2015 (6) TMI 381 - AT - Income Tax

Deduction under Section 80-IC - CIT(A) allowed the claim - Held that - A.O., after examining the entire facts and circumstances of the case, has come to a conclusion that the assessee by splitting the Chennai unit, it has established the Haridwar unit. Therefore, the assessee is not eligible under Section 80-IC(4) of the Act and for the reason that the net profit of Haridwar unit is at 26.41% on the total turnover whereas the net profit of Chennai unit is at 2.12% on the total turnover. The assessee has not filed any details with regard to machineries, equipments and assets in respect of newly established Haridwar unit, before the A.O. These details were filed before the Ld. CIT(Appeals). Under these circumstances, we are of the opinion that all the details such as machineries, equipments and other assets purchased/acquired by the assessee, including bills, in respect of Haridwar unit established by the assessee have to be produced before the A.O. The A.O. is directed to decide the issue de novo. Remit the matter back to the file of the A.O. for fresh examination. - Decided in favour of revenue for statistical purposes. Disallowance of mould amortization charges - CIT(A) allowed the claim - Held that - CIT(Appeals) without discussing anything on the matter simply allowed the ground raised by the assessee. Necessary document like agreement between the assessee and M/s HUL and the life time of the moulds provided by M/s HUL are required to be examined to decide the issue. Therefore we set aside the order passed by the Ld. CIT(Appeals) and remit the matter back to the file of the A.O. to examine the agreement between the assessee and M/s HUL and other details. The A.O. is directed to decide the issue afresh after giving reasonable opportunity of being heard to the assessee. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
1. Disallowance under Section 80-IC of the Income Tax Act for the assessment year 2009-10.
2. Disallowance of mould amortization charges under Section 40(a)(ia) of the Income Tax Act.

Analysis:

1. Disallowance under Section 80-IC of the Income Tax Act:
The case involved the assessee, engaged in the business of manufacturing plastic products, claiming deduction under Section 80-IC of the Income Tax Act for its unit at Haridwar. The Assessing Officer (A.O.) disallowed the deduction, stating that the Haridwar unit was formed by splitting the existing business from the Chennai unit. The A.O. observed a significant increase in sales and profits in the Haridwar unit compared to the Chennai unit, indicating a shift of business activity. The A.O. concluded that the conditions of Section 80-IC(4)(i) were not met. The Commissioner of Income Tax (Appeals) allowed the claim based on the assets of the Haridwar unit submitted during the appeal. However, the Tribunal remanded the matter back to the A.O. for a fresh examination, emphasizing the need for detailed documentation on assets and machinery of the Haridwar unit.

2. Disallowance of mould amortization charges:
The A.O. disallowed the mould amortization charges claimed by the assessee as revenue expenditure under Section 40(a)(ia) of the Act. The A.O. treated the expenditure as lease rentals paid to a supplier, attracting tax deduction at source. The assessee contended that the charges were part of the production cost and not capital expenditure, as the moulds provided by the supplier did not offer enduring benefits. The CIT(A) allowed the claim, stating that the amount was towards production costs and not subject to TDS provisions. The Tribunal, however, set aside the CIT(A)'s decision, directing the A.O. to examine the agreement between the assessee and the supplier to determine the nature of the expenditure and decide the issue afresh.

In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, remanding both issues back to the A.O. for detailed examination and decision.