1990 (6) TMI 91 - AT - Income Tax

Summary

Issues:
- Disallowance of claim under sections 80-I and 80HH of the Income Tax Act
- Disallowance of sales tax collections under Madhya Pradesh Deferment of Sales Tax Rules

Analysis:

Issue 1: Disallowance of claim under sections 80-I and 80HH of the Income Tax Act
The appeals were filed by the assessee against the orders of the CIT (Appeals) for the assessment years 1984-85 and 1985-86. The main contention was the disallowance of the claim under sections 80-I and 80HH. The assessee established a new factory at Dewas for manufacturing glazed tiles, claiming benefits for being in a backward area. The Income-tax Appellate Tribunal (ITAT) analyzed the conditions prescribed under section 80HH and found that the assessee had satisfied them. The Tribunal noted that the Dewas unit was independent and had new machinery without any transfer from the original factory. Referring to legal precedents, including judgments of the Supreme Court and the Bombay High Court, the Tribunal held that the order disallowing the claim was not justified. The Tribunal emphasized that the mere continuity of management and funding did not negate the establishment of a new industrial undertaking. Therefore, the Tribunal allowed the claim under sections 80-I and 80HH.

Issue 2: Disallowance of sales tax collections under Madhya Pradesh Deferment of Sales Tax Rules
The third ground in one of the appeals pertained to the disallowance of sales tax collections under the Madhya Pradesh Deferment of Sales Tax Rules. The assessee provided documents showing eligibility for sales tax deferment under government rules. The CBDT circular supported the treatment of deferred sales tax as actually paid, which would not be hit by section 43B of the IT Act. The Tribunal, after examining the documents, concluded that the sales tax collections under the deferment scheme should not be treated as a liability under section 43B. Therefore, the Tribunal reversed the CIT(A)'s decision and quashed the disallowance of sales tax collections.

Conclusion:
The ITAT Bombay-A allowed the assessee's appeals by permitting the claim under sections 80-I and 80HH and reversing the disallowance of sales tax collections under the Madhya Pradesh Deferment of Sales Tax Rules. The judgments were based on the fulfillment of statutory conditions and legal precedents supporting the assessee's position. The Tribunal emphasized the establishment of a new industrial undertaking and the treatment of deferred sales tax as actually paid, leading to a favorable decision for the assessee.