2021 (3) TMI 363 - HC - Income Tax

Deduction under Section 80IA - whether the Tribunal was right in allowing the claim of deduction under Section 80IA ? - HELD THAT - The point, now canvassed before us by the Revenue stating that the condition stipulated in sub-Section (7) of Section 80IA of the Act has not been fulfilled by the assessee, is a point, which was never taken by the Revenue at any earlier point of time. That apart, the benamidar of the assessee, viz., Francis Joseph had availed the benefit of the KVSS Scheme by filing a declaration and certificate was also issued. Subsequently, the assessee addressed the Department on 27.09.1999, stating the factual position. This has led to the issuance of a notice/order dated 01.11.1999 by the Commissioner of Income Tax (Central), Chennai stating that Mr.Francis Joseph has obtained the certificate under Section 90(2) of the Finance (No.2) Act, 1998 by making a false declaration. In the said notice/order, it was also mentioned that Mr.Francis Joseph, by letter dated 21.10.1999, has expressed his consent for the adjustment of tax of ₹ 8,69,338/- paid by him under KVSS Scheme towards the tax payable by the assessee before us under the KVSS in view of the inclusion of Francis Joseph's income for the relevant year 1994-95 in the hands of the assessee before us. All the above facts will clearly show that there is no error in the order passed by the Tribunal. - Decided against the Revenue.

Summary

Issues:
- Appeal against order allowing deduction under Section 80IA of the Income Tax Act
- Fulfillment of conditions under sub-Section (7) of Section 80IA
- Interpretation of the term "new industrial undertaking"
- Application of Central Board of Direct Taxes circular dated 23.07.1999
- Claim of deduction under Section 80IA by the assessee
- Benefit availed under the Kar Vivad Samadhan Scheme (KVSS)

Analysis:
The High Court of Madras heard an appeal filed by the Revenue challenging an order of the Income Tax Appellate Tribunal (ITAT) allowing deduction under Section 80IA of the Income Tax Act for the assessment block period 01.04.1986 to 31.03.1996 and 01.04.1996 to 30.01.1997. The main issue was whether the Tribunal was correct in allowing the deduction. The Revenue contended that the assessee did not fulfill the conditions under sub-Section (7) of Section 80IA.

The case involved a history of a search conducted in 1997, leading to findings by the Income Tax Settlement Commission regarding benamidars controlled by the assessee. The Tribunal's decision was influenced by a previous judgment related to a benamidar, Francis Joseph, and the interpretation of the term "new industrial undertaking." The Tribunal considered a Bombay High Court decision and a circular by the Central Board of Direct Taxes to support its decision in favor of the assessee.

The Revenue raised a new argument regarding the fulfillment of conditions under sub-Section (7) of Section 80IA, which had not been previously contested. It was noted that Francis Joseph had benefited from the KVSS Scheme, and subsequent actions by the Department did not invalidate the Tribunal's decision. The High Court dismissed the appeal, affirming the Tribunal's order allowing the deduction and answering the substantial questions of law against the Revenue. No costs were awarded in this judgment.