2010 (1) TMI 261 - HC - Income Tax

Industrial undertaking- The assessee claime deduction under section 80-IA of the Act. The Assessing officer denied the benefit of section 80-IA to the assessee and the Commissioner (Appeals) took the view that the audit report as prescribed under the Act was not filed and the conditions of section 80-IA(2) were not satisfied. The Tribunal held that the assessee was entitled to the special deduction. Held that- as regard the claim under section 80-IA(2) the statement has been found to be supported by the data and figures and the Tribunal had found that the proper books of account were maintained and were audited and the audit reports in prescribed forms were filed. The assessee was entitled to special deduction u/s 80-IA for the Assessment years 2003-04 and 2004-05.

Summary

Issues:
Appeal against denial of deduction under section 80-IA of the Income-tax Act for assessment years 2003-04 and 2004-05.

Analysis:
The respondent, a manufacturer of empty hard gelatine Capsules, claimed deductions under section 80-IA for the assessment years in question, based on an expansion program undertaken in earlier financial years. The expansion, known as unit 2, commenced commercial production in 1997-98 after receiving a capacity increase certificate from DIC, Pithampur. The deduction was first claimed in 2003-04 due to prior profit inadequacy. The Assessing Officer initially denied the deduction, citing non-compliance with section 80-IA(2) conditions. The Commissioner of Income-tax (Appeals) upheld this decision. However, the Income-tax Appellate Tribunal ruled in favor of the respondent, finding that the conditions of section 80-IA(2) were met, leading to the Department's appeal.

The Tribunal's decision was based on evidence showing the establishment of unit 2, supported by a project report, capacity increase certificate, and separate building construction. The Tribunal noted that the respondent's claim was undisputed, and the conditions under section 80-IA(2) were fulfilled. Despite not claiming the deduction in earlier years due to losses, the Tribunal held that the respondent was entitled to claim it for subsequent years as per the law. The respondent provided detailed accounts, audit reports, and evidence of separate identity and profitability of unit 2. The Tribunal also accepted the filing of audit reports at the appellate stage as procedural and supported by relevant data.

The High Court, after reviewing the Tribunal's findings, concluded that no error of law was committed in granting the deduction under section 80-IA(2). The court dismissed the appeal, stating that no substantial question of law requiring consideration under section 260A of the Income-tax Act arose. The decision was made in favor of the respondent, affirming their entitlement to the deduction under section 80-IA(2) for the relevant assessment years.