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2015 (2) TMI 1031 - AT - Income TaxDeduction u/s 80IB - AO has disallowed claim on the premise that the assessee was qualified to get deduction u/s.80IB only in AY 2003-04 and not in AY 2002-03 i.e. the FY 2001-02 - CIT(A) allowed the deduction accepting that the old unit engaged in production since F.Y. 2000-01 - Held that - Assessing officer was not correct in denying claim of deduction u/s. 80IB(3) to the appellant merely because the trade license for the new premise and provisional registration by Directorate of Cottage & Small Scale Industries of state Government was after 01.04.2002, when there was clear evidence before him that the appellant was engaged in manufacturing activity from FY 2000-01 onwards. Here is no dispute that the appellant satisfies all other eligibility conditions prescribed u/s. 80IB. The assessee has been allowed deduction u/s 80IB of the Act for and from AY 2004-05 to 2008-09 and now in AY 2009-10 the claim is declined. For the sake of consistency the claim of deduction u/s. 80IB of the Act cannot be disallowed. Therefore, the assessing officer was correctly directed to allow deduction u/s. 80IB(3) of I.T. Act, 1961, as computed in accordance with the provisions of law after going through the audit report and other relevant material. - Decided in favour of assessee.
Issues Involved:
1. Eligibility for deduction under Section 80IB of the Income Tax Act, 1961. 2. Consistency in allowing deductions in subsequent assessment years. Issue 1: Eligibility for Deduction under Section 80IB The primary issue in this appeal was whether the assessee was eligible for deduction under Section 80IB of the Income Tax Act, 1961. The assessee, an individual proprietor of M/s Invotech Engineers, claimed a deduction of Rs. 18,16,678 under Section 80IB(3) for the Assessment Year (AY) 2009-10. The Assessing Officer (AO) disallowed this claim, arguing that the assessee did not meet the conditions stipulated in Section 80IB(3)(ii), which required the industrial undertaking to begin manufacturing between April 1, 1995, and March 31, 2002. The AO contended that the assessee's unit became a small-scale industrial undertaking only on September 5, 2002, and thus was not eligible for the deduction for AY 2002-03 and subsequent years. The CIT(A) allowed the deduction, observing that the unit had commenced manufacturing operations in FY 2000-01 and had only shifted premises in FY 2002-03. The CIT(A) noted that the unit was already engaged in production since FY 2000-01, and the shift did not equate to the formation of a new undertaking. The CIT(A) also clarified that registration with the Directorate of Cottage & Small Scale Industries was not a prerequisite for claiming the deduction under Section 80IB. Issue 2: Consistency in Allowing Deductions The Tribunal emphasized the principle of consistency in tax assessments. It noted that the assessee had been allowed deductions under Section 80IB for AY 2004-05 to AY 2008-09 without any objections from the AO. The Tribunal referred to the Supreme Court's decision in Bajaj Tempo Ltd. v. CIT, which held that non-fulfillment of restrictive conditions in the initial assessment year does not disqualify the assessee from claiming benefits in subsequent years if such conditions are met later. The Tribunal also cited the Delhi High Court's decision in CIT Vs. Delhi Press Patra Prakashan Ltd., which emphasized that issues settled in earlier years should not be revisited in subsequent years unless there is a material change in facts. The Tribunal found that the assessee had started manufacturing in FY 2000-01, as evidenced by trade licenses, central excise registration, and invoices. The Tribunal concluded that the assessee was entitled to the deduction under Section 80IB for AY 2009-10, as the initial conditions were met in FY 2000-01, and the claim should not be disallowed for subsequent years for the sake of consistency. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order allowing the deduction under Section 80IB. The Tribunal emphasized the importance of consistency in tax assessments and the fulfillment of initial conditions for claiming deductions. The order was pronounced in the open court on February 6, 2015.
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