2022 (9) TMI 811 - AT - Income Tax

Deduction u/s. 80IB - disallowance of deduction as conditions cumulatively as are stipulated u/s 80IA(2) not met by assessee - assessee could not produce evidence to substantiate that it has employed twenty or more worker in the manufacturing process , while secondly , the assessee failed to produce evidence to substantiate the installation of machinery - HELD THAT - Assessee has to cumulatively meet all the stipulated conditions u/s 80IA before any deduction can be allowed, and the onus is on the assessee to demonstrate that it complies with all the stipulated conditions , as it is the assessee who is claiming deduction u/s 80IA from the profits and gains of business. The exemption provisions are to be strictly construed. Even if we accept that books of accounts, vouchers etc. were destroyed in a fire, firstly the assessment order in first round was passed prior to the date of fire, and secondly even if primary evidences are not available, the assessee could have collected secondary evidences to demonstrate its bona-fide in case of installation of plant and machinery during the year under consideration , such as report(s) submitted to Directorate of Industries (DIC), or report submitted under MSME Act, report to Service tax department, report to Excise department etc. indicating installation of plant and machinery , trial runs and commencement of production, reports from machinery suppliers , electricity departments etc. could have been brought on record, to justify/substantiate its stand. Similarly, for employment of twenty or more worker in manufacturing process, reports/returns submitted under ESI/PF, TDS, or to any other government agencies specifying number/name etc of worker employed ,or payment of wages by bank etc. could have been procured as secondary evidence to justify employability of twenty or more workers in manufacturing process. Despite three round of litigation , the assessee is not able to justify/substantiate the meeting of conditions for claiming deduction u/s 80IA - Thus, presumption has to be drawn against the assessee, and we hold that the assessee is not entitled/eligible for deduction u/s 80IA of the 1961 Act as it has failed to meet the conditions cumulatively as are stipulated u/s 80IA(2), and this appeal filed by assessee lacks merit and is dismissed.

Issues Involved:
1. Denial of deduction under Section 80IA of the Income-tax Act, 1961.
2. Validity of the assessment based on facts and law.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Section 80IA:
The primary issue revolves around the denial of the deduction claimed by the assessee under Section 80IA of the Income-tax Act, 1961. The assessee filed its return of income declaring a loss and did not initially claim any deduction under Section 80IA due to the loss. The case went through multiple rounds of litigation.

In the first round, the Assessing Officer (AO) made certain additions to the income and noted that no deduction under Section 80IA was claimed due to the loss. The matter was restored by the tribunal to the AO for fresh decision on the deduction claim. In the second round, the AO denied the deduction as the assessee could not produce relevant books of accounts, bills, and vouchers, nor establish the fulfillment of mandatory conditions under Section 80IA.

The tribunal again restored the matter to the AO with the direction to examine the eligibility of the assessee for the deduction and whether all conditions under Section 80IA were met. In the third round, the AO issued notices requiring the production of books of accounts and other evidence to justify the deduction claim. The assessee failed to produce the necessary documents, leading to the rejection of the deduction claim by the AO.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the assessee did not submit details of employees, actual monthly salary paid, or evidence of employing 20 or more workers in the manufacturing process, which is a mandatory condition under Section 80IA(2). The CIT(A) also noted the absence of evidence for the installation of machinery.

2. Validity of the Assessment Based on Facts and Law:
The assessee argued that the records were destroyed in a fire on 28.03.2002, which prevented the production of necessary documents. However, the tribunal noted that the assessment order in the first round was passed on 20.03.2001, prior to the fire incident. Despite multiple opportunities and rounds of litigation, the assessee failed to provide secondary evidence to substantiate the claim of employing 20 or more workers or the installation of machinery.

The tribunal emphasized that the onus is on the assessee to prove compliance with the conditions stipulated under Section 80IA, as it is a deduction provision that needs to be strictly construed. The tribunal referred to the judgments of the Supreme Court, which held that exemption provisions in taxing statutes are to be strictly construed, and any ambiguity should be resolved in favor of the Revenue.

The tribunal concluded that the assessee failed to meet the conditions for claiming the deduction under Section 80IA, as no evidence was produced to substantiate the employment of 20 or more workers in the manufacturing process or the installation of machinery during the year under consideration. The appeal was dismissed, and the order of the AO was sustained.

Conclusion:
The appeal filed by the assessee was dismissed, and the denial of the deduction under Section 80IA was upheld due to the failure to produce necessary evidence and fulfill the mandatory conditions stipulated under the section. The tribunal emphasized the strict construction of exemption provisions and the onus on the assessee to prove eligibility for the deduction.

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