2021 (6) TMI 419 - AT - Income Tax

Deduction u/s 80lB - appellant is processing sweet corn which is vegetable - HELD THAT - As relying on assessee's own case 2021 (5) TMI 657 - ITAT HYDERABAD we hold that the assessee is eligible for deduction on the profit derived from processing, preservatives and packing of fruits and vegetables as contemplated in section 80(B(11A) of the IT Act. However, on perusal of computation of income placed in paper book at page No. 2, the entire net profit has been taken, whereas, on examination of financial statements, the assessee has shown gross receipts in Trading and Profit Loss Account In our considered opinion, some of the income/receipts shown are, prima-facie, not eligible for deduction. Therefore, we remit the issue to the file of the AO with a direction to recalculate the eligible profit for deduction as per section 80IB(11A) and the assessee is directed to provide all necessary details before the AO in support of its claim of deduction and cooperate in completing the correct profit element for eligible for deduction u/s 80IB(11A) . Appeal of the assessee is partly allowed

Summary

Issues Involved:
1. Whether the assessee is eligible for deduction under Section 80IB(11A) of the Income Tax Act, 1961.
2. Whether sweet corn qualifies as a vegetable under Section 80IB(11A).

Issue-wise Detailed Analysis:

1. Eligibility for Deduction Under Section 80IB(11A):
The assessee, engaged in the business of purchase and sale of sweet corn and frozen food items, filed its return for AY 2016-17 claiming a deduction of ?82,72,150 under Section 80IB(11A). The Assessing Officer (AO) disallowed this claim, holding that sweet corn is not termed as a vegetable. The CIT(A) confirmed the AO's decision. The ITAT, however, examined whether the business activities of the assessee, which include processing, preservation, and packaging of sweet corn, qualify for the deduction under Section 80IB(11A).

2. Classification of Sweet Corn as a Vegetable:
The crux of the dispute was whether sweet corn qualifies as a vegetable. The assessee argued that sweet corn is a vegetable and provided definitions and references, including dictionary meanings and classifications under the AP VAT Act, which consider sweet corn as a vegetable. The ITAT agreed with the assessee, noting that sweet corn fits the definition of a starchy vegetable and is treated as such in various contexts, including dietary guidelines.

Judgment Analysis:

1. Findings on Deduction Eligibility:
The ITAT reviewed the assessee's business activities, including the procurement, processing, preservation, and packaging of sweet corn. The Tribunal noted that the assessee had invested in relevant plant and machinery and maintained a workshop, which substantiated its claim of being engaged in the processing and preservation of vegetables. The ITAT concluded that the assessee's activities fall under the purview of Section 80IB(11A), making it eligible for the deduction.

2. Sweet Corn as a Vegetable:
The ITAT concurred with the assessee's submission that sweet corn, when harvested before maturity, is considered a vegetable. This classification aligns with definitions from various authoritative sources, including dietary guidelines and the AP VAT Act. The Tribunal emphasized that sweet corn fits the bill of a starchy vegetable, which is crucial for determining eligibility under Section 80IB(11A).

Directions for Recalculation:
The ITAT observed discrepancies in the income/receipts shown by the assessee, indicating that not all income might be eligible for the deduction. Consequently, the Tribunal remitted the issue back to the AO to recalculate the eligible profit for deduction under Section 80IB(11A). The AO was directed to exclude ineligible income and ensure that the assessee provides all necessary details to support its claim.

Conclusion:
The ITAT allowed the assessee's appeal partly, directing the AO to reassess the eligible profit for deduction under Section 80IB(11A) based on the Tribunal's findings. The judgment underscores the importance of accurate classification and substantiation of business activities to qualify for tax deductions.

Pronouncement:
The judgment was pronounced in the open court on 10th June 2021.