2018 (4) TMI 1118 - AT - Income Tax

Deduction u/s. 80IC denied to unit at Dehradun - disallowance on proportionate basis - assessee did not produce the Form 10CCB and has not kept the separate books for the unit at Dehradun - CIT(A) has allowed the claim of the assessee and directed the AO to allow deduction u/s 80IC on the net profit of the Dehradun units as declared by the assessee after reducing the misc. income as taken in the P&L Account - Held that - AO could not point out any defects in the books of account maintained separately for the Dehradun unit and during remand proceedings when the Form 10CCB was produced before the AO, he could not point out any fault. We also note that there was no material to allege that there was shifting of expenses of eligible unit to non-eligible unit so that higher deduction can be claimed for 80IC unit at Dehradun. The Dehradun unit had new machineries and there were excise exemption also and thus, the profits generated at Dehradun unit cannot be termed as unnatural without any material to suggest the other way; and taking into consideration the results of the previous year also we do not find any infirmity in the order of the ld. CIT(A) which warrants our interference Addition under the head Misc. expenses - Held that - A sum of ₹ 14,58,007/- was on account of tax against stock transfer. The assessee was asked to explain the nature of such payments and since the assessee failed to offer any satisfactory explanation for the same, the assessee s claim for such expenses were not allowed by the Ld. CIT(A) and, therefore, he deducted the said amount from the total misc. expenses claimed of ₹ 17,36,842/- and directed the AO to allow only ₹ 2,78,838/-. Against the said order of Ld. CIT(A) the Ld. DR was unable to point out any defect or infirmity which need our interference. Therefore, we are not inclined to interfere with the order of the Ld. CIT(A) and we confirm the same. Claim in respect to custom duty and entry tax - Held that - As the entire amount was paid during the year itself and there was no outstanding at the year end and thus, the Ld. CIT(A) held that disallowance u/s. 43B of the Act also does not arise. - Revenue appeal dismissed

Summary

Issues involved:
1. Allowance of deduction u/s. 80IC in violation of Rule 46A of the Income-tax Rules.
2. Disallowance of certain expenses under the head Misc. expenses.
3. Allowance of custom duty and entry tax.

Detailed Analysis:

1. The first issue pertains to the allowance of deduction u/s. 80IC in violation of Rule 46A of the Income-tax Rules. The appellant, the revenue, contested the action of the Ld. CIT(A) in allowing a deduction of ?4,70,63,306 under section 80IC of the Income-tax Act, 1961. The AO had passed a best judgment assessment under section 144 of the Act, rejecting the claim due to non-cooperation and non-submission of Form 10CCB. However, the Ld. CIT(A) favored the assessee, considering factors such as labor unrest causing office closures and the production capacity of the Dehradun unit. The Tribunal concurred with the Ld. CIT(A), noting the absence of evidence suggesting inflated expenses or shifting of costs. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the legitimate reasons for non-submission of Form 10CCB and the absence of defects in the separate accounts maintained by the assessee for different units.

2. The second issue concerns the deletion of ?2,78,838 out of total misc. expenses claimed. The AO disallowed these expenses, alleging double claims, but the Ld. CIT(A) disagreed, stating they were accumulations of expenses under various income heads. However, a portion related to tax against stock transfer lacked satisfactory explanation, leading to its disallowance. The Tribunal found no defect in the Ld. CIT(A)'s order and upheld the deduction of ?2,78,838.

3. The final issue involves the allowance of custom duty and entry tax amounting to ?12,74,450. The Ld. CIT(A) correctly differentiated between custom duty on imports and entry tax on outside purchases, noting the timely payment without year-end outstanding. The AO failed to counter these facts during remand proceedings, and the Tribunal found no fault in the Ld. CIT(A)'s decision. Consequently, the Tribunal dismissed the revenue's appeal, confirming the Ld. CIT(A)'s orders on all issues.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decisions on all issues, emphasizing the absence of evidence supporting the revenue's contentions and the reasonable justifications provided by the assessee for their actions.