2016 (8) TMI 104 - HC - Income Tax

Disallowance of deduction claimed u/s.80IA - Held that - From the records it is borne out that the unit is registered with the Central Excise Department and Sales Tax Authority which charges excise duty on the goods dispatched from the undertaking at Daman. The Excise Register maintained by the assessee is being verified by the Central Excise and Customs Department. Learned advocate for the revenue could not rebut this finding. Moreover, from the report of the Assessing Officer himself, there were more than 10 persons working in Daman. We have also gone through the report dated 23.06.2003 addressed by the ITO Ward-2, Mehsana that the assessee had purchased the diesel for the power requirement for the industrial undertaking. We have gone through the orders passed by the CIT(A) as well as the Tribunal who have given detailed reasons for deleting the disallowance. The assessee was allowed such deduction in the earlier years and no action u/s 263 or 147 was taken against the assessee. Therefore we do not see any reason for interference so far as the first question is concerned. With regard to the question regarding disallowance of salary, we are of the view that the Tribunal has rightly proceeded on the footing that since at the time of inspection it was found that the employees were actually engaged in the factory at Daman and merely that the assessee has not employed employees regularly it cannot be the basis of disallowing salary. In view of the evidence in the form of salary register and the statements of employees and the partner etc., the CIT(A) and the Tribunal has rightly deleted the disallowance. We do not find any infirmity in the impugned orders passed by the Tribunal.- Decided in favour of the assessee

Summary

Issues:
1. Deduction u/s.80-IA of the Income Tax Act, 1961
2. Addition of specific amounts based on physical inspection timing
3. Disallowance of deduction claimed u/s.80IA of the I.T. Act

Analysis:
1. The first issue revolves around the deduction u/s.80-IA claimed by the assessee. The Assessing Officer initially disallowed the deduction, citing reasons like the absence of power and fuel expenses in the books and zero units consumed, indicating no industrial activity. However, the CIT (Appeals) overturned this decision, which was further upheld by the ITAT. The ITAT found that the assessee had a manufacturing unit at Daman, engaged workers, and was registered with tax authorities, fulfilling the conditions for the deduction. The Tribunal emphasized that employing casual laborers did not negate the manufacturing activity. The Court concurred with the Tribunal's findings, dismissing the revenue's appeal.

2. The second issue pertains to additions made based on physical inspection findings conducted years after the relevant assessment years. The revenue contested these additions, arguing that the Tribunal erred in relying on late inspections. However, the Court noted that the Tribunal's decisions were based on substantial evidence, such as salary registers and employee statements, supporting the legitimacy of expenses. Consequently, the Court upheld the Tribunal's decision to delete the additions.

3. The final issue involves the disallowance of a deduction claimed u/s.80IA of the I.T. Act concerning 'incentive income.' The Assessing Officer made the disallowance based on a previous decision for the same assessee. The CIT (Appeals) and the ITAT both ruled in favor of the assessee, leading to the revenue's appeal. The Court found no reason to interfere with the lower authorities' decisions, noting that the assessee had been allowed the deduction in previous years without challenge under other tax provisions. Therefore, the Court upheld the deletion of the disallowance.

In conclusion, the Court dismissed the Tax Appeals, confirming the ITAT's judgments in favor of the assessee. The detailed analysis of each issue highlighted the fulfillment of statutory conditions by the assessee, the reliance on substantial evidence by the Tribunal, and the consistent application of deduction provisions over the years, leading to the dismissal of the revenue's appeals.