2021 (4) TMI 1191 - AT - Income Tax

Deduction u/s 80IC - whether CIT (A) has erred in deleting the disallowance of addition made u/s 80IC by the AO by granting 25%/30% of the deduction instead of 100% claimed by the assessee during the year under assessment? - Revenue contended that when initially assessee has availed deduction u/s 80IC for a period of 5 years @ 100%, it would be entitled to deduction on substantial expansion for remaining five assessment years @ 25%/30% - HELD THAT - Hon ble Supreme Court in case of Aarham Softronics 2019 (2) TMI 1285 - SUPREME COURT in the preceding para after duly discussing the decision rendered by Hon ble Supreme Court in case of Classic Binding Industries 2018 (8) TMI 1209 - SUPREME COURT , reached the conclusion that when the assessee has carried out substantial expansion in the existing unit immediately on completion of first five years i.e. FY 2011-12 and duly complied with the conditions laid down in clause (ix) sub-section 8 of section 80IC, it is entitled for deduction u/s 80IC for the year under assessment. So, we are of the considered view that ld. CIT (A) has decided the issue in controversy in favour of the assessee by duly relying upon the order passed by the coordinate Bench of the Tribunal in case of Tirupati LPG Industries Ltd. 2014 (1) TMI 1689 - ITAT DELHI and has rightly deleted the addition made by the AO on account of disallowance u/s 80IC. So, finding no scope to interfere into the findings returned by the ld. CIT (A), grounds no.1, 2, 3 4 are determined against the Revenue. Addition on ad hoc basis @ 10% on account of interest expenses on car having element of personal use, tour and travelling expenses and conveyance expenses respectively - HELD THAT - When undisputedly assessee has claimed the expenses on the basis of its audited financials which have not been disputed by the AO, the ad hoc additions on the basis of surmises are not permissible under law. Moreover when it is not the case of the AO that these expenses have not been made wholly and exclusively for the purpose of business by the assessee, there is no ground to disallow the same. So, we are of the considered view that when AO has proceeded to make aforesaid disallowances without assigning any reason but on the basis of surmises, the disallowances are not sustainable in the eyes of law, hence there is no scope to interfere into the deletion made by the ld. CIT (A). - Decided against revenue.

Summary

Issues:
1. Disallowance of deduction under section 80-IC.
2. Interpretation of deduction under section 80-IC for new and existing undertakings.
3. Benefit of substantial expansion under section 80-IC.
4. Comparison between sections 80-IB and 80-IC.
5. Disallowance of interest, tour, and conveyance expenses.

Analysis:

Issue 1: Disallowance of deduction under section 80-IC:
The Appellate Tribunal ITAT Delhi addressed the disallowance of deduction under section 80-IC by the Assessing Officer (AO) for the assessment year 2014-15. The AO restricted the deduction claimed by the assessee to 25% instead of the 100% claimed. However, the Tribunal ruled in favor of the assessee, stating that substantial expansion undertaken by the assessee entitled them to the full 100% deduction as per the provisions of section 80-IC.

Issue 2: Interpretation of deduction under section 80-IC for new and existing undertakings:
The Tribunal analyzed the interpretation of deduction under section 80-IC for new and existing undertakings. It was highlighted that the provisions allowed for 100% deduction for substantial expansion, and the Tribunal referred to previous judgments to support their decision in favor of the assessee.

Issue 3: Benefit of substantial expansion under section 80-IC:
The Tribunal discussed the benefit of substantial expansion under section 80-IC. It emphasized that when an assessee carries out substantial expansion as per the specified conditions, they are entitled to 100% deduction for the profits and gains. The Tribunal cited relevant legal precedents and upheld the assessee's claim for the deduction.

Issue 4: Comparison between sections 80-IB and 80-IC:
The Tribunal compared the provisions of sections 80-IB and 80-IC, stating that they are parallel provisions in nature. It was noted that the deductions available under these sections differ based on the specific circumstances and conditions, and the Tribunal clarified the applicability of these provisions in the present case.

Issue 5: Disallowance of interest, tour, and conveyance expenses:
Regarding the disallowance of interest, tour, and conveyance expenses by the AO, the Tribunal found that the additions made on an ad hoc basis were not permissible under the law. The Tribunal emphasized that when the expenses were claimed based on audited financials and were not proven to be non-business related, the disallowances were not justified. Consequently, the Tribunal dismissed the grounds raised by the Revenue regarding these expenses.

In conclusion, the Appellate Tribunal ITAT Delhi upheld the decision in favor of the assessee, allowing the deductions claimed under section 80-IC and dismissing the disallowances of various expenses made by the AO. The judgment provided a detailed analysis of the legal provisions and precedents to support the rulings on each issue raised in the appeal.