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2010 (8) TMI 974 - ITAT CHANDIGARHDeduction u/s 80IC or 80IB - Manufacturing activity or not? - assessee company was engaged in the business of manufacturing, installation of effluent treatment plants for Air and water, sewerage treatment plant, reverse osmosis plants, Air Conditioning and ventilation and air handling units - Assessee undertaken substantial expansion of the industrial unit during the year under consideration - this was the 5th year of claiming deduction u/s 80IC - AO passed order u/s 154, rejected the claim of the assessee as the benefit of exemption after substantial expansion was available u/s 80IC and assessee’s claim u/s 80IB was not maintainable as it had already availed the exemption u/s 80IB for the specified period - AO noted that the increase in plant and machinery during the Financial Year 2005-06 was less than 50% as the value of plant & machinery. Hence, the claim of deduction u/s 80IC was also rejected - CIT(A) observed the assessee to have fulfilled the conditions of eligibility given u/s 80IC of the Act, since the increase in assets exceeds 50% of book value, without taking depreciation into account also there is no justification to deny the exemption because the assessee had failed to mention the correct section. HELD THAT:- The assessee after the start of production on 28.4.2005, in Assessment Year 2006-07 i.e. year under appeal had claimed deduction u/s 80 IB. The plea of the assessee was that there was an error in the mention of section 80 IB as against 80IC. The assessee claims that it was entitled to the deduction available to its Baddi Unit on expansion u/s 80IC. We find merit in the plea of the assessee. The intention of the assessee undertaking expansion under the amended provisions, was to avail deduction u/s 80IC on the start of operations at its Baddi Unit. Even in notes to accounts relating to Assessment Year 2005-06, it was reported that no depreciation is being claimed on additions to plant and machinery after 30.9.2004 as plant and machinery was put to use on 28.4.2005, which were part of substantial expansion undertaken for claiming deduction u/s 80 IC. Mere mention of wrong section would not disentitle the assessee to claim the aforesaid deduction, which is allowable under the provisions of Act. The AO has failed in its duty of not confronting the assessee with his findings, before rejecting the claim of assessee. We are in conformity with the claim of assessee, that it had made a claim for deduction u/s 80IC on expansion of its plant and by an error, section 80IB was mentioned in the computation of income. The conditions for allowing claim u/s 80IC & 80IB are identical. In the facts and circumstances, we uphold the order of CIT(A) in allowing the claim of deduction u/s 80IC. Deduction u/s 80IC - substantial expansion - Non-fulfillment of conditions of ‘substantial expansion’ of the unit as the increase in plant and machinery during financial year 2005-06 was less than 50% - The assessee in the present case had undertaken the expansion plan in financial year 2004-05, under which after 30.9.2004, there was addition to plant and machinery of Rs. 11,54,610/-, which was completed in financial year 2005-06, where the addition was Rs. 3,11,737/-. That as tabulated in Para 15 above, the total additions in plant and machinery under the expansion plan was more than 50% of the book value of plant and machinery at the start of expansion of undertaking. The assessee having fulfilled the conditions of Section 80IC (8)(iv) of the Act is entitled to claim of benefit of deduction u/s 80IC.
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