2019 (11) TMI 1812 - AT - Income Tax

Deduction u/s 80IC - claim denied as work of printing was not carried out at the premises of the assessee in the notified area for the purpose of Section 80IC - HELD THAT - As decided in own case 2019 (7) TMI 535 - ITAT DELHI Once the deduction u/s 80IC of the Act is allowed in the initial assessment year i.e. in the AY 2010-11 after due verification of the prescribed conditions and there is no change in the facts, then the deduction cannot be disallowed in subsequent years on the ground of non-fulfillment of conditions laid down in section 80-IC of the Act. This view has been fortified by the decision of the Hon ble Delhi High Court in the case of CIT vs. Tata Communication Internet Servicse Ltd. 2011 (8) TMI 633 - DELHI HIGH COURT - Decided in favour of assessee TDS u/s 194H - Disallowance of Trade discount u/s 40(a)(ia) - not deducting the tax at source on the commission payment made under the guise of Trade Discount - trade discount OR commission' - HELD THAT - In the case of Skol Breweries 2013 (10) TMI 416 - ITAT MUMBAI as held that when a purchase / sales is made at discounted price, it is called discount but when an incentive is given for undertaking task / job/ services provided or on sale of goods by one person on behalf of other, then it is commission. Since the benefit given by the assessee to M/s S. Chand Co. Ltd. was in the nature of trade discount and not commission , therefore, the assessee was not required to deduct income tax at source u/s. 194H of the Act, thus, no disallowance can be made u/s. 40(a)(ia) - Decided in favour of the assessee. Disallowance for delay in deposit of Employees Contribution to PF - due date of filing of return of income - HELD THAT - The employees contribution to EPF was deposited well before the due date of filing of return of income. The assessee has explained the circumstances in which such delay has been occurred. Thus, relying on the judgment of CIT vs. Vinay Cement Ltd. 2007 (3) TMI 346 - SC ORDER and CIT vs. AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT the addition was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80IC of the Income Tax Act, 1961.
2. Disallowance under Section 40(a)(ia) for non-deduction of tax at source on trade discount.
3. Disallowance under Section 36(1)(va) for late deposit of employee contribution to PF and ESI.
4. Applicability of the principle of res judicata in income tax proceedings.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IC:
The primary issue was whether the assessee was eligible for a deduction under Section 80IC of the Income Tax Act, 1961. The Revenue contended that the work of printing was not carried out at the premises of the assessee in the notified area. However, the Tribunal found that the unit of the assessee was situated in a notified area and that the assessee was engaged in the production of 'printed books', which qualifies for the deduction under Section 80IC. The Tribunal noted that the assessee had provided substantial evidence, including sales tax returns, purchase bills, and transportation receipts, to prove that the manufacturing activities were conducted at the eligible premises. The Tribunal upheld the CIT(A)'s decision, stating that the deduction under Section 80IC was rightly allowed, as the assessee's activities met the required conditions.

2. Disallowance under Section 40(a)(ia) for Non-Deduction of Tax at Source on Trade Discount:
The second issue was whether the trade discount given by the assessee to M/s S. Chand & Co. Pvt. Ltd. should be treated as commission, thereby necessitating tax deduction at source under Section 194H. The Tribunal held that the discount was a trade discount and not a commission, as it was not in lieu of any services provided for effecting sales. The Tribunal distinguished the case from those cited by the AO, noting that the discount was not an incentive for services but a reduction in the sale price. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the disallowance under Section 40(a)(ia), as no TDS was required on the trade discount.

3. Disallowance under Section 36(1)(va) for Late Deposit of Employee Contribution to PF and ESI:
The third issue involved the disallowance for the delayed deposit of employee contributions to PF and ESI. The Tribunal noted that the contributions were deposited before the due date of filing the return of income. Relying on the judgments of CIT vs. Vinay Cement Ltd. and CIT vs. AIMIL Ltd., the Tribunal upheld the CIT(A)'s decision to delete the addition, as the delay was within permissible limits and did not warrant disallowance.

4. Applicability of the Principle of Res Judicata in Income Tax Proceedings:
The Revenue argued that the principle of res judicata does not apply to income tax proceedings, and each assessment year is a separate proceeding. However, the Tribunal found that both the AO and CIT(A) had followed the order of their predecessors for the assessment year 2011-12, where similar issues were decided in favor of the assessee. Given the identical facts and circumstances, the Tribunal upheld the CIT(A)'s decision, emphasizing consistency and the absence of any new adverse evidence.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, affirming the CIT(A)'s order. The Tribunal's decision was based on substantial evidence provided by the assessee and consistent with prior rulings on similar issues. The judgment underscored the importance of consistency in tax proceedings and the validity of claims substantiated by relevant evidence. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 14th November 2019.