2014 (2) TMI 87 - AT - Income Tax

Deduction u/s 80IA/80IB of the Act Held that - The CIT(A) has ascertained the factual aspect of the case and found that there was manufacturing activity carried out by the assessee - the AO has come to the conclusion that there was no manufacturing activity carried out by the assessee and against this finding CIT(A) noted that the assessee has given evidence with regard to purchase of machinery at the factory at Silvassa, evidence in the form of number of workers employed and the entire manufacturing account - there is nothing on record brought out by the AO to disprove that no manufacturing activity actually took place at Silvassa - The assessee was able to show the Sale Tax Returns filed with Silvassa Sales Tax Office in support of his arguments. The assessee has furnished the purchase bill for machinery, evidence of supply of raw material at the factory at Silvassa, records filed with the statutory authorities, registration with the Directorate of Industries as small scale industry - the AO was directed to allow the deduction claimed by the assessee for all the four assessment years - There was no reason to interfere in the findings of the learned CIT(A) - the CIT(A) has allowed deduction under Section 80IA/80IB on the amount received against manufactured items, however, learned CIT(A) has denied deduction under Section 80IA/80IB on the ground of interest earned on fixed deposit - The assessee has not challenged the denial of deduction in respect of interest as the assessee has challenged through its cross objections only in respect of reopening of the assessment Order of the CIT(A) upheld Decided against Revenue.

Summary

Issues involved:
Appeals against allowing deduction under Section 80IA/80IB for assessment years 1999-2000 to 2002-03. Cross objections by assessee against the reopening of assessment for the same years.

Analysis:
The Tribunal consolidated four appeals by the department and four cross objections by the assessee regarding deduction under Section 80IA/80IB for the mentioned assessment years. The department contested the allowance of the deduction, claiming no genuine manufacturing activity by the assessee. The AO reopened the assessment based on an Inspector's report indicating the alleged factory's closure. However, the CIT(A) upheld the reopening but found genuine business activities by the assessee, allowing the deduction. The department appealed this decision, while the assessee filed cross objections against the reopening.

During the hearing, the department argued based on the AO's findings of no business activity due to the locked factory and absence of machinery. Conversely, the assessee's counsel relied on the CIT(A)'s decision, emphasizing genuine business activities supported by evidence like machinery purchase, worker employment, and manufacturing accounts. The CIT(A) noted the assessee's compliance with industry regulations and supply evidence to TCS, supporting the manufacturing claim. The CIT(A) concluded the AO's findings lacked merit and directed the allowance of deductions for all years.

The Tribunal found the CIT(A)'s factual findings uncontroverted, supporting the manufacturing activities and dismissing the department's appeals. The deduction was allowed for the relevant assessment years, except for interest earned on fixed deposits, which was denied but not challenged by the assessee. Consequently, the department's appeals were dismissed, leading to the dismissal of the assessee's cross objections. The order confirming the deduction under Section 80IA/80IB was pronounced in open court on August 21, 2013.