2011 (12) TMI 338 - HC - Income Tax

Deduction u/s 80-IB and under s. 10BA - Held that the decision of the Tribunal in the case of the assessee for the earlier years in holding that the assessee is engaged in the manufacturing activity and, therefore, entitled to deduction under s. 80-IB of the IT Act 1961 has been accepted by the Revenue in the earlier years - Appeal is dismissed

Summary

Issues:
1. Deduction under sections 80-IB and 10BA for outsourcing craft and artistic items.
2. Eligibility for deduction under section 10BA based on the number of workers employed.
3. Treatment of DEPB as profit derived from export business for deduction under section 10BA.

Analysis:
1. The first issue raised by the Revenue pertains to the deduction under sections 80-IB and 10BA concerning the outsourcing of craft and artistic items. The Tribunal allowed the deduction by considering the undertaking as engaged in manufacturing, even though the items were outsourced without value addition. The Revenue did not challenge the Tribunal's decision for earlier years, where the manufacturing activity was accepted. Consequently, the court held that the Revenue cannot contest the deduction in the current assessment year, leading to the dismissal of this issue.

2. The second issue revolves around the eligibility for deduction under section 10BA based on the employment of twenty or more workers. The Tribunal granted the deduction despite the actual employment of only two carpenters and a few other laborers for crafting artistic articles. The Revenue did not dispute the Tribunal's acceptance of manufacturing activity in previous years. As a result, the court concluded that the Revenue's challenge on the grounds of insufficient worker count cannot be entertained, leading to the dismissal of this issue.

3. The final issue concerns the treatment of Duty Entitlement Pass Book (DEPB) as profit derived from export business for the purpose of computing deduction under section 10BA. The Revenue raised this question citing a decision by the apex court, which was deemed irrelevant to the present case by the Revenue itself. Consequently, the court held that the apex court's decision did not apply to the facts of this case, leading to the dismissal of this issue.

In conclusion, the High Court dismissed the appeal as it found no valid reasons to entertain the Revenue's challenges on the deductions under sections 80-IB and 10BA, as well as the treatment of DEPB for computing deduction under section 10BA, based on the arguments presented and the acceptance of previous Tribunal decisions by the Revenue.