2014 (1) TMI 1137 - AT - Income Tax

Deduction u/s 80IB - Held that - Following assessee s own case for A.Y. 2006-07 - The claim of the Assessee for A.Ys 2004-05 and 2005-06 have been allowed - When deduction is allowed in the initial assessment order, there is no reason for disallowing the claim in the year under consideration - The AO has confirmed that the activities undertaken by the Assessee qualifies to be regarded as manufacture and allowed the claim of the Assessee for A.Y. 2004-05 - The principles of consistency would apply and hence it is not open for the Department to question the validity of the allowability of the claim of deduction u/s 80IB(4) for the impugned assessment year by holding that the activities undertaken by the Assessee cannot be regarded as manufacture more particularly when there is no change in the facts and circumstances of the case of the Assessee - Decided against Revenue. Deduction u/s 10B - Held that - As per section 10B(4) - The deduction available u/s 10B(1) will be the amount which bears to the profit of the business of the eligible undertaking the same proportion as the export turnover bears to the total turnover - The scrap sale is part of the profit of the business of the undertaking - The CIT(A) has rightly re-calculated the exemption available to the Assessee u/s 10B(4) by including the sale of the scrap in the profits of the business of the undertaking for the purpose of computation of the deduction in respect of profit derived from the exports in accordance with the provisions of Sec. 10B(4) - Decided against Revenue.

Summary

Issues:
1. Appeal filed by the Revenue against the order of CIT(A) regarding deduction under section 80IB of the Income Tax Act.
2. Claim of deduction under section 10B by the Assessee.

Issue 1:
In the first appeal (ITA No. 215/PNJ/2013), the Revenue challenged the CIT(A)'s decision to delete the addition made by the Assessing Officer under section 80IB of the Income Tax Act. The Revenue contended that the Assessee's business activity did not fall under manufacturing activities within the ambit of section 80IB, thus disputing the entitlement to the deduction. The Tribunal referred to a previous decision where it was held that the Assessee's manufacturing activities qualified for deduction under section 80IB. The Tribunal, following the principle of consistency, dismissed the Revenue's appeal, confirming the deduction under section 80IB for the Assessee.

Issue 2:
Regarding the claim of deduction under section 10B in the same appeal (ITA No. 215/PNJ/2013), the Assessee, being a 100% Export Oriented Unit (EOU), computed the deduction as per the provisions of section 10B(4). The Assessing Officer disagreed with the Assessee's computation, specifically concerning the inclusion of the sale of scrap in the profit from the business. The Tribunal analyzed section 10B(4) and concluded that the sale of scrap should be included in the profit of the business for calculating the deduction under section 10B. Consequently, the Tribunal upheld the CIT(A)'s decision to include the sale of scrap in the profit for computing the deduction under section 10B, dismissing the Revenue's appeal on this ground.

Issue 3:
In the second appeal (ITA No. 216/PNJ/2013), the only issue was the claim of deduction under section 10B by the Assessee. Both parties agreed that this issue was similar to the one in the first appeal (ITA No. 215/PNJ/2013) concerning the deduction under section 10B. Since the Tribunal had already dismissed the Revenue's appeal in the first case, it confirmed the CIT(A)'s order and dismissed the Revenue's appeal in the second case as well.

In conclusion, the Tribunal upheld the Assessee's entitlement to deductions under sections 80IB and 10B, dismissing the Revenue's appeals in both cases based on the consistent application of legal principles and statutory provisions.