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2012 (12) TMI 412 - AT - Income TaxDeduction u/s 80IB - deduction to small scale industrial units engaged in manufacture or producing articles or things. - reduction in investment limit from Rs. 3 crore to Rs. 1 crore in case of small scale industrial undertaking. - Ministry of Commerce and Industry, Government of India, in press note No.3 has clarified that units which have obtained permanent registration based on the order dated 10.12.1997 would continue to remain as SSI unit in spite of order dated 24.12.1999 reducing the investment limit to Rs. 1 crore. - held that - it appears that the assessee satisfies all the conditions to be regarded as a small scale undertaking under S.11B of the Industries (Development and Regulation) Act,1951. The letter dated 19.10.2000 of the Additional Development Commissioner, SSI relied upon by the Learned Departmental Representative only supports the claim of the assessee. In view of the aforesaid facts and circumstances, the direction of the CIT(A) to the assessing officer to verify the original documents and allow deduction under S.80IB, if registration has been obtained prior to 24.12.1999 is most appropriate and does not call for any interference. - Decided in favor of assessee. Deduction of TDS withheld by the the authorities of Sikkim as expenditure - the assessee explained that the amount debited is income tax deducted by State Government of Sikkim while making payment to the assessee for material supplied during the relevant previous year. The assessing officer disallowed the claim of the assessee by observing that the TDS is not an allowable expenditure. - held that - any rate or tax levied on the profit or gain of any business or profession shall not be allowed as deduction. The tax levied on the profits or gain of any business would mean that profit has been ascertained in a manner comparable with the outline in the provisions of the Income-tax Act. In the aforesaid context, it has to be seen whether the income-tax deducted at 3% on the bills of the assessee, partakes the character of a tax levied on the profits of the assessee. It has also to be seen whether the tax levied at the rate of 3% under the Sikkim Income Tax Manual, is after determination of profit in accordance with a machinery provision comparable with the provisions of the Indian Income Tax Act, or whether it is on the basis of a rough estimate. - matter remanded back to AO.
Issues Involved:
1. Deduction under Section 80IB of the Income Tax Act. 2. Disallowance of tax retained by Sikkim authorities. 3. Disallowance of expenditure claimed as penalty. Detailed Analysis: Issue 1: Deduction under Section 80IB of the Income Tax Act Revenue's Appeal: ITA 321/Hyd/2010 (Assessment Year 2005-06) The primary issue in this appeal concerns the deduction claimed by the assessee under Section 80IB of the Income Tax Act. The assessee, engaged in manufacturing and printing lottery tickets, claimed a deduction of Rs. 3,81,035 under Section 80IB. The assessing officer disallowed this deduction, arguing that the assessee's investment in plant and machinery exceeded Rs. 1 crore, thereby disqualifying it as a small-scale industrial unit as per the Central Government's Gazette Notification SO 857(E) dated 10.12.1999. The CIT(A) directed the assessing officer to verify the original registration documents and allow the deduction if it was found that the assessee was registered as an SSI unit before 24.12.1999. The Tribunal upheld the CIT(A)'s direction, noting that the assessee had been provisionally registered on 4.2.1999 and permanently on 25.3.1999, and had commenced production before 24.12.1999. Consequently, the appeal by the Revenue was dismissed. Revenue's Appeal: ITA 322/Hyd/2010 (Assessment Year 2006-07) The grounds raised by the Revenue in this appeal were identical to those in ITA No.321/Hyd/2010. Following the same reasoning, the Tribunal upheld the CIT(A)'s directions and dismissed the appeal. Assessee's Appeal: ITA No.385/Hyd/2012 (Assessment Year 2008-09) The solitary issue here was the disallowance of the assessee's claim for deduction under Section 80IB, which had been confirmed by the CIT(A). The Tribunal set aside the CIT(A)'s order and directed the assessing officer to allow the claim after due verification, as directed by the CIT(A) for the assessment years 2005-06 and 2006-07. Issue 2: Disallowance of Tax Retained by Sikkim Authorities Assessee's Appeal: ITA No.339/Hyd/2010 (Assessment Year 2005-06) The assessee contended that the amount of Rs. 1,82,742, retained by the Sikkim authorities as tax, should not be disallowed under Section 40(a)(ii). The Tribunal noted that the provisions of the Sikkim Income Tax Manual needed to be examined to determine whether the tax deducted was on the profits or gains of the business. The issue was restored to the file of the assessing officer for fresh consideration. Assessee's Appeal: ITA No.340/Hyd/2010 (Assessment Year 2006-07) The issue here was identical to that in ITA No.339/Hyd/2010. The Tribunal restored the issue to the file of the assessing officer for fresh consideration, following the same reasoning. Issue 3: Disallowance of Expenditure Claimed as Penalty Assessee's Appeal: ITA No.340/Hyd/2010 (Assessment Year 2006-07) The assessee challenged the disallowance of Rs. 27,075, claimed as expenditure, which the assessing officer had treated as a penalty. The CIT(A) sustained the disallowance, and the Tribunal upheld this decision, noting that the assessee could not provide evidence to show that the levy was not a penalty for infraction of law. Summary of Judgments: - Revenue's Appeals (ITA Nos.321-322/Hyd/2010) for Assessment Years 2005-06 and 2006-07: Dismissed. - Assessee's Appeal (ITA No.385/Hyd/2012) for Assessment Year 2008-09: Allowed. - Assessee's Appeal (ITA No.339/Hyd/2010) for Assessment Year 2005-06: Allowed for statistical purposes. - Assessee's Appeal (ITA No.340/Hyd/2010) for Assessment Year 2006-07: Partly allowed for statistical purposes.
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