2014 (5) TMI 1004 - HC - Income Tax

Settlement commission - deduction u/s 80IB - Material placed by the CIT under Rule 9 not considered Held that - The contention of the revenue cannot be accepted that Settlement Commission had not examined and overlooked the material placed before the Settlement Commission in support of their contentions that the respondent was not entitled to the deduction under Section 80-IB of the said Act - the new unit should not have been made by splitting up or reconstructing an already existing business - the new business should not have been formed by transfer if the plant or machinery which had been previously used for the purpose - Insofar as these conditions are concerned, there is no material to show that they have not been satisfied. There is evidence of the fact that the AO, in respect of the AY 2005-06, 2006-07 and 2007-08, has allowed the deduction u/s 80-IB of the Act - The presumption is that an AO is aware of the conditions stipulated in sub-section (2) of Section 80-IB of the Act and that those conditions have been met - It is his duty to do so - the AO allowed the deduction u/s 80-IB of the Act for the three AY- 2005-06, 2006-07 and 2007-08 - he had checked and verified that the conditions stipulated in Section 80-IB (2) had been satisfied - There is nothing on record to rebut this presumption - it cannot be contended that the conclusion arrived at by the Settlement Commission that the respondent was entitled to the deduction u/s 80-IB of the Act was arbitrary or perverse thus, there was no reason for interference in the order of the Settlement Commission Decided against Revenue.

Summary

Issues:
Challenge to Settlement Commission's order under Section 245C(1) of the Income Tax Act, 1961 regarding deduction under Section 80-IB.

Analysis:

Issue 1: Settlement Commission's Consideration of Material
- The petitioner argued that the Settlement Commission did not consider the material provided by the Commissioner of Income Tax, leading to an incorrect allowance of deduction under Section 80-IB.
- Respondent countered, stating that all necessary conditions for the deduction were met, supported by evidence including payment of Central Excise duty and previous Assessing Officer's approval for deduction.
- The Settlement Commission examined the contentions and evidence thoroughly, concluding that the respondent was entitled to the deduction under Section 80-IB, as per the details provided in the impugned order.

Issue 2: Scope of Judicial Review
- Respondent highlighted the limited scope of review under Article 226 of the Constitution for orders by the Settlement Commission, citing relevant Supreme Court decisions.
- The Court emphasized that interference is only warranted if the Commission's decision is contrary to the law, not based on disagreement with interpretation, unless it is arbitrary or perverse.
- The Court reiterated that it cannot substitute its view for that of the Settlement Commission unless the interpretation given is clearly flawed.

Issue 3: Manufacturing Activity for Deduction Eligibility
- A key issue raised was the location and extent of manufacturing activity by the respondent at its Baddi unit for eligibility of deduction under Section 80-IB.
- The Settlement Commission found that the respondent had provided sufficient evidence, including Central Excise duty payments, to justify the deduction claim, rejecting the Revenue's claim of manufacturing outside the Baddi factory.
- The Commission observed that the Revenue failed to produce any incriminating evidence to support their contention against the deduction eligibility under Section 80-IB.

Conclusion:
- The Court found no grounds for interference with the Settlement Commission's order, emphasizing the limited power of review.
- The Court dismissed the writ petition, stating there is no basis for challenging the Commission's decision, and no costs were awarded.

This detailed analysis covers the issues raised in the legal judgment regarding the Settlement Commission's order under Section 245C(1) of the Income Tax Act, 1961, specifically focusing on the deduction under Section 80-IB and the scope of judicial review under Article 226 of the Constitution.