2015 (2) TMI 629 - AT - Income Tax

Eligibility for deduction u/s 80IC - assessee was engaged in manufacturing of plastic products - CIT(A) deleted the disallowance on the basis that the AO did not appreciate the material and evidence furnished by the assessee to differentiate between the raw material and the articles or things manufactured by the unit in an industrial area - Held that - After going through the provisions laid down u/s 80IC of the I.T. Act, schedule 13 serial No. 20 of the I.T. Act as well as the stated notifications dated 18.5.95 and 10.6.2003 issued by Central Excise Department reproduced in the first appellate order, we do not find any reason to interfere with the above findings and observations of the Ld. CIT(A). As decided in assessee's own case reported in 2013 (3) TMI 36 - DELHI HIGH COURT a reasonable interpretation of the provisions of section 80-IC(2) read with serial No. 20 of the 13th schedule of the said Act read with the first schedule to the Central Excise Tariff Act, 1985, it would be clear that the petitioner s product does not fall within the negative list and therefore the petitioner had rightly claimed deduction under section 80-IC of the said Act which the assessing officer in the years in which the assessment had been completed under section 143(3) had allowed after examining the necessary evidence - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction under section 80IC of the IT Act for manufacturing plastic products.
2. Dispute over exemption under the Excise Act affecting disallowance under the IT Act.

Issue 1 - Disallowance of Deduction under Section 80IC:
The Assessing Officer (AO) disallowed a deduction claimed under section 80IC of the Income Tax Act amounting to Rs. 70,93,061, contending that the items manufactured by the assessee were in the negative list of the Thirteenth Schedule, specifically related to plastics and articles thereof. The AO argued that the products manufactured by the assessee, such as pet bottles, caps, and jars, fell under the negative list, making them ineligible for the deduction. The assessee, however, argued that their products were classified under heading no. 3923 of the excise tariff manual, not falling within the negative list. The AO also highlighted past rejections of similar claims by the department. The issue revolved around whether the assessee was eligible for the deduction under section 80IC.

Issue 2 - Dispute Over Excise Act Exemption:
The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the disallowance, emphasizing that the AO failed to differentiate between raw materials and manufactured goods. The CIT(A) pointed out that the products manufactured by the assessee fell under specific excise classifications, not falling within the negative list as per the Thirteenth Schedule. The CIT(A) referred to exemption certificates and rulings related to waste generated during manufacturing processes. Additionally, the CIT(A) highlighted the legislative intent behind section 80IC for developing backward areas and the role of various departments in granting exemptions. The CIT(A) also cited a judgment of the Delhi High Court in a related case, where it was established that the assessee's products did not fall within the negative list, thus justifying the deduction claimed under section 80IC.

In conclusion, the ITAT Delhi upheld the CIT(A)'s decision, citing the Delhi High Court's judgment that supported the assessee's eligibility for the deduction under section 80IC. The appeal was dismissed, and the ITAT's decision was pronounced on January 17, 2014.