TMI Blog2020 (3) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... all the expenses incurred by the assessee for ascertaining shifting of any expenses to any other business of the assessee or to any other concern. From the finding of the CIT(A), it cannot be ascertained that he has examined the expenses as per the requirement of the section 80IA(8) or 80IA(10). CIT(A) is having coterminous power of the Assessing Officer, and thus, he was required to examine this issue thoroughly. In view of the facts of the circumstances of the case and in the interest of the substantial justice, we feel it appropriate to restore this issue back to the file of the Assessing Officer for deciding applicability of section 80IA(8) and 80IA(10) of the Act over the affairs of the assessee. The grounds raised by the Revenue in both the appeals are accordingly allowed for statistical purposes - ITA No.6196/Del./2016 And ITA No.6197/Del./2016 - - - Dated:- 28-2-2020 - Shri Amit Shukla, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Shri J.K. Mishra, CIT(DR) For the Respondent : Dr. Rakesh Gupta, Adv., Shri Somil Agarwal, Adv. ORDER PER O.P. KANT, AM: These two appeals by the Revenue are directed against common im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing. 2. Briefly stated facts of the case are that the assessee was engaged in rendering services of the job work to M/s Glaxo Smithkline Consumer Healthcare Ltd.(in short the Glaxo ). According to the Assessing Officer, the job work was only of packaging of Horlicks , Boost and another products of the company Glaxo , whereas according to the assessee, it was engaged in contract manufacturing of those products for the said company. 2.1 The assessee filed return of income for assessment year 2010-11 on 06/10/2010 declaring nil income and for assessment year 2011-12 on 29/09/2011 declaring total income of ₹ 6,07,98,667/-. The assessments under section 143(3) of the Income-tax Act, 1961 (in short the Act ) for assessment years 2010-11 and 2011-12 were completed on 31/03/2013 and 24/03/2014 respectively. During the assessment proceeding, the Assessing Officer noticed claim of deduction by the assessee under section 80IC of the Act amounting to ₹ 8,33,74,722/- @ 100% of the profit of the eligible business for assessment year 2010-11 and amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of deduction under section 80IC of the Act amounting to ₹ 8,33,74,722/- for assessment year 2010-11 and ₹ 2,59,58,108/- for assessment year 2011-12. 2.4 Aggrieved, the assessee filed appeal before the Ld. CIT(A) and submitted that in assessment year 2009-10, the Ld. CIT(A) as well as the Tribunal has decided the issue in favour of the assessee. The assessee also submitted that it has complied all the necessary condition for claim of deduction under section 80IC i.e. it was doing manufacturing activities and had consequently correctly claim the deduction under the said section. The detailed submission of the assessee have been reproduced by the Learned CIT(A) in the impugned order. 2.5 The Ld. CIT(A) referred the matter to the Assessing Officer regarding the possible application of the provision of section 80IC(7) of the Act. In the remand report, the Assessing Officer submitted that the assessee has not complied the Rule 18BBB of the Income-tax Rules, 1962 (in short the Rules ) and did not file details of the approval/permission issued by the Central Government/State Government/local authority for carrying out the eligible business vide column 13 of the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. Coming to the other issue, which . involves the possible application of the provisions of section 80IC(7) r.w.s 80IA(10), although the Assessing Officer has not commented on this issue in the remand report, it is clear from the financial statements and the discussions with the AR, that there is no other business, which is carried out by the appellant company. Hence, there is no reason to go into the issue of the deriving of more than ordinary profits which might be expected to arise in the eligible business as enshrined in those sub sections. However, the A.O has raised a separate issue regarding the deficiencies in the Audit Report in Form 10CCB, which are briefly discussed at para 5.4 herein above. The provisions of section 80IC of the Act are applicable to any undertaking or enterprise, which has begun or began to manufacture, produce any article or thing, and is not engaged in the manufacture or production of any article or thing, specified in Thirteenth Schedule of the Act. The section further deals with an industrial undertaking situated in any of the eligible states and which is engaged in the manufacture or production of articles or thing specified in Fourteenth Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, by merely stating that it was found to be a nonissue. 3. Before us, the learned DR relied on the order of the Assessing Officer and the remand report filed by him before the Ld. CIT(A). According to him, filing of copy of agreement or permission to carry on the activity, signed or issued by the Central Government or the State Government or the local authority for carrying on the eligible business, was requirement of Sub-rule 4 of Rule 18BBB of the Rules, which the assessee did not satisfy despite specifically asked to file such approval or permission during the course of the remand proceeding. He submitted that matter may be restored back to the learned CIT(A) to give a reasoned finding on the issue of the requirement of Rule 18BBB(4) of the Rules and also the abnormal profit from the job work declared by the assessee. 3.1 The Learned Counsel of the assessee, on the other hand, submitted that issue in dispute has already been decided in favour of the assessee by the Tribunal in assessment year 2009- 10 and there being no change in facts and circumstances of the case, the issue in dispute whether the activity of the assessee is manufacturing, is squarely covered in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. 4.3 Since in the instant case issue in dispute is not in respect of the quantum of the deduction with respect to intra-units and therefore, there is no effect of section 80IA(5) of the Act in the instant case. 4.4 Further, the section 80-IA(7) of the Act prescribes for admissibility of the deduction subject to filing of the Audit Report in prescribed form duly signed and verified by the accountant. The relevant section is reproduced as under: 80-IA (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have been summarized by the Ld. CIT(A) as under: 5.5 In the rejoinder to the report of the A.O filed during the course of hearing on 30.08.2016 the appellant has submitted that the filing of the Audit Report is the responsibility of the statutory auditor and column no. 13 of form 10CCB is not applicable for 80IC cases. From a bare perusal of section 80IC, it is apparent that there is no such requirement of taking any approval from Central Government/State Government/ Local Authority for carrying out the eligible business. In fact form 10CCB is a consolidated form for deductions claimed under sections 80IA, 80IB 80IC. It is stated that approval is required from Central Government/State Government/ Local Authority in cases of 80IA/80IB and not for section 80IC. It is settled law that the action point mention in the Rules cannot override the Rules nor can the Rules override the Act. My attention has been drawn to action point 6 and moreover it is submitted that this was never the case of the A.O in the assessment orders and it was precisely for this reason that column no. 13 was never required to be filled in by the assessee. 4.7 After taking into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the Central Government or the State Government or the local authority for carrying on the eligible business. Evidently, this requirement has not been fulfilled by the assessee. The Revenue before us has taken this ground specifically and also submitted that this issue has not been considered by the Tribunal in assessment year 2009-10. The filing of agreement/approval/permission being one of requirement of the statute and not complied by the assesee cannot be rejected as non-issue. In the facts and circumstances of the case and in the interest of the substantial justice, we feel it appropriate to restore the issue in dispute the file of the Assessing Officer to provide one more opportunity to the assessee to satisfy the requirement of section 80IA(7) of the Act along with Rules thereon. We are aware that activity of the assessee has been held to manufacturing activity in earlier year by the Tribunal but the assessee is required to fulfill the requirement of law in relevant assessment year. We may note that the Hon ble Supreme Court in the case of Distribution (Baroda) Pvt. Ltd. Vs. Union of India 155 ITR 120 has held that to perpetuate an error is no heroism and to rectify i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in clause (ii) of section 92F. (11) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertaking or enterprise with effect from such date as it may spe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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