2019 (6) TMI 750 - HC - Income Tax

Claim for deduction u/s 80IB - as alleged petitioner/appellant is not engaged in any manufacturing activity and instead, it was only doing trading of mushroom powders in capsules - HELD THAT - As decided in assessee's own case 2018 (7) TMI 1733 - MADRAS HIGH COURT what has been done by the assessee is manufacture. In the assessee s case, the product which emerges after the process of manufacture is commercially a distinct commodity, can be of consumption as such containing a requisite amount of ingredients in the appropriate percentage, preserved in proper form as contained in the licence issued under the authorised enactments as well as the technical logo shared by the foreign company. - decided in favour of assessee Denying the claim u/s 43B - HELD THAT - Admitted facts recorded by the Assessing Officer, which clearly shows the assessee has availed the CENVAT credit and paid the excise duty. That apart, the assessee won the case for the subsequent year 2009-2010 - Decided in favour of assessee Violation of principles of the natural justice by the lower authorities has not resulted an injury to the appellant - The settled legal position is that every lack of opportunity cannot be construed as to be a violation of principle of natural justice - though the assessee took a stand that its former employee should be made available for cross-examination,he contested the matter before the Assessing Officer by placing facts to substantiate their case that they are engaged in the process of manufacturing and excise duty has been paid. Thus, in the absence of any proof produced to show that the statement obtained from the employee has caused prejudice to the assessee, the Tribunal has to only justify the decision taken by the Assessing Officer and CIT(A). This appeal filed by the Revenue is dismissed as being covered by the earlier decision and the substantial question of law is answered against the Revenue.

Issues Involved:
1. Whether the Appellate Tribunal is correct in following the High Court's judgment of the assessee's own case without going into the merits.
2. Whether the appellant is entitled to the claim under Section 80IB of the Income Tax Act.
3. Whether the claim made under Section 43B was rightly denied.
4. Whether the violation of principles of natural justice by the lower authorities resulted in an injury to the appellant.

Detailed Analysis:

Issue 1: Following High Court's Judgment Without Merits
The Revenue questioned whether the Tribunal was correct in following the High Court's judgment in the assessee's own case for earlier assessment years without re-evaluating the merits, especially since Special Leave Petitions (SLPs) were pending before the Supreme Court. The Tribunal had allowed the appeal by the assessee based on the High Court's previous decision, which had ruled in favor of the assessee for the assessment years 2003-04 and 2004-05. The High Court reiterated that the Tribunal's decision was appropriate as it was consistent with the earlier judgment.

Issue 2: Entitlement to Claim Under Section 80IB
The High Court had previously addressed whether the assessee was entitled to deductions under Section 80IB. The Court had found that the assessee was engaged in manufacturing activities, as evidenced by the Central Excise Registration Certificate and other documentation showing excise duty payments and manufacturing processes. The Tribunal's earlier finding that the assessee was not engaged in manufacturing was deemed unsustainable. The detailed description of the manufacturing process and the necessity of encapsulating the bulk powder substantiated the assessee's claim. The High Court concluded that the product emerging from the manufacturing process was a distinct commodity, thus affirming the assessee's entitlement to the claim under Section 80IB.

Issue 3: Denial of Claim Under Section 43B
The High Court had also evaluated whether the Tribunal was right in denying the assessee's claim under Section 43B. The Tribunal had initially denied the claim on the grounds that the payment was not made at the time of filing the return but during the assessment process. However, the High Court noted that the assessee had availed CENVAT credit and paid excise duty, which was sufficient to meet the requirements of Section 43B. The High Court referred to the assessee's success in a similar claim for the subsequent year, thereby ruling that the denial of the claim under Section 43B was incorrect.

Issue 4: Violation of Principles of Natural Justice
The final issue was whether the violation of principles of natural justice by the lower authorities had caused prejudice to the assessee. The High Court held that not every lack of opportunity constitutes a violation of natural justice unless it results in prejudice. The assessee had argued that a former employee's statement should have been available for cross-examination. However, the High Court found that the assessee had adequately substantiated their manufacturing process and excise duty payments before the Assessing Officer. The statement of the former employee was not deemed conclusive or binding on the assessee, and there was no proof that it had caused prejudice. Thus, the Tribunal's decision on this issue was justified.

Conclusion:
The High Court dismissed the Revenue's appeal, affirming that the issues were covered by the earlier decision favoring the assessee. The substantial question of law was answered against the Revenue, and no costs were awarded.

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