2015 (1) TMI 971 - HC - Income Tax

Benefit of exemption under Section 80-IC - LCD Monitor - ITAT concurred with the findings of the CIT(A) that the assessee was eligible to claim deduction - Held that - Aside from the reasons cited by the ITAT affirming the conclusions reached by the CIT (A), which we uphold, we must add that the plea that the LCD Monitor would not fall within the description of items at sl. No. 13 in part (c) of XIV Schedule is also not correct. The LCD Monitors do subscribe to the description of information and communication technology devices and, therefore, would attract, provided other statutory conditions are fulfilled, the benefit of exemption under Section 80-IC of Income Tax. We concur with the conclusion that A.O. had proceeded more on the basis of doubts entertained by him as to the genuineness of the claim rather than some concrete material. If he had any reasons to disbelieve the correctness of the claim about the manufacturing activity (on the basis of considerations such as wages paid, electricity bills generated, the nature of the plant and machinery etc.,), the least that could have been done by him was to have the manufacturing unit of the assessee inspected. For such purposes, he only had to take recourse to his statutory powers under the law. Without having undertaken any such exercise, as observed by the authorities below or rejecting the accuracy of the books of accounts, adverse conclusions on facts as reached could not have been drawn. No question of law arising for consideration. - Decided against revenue.

Summary

Issues:
1. Appeal against ITAT order for Assessment Year 2009-10.
2. Claim of deduction under Section 80-IC.
3. Manufacturing activities of the assessee.
4. Denial of deduction by Assessing Officer.
5. Decision of CIT(A) and ITAT.
6. Eligibility of the assessee for deduction under Section 80-IC.
7. Interpretation of Schedule XIV for Section 80-IC.
8. Adequacy of local workers employed.
9. Conclusion of the High Court.

Analysis:

1. The appeal before the High Court challenged the ITAT order for the Assessment Year 2009-10. The ITAT had dismissed the Revenue's appeal against the CIT(A)'s order allowing the respondent/assessee's appeal and setting aside the Assessing Officer's order assessing the income at a specific amount and initiating penalty proceedings.

2. The main issue revolved around the claim of deduction under Section 80-IC by the assessee, who was engaged in manufacturing electronic goods. The Assessing Officer had denied the deduction, stating that the assessee was only involved in trading under a parent company's brand name, lacking adequate infrastructure for manufacturing.

3. The CIT(A) disagreed with the Assessing Officer's conclusions, noting that the assessee was indeed engaged in manufacturing electronic goods under a technical collaboration, importing components for assembly in a factory located in Himachal Pradesh. The CIT(A) emphasized that selling products under a brand name did not negate the manufacturing activity.

4. The High Court concurred with the CIT(A) and ITAT, upholding the assessee's eligibility for claiming deduction under Section 80-IC. The High Court emphasized that the Assessing Officer's doubts and lack of concrete evidence did not justify denying the deduction, especially since the manufacturing unit had not been inspected.

5. The High Court further clarified that the LCD Monitors manufactured by the assessee fell within the description of information and communication technology devices, making them eligible for the exemption under Section 80-IC. The Assessing Officer's reliance on doubts without proper inspection or concrete evidence was deemed insufficient to reject the claim.

6. Ultimately, the High Court dismissed the appeal, stating that no legal questions arose for consideration. The decision highlighted the importance of concrete evidence and proper assessment before denying legitimate claims under tax laws.

This detailed analysis covers the key issues raised in the legal judgment, providing a comprehensive overview of the case and the High Court's decision.