2018 (3) TMI 1738 - AT - Income Tax

Deduction u/s 80IC - difference in billing and payments made and as such the income derived is from industrial undertaking - diverting more profits towards non exempt units, the assessee had diverted profits towards exempt units and had not examined the issue while coming to conclusion - A.O. calculated the income of exempted unit by calculating total turnover of all the units of assessee-firm and total profit declared by all the units and reduced the deduction under section 80IC HELD THAT - As decided in DEPUTY COMMISSIONER OF INCOME TAX, ROHTAK CIRCLE, ROHTAK, HARYANA VERSUS M/S MICRO TURNERS HISAR ROAD, ROHTAK 2016 (9) TMI 752 - ITAT DELHI the assessee has produced all the books of accounts and vouchers before the AO during the assessment proceedings. No show cause query was issued by the AO on this account during the assessment proceedings. AO has not considered the fact that the units in exempted zones are mainly engaged in manufacturing on job work basis where there is either negligible or no input cost of raw material involved. It was noted that if the sales were made using their own raw material, there would be substantial difference in the GP rate insofar as, if the cost of raw material was excluded, the GP rate in all the units would remain the same. The fact that the exempted unit at Haridwar has shown a loss has not been referred to by the AO. Therefore, it is clear that no profit has been diverted to this unit. As further noted that there has been no investigation or specific exercise to show that the amount claimed as deduction u/s 80-IC was wrong. We find considerable cogency in the finding of the CIT(A) that there is no ground for disallowing claim for job work expenses for the eligibility u/s 80IC - Decided against revenue.

Summary

Issues:
Appeal against deletion of addition under section 80IC for diverting profits towards exempt units.

Analysis:
The departmental appeal challenged the deletion of an addition made by the Assessing Officer under section 80IC. The dispute arose from the assessee-firm's operations involving manufacturing of precision turned parts at various units, some located in exempted zones. The AO reduced the deduction under section 80IC by a specific amount, alleging diversion of profits towards exempt units. The assessee contended that the exempted units were engaged in manufacturing activities covered under section 80IC, generating income from industrial undertakings. The Ld. CIT(A) allowed the appeal, emphasizing the lack of evidence to support the AO's claim and referencing a previous decision in favor of the assessee for AY 2009-2010.

In a related appeal for AY 2010-2011, the Tribunal upheld the Ld. CIT(A)'s decision to delete the addition under section 80IC. The Tribunal highlighted discrepancies in the AO's assessment, noting the absence of evidence regarding manufacturing activities and the lack of investigation into the claimed deduction. The Tribunal emphasized the principle of consistency and cited precedents supporting the assessee's position. The Ld. D.R. acknowledged that the issue was in favor of the assessee based on the Tribunal's previous order.

Considering the Tribunal's previous decision and the consistent application of legal principles, the current departmental appeal was dismissed. The Tribunal found that the issue was already settled in favor of the assessee by the previous order, and the departmental appeal lacked merit. The judgment upheld the decision of the Ld. CIT(A) to delete the addition under section 80IC, concluding that the departmental appeal had no grounds for interference.

In conclusion, the Tribunal dismissed the departmental appeal, affirming the decision to delete the addition under section 80IC and upholding the assessee's position regarding the diversion of profits towards exempt units. The judgment highlighted the importance of evidence, consistency in legal interpretation, and adherence to precedents in tax assessments involving deductions under section 80IC.