2019 (8) TMI 624 - HC - Income Tax

Deduction of certain amount u/s 80 IB/IC as part of trading profits for the bated unit - HELD THAT - The record shows that the assessee derived this income from the sale of boxes manufactured by it to house electric meters. It is not disputed that the deduction under Section 80 IB/IC was for manufacture of electric meters. The manufacture and supply of boxes, which are essentially for housing electronics meters so as to make it convenient for use by the consumers is an activity intrinsically connected with the business qualifying for deduction. As a consequence, it is held that this question of law does not arise. Dis-allowance under Section 14 A - HELD THAT - Decision of Godrej Boyce Manufacturing company ltd. Vs. Deputy Commissioner of Income Tax Anr. 2017 (5) TMI 403 - SUPREME COURT covers the question of dis-allowance against the revenue under Section 14 A. ALP determination and adjustment , the question does not arise in view of the recent decision of this Court in Pr. Commissioner of Income Tax, Udaipur Vs. M/s Secure Meters Ltd., E-Class, Pratapnagar Industrial Area, Udaipur 2019 (8) TMI 512 - RAJASTHAN HIGH COURT Adjustment on account of the corporate guarantee provided by the assessee to its A.E , does not arise. The reasoning is that such corporate guarantee is part of the commercial activity of the assessee and no cost was incurred by the assessee when it provided this benefit to its A.E. By all accounts it appears, therefore, to be book transaction. Deduction u/s 80IB / 80IC in respect of other income, apportionment of depreciation made on assets of Head Office used also for activities of different eligible industrial undertaking and apportionment of expenses on product development for activities of different eligible industrial undertaking for deduction u/s 80IB / 80IC - question of law admitted - List the appeals for hearing on 03.09.2019.

Summary

Issues:
1. Inclusion of other income for computing deduction u/s 80IB / 80IC
2. Deletion of apportionment of depreciation on assets of Head Office
3. Deletion of apportionment of expenses on product development
4. Justifiability of deduction under Section 80 IB/IC as part of trading profits
5. Deletion of apportionment of expenses on information system
6. Disallowance of deduction of certain amount in respect of service income
7. Adjustment of certain amount towards interest chargeable on credit facility
8. Disallowance of certain amount under Section 14 A of the Income Tax Act

Analysis:

1. The High Court considered the question of law regarding the inclusion of other income for computing deduction under sections 80IB / 80IC of the Income Tax Act. The Court examined whether the other income was 'profit derived from industrial undertaking' and thus eligible for the deduction. The respondent accepted the notice on behalf of the respondents.

2. The Court also analyzed the issue of deleting the apportionment of depreciation made on assets of the Head Office used for different eligible industrial undertakings for computing deductions under sections 80 IB / 80 IC. The questions raised included the justifiability of deduction under Section 80 IB/IC as part of trading profits for the relevant unit.

3. Furthermore, the judgment addressed the deletion of apportionment of expenses on product development for activities of different eligible industrial undertakings for computing deductions under sections 80IB / 80IC. The Court examined the nature of expenses and their relevance to the industrial activities.

4. The Court discussed the disallowance of deduction of a certain amount in respect of service income and the adjustment of a specific amount towards interest chargeable on a credit facility. The judgment also touched upon the disallowance of a certain amount under Section 14 A of the Income Tax Act.

5. The High Court clarified that certain questions, such as ALP determination and disallowance under Section 14 A, were covered by previous decisions of the Supreme Court. The judgment highlighted the relevance of specific cases in determining the applicability of certain provisions of the Income Tax Act.

6. In conclusion, the Court provided directions for listing the appeals for a hearing on a specified date and requested the parties to file brief synopses. The judgment addressed various intricate issues related to income tax deductions and the interpretation of relevant provisions under the law.