2014 (4) TMI 790 - AT - Income Tax

Disallowance of Interest u/s. 80IB of the Act Belated filed Audit Report under Rule 46A - Held that - The decision in CIT vs. Punjab Financial Corporation 2001 (12) TMI 50 - PUNJAB AND HARYANA High Court and Zenith Processing Mills vs. CIT 1995 (9) TMI 37 - GUJARAT High Court followed the otherwise admissible claim of the assessee cannot be defeated for technical reason - the claim of the assessee had been rejected only on the ground that the audit report was not filed along with return of income - The assessee was not asked by the AO to furnish the audit report during assessment proceedings - The assessee had furnished the audit report u/s 10CCB of the Act as additional evidence under rule 46A of the I.T. Rules and the same was admitted by the CIT (A) and also, accepting the explanation of the assessee regarding its failure to submit it before the AO and the remand report was also called from the AO - The AO had not reported anything adverse against the proof submitted by the assessee Decided in favour of Assessee. Rejection of claim of interest and rent Held that - The decision in Liberty India vs. CIT 2009 (8) TMI 63 - SUPREME COURT followed - the claim of the assessee is disallowance relating to interest income, rental income and foreign exchange rate fluctuation being not derived from industrial undertaking of the assessee Decided against Assessee. Income on account of foreign exchange fluctuation Held that - The income on account of foreign exchange fluctuation is also to be treated as taxable business income - the income from foreign exchange may be incidental to the business activity of the assessee but the same cannot be said to be derived from the manufacturing activity of the assessee Decided against Assessee.

Summary

Issues:
1. Disallowance of Interest u/s. 80IB
2. Levy Of Penal Interest

Analysis:
1. Disallowance of Interest u/s. 80IB:
The appellant filed an appeal against the Commissioner of Income Tax (Appeals) order disallowing interest under section 80IB. The appellant argued that the claim should not be denied on technical grounds, especially when similar claims were allowed in previous and subsequent years. The appellant's accounts were audited as per the requirements, and any technical deficiencies should have been addressed at the assessment or remand stage. The Commissioner disallowed various claims, including interest income, rent received, and foreign exchange, stating they were not eligible under section 80IB. However, the appellant contended that these receipts were closely related to the manufacturing activity. The Tribunal noted that the appellant's claim under section 80IB had been consistently allowed in previous years. The failure to submit the audit report in the specified format during assessment proceedings led to the disallowance. The Tribunal referred to previous court decisions where the submission of audit reports was not mandatory with the return and held that the claim should not be rejected solely on this basis. The Tribunal allowed the appellant's claim under section 80IB.

2. Levy Of Penal Interest:
The appellant also denied liability for penal interest. However, the judgment did not provide detailed analysis or specific reasons for this aspect of the appeal.

In conclusion, the Tribunal allowed the appeal partly, specifically regarding the disallowance of the appellant's claim under section 80IB. The judgment highlighted the importance of following procedural requirements but also emphasized that genuine claims should not be denied solely on technical grounds. The decision provided a comprehensive analysis of the issues raised by the appellant and the reasoning behind the Tribunal's decision, referencing relevant legal precedents and court interpretations to support the final ruling.