2017 (7) TMI 214 - HC - Income Tax

Exemption u/s. 10B - insufficient manufacturing activity set up of the assessee - Held that - For the assessment year 1996-1997, the assessee had claimed deduction under section 80HHC and 80IA of the Income Tax Act which would be available to an industrial undertaking manufacturing or producing an article or thing. Thus in plain terms, case of the assessee was that even during the said period, the assessee was engaged in the manufacturing activity. Faced with such a situation, the assessee took an unusual stand claiming that such deduction was wrongly claimed and wrongly granted. Tribunal correctly held that the assessee cannot be allowed to blow hot and cold. Having set up and established the claim of being engaged in the manufacturing activity during a particular period, which stand of the assessee was accepted by the department, the assessee cannot be allowed to shift the stand merely because in the later year the assessee finds that it would be more advantageous to shift the beginning of 10 consecutive years for the exemption under section 10B of the Act.

Summary

Issues:
Availability of exemption under section 10B of the Income Tax Act for the assessment year 2007-2008.

Analysis:
The case involved an appeal against the Tribunal's judgment concerning the availability of exemption under section 10B of the Income Tax Act for the assessment year 2007-2008. The primary contention was whether the manufacturing activity had commenced during the relevant period for the assessment year 1998-1999, as claimed by the assessee, or during the financial year 1995-1996, as asserted by the Assessing Officer. The assessee argued that since the manufacturing activity began in 1998-1999, they were entitled to the exemption under section 10B for the assessment year 2007-2008. However, the Assessing Officer disagreed, stating that the activity had started in 1995-1996, making the assessee ineligible for the exemption in 2007-2008.

The Commissioner initially allowed the appeal, citing insufficient manufacturing activity in earlier years as justification for granting the exemption for the current year. Upon further appeal by the Revenue, the Tribunal reversed the Commissioner's decision and favored the Revenue. The Tribunal noted that the assessee had been exporting products since the financial year 1995-1996 and had claimed deductions under different sections in previous years. The Tribunal emphasized that the assessee could not claim deductions for the same years now, as it had already benefitted from them. The Tribunal also highlighted discrepancies in the evidence provided by the assessee regarding the commencement of manufacturing activities.

The Tribunal concluded that the assessee could not alter its position regarding the manufacturing activity timeline to suit its current benefit under section 10B. The Tribunal held that the assessee could not claim deductions for the same years twice and dismissed the Tax Appeals, affirming the decision against granting the exemption for the assessment year 2007-2008. In essence, the Tribunal emphasized consistency in claiming deductions and rejected the assessee's attempt to change the narrative for tax benefits.

In summary, the judgment revolved around the consistent commencement of manufacturing activities and the eligibility for tax exemptions under section 10B. The Tribunal's decision highlighted the importance of maintaining a consistent stance regarding deductions claimed in previous years and denied the assessee's attempt to manipulate the timeline of manufacturing activities for tax advantages. The Tribunal's ruling underscored the principle of fairness and consistency in tax assessments and upheld the denial of the exemption for the assessment year 2007-2008 based on the facts and evidence presented in the case.