2016 (8) TMI 1085 - AT - Income Tax

Eligibility of deduction u/s 80IC - AO has recorded that the assessee has sold one amplifier which was purchased from sister concern namely M/s Saraswati Dynamics, Roorkee and, therefore, the year under which the survey took place the assessee was not engaged in manufacturing activities - Held that - A.O. has allowed deduction u/s 80IC of the Act in the immediately preceding years. Survey should have been done before allowing deduction u/s 80IC of the Act in the very first year of its claim, but the Revenue has conducted the same in 2008. The survey team failed to collect the evidences during the survey as to how the business was closed for the Assessment Year 2008-09. The operation was closed in November 2008 because of the natural calamities. The production of all the documents were produced by the assessee company before the Assessing Officer related to the business of the assessee to the government organization till September 2006. These documents has categorically revealed that the very foundation of the Assessing Officer s order was not justified as the Assessing Officer for the Assessment Year 2006-07 has made a clear findings that the assessee has purchased digital powers sub assemblies for which invoice has been raised by M/s Saraswati Dynamics Pvt. Ltd dated 8/3/2006. Thus the sub assemblies cannot be termed as the amplifier as a whole. In the same para, the Assessing Officer mentioned that assessee had sold amplifier to SHAR Centre, Sriharikota for ₹ 1,27,51,250/- for which invoice has been raised dated 06.03.2006. But while computing the total income the Assessing Officer has made disallowance for the receipt for amplifier from the total income amounting to ₹ 1,27,51,250/- and as relates to total expenses has disallowed purchase of amplifiers as to ₹ 57,20,000/-. There was manufacturing activity going on during the relevant assessment years. The disallowance was not proper and the reason for disallowance of the benefit under Section 80IC does not sustain. Thus, the CIT(A) has rightly held that A.O was not correct while disallowing the benefit under Section 80IC of the Act.

Summary

Issues involved:
- Appeal against orders passed by CIT(A) for Assessment Years 2006-07, 2007-08, and 2008-09
- Claim of deduction u/s 80IC of the Income-tax Act
- Disallowance of claim of Section 80IC due to alleged lack of manufacturing activities
- Dispute over interest income
- Validity of documents and certificates submitted by the assessee

Analysis:
1. The primary issue in this case revolves around the claim of deduction u/s 80IC of the Income-tax Act. The Assessing Officer (A.O) disallowed the claim citing lack of manufacturing activities during the relevant assessment years. The CIT(A) allowed the appeals of the assessee, leading to the Revenue's appeal before the tribunal.

2. The assessee, engaged in the manufacture and sale of electronics and mechanical equipment, had previously been allowed deduction u/s 80IC in earlier assessment years. However, in the assessment year under question, the A.O alleged that the assessee had sold an amplifier purchased from a sister concern, leading to the disallowance of the claim of Section 80IC.

3. The tribunal considered the submissions made by both parties. The A.O contended that the claim was rightly disallowed due to the absence of manufacturing activities. In contrast, the assessee's representative argued that the company had provided various certificates and licenses issued by government authorities to substantiate its manufacturing activities during the relevant period.

4. The documents submitted by the assessee included certificates from Government bodies such as Directorate of Industries, NQAQSR, Research Center IMARAT VIGNYANA KANCHAPO, and others, confirming the company's status as a manufacturer and approved vendor. These documents were crucial in establishing the manufacturing activities of the assessee during the disputed assessment years.

5. The tribunal noted that the A.O had allowed the deduction u/s 80IC in preceding years and that the survey conducted by the Revenue in 2008 failed to collect evidence supporting the claim that the business was closed in the assessment year 2008-09. The tribunal found that the disallowance of the benefit under Section 80IC was not justified, considering the evidence provided by the assessee regarding its manufacturing operations.

6. Ultimately, the tribunal upheld the CIT(A)'s decision and dismissed the appeals filed by the Revenue. The order emphasized the importance of substantiating claims with concrete evidence and highlighted the inconsistency in the A.O's approach towards allowing the deduction u/s 80IC.