2017 (2) TMI 1095 - AT - Income Tax

Allowability of deduction u/s 80IB - AO denied the benefit of deduction on the ground that assessee s eligible unit was formed by transfer of plant & machinery which was previously used and it was not new plant & machinery - Held that - The requisite finding of fact to decide the issue before us is conspicuously missing; therefore we send the matter to the file of the AO. The assessee shall submit all the requisite details and evidences to show compliance of all the conditions of section 10B including the condition of old plant and machinery being less than 20%. The AO shall take into account the facts of the case and also judgements placed by both the sides before us to decide whether the assessee would be eligible to claim the deduction in A.Y. 2006-07 (third year of formation of unit) particularly when all the conditions were not fulfilled in AY 2003-04, being first year of the formation. The assessee shall be free to raise all the legal and factual issues in this regard. With these directions, all the grounds are sent back to the file of the AO and may be treated as allowed, for statistical purposes.

Summary

Issues:
- Allowability of deduction u/s 10B for the appellant.

Analysis:
1. The primary issue in the judgment revolves around the allowability of deduction u/s 10B for the appellant for the assessment year 2006-07. The appellant contested the denial of the claim under section 10B by the Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) (CIT(A)). The appellant argued that all conditions prescribed under section 10B were met, and there was no violation of the conditions specified in section 10B(2)(iii). The appellant relied on judgments such as CIT vs. Orissa Cement Ltd. and CIT vs. Satellite Engineering Ltd. to support their claim for deduction under section 10B.

2. The appellant further contended that the value of old/second-hand plant and machinery had dipped below 20% of the total plant and machinery during the relevant assessment year. They emphasized that the conditions of section 10B were satisfied in the current assessment year, and the claim was made for the first time in that year. The appellant cited the decision of the Gujarat High Court in CIT vs. Satellite Engineering Ltd. to strengthen their argument for the allowance of the deduction under section 10B.

3. The appellant also raised the issue that the claim under section 10B should be allowed before setting off unabsorbed losses of earlier years. However, both the CIT(A) and the AO upheld the denial of the deduction under section 10B, stating that the eligible unit was formed by the transfer of previously used plant and machinery, which did not qualify as new plant and machinery as required by the provision.

4. The Tribunal noted that the essential finding of fact to decide the issue was missing in the orders of the lower authorities. Consequently, the matter was remanded to the AO for further examination. The AO was directed to consider all relevant facts, evidence, and legal arguments presented by both parties. The appellant was instructed to provide all necessary details to demonstrate compliance with the conditions of section 10B, specifically regarding the percentage of old plant and machinery being less than 20%.

5. The Tribunal emphasized that the appellant should be given the opportunity to raise all legal and factual issues related to the claim for deduction under section 10B. The matter was remanded to the AO for a fresh decision on the eligibility of the appellant to claim the deduction for the assessment year 2006-07. Additionally, similar issues in other appeals were also sent back to the AO for fresh consideration.

6. In conclusion, all the issues raised in the appeals were remanded to the AO for a fresh decision. The appeals were treated as allowed for statistical purposes, and the matter was directed to be decided afresh by the AO after verifying the facts and considering the legal arguments presented by both parties.