2014 (5) TMI 515 - HC - Income Tax

Deduction u/s 80IB of the Act Profits and gains from industrial activities Infrastructural undertaking Held that - The Tribunal was rightly of the view that assessee does not satisfy and fulfill the condition of manufacturing or producing articles or things which have been specified in the Central Government Notification - Though the Assessee may be held to be manufacturing or producing articles or things from 1.4.1991 and ending on 31.3.1995, it is not engaged in manufacturing or production of articles or things which have been specified in the Notification published by the Central Government in the official Gazette - the deduction has been rightly disallowed - No assistance can be derived from Section 80IA because that is in relation to the undertakings which are engaged in infrastructure development - Such of the industrial undertakings or enterprises which are engaged for infrastructure development alone are covered by Section 80IA - the disallowance has been rightly confirmed throughout no substantial question of law arises for consideration Decided against Assessee.

Summary

Issues:
Challenge to disallowance of deductions under Section 80IB of the Income Tax Act, 1961 for profits and gains derived from certain industrial undertakings.

Analysis:
The appeal before the High Court challenged the disallowance of deductions under Section 80IB of the Income Tax Act, 1961 concerning profits and gains from specific industrial undertakings for the assessment year 2002-2003. The issue revolved around the appellant's claim for deductions, which were disallowed by the Assessing Officer, upheld by the Commissioner of Income Tax (Appeals), and further confirmed by the Tribunal. The appellant contended that the Tribunal erred in confirming the disallowance, arguing that the conditions specified in Section 80IB(3)(i) were not fulfilled as the industrial undertaking did not meet the requirements despite being engaged in manufacturing activities. The Tribunal found that the appellant failed to satisfy the conditions related to manufacturing or producing specified articles as per the Central Government Notification, leading to the disallowance of deductions.

The High Court emphasized that the appellant's manufacturing activities, particularly in the tobacco industry, did not align with the conditions outlined in Section 80IB(3)(i) or (ii) of the Income Tax Act, 1961. The Court noted that the appellant's claims for deductions were contradictory, as they did not manufacture the specified articles or things during the relevant periods. The judgment highlighted the importance of adhering to the conditions set forth in the legislation for claiming deductions under Section 80IB. Additionally, the Court clarified that Section 80IA incentives were not applicable in this case, as they are specifically for undertakings involved in infrastructure development, which did not apply to the appellant's situation.

Ultimately, the High Court concluded that the appeal did not raise any substantial question of law. The circular issued by the Central Board for Direct Taxes, which the appellant relied upon, was deemed irrelevant to the case as it pertained to incentives for small-scale industrial units commencing production after a specific date. Therefore, the Court dismissed the appeal, upholding the disallowance of deductions under Section 80IB for the appellant's industrial undertakings.