2023 (9) TMI 381 - ITAT RAJKOT

Deduction u/s 80IA(4) - claim made for the first time - Choice of initial assessment year - as per AO assessee is engaged in the business of manufacturing of energy-saving devices being briquettes which cannot be considered as infrastructure facilities - Also period of 10 years for claiming the benefit of deduction under section 80-IA(4) of the Act has already expired from the initial assessment year - assessee contended that it has started new infrastructure facilities by upgrading its business with new plants and machinery, thus, the assessee should be eligible for deduction u/s 80 IA(4) - whether the assessment year in dispute in which the assessee has claimed deduction u/s 80IA in the year under consideration is the 2nd assessment year - HELD THAT:- It is the settled position of law that the conditions attached for claiming the deduction u/s 80-IA has to be verified by the revenue in the 1st year itself i.e. in the initial assessment year.

The revenue is debarred from denying the benefit of the deduction to the assessee claimed by it under section 80-IA of the Act after the initial assessment year on account of examination of preconditions. In holding so, we draw support and guidance from the judgement of Saurashtra Cement & Chemical Industries Ltd. [1979 (2) TMI 21 - GUJARAT HIGH COURT]

We also draw support and guidance from the judgment of ACE Multi Axes System Ltd [2017 (12) TMI 372 - SUPREME COURT] where it was observed, the issue regarding allowances of deduction under section 80IB of Act to small scale industrial undertaking, that certain precondition to allow tax holiday under impugned section can be only examined in the initial assessment year only.

It is the choice of the assessee to select the initial assessment year and therefore the same cannot be questioned. Furthermore, there is a possibility that the AO during the assessment proceedings might disallow the expenses which may turn the loss of the assessee into positive income, then in that eventuality the assessee can claim the benefit of deduction under section 80 IA of the Act.

Thus we are inclined to hold that the deduction u/s 80IA of the Act was first-time claimed by the assessee in the immediately preceding assessment year. Therefore, the deduction u/s 80IA claimed by the assessee in the subsequent year cannot be questioned until and unless the deduction claimed by the assessee in the initial assessment year is disturbed. Thus, we are inclined to set aside the order of the CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.

Non-deduction of TDS u/s 40(a)(ia) - AO during the assessment proceedings based on the audit report found that the assessee has given an advance to the party namely Garima Communication towards the advertisement expenses without deducting the TDS - HELD THAT:- Assessee has not claimed the deduction of ₹5 lakhs shown as an advance to the party namely Garima Communication. Thus, in such a situation we are of the view that there is no question of making the disallowance by adding to the total income of the assessee. Accordingly, we set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee are allowed.