2016 (5) TMI 357 - HC - Income Tax

Deduction under Section 10A - Held that - No manufacturing activity was carried out by the respondent-assessee for the three earlier years i.e. A.Y. 2006-07, 2007-08 and 2008-09 on the basis of a survey carried out on 25th September, 2008. The result of this survey would be relevant if at all for examining the petitioner s claim, if any, under Section 10A of the Act for the assessment year 2009-10. It cannot be the basis for denying the claim of benefit under Section 10A of the Act for the earlier assessment years 2006-07, 2007-08 and 2008-09 in the absence of any evidence to support the Revenue s contention of no manufacture during the three assessment years i.e. A.Y. 2006-07, 2007-08 and 2008-09. Both the CIT(A) as well as the Tribunal have on examination of the record rendered a finding of fact that the respondent is engaged in manufacturing activity under the control of Central and Excise Department. The document which was submitted during the assessment proceeding were not found to be lacking in any material particulars by the authorities. The impugned order also finds that payments for imports and receipts on account of exports were made through regular banking channels and with the due approval of the Customs and Central Excise Department. - Decided in favour of assessee

Issues Involved:
- Challenge to the order of the Income Tax Appellate Tribunal confirming the deduction under Section 10A of the Income Tax Act
- Disallowance of deduction under Section 10A based on survey report
- Dispute regarding manufacturing activity and export claims
- Appeal to the Commissioner of Income Tax (Appeals)
- Appeal to the Tribunal and its findings
- Concurrent findings of fact by the CIT(A) and the Tribunal

Analysis:
1. The case involves three appeals challenging the common order passed by the Income Tax Appellate Tribunal regarding the deduction under Section 10A of the Income Tax Act for assessment years 2006-07, 2007-08, and 2008-09. The primary question raised is whether the Tribunal was justified in confirming the order of the CIT(A) to allow the deduction under Section 10A of the Act.

2. The respondent-assessee, engaged in manufacturing gold jewelry for export in a Special Economic Zone (SEZ) at Surat, claimed the benefit of deduction under Section 10A for all three assessment years. However, the Assessing Officer disallowed the deduction based on a survey report indicating discrepancies in the manufacturing unit, such as rusted machinery and lack of evidence supporting production and exports.

3. The CIT(A) overturned the Assessing Officer's decision after finding that the machinery was operational, materials were under the control of customs, and supporting documents proved import, production, and export activities. The CIT(A) allowed the deduction for all three assessment years, leading to the revenue-appellant appealing to the Tribunal.

4. The Tribunal concluded that the survey report was not sufficient to deny the deduction for the earlier assessment years as it pertained to a different period. It highlighted the absence of evidence for no manufacturing or export activities in the relevant years, ultimately dismissing the Revenue's appeal for all three years.

5. The High Court upheld the findings of the CIT(A) and the Tribunal, emphasizing that the survey report could not be the sole basis for denying the deduction for the earlier assessment years. The Court noted the presence of manufacturing activities under the control of the Customs and Excise Department, along with proper documentation of imports and exports through approved channels.

6. With no substantial question of law arising from the concurrent findings of fact by the CIT(A) and the Tribunal, the High Court dismissed the appeals, affirming the allowance of the deduction under Section 10A of the Income Tax Act for the respondent-assessee.

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