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TMI Blog2012 (12) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... IB, if registration has been obtained prior to 24.12.1999 is most appropriate and does not call for any interference. - Decided in favor of assessee. Deduction of TDS withheld by the the authorities of Sikkim as expenditure - the assessee explained that the amount debited is income tax deducted by State Government of Sikkim while making payment to the assessee for material supplied during the relevant previous year. The assessing officer disallowed the claim of the assessee by observing that the TDS is not an allowable expenditure. - held that:- any rate or tax levied on the profit or gain of any business or profession shall not be allowed as deduction. The tax levied on the profits or gain of any business would mean that profit has been ascertained in a manner comparable with the outline in the provisions of the Income-tax Act. In the aforesaid context, it has to be seen whether the income-tax deducted at 3% on the bills of the assessee, partakes the character of a tax levied on the profits of the assessee. It has also to be seen whether the tax levied at the rate of 3% under the Sikkim Income Tax Manual, is after determination of profit in accordance with a machinery provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed assets like plant and machinery having exceeded Rs. 1 crore. The assessing officer asked the assessee to explain why the claim of deduction under S.80IB shall not be disallowed. The assessee replied that since it is not manufacturing any goods mentioned in Schedule 11, it will be entitled to avail deduction under S.80IB, even assuming that it is not a small scale industrial undertaking. The assessing officer did not accept the assessee's explanation by observing that deduction under S.80IB(3)(i) is available to all industrial undertakings, whether it is small scale industrial undertaking or not, if the company has started its operations on or after 1.4.1999 but on or before 31.3.1995. Whereas the companies commencing business operations after 1.4.1995 are entitled to claim deduction under S.80IB(3)(ii) only which is applicable to small scale industrial undertaking. The assessing officer disallowed the claim for deduction by holding that unit 2 of the assessee company having started its operation after 1.4.1995 and not being a small scale industrial undertaking as on 31.3.2005 in view of the gazette notification of the Central Government, being SO 857(E) dated 10.12.1999, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer is directed to verify the original documents regarding registration. In case the registration is found as obtained before 24.12.1999, the appellant would be entitled to deduction u/s.80IB." Aggrieved by the above order of the CIT(A), Revenue has preferred this appeal before this Tribunal. 6. The learned Departmental Representative submitted before us that the Central Government having reduced the limit for fixed assets, plant and machinery to Rs. 1crore, the assessee cannot be regarded as a small scale industrial unit, since its investments in fixed assets, plant and machinery exceeded Rs. 1 crore. The Learned Departmental Representative therefore, justified the action of the assessing officer in rejecting the assessee's claim of deduction under S.80IB of the Act. The Learned Departmental Representative in support of her contentions, produced a clarification dated 19.10.2000 issued by the Additional Development Commissioner(SSI). 7. The learned Authorised Representative submitted that as per the definition of small scale industrial undertaking under S.80IB (14)(g), an industrial undertaking which is regarded as a small scale industrial undertaking on the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial undertaking from Rs. 3 crore to Rs. 1 crore. 9. However, the Ministry of Commerce and Industry, Govt. of India issued press note dated 23.3.2000 clarifying that units which have obtained provisional registration as per the notification dated 10.12.1997 and have taken concrete steps for implementing the project such as preparation of project report, sanction of loan, purchase of land, civil construction, placement of orders for plant and machinery, etc., prior to 24.12.1999, will continue to enjoy the SSI status, so long as the investment in plant and machinery does not exceed Rs. 300 lakhs notwithstanding the revised investment limit of Rs. 100 lakh notified on 24.12.1999. Even earlier to it, i.e. on 14.3.2000, Ministry of Commerce and Industry, Government of India, in press note No.3 has clarified that units which have obtained permanent registration based on the order dated 10.12.1997 would continue to remain as SSI unit in spite of order dated 24.12.1999 reducing the investment limit to Rs. 1 crore. Further clarification was again issued in this regard by the Additional Development Commissioner(SSI) on 27.3.2000. Therefore, it has to be seen whether the assessee has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the assessment year 2008-09, the CIT(A) by the impugned order has confirmed the action of the assessing officer in disallowing the assessee's claim for deduction under S.80IB of the Act, which action of the CIT(A) has prompted the assessee to file the present appeal before this Tribunal. 16. We heard both the sides and perused the impugned orders of the lower authorities. We have considered this very issue in the light of the Revenue's appeals for the assessment years 2005-06 and 2006-07, hereinabove. For the detailed reasons discussed in paras 8 to 10 hereinabove, while dealing with Revenue's appeal for assessment year 2005-06, we set aside the impugned order of the CIT(A)and direct the assessing officer to allow the claim of the assessee, after due verification, as directed by the CIT(A) for the assessment years 2005-06 and 2006-07 discussed above. Accordingly, grounds of the assessee in this appeal are allowed. 17. In the result, assessee's appeal, ITA No.385/Hyd/2012 for assessment year 2008-09, is allowed. Assessee's Appeal : ITA No.339/Hyd/2010 : Assessment year 2008-09 18. Assessee raised the following effective ground- 2. "The learned Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unavoidable. In this regard, the learned Authorised Representative invited our attention to the circular of the Sikkim Government and the communications made with the Director of Sikkim State Lotteries. He submitted that the tax deducted by the Sikkim Government is not with regard to the profits and gains of business of the assessee. Therefore, no disallowance could be made under S.40(a)(ii) of the Act. The learned Authorised Representative further submitted that the Government of Sikkim has a right to collect a certain percentage of payment made to the assessee. Hence, it is not in the nature of expenditure but assessee's receipt has been reduced to that extent. 22. The Learned Departmental Representative strongly supported the finding of the CIT(A). 23. We have heard the rival submission and perused the materials on record. The assessee has entered into a contract with finance Department, Government of Sikkim for printing and supply of lottery tickets. While making payment an amount computed at 3% has been deducted from the bills of the assessee towards income tax under the Sikkim Income Tax Manual, 1948. As per the terms of the contract, based on the circular dated 19.8.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,75,776, being the amount of tax retained by the authorities of Sikkim under the Income-tax Act applicable to the said province. This ground of the assessee is identical to the only effective ground taken by the assessee in its appeal ITA No. 339/Hyd/2010 for assessment year 2005-06. For the detailed reasons discussed in para 23 hereinabove, while dealing with the corresponding ground of the assessee for the assessment year 2005-06, we consider it appropriate to restore this issue to the file of the assessing officer, to consider this issue afresh keeping in view our observations hereinabove, and of course, after giving a reasonable opportunity of hearing to the assessee. This ground of the assessee is allowed for statistical purposes. 27. Ground No.3 relates to disallowance of expenditure claimed for an amount of Rs. 27,075. In the course of assessment proceedings, the assessing officer noticing that the exp claimed for an exp of Rs. Being in the nature of penalty, disallowed the same. Since apart from submitting that the deduction has been made by the bank from the bills, the assessee could not produce any evidence to show that what is levied is not a penalty for infraction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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