2015 (10) TMI 2182 - AT - Income Tax

Addition u/s. 40(a)(ia) r.w.s. 194C - payment of demurrage to parties in India - CIT(A) deleted addition - Held that - No specific error in the order of the Ld. CIT(A) could be pointed out by the DR. He could not bring any material on record to show that the amount were not reimbursement of expenses paid by the clearing and forwarding agents for freight to the airlines. In the absence of the same, we do not find any infirmity in the order of the Ld. CIT(A), which is hereby confirmed and the ground of appeal of the Revenue is dismissed. - Decided in favour of assessee. Addition on account of Goa VAT incentive by disallowing deduction u/s. 80IB - CIT(A) deleted addition - Held that - Goa VAT incentive received by the assessee is directly linked with the manufacturing and sale of goods and therefore income derived from the industrial undertaking and consequently is eligible for deduction u/s. 80IB of the Act. See M/s. Diamond Tool Industries Vs. JCIT 2011 (12) TMI 534 - ITAT MUMBAI - Decided in favour of assessee.

Summary

Issues:
1. Deletion of addition under sec. 40(a)(ia) r.w.s. 194C for demurrage payment.
2. Deletion of addition under sec. 80IB for Goa VAT incentive.

Analysis:

Issue 1: Deletion of addition under sec. 40(a)(ia) r.w.s. 194C for demurrage payment:
The appeals by the Revenue challenged the CIT(A)'s order deleting additions made under sec. 40(a)(ia) r.w.s. 194C for demurrage payments. The Assessing Officer disallowed the amounts for A.Ys. 2009-10, 2010-11, and 2011-12, citing the clearing and forwarding agents as service contractors/transport contractors, requiring TDS deduction on freight payments. However, the CIT(A) ruled in favor of the assessee, stating that the reimbursement to agents constituted actual air freight paid to airlines, not subject to sec. 194C. The Tribunal upheld the CIT(A)'s decision, finding no error in the order and dismissing the Revenue's appeal.

Issue 2: Deletion of addition under sec. 80IB for Goa VAT incentive:
The second ground of appeal concerned the deletion of additions under sec. 80IB for Goa VAT incentives. The Assessing Officer disallowed the deduction, considering the incentives as incentive profit not eligible for sec. 80IB. However, the CIT(A) allowed the deduction following a decision by the Gauhati High Court, linking tax incentives to manufacturing activity. The Tribunal referred to precedents from the Bombay and Hyderabad Benches, supporting the eligibility of such incentives for sec. 80IB deduction. Consequently, the Tribunal confirmed the CIT(A)'s order, dismissing the Revenue's appeal against the allowance of sec. 80IB deduction on Goa VAT incentives.

In conclusion, the Tribunal upheld the CIT(A)'s decisions in both issues, affirming the deletion of additions under sec. 40(a)(ia) and sec. 80IB.