2025 (3) TMI 1118 - AT - Income Tax

Deduction u/s. 80IC - cumulative satisfaction by the assessee company of the pre-conditions for claiming the modified deduction - HELD THAT - There is neither any whisper in the order of the CIT(A) as to whether or not the assessee-company had in substance carried out substantial expansion as defined in clause (ix) of sub-section (8) of section 80IC nor he had verified to his satisfaction that the other pre-conditions for supporting the aforesaid modified claim of deduction raised by the assessee company were duly complied with. AR s claim that the AO had allowed the enhanced claim for deduction u/s 80IC to the assessee company in the immediately preceding year the same in our considered view would though support the latter s claim for modified deduction for the subject year but cannot be stretched to the extent of justifying dispensing with verification as regards the cumulative satisfaction of the pre-conditions for claiming the modified/enhanced deduction during the year under consideration. Accordingly we though principally concur with the CIT(A) that as per the judgment of Aarham Softronics. 2019 (2) TMI 1285 - SUPREME COURT assessee-company on carrying out substantial expansion as defined in clause (ix) of subsection (8) of section 80IC would pass the eligibility criterion to claim 100 percent deduction of its profits and gains reckoned from the previous year in which such substantial expansion was undertaken by treating the same as the initial assessment year but are unable to approve his summarily allowing of the modified claim for deduction by dispensing with the verification of the cumulative satisfaction of the pre-conditions contemplated in the said statutory provision. We thus are of a firm conviction that the matter in all fairness requires to be restored to the file of the CIT(A) who is directed to read-judicate the same after verifying the cumulative satisfaction by the assessee company of the pre-conditions for claiming the modified deduction so raised by it under Sec. 80IC(2)(a)(ii). Appeal filed by the Revenue and the cross-objection filed by the assessee company are allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the Commissioner of Income-Tax (Appeals) [CIT(A)] was correct in holding that a revised computation of total income is sufficient for claiming a deduction under Section 80IC of the Income-tax Act, 1961, without the necessity of filing a revised return.

2. Whether the CIT(A) was justified in allowing the assessee's claim for a 100% deduction under Section 80IC based on substantial expansion, as interpreted by the Supreme Court in Pr. Commissioner of Income Tax vs. Aarham Softronics.

3. Whether the CIT(A) erred in summarily accepting the modified claim for deduction without verifying the preconditions for such a claim.

ISSUE-WISE DETAILED ANALYSIS

1. Requirement of Revised Return for Claiming Deduction under Section 80IC

- Relevant Legal Framework and Precedents: The legal framework involves Section 80IC of the Income-tax Act, 1961, which provides deductions for certain undertakings. The precedent from Goetze (India) Ltd vs. CIT (2006) limits the Assessing Officer's (AO) ability to entertain new claims without a revised return.

- Court's Interpretation and Reasoning: The Tribunal noted that the AO was correct in not considering the modified claim without a revised return, as per the Supreme Court's ruling in Goetze.

- Key Evidence and Findings: The assessee did not file a revised return but argued that the claim was a modification based on the Supreme Court's judgment in Aarham Softronics.

- Application of Law to Facts: The Tribunal agreed with the AO's decision not to entertain the claim without a revised return, as the procedural requirement was not met.

- Treatment of Competing Arguments: The Tribunal acknowledged the CIT(A)'s view that the claim was a modification rather than a new claim, but emphasized the procedural requirement of a revised return.

- Conclusions: The Tribunal upheld the AO's decision, emphasizing the necessity of a revised return for new claims.

2. Entitlement to 100% Deduction under Section 80IC Based on Substantial Expansion

- Relevant Legal Framework and Precedents: The legal framework includes Section 80IC and the Supreme Court's interpretation in Aarham Softronics, which allows 100% deduction upon substantial expansion.

- Court's Interpretation and Reasoning: The Tribunal recognized the Supreme Court's decision in Aarham Softronics, which allows a 100% deduction if substantial expansion is carried out within the specified period.

- Key Evidence and Findings: The assessee claimed substantial expansion, but the AO noted inconsistencies in the audit report regarding this claim.

- Application of Law to Facts: The Tribunal agreed with the CIT(A) that the assessee could claim 100% deduction based on substantial expansion, but emphasized the need for verification of facts.

- Treatment of Competing Arguments: The Tribunal considered the CIT-DR's argument regarding the lack of a revised audit report and the inconsistency in the audit report filed by the assessee.

- Conclusions: The Tribunal agreed with the CIT(A) in principle but remanded the case for verification of the substantial expansion claim.

3. Verification of Preconditions for Modified Deduction Claim

- Relevant Legal Framework and Precedents: The legal framework involves the requirement for verification of claims under Section 80IC.

- Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) erred in not verifying the preconditions for the modified claim.

- Key Evidence and Findings: The Tribunal noted the lack of verification of substantial expansion and other preconditions by the CIT(A).

- Application of Law to Facts: The Tribunal emphasized the need for verification of the substantial expansion claim and other preconditions before allowing the deduction.

- Treatment of Competing Arguments: The Tribunal considered the arguments from both sides and concluded that verification was necessary.

- Conclusions: The Tribunal remanded the case to the CIT(A) for verification of the preconditions for the deduction claim.

SIGNIFICANT HOLDINGS

- The Tribunal upheld the requirement for a revised return for new claims, as per the Supreme Court's ruling in Goetze (India) Ltd vs. CIT.

- The Tribunal recognized the Supreme Court's decision in Aarham Softronics, allowing 100% deduction upon substantial expansion, but emphasized the need for verification of claims.

- The Tribunal remanded the case to the CIT(A) for verification of the preconditions for the modified deduction claim, emphasizing the necessity of factual verification before allowing such claims.

Final determinations on each issue were made with a focus on procedural compliance and factual verification, ensuring that the legal framework and precedents were applied correctly to the facts of the case.