9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (3) TMI 44 - AT - Income TaxEligibility to deduction u/s 80IB - profit derived from the activity of manufacture - plea of the Assessee that the process of producing poultry feed involved mechanical, chemical & electrical processes for which the Assessee used sophisticated Plant & Machinery - Held that - The assessee s eligible undertaking itself was independently carrying out the complete activity i.e. from mixing, grinding till the pelletisation. The raw materials once consumed could not be reconverted into the same position. Its utility gets changed. The prime raw materials such as maize, soya oil, rice bran, etc. can no more be regarded to be the rice bran, soya oil, maize. We are of the view that the issue in the Revenue s appeal is squarely covered against the revenue by the decision of the Co-ordinate Bench of this Tribunal in assessee s own case for the earlier years Interest income exclusion from the profits on which deduction u/s 80IB(5)allowable - Held that - Interest income and the interest expenses had a direct nexus and therefore netting off interest income against the interest expenses had to be allowed. Since the interest expenses was much more than the interest income no interest income can be excluded from the profits on which deduction u/s 80IB(5) of the Act ought to be allowed. We therefore uphold the order of the Ld. CIT(A) on this issue. We find that this tribunal in assessee s own case for the Asst Years 2008-09, 2010-11 to 2012-13 vide order dated 2017 (4) TMI 1313 - ITAT KOLKATA had held in the aforesaid manner. Penalty u/s 271AAB(1)(a) on account of disclosure made u/s 132(4) at the time of search on undisclosed stock - Held that - There is no escape from the rigor of Sec.271AAB(1) if income of the specified previous year emanates from the material found in the course of search and such income or transaction has not been records in the books of accounts maintained by the Assessee. The legislature has given sanctity to entries made in the Books of accounts maintained in the ordinary course of business on the premise that it is maintained contemporaneously. If there is excess stock physically found than what is recorded in the books of accounts, then Sec.69 of the Act (Unexplained investments not recorded in the books), comes into play. Therefore such income does not have any source as the source is unexplained. It is also undisclosed because it is not recorded in the books of accounts of the Assessee. Hence we have no hesitation in holding that the excess stock in the sum of ₹ 2,73,38,000/- does fall under the definition of undisclosed income and consequently penalty u/s 271AAB of the Act is leviable for the same. Accordingly, the grounds raised by the revenue in this regard are allowed. Levy of penalty u/s 271AAB on account of denial of deduction u/s 80IB - Held that - We find in the facts of the case, that there was absolutely no seizure of any material or documents at the time of search to reach to a different conclusion that assessee is not entitled for deduction u/s 80IB of the Act. Hence the same does not fall within the definition of the expression undisclosed income and therefore would be outside the ambit of penalty u/s 271AAB. The assessee has been claiming deduction u/s 80IB of the Act consistently from earlier years. Since the revenue had denied deduction thereon in earlier years, it was denied for the year under appeal also . This has nothing to do with the search proceedings so as to fall within the ambit of undisclosed income and consequential levy of penalty u/s 271AAB of the Act. - Decided against revenue
Issues Involved:
1. Eligibility for deduction under section 80IB of the Income Tax Act. 2. Netting off interest income against interest expenses for the purpose of section 80IB. 3. Levy of penalty under section 271AAB of the Income Tax Act. Issue-wise Detailed Analysis: 1. Eligibility for Deduction under Section 80IB: The primary issue revolves around whether the assessee is engaged in the "manufacture" of poultry feed, thereby qualifying for deduction under section 80IB. The revenue contended that the process did not amount to "manufacture" as there was no change in the chemical composition of the ingredients. However, the assessee argued that the process involved mechanical, chemical, and electrical processes using sophisticated machinery, resulting in a distinct and separate product known as poultry feed. The Tribunal referred to its earlier decisions in the assessee's own case and in the case of M/s Amrit Feeds, which held that the production of poultry feed qualifies as "manufacture" under section 80IB. The Tribunal upheld the CIT(A)'s decision, allowing the deduction under section 80IB, as the process met the criteria laid down by judicial precedents, including recognition by trade and statutory authorities as a distinct product. 2. Netting off Interest Income Against Interest Expenses: The second issue pertains to whether interest income earned on fixed deposits, which were given as security for availing credit facilities, should be netted off against interest expenses for the purpose of computing deduction under section 80IB. The assessee argued that the interest income had a direct nexus with the business and should be netted off against the interest expenses. The CIT(A) agreed with the assessee, relying on the Supreme Court's decision in ACG Associated Capsules (P) Ltd. vs. CIT, which allowed netting off interest income against interest expenses. The Tribunal upheld the CIT(A)'s decision, noting that the interest income and expenses had a direct nexus, and therefore, netting off was justified. As the interest expenses exceeded the interest income, no interest income was excluded from the profits eligible for deduction under section 80IB. 3. Levy of Penalty under Section 271AAB: The third issue concerns the levy of penalty under section 271AAB on account of disclosure made during the search operation. The search revealed a stock audit report indicating excess stock, which the assessee had incorporated in its books at NIL cost. The assessee argued that the stock audit was conducted voluntarily as part of regular business operations and that the excess stock did not constitute "undisclosed income." The CIT(A) agreed with the assessee and deleted the penalty. However, the Tribunal found that the excess stock represented an unexplained investment, which fell under the definition of "undisclosed income" under section 271AAB. Consequently, the Tribunal held that the penalty was justified and allowed the revenue's appeal on this ground. 4. Penalty on Disallowance of Deduction under Section 80IB: The final issue is whether the penalty under section 271AAB was justified on account of the disallowance of deduction under section 80IB. Since the Tribunal upheld the deduction under section 80IB in the quantum appeal, the penalty related to this disallowance did not survive. The Tribunal noted that there was no seizure of any material or documents during the search to suggest that the assessee was not entitled to the deduction. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the penalty related to the disallowance of deduction under section 80IB. Conclusion: The appeal of the revenue in ITA No. 2304/Kol/2016 was dismissed, and the appeal in ITA No. 2305/Kol/2016 was partly allowed, with the Tribunal confirming the eligibility for deduction under section 80IB, allowing netting off interest income against interest expenses, upholding the levy of penalty under section 271AAB for undisclosed stock, and deleting the penalty related to the disallowance of deduction under section 80IB.
|
