the facts, considering the nature of services provided and the rates of commission to unrelated parties, and allowed the claim partly, directing the AO to provide relief to the appellant.

In conclusion, the ITAT Mumbai, in the cited judgment, addressed the issues of disallowance of deduction u/s 80IB on interest and sales tax incentive, as well as the disallowance of excess commission paid u/s 40A(2)(b). The Tribunal ruled in favor of the appellant on the sales tax incentive issue but partly allowed the claim on the commission disallowance. The judgment provides a comprehensive analysis of legal precedents and factual considerations to arrive at a reasoned decision for each issue raised in the appeal.