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2019 (7) TMI 665 - AT - Income TaxDeduction u/s 80IC - @ 30% or 100% claimed by the appellant - substantial expansion - initial assessment year - HELD THAT - As decided in assessee's own case 2019 (5) TMI 941 - ITAT CHANDIGARH Tribunal passed in relation to the eligibility of deduction @ 100% u/s 80IC of the Act was in respect of the 7th year from the start / operation of manufacturing activity of the assessee. The findings given above are applicable for the assessment year under consideration also being the 8th year as it has been held that the assessee will be eligible for deduction @ 100% on account of substantial expansion subject to the condition that the total period of deduction u/s 80IC would not exceed to 10 years.In view of this, this issue is decided in favour of the assessee. Disallowance u/s 14A - disallowance out of interest expenditure u/s 36(1)(iii) - HELD THAT - The assessee is eligible for claim of 100% deduction on its income from eligible business for the year under consideration. Hence, the aforesaid additions will not have any tax bearing in view of our findings given above. Hence, ground Nos. 2 3 of the appeal have become infructuous. Disallowance of deduction u/s 80IC of Misc. Income - HELD THAT - Assessee has explained before us that out of the misc. income of ₹ 2,81,825/-, a sum of ₹ 1,37,649/- is on account of discounts and deductions which relates to the business activity of the assessee and was part of the business income. A sum of ₹ 53,229/- was received on account of insurance claim, the expenditure related to which was debited in the earlier years. The insurance claim received by the assessee to indemnify the losses would go on to enhance the business income of the assessee. Further, the balance sum of ₹ 90,945/- was received by the assessee on account of return of cheques of membership subscription paid to the association. It was nothing but the refund of the amount already paid and claimed as expenditure. In view of this, the misc. receipt of ₹ 2,81,825/- is held to be income relating to the business activity of the assessee and thus eligible for deduction u/s 80IC of the Act.
Issues Involved:
1. Legality of the order passed under section 250(6) by the CIT(A). 2. Disallowance of ?84,248/- by invoking Section 14A of the Income Tax Act, 1961. 3. Disallowance of ?2,65,573/- by invoking Section 36(1)(iii) of the Income Tax Act, 1961. 4. Disallowance of deduction under Section 80IC on miscellaneous income of ?2,81,825/-. 5. Addition of ?10,44,833/- by allowing deduction under Section 80IC at 30% as against 100% claimed by the appellant. Issue-Wise Detailed Analysis: 1. Legality of the Order Passed Under Section 250(6): The assessee contended that the order dated 16.07.2018 by the CIT(A) was contrary to law and facts of the case. However, this issue was not specifically adjudicated as it was general in nature and did not require specific adjudication. 2. Disallowance under Section 14A: The assessee challenged the disallowance of ?84,248/- made by the Assessing Officer (AO) under Section 14A. However, it was noted that the disallowance had the effect of adding to the income of the assessee. Given that the assessee was found eligible for 100% deduction under Section 80IC, this addition became infructuous. 3. Disallowance under Section 36(1)(iii): The assessee contested the disallowance of ?2,65,573/- by the AO under Section 36(1)(iii). Similar to the disallowance under Section 14A, this addition also became infructuous due to the 100% deduction eligibility under Section 80IC. 4. Disallowance of Deduction under Section 80IC on Miscellaneous Income: The assessee argued that the miscellaneous income of ?2,81,825/- should be eligible for deduction under Section 80IC. The Tribunal agreed, noting that ?1,37,649/- was related to business discounts, ?53,229/- was an insurance claim enhancing business income, and ?90,945/- was a refund of previously claimed expenditure. Thus, the entire amount was considered business income eligible for deduction under Section 80IC. 5. Deduction under Section 80IC at 30% vs. 100%: The primary issue was whether the assessee was entitled to a 100% deduction under Section 80IC for the 8th year, following substantial expansion. The Tribunal referred to its earlier decision and the Supreme Court's ruling in Pr.CIT, Shimla Vs. M/s Aarham Softronics, which established that substantial expansion within the first ten years allows for a 100% deduction. The Tribunal concluded that the assessee was entitled to a 100% deduction for the 8th year, subject to the ten-year cap. Conclusion: In light of the above findings, the Tribunal upheld the assessee's eligibility for a 100% deduction under Section 80IC for the 8th year. Consequently, the disallowances under Sections 14A and 36(1)(iii) became infructuous, and the miscellaneous income was deemed eligible for deduction. The appeal was partly allowed. Order Pronounced: The order was pronounced in the Open Court on 10.07.2019.
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