2014 (5) TMI 398 - HC - Income Tax

Ambit and scope of section 80IB of the Act Held that - Following DCIT Versus Cello Stationery Products 2010 (2) TMI 810 - ITAT, Mumbai - the existing financial results of the Assessee and other manufacturing concerns with their financial results need to be compared with the situation of absence of marketing or sales concern - the profit of the manufacturing concern would have been higher by the amount of profit actually earned by the marketing concern - The manufacturing concern would have claimed deduction u/s 80IB on such higher amounts of profit and the Revenue could not have resisted it - the Revenue s assertion that the marketing concern was floated with a view to claim higher deduction u/s 80IB, is baseless no substantial question of law arises for consideration Decided against Revenue.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding Section 80IB deduction.

Analysis:
The appellant challenged the ITAT's order, arguing that the questions framed were substantial questions of law related to Section 80IB of the Income Tax Act, 1961. The appellant claimed that the ITAT failed to understand the scope of Section 80IB, which allows deduction for profits from industrial undertakings. The appellant contended that setting up a marketing unit in Mumbai alongside a manufacturing unit in Daman was solely for claiming benefits under Section 80IB. The Assessing Officer's conclusions were deemed correct, and the CIT (Appeals) and ITAT should not have reversed them.

Upon reviewing the orders of the CIT (Appeals) and the ITAT, it was noted that both had concurrently concluded that the Assessee was entitled to the deduction under Section 80IB for the entire profits. Reference was made to a previous assessment year where a similar decision was upheld by the ITAT. The CIT (Appeals) had compared the financial results of the Assessee with and without the marketing concern, concluding that the marketing concern's existence did not impact the Assessee's eligibility for the deduction. The ITAT confirmed these findings, stating that the Revenue's claim that the marketing concern was established to claim higher deductions under Section 80IB was unfounded. The ITAT held that the factual findings did not raise any substantial question of law as presented in the appeal, leading to the dismissal of the appeal without costs.

In summary, the High Court upheld the decisions of the CIT (Appeals) and the ITAT, ruling that the Assessee was entitled to the deduction under Section 80IB for the entire profits. The court found no merit in the appeal, as the establishment of the marketing concern did not affect the Assessee's eligibility for the deduction, and the Revenue's claims were baseless. The appeal was dismissed, and no costs were awarded.