9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (5) TMI 278 - AT - Income TaxDeduction u/s 80lB - whether the assessee has set up a new unit or undertaking capable of producing entirely different products or articles from the existing unit and also as to whether the assessee is eligible for claim of deduction u/s 80lB in respect of profits declared in the returns of income filed by it? - HELD THAT - Appellant has sold entire old machineries during the financial year 2007-08. The appellant has shown the same as sale of scrap vide his invoice dated 09.01.2009. Then how come, the chartered engineer verified the old machinery on 07.01.2014 when that has already become scrap during the FY 2007-08 and also disposed on 09.01.2009. CIT(A) held that the certificate given by the chartered engineer cannot be the basis for holding a view that old machines are not capable of manufacturing so called businessman range products and appellant has established entirely new industrial undertaking. Thus, the only external evidence, filed by the assessee has become totally unreliable. CIT(A) held that the assessee has not maintained separate books of accounts, it employed the same employees for manufacture of all products, there was no physical separation of units, separate power connection and separate stock registers, etc. On such findings, he has come to the conclusion, that no new undertaking has come up by substantial investment, the so called new unit is not an integrated unit by itself, the subsequent purchases of new machinery's after the purchase of old unit was done in the ordinary course of expansion of the business and not in the nature of new industrial undertaking within the meaning of Section 80IB - On such cumulative findings, the assessee has not laid any fresh material to prove that the appellant has established a new undertaking which is capable of manufacturing new products with distinct characteristics has come into existence during the assessment year 2001-02 which is the initial year for the claim of deduction u/s.80IB. We do not find any reason to interfere with the order of the ld.CIT(A) and hence, the corresponding grounds of the assessee are dismissed. Disallowance of payments made to ASTA Beab Certification Service and China Inspection Company Ltd., as testing / certification fees, invoking provisions of Section 40(a)(i) - HELD THAT - Since the payment is towards certification, it is purely professional services and in the absence of any business connection and activity being carried out by ASTA and China Inspection Company Ltd., in India, the same is not taxable in India and hence, we find merit in the grounds of the assessee and hence allow the appeals. AR pleaded that the AO has not given the credit of advance tax and self-assessment tax amounting to ₹ 16,02,767/- and ₹ 1,41,80,738/- respectively for the assessment year 2008-09. The issue was raised before the CIT(A) vide ground No.6, however the ground has not been adjudicated. Therefore the assessee pleaded that AO may be directed to allow correct credit of taxes. We direct the AO to examine and allow the correct credit of taxes. Incorrect computation of interest U/s.234B which was not adjudicated by the CIT(A) - Therefore the assessee pleaded that AO may be directed to verify and recompute. We direct the AO to verify and recompute accordingly.
Issues Involved:
1. Eligibility for deduction under Section 80IB. 2. Disallowance of payments made to ASTA Beab Certification Service and China Inspection Company Ltd. 3. Credit of advance tax and self-assessment tax. 4. Incorrect computation of interest under Section 234B. Issue-wise Detailed Analysis: 1. Eligibility for Deduction under Section 80IB: The primary issue was whether the assessee had established a new unit or undertaking capable of producing entirely different products from the existing unit, and if it was eligible for a deduction under Section 80IB for the profits declared in its income returns from the assessment year 2001-02 onwards. The Tribunal examined the following points: - Substantial Investment: The assessee claimed substantial investment in new machinery and plant. However, the Tribunal found that the investment was only 4.23% of the total investment after acquiring the old unit, which was considered normal business expansion rather than establishing a new industrial undertaking. - New Technology and Products: The Tribunal noted that the new machinery purchased was not significantly different from the existing machinery, and no new technology was involved. The products were distinguished only as a marketing strategy for export purposes, not due to any substantial technological or qualitative difference. - Separate Books of Accounts: The assessee did not maintain separate books of accounts for the new unit, which was crucial for claiming the deduction under Section 80IB. - Employment and Physical Separation: The same employees were used for both units, and there was no physical separation of the units. The Tribunal found that the new machinery was installed in the same factory area without any significant new construction. - Power Connection and Stock Registers: There was no separate power connection or stock registers for the new unit, further indicating that it was not a distinct new undertaking. - Commencement of Manufacturing Activity: The Tribunal found no conclusive evidence of new manufacturing activity commencing in the assessment year 2001-02. The invoices provided did not establish that distinct new products were manufactured. - Chartered Engineer's Certificate: The certificate provided by the Chartered Engineer was deemed unreliable as it was issued after the old machinery had been sold as scrap. Based on these findings, the Tribunal upheld the CIT(A)'s decision to disallow the deduction under Section 80IB for the specified assessment years. 2. Disallowance of Payments to ASTA Beab Certification Service and China Inspection Company Ltd.: The AO disallowed payments made to ASTA Beab Certification Service and China Inspection Company Ltd. under Section 40(a)(i), as the assessee did not deduct tax at source. - Assessee's Argument: The payments were for product certification services provided overseas, with no business connection in India. These services were not managerial, technical, or consultancy services but purely audit work, which does not attract tax under Section 195 if not taxable in India. - Tribunal's Decision: The Tribunal agreed with the assessee, stating that the payments were for professional services provided outside India without any business connection in India. Hence, the payments were not taxable in India, and the disallowance under Section 40(a)(i) was overturned. 3. Credit of Advance Tax and Self-assessment Tax: The assessee claimed that the AO did not give credit for advance tax and self-assessment tax amounting to ?16,02,767 and ?1,41,80,738 respectively for the assessment year 2008-09. - Tribunal's Direction: The Tribunal directed the AO to examine and allow the correct credit of taxes. 4. Incorrect Computation of Interest under Section 234B: The assessee raised a ground on incorrect computation of interest under Section 234B for the assessment year 2010-11, which was not adjudicated by the CIT(A). - Tribunal's Direction: The Tribunal directed the AO to verify and recompute the interest accordingly. Conclusion: - The appeals for the assessment years 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, and 2009-10 were dismissed. - The appeals for the assessment years 2008-09 and 2010-11 were partly allowed for statistical purposes. - The appeal for the assessment year 2011-12 was allowed. Order Pronounced: The order was pronounced in the court on 1st November 2019 at Chennai.
|
