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TMI Blog2021 (4) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided the issue in controversy in favour of the assessee by duly relying upon the order passed by the coordinate Bench of the Tribunal in case of Tirupati LPG Industries Ltd. [ 2014 (1) TMI 1689 - ITAT DELHI] and has rightly deleted the addition made by the AO on account of disallowance u/s 80IC. So, finding no scope to interfere into the findings returned by the ld. CIT (A), grounds no.1, 2, 3 4 are determined against the Revenue. Addition on ad hoc basis @ 10% on account of interest expenses on car having element of personal use, tour and travelling expenses and conveyance expenses respectively - HELD THAT:- When undisputedly assessee has claimed the expenses on the basis of its audited financials which have not been disputed by the AO, the ad hoc additions on the basis of surmises are not permissible under law. Moreover when it is not the case of the AO that these expenses have not been made wholly and exclusively for the purpose of business by the assessee, there is no ground to disallow the same. So, we are of the considered view that when AO has proceeded to make aforesaid disallowances without assigning any reason but on the basis of surmises, the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and in law, the Ld. CIT(A) has erred in deleting the addition made u/s 80-IC ignoring the fact that the benefit of substantial expansion was meant only for units existing as on 07.01.2003. If the contention of the assessee is accepted, then 100% deduction will be available to the assessee for 1st five years thereafter 100% deduction will be available to the assessee for next five years on expansion of the undertaking and 25% / 30% deduction will be available for next 5 years. While 80-IC (6) provides that no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to sub-section (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. 4. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that 100% deduction in section 80-IC would be available to the assessee after completing 5 years if the assessee substantially expands its undertaking as held by Hon'ble Gujrat High Court in the case of M/s Anand Food Dairy Products vs. ITO 394 ITR 0531 inter-al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the units located in North Indian states for the first 5 years and for the next 5 years @ 25%/35%. AO also made ad hoc disallowance of ₹ 41,711/- on account of interest expenses on car on account of personal use of the car. AO also made addition of ₹ 66,099/- by way of disallowance on account of tour and travelling expenses @ 10% of the total amount of ₹ 6,60,988/-. AO also made addition of ₹ 58,714/- by way of disallowance on account of conveyance expenses being 10% of ₹ 5,87,144/-. 4. Assessee carried the matter before the ld. CIT (A) by way of filing the appeal who has deleted the additions by allowing the same. Feeling aggrieved by the order passed by the ld. CIT (A), the Revenue has come up before the Tribunal by way of filing the present appeal. 5. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 6. Ld. DR for the Revenue challenging the impugned order passed by Ld. CIT(A) relied upon the assessment order and contended that the entire additions/disallowances have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as Principal Commissioner of Income-tax, Shimla Vs. Aarham Softronics (supra) decided the identical issue in favour of the assessee by holding that in case of substantial expansion carried out as per clause (ix) of sub section 8 of section 80IC within the aforesaid period of 10 years the said previous years in which the substantial expansion is undertaken would become initial assessment year and as such entitled for 100% deductions of profits and gains. Operative part of the judgment (supra) is extracted for ready perusal as under: a) .. b) An undertaking or an enterprise which had set up a new unit between 7th January, 2003 and 1st April, 2012 in State of Himachal Pradesh of the nature mentioned in clause (ii) of sub-section (2) of Section 80-IC, would be entitled to deduction @ 100% of the profits and gains for five assessment years commencing with the initial assessment year . For the next five years, the admissible deduction would be 25% (or 30% where the assessee is a company) of the profits and gains. c) However, in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of section 80-IC by such an undertaking or ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GROUNDS NO.5, 6 7 11. Ld. CIT (A) also deleted the addition of ₹ 41,711/-, ₹ 66,099/- ₹ 58,714/- made by the AO on ad hoc basis @ 10% on account of interest expenses on car having element of personal use, tour and travelling expenses and conveyance expenses respectively. 12. When undisputedly assessee has claimed the expenses on the basis of its audited financials which have not been disputed by the AO, the ad hoc additions on the basis of surmises are not permissible under law. Moreover when it is not the case of the AO that these expenses have not been made wholly and exclusively for the purpose of business by the assessee, there is no ground to disallow the same. So, we are of the considered view that when AO has proceeded to make aforesaid disallowances without assigning any reason but on the basis of surmises, the disallowances are not sustainable in the eyes of law, hence there is no scope to interfere into the deletion made by the ld. CIT (A). Consequently, grounds no.4, 5 6 raised by the Revenue are dismissed. 13. Resultantly, the appeal filed by the Revenue is dismissed. Order pronounced in open court on this 23rd day of April ..... X X X X Extracts X X X X X X X X Extracts X X X X
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