TMI Blog2014 (11) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... e is vague in nature and does not even prescribe the method of calculating the remuneration - remuneration cannot be thrust upon the appellant so this ground of appeal is allowed - though Assessee had not claimed remuneration to partners, AO had allowed the same - the clause relating to remuneration in the partnership deed is vague in nature and does not prescribe the method of calculation of remuneration - Revenue has not brought any contrary binding decision in its support nor has been able to distinguish the judgments relied upon by the CIT(A) – the order of the CIT(A) is upheld – Decided against revenue. Deletion of disallowance u/s 40(a)(ia) – Disallowance in next year on payment basis amounts to double benefit to assessee or not – Held that:- CIT(A) rightly was of the view that the deduction u/s.80-IB was not granted to the appellant on the disallowance made on technical ground - the deduction u/s.80-IB has to be granted on the computed income derived from the industrial undertaking - any addition/disallowance made during the course of assessment do not lose the characteristic of being derived from the industrial undertaking as its original source – the order of the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving factory license before it started manufacturing activities is without any merits. 2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not considering the point that the assessee has failed to prove that it has commenced the manufacturing activity on or before 31.03.2004, as stipulated in Section 801B of the Act. 3. On the facts and circumstances of the case and in law, the learned C1T(A) has erred in deleting the disallowance made on account of remuneration to the partners which was allowed as per partnership deed. 4. On the facts and circumstances of the case and in law, the learned C1T (A) has erred in allowing the deduction u/s.80IB on disallowance of ₹ 6,77,112/- u/s. 40(a)(ia) of the Act , as the disallowance being technical in nature and assessee is entitled to deduction of such disallowance in next year on payment basis. This would lead to double benefit to the assessee. Ground no. 1 2 are interconnected and are with respect to deduction u/s 80IB therefore considered together. 4. During the course of assessment proceedings, A.O noticed that Assessee has claimed deduction of ₹ 6,31,545/- U/s 80IB of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant period. With regard to the Third Party evidence the matter has been decided by the Hon'ble ITAT, Ahmedabad in the case of Samarth Healthcare has held that Factory License is not the necessary conditions tor the eligibility of deduction u/s. 80-lB. Respectfully, following the decision of the Hon'ble ITAT, and also considering the evidences produced before me I am inclined to agree with the contention of the Id. AR. With regard to the second reason that the appellant had employed less than 10 worker on the basis of the report from the Inspector of the Department, the point raised by the Id. AR was plausible that the strength of workers for F.Y.2004-05 cannot be decided on the basis of the Inspector's visit on 17.9.2007 which is much subsequent to the Assessment Year under consideration. The AR had submitted wages/salary register before the AO during the assessment proceeding the content of it was not disputed by the AO. Taking into consideration the facts of the appellant case and submission of the AR and keeping in view the decision of the ITAT, Ahmedabad in the case of Samarth Healthcare, 1 am of the opinion that the appellant is eligible for the deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1622/AHD/2012 order dated 21.02.2013 had upheld the order of Hon ble Tribunal wherein the Hon ble Tribunal relying upon the decision in the matter of ITO vs. Samarth Health Care had allowed the Assessee the claim of deduction u/s 80IB of the Act. He therefore submitted that since the Assessee is of Daman, the Jurisdictional High Court in the present case would be Hon ble Bombay High Court and the issue has to be decided in the light of the principles laid down by jurisdictional High Court. He further submitted that since on identical facts, the issue has been decided by the jurisdictional Hon ble Bombay High Court in favour of the Assessee, the ground of the Revenue needs to be dismissed. He also placed reliance on the decision in the case of ITO vs. Auto Tuff Safety Glass ITA No. 3335/AHD/2010. He thus supported the order of CIT(A). 7. We have heard the rival submissions and perused the material on record. We find that issue in the present case is with respect to deduction u/s 80IB which was denied by the A.O for the reason that the factory license was issued to the Assessee on 18.11.2004 and thereof the Assessee could not have started the production before 31st March, 2004. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s implementing those Acts/Statutes and the same cannot be the basis of denial of benefit under Section 80IB of the said Act. The Revenue has not been able to point out why and how the decision of the Tribunal in the matter of Samarth Health Care (supra) is inapplicable to the present facts. In any event, the CIT(A) while setting aside the order of the Assessing Officer, directs the Assessing Officer to verify the Income of the Respondent-Assessee eligible for deduction under section 80IB before granting relief. 8. Before us Revenue has not brought any contrary binding decision in its support nor has been able to distinguish the judgments relied upon by the CIT(A) or the Assessee. In view of aforesaid facts, relying on the aforesaid decisions of Hon ble High Courts, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. Ground no. 3 is with respect to deletion of disallowance made on account of remuneration to partners. 9. During the course of assessment proceedings, on perusing the partnership deed A.O noticed that no remuneration has been paid to the partners. A.O was of the view that since the Assessee was entitled to claim ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees' have claim deduction under Chapter VI-A has been set to rest by the decision of the Ahmedabad Tribunal in the case of Mundra Packaging Industries, Silvassa and Thermal Systems and Engineers, Silvassa, wherein the Tribunal has concluded that interest on capital and remuneration cannot be thrust upon the assessee when the assessee has neither credited interest or remuneration to capital account nor has it paid the same to any partner. In the remand report the assessing officer has produced the relevant clause of the partnership deed and has contended that remuneration is payable to partners based on this clause of partnership deed. 6.3 On going through the clause relating to reimbursement in the partnership deed it is evident that the clause is vague in nature and does not even prescribe the method of calculating the remuneration. Moreover keeping in view of decision of the Hon'ble ITAT, Ahmedabad in the case of Mundra Packaging Industries, Silvassa and Thermal Power Systems and Engineers, Silvassa I am of the opinion that remuneration cannot be thrust upon the appellant so this ground of appeal is allowed. 10. Aggrieved by the order of CIT(A), Revenue is now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re CIT(A) who deleted the addition by holding as under:- 7.3 I have perused the Assessment Order and the submission before me by the Ld. AR of the appellant. The deduction U/s.80-IB was not granted to the appellant on the disallowance made on technical ground. I am of the opinion that the deduction U/s.80-IB has to be granted on the computed income derived from the industrial undertaking. Any addition / disallowance made during the course of assessment do not lose the characteristic of being derived from the industrial undertaking as its original source. Accordingly I am constrained to disagree with the assessing Officer that such disallowance is not entitled for deduction U/s.8o-IB. This deduction is to be allowed on the computed income of the Industrial undertaking. The same has been confirmed by the Hon'ble ITAT, Ahmedabad in the case (i) I.T.O. Ward-4 v/s. M/s. Anupam Industries ITA No.3571/Ahd/2008, (2) I.T.O. Ward-4, Vapi v/s.M/s. Unimold India ITA No.4145/Ahd/2008. So the appellant succeeds in this ground of appeal and the Assessing Officer is directed to grant deduction U/s.8o-IB @ 100% of computed income from business 14.Aggrieved by the order of CIT(A), Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year on payment basis. This would lead to double benefit to the assessee. 19.Before us, both the parties submitted that the grounds no. 1 2 are identical to ground no. 1 2 for A.Y. 05-06 except for the amounts and the submissions made by them while arguing the grounds for A.Y. 05-06 would equally apply to present grounds. 20.We have heard the rival submissions and perused the material on record. Before us, both the parties have admitted that the facts and circumstances of case in the present grounds are similar and identical to the ground no. 1 2 of the Revenue s appeal for A.Y. 05-06. We hereinabove, while deciding the appeal of Revenue for A.Y. 05-06 for the reasons stated therein have dismissed the grounds of Revenue. Since the facts and circumstances of the present grounds raised by Revenue are similar to the grounds for A.Y. 05-06, we therefore for similar reasons stated herein, while deciding the grounds for A.Y. 05-06 also dismiss the grounds of Revenue. Ground no. 3 is with respect to the allowing the deduction u/s 80IB(10). 21.During the course of assessment proceedings, A.O noticed that Assessee has filed the return of income for A.Y. 06-07 on 30.12.2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is seen that facts are identical in both the cases. In that case, the issue in dispute was decided by the Tribunal in favour of the assessee and the relevant para of the Tribunal decision is para 7 which is reproduced below: We have considered the rival submissions and we do not find merit in the appeal of the revenue. The facts noted in the impugned order have not been disputed. It is not in dispute that the CBDT considering the reports on disruption caused due to heavy rains and floods in the State of Gujarat extended the due date for filing of return from 31-10-2006 to 31-12-2006 in the case of income tax assessees in the State of Gujarat. The assessments framed in the cases of the assessees who carried on business in Daman are assessed or assessable in the State of Gujarat by Income Tax Office situated at Vapi. The assessee also explained that due to different category of AO, status, income and in cases of non-cooperate, the assessees having income of more than ₹ 5 lacs are assessed at Vapi and the small assessees are assessed at the Office at Vapi, Ward -4, Daman. It is not in dispute that the office of Income Tax Office, Vapi, Ward-4, Daman falls within the juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of Revenue is dismissed. Ground no. 4 is with respect to the expenses of labour charges disallowed u/s 40A(2)(b). 23. During the course of assessment proceedings, A.O noticed that Assessee has paid labour charges to its sister concern, Twina Polymers at ₹ 4 per Kg. whereas to other concerns it was paid at ₹ 5 per Kg. A.O was of the view that by paying less labour charges, the Assessee has increased the profit and thereby has claimed excess deduction U/s. 80IB. He accordingly worked out the labour charges at ₹ 78,137/- and allowed the same. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A).CIT(A) deleted the action of the A.O by holding as under:- 7.3 I have considered the observation of the A.O in the assessment order as well as the contentions raised by the A.R of the appellant in the written submission. I agree with the contentions raised by the A.R. of the appellant that labour charges paid for different gauge and specification of the finished goods and therefore the wages rate are different. Thus, the appellant s Ground no. 3 is Allowed. 25.Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 26.Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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