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2022 (7) TMI 1018 - HC - Income TaxDeduction u/s 80IC - whether the process undertaken by the assessee in its industrial unit at Parwanoo amounted to ‘manufacture’ or ‘production’ of the Anchors so as to qualify the requirements of Section 80IC - AO and CIT(A) concurrently held that since the substantial process involved in production of Anchors was being got done by the assessee from Ludhiana on work order basis and only a small part of it was being done at Parwanoo, the assessee could not be said to have the necessary qualification to avail deduction under Section 80IC - ITAT allowed the deduction - HELD THAT:- Section 80IC of the Act allows deduction from the profits and gains in computing the total income of the assessee in specific cases enumerated in said provision. The assessee should be an undertaking or enterprises, which had begun to manufacture or produce any article or thing not being an article or thing specified in 13th schedule, between 07.01.2003 to 01.04.2012 in an Industrial Area notified by the CBDT. In the State of Himachal Pradesh, the industrial area of Parwanoo was so notified by the CBDT vide Notification No. 273/2003 dated 04.11.2003. The purpose of incorporation of Section 80IC manifestly was to invite long term investment, entrepreneurship etc. in the areas which were industrially backward. The incentive of deduction from the income generated from such enterprise for the limited years could not be used to negate the very purpose of the inclusion of Section 80IC. This facility could not be allowed to be used to camouflage the production by making only small investment in the areas specified in Section 80IC on one hand and abandon the production after lapse of incentive period on the other. The very small quantum of capital investment made by the assessee in establishing its unit at Parwanoo had also weighed with the Assessing Officer as one of the reasons to hold as above. The term ‘manufacture’ or ‘produce’ used in Section 80IC has to be construed in the true context of the object and purpose of the said provision. The ITAT has failed to consider this important aspect which, in our considered view, necessarily was mixed question of fact and law required to be decided by the Appellate Tribunal in exercise of jurisdiction vested in it under law. The substantial questions of law at Serial No. 1 and 2 are answered accordingly. Entire profit declared by the assessee was allowable as deduction u/s 80IC - Whether ITAT has misconstrued and misunderstood the facts on record while setting aside the clear finding that the profit had been inflated by the assessee for the purpose of deduction u/s 80IC - HELD THAT:- ITAT being the final fact finding authority, in our considered view, has drawn the conclusions on the basis of records. There is nothing in the order of Assessing Officer that the books of account of assessee were rejected. In the Assessment Order passed for Assessment Year 2006-07 the Assessing Officer had only observed that such books were not reliable, which cannot be taken to compliance of Section 145 of the Act. Further, the orders passed by Assessing Officer with respect to capping of profits earned by the assessee at 7% only on the alleged basis of comparison of accounts of Kay Pee Industries coupled with deduction of amount equivalent to 10% of the total sales towards non-payment of know how charges and towards usage of goodwill etc. have rightly been rejected by the ITAT being without any legal material or evidence. The Appellate Tribunal found nothing on record which could warrant the conclusions drawn by the Assessing Officer. To that extent, we are in agreement with the findings recorded by the ITAT. Questions No. 3 and 4 are answered accordingly.
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