THE CHIEF COMMR. OF INCOME TAX FARIDABAD V. M/S TALBROS ENGINEERING LTD.

ITA/497/2006

AI Insights

The case revolves around the eligibility of M/s Talbros Engineering Limited for a deduction under Section 80-I of the Income Tax Act, 1961, for the assessment year 1996-97. The company, formed by the de-merger of M/s TACL, claimed deductions for profits earned in Plant II, which was transferred from Talbros Automotive Components Limited (TACL) following a Delhi High Court order. The Assessing Officer initially denied the deduction, leading to a series of appeals. The Income Tax Appellate Tribunal eventually ruled in favor of the assessee, a decision which the revenue challenged in the High Court. The High Court, referencing a precedent set in Commissioner of Income Tax v. Mega Packages, upheld the Tribunal's decision, affirming the assessee's entitlement to the deduction.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 730337 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 31-03-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Mega Packages, (2011) 203 Taxman 236 (P&H)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAKESH GUPTA; RISHAB KAPOOR
• Assessee Lawyers: TEJINDER JOSHI
• Keywords: Assessment Year; De-merger; Deduction; Income Tax; Industrial Undertaking
• Section: 143(3); 260A; 80-I

Judgement Text

"ITA No.497 of 2006 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.497 of 2006 Date of decision:31.3.2014 Chief Commissioner of Income Tax (OSD), Faridabad …Appellant Vs. M/s Talbros Engineering Limited, 74-75, Sector 6, Faridabad …Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Tejinder K.Joshi, Advocate for the appellant. Dr. Rakesh Gupta, Advocate and Mr. Rishab Kapoor, Advocate for the respondent. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 18.11.2005, Annexure A.III passed by the Income Tax Appellate Tribunal, Delhi Bench ‘A’ New Delhi in ITA No.3013/Del/1999 for the assessment year 1996-97. It was admitted on 9.1.2007 to consider the following substantial questions of law:- “a) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal (ITAT) was correct in holding that the assessee company was entitled to deduction under section 80-I of the Income Tax Act, 1961, despite the fact 1 Singh Gurbax 2014.05.27 11:50 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.497 of 2006 that it had been formed by de-merger of erstwhile company M/s TACL and, thus, was a case of splitting up or reconstruction of a business already in existence? b) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal (ITAT) was correct in holding that the condition prescribed in Section 80-I (2) (i) and (ii) of the Income Tax Act, 1961 were fulfilled by the assessee company for availing benefits under section 80-I of the Income Tax Act, 1961?” 2. A few facts relevant for the decision of the controversy involved, as narrated in the appeal, may be noticed. The assessee filed its return of income declaring an income of ` 21,63,875/- on 29.11.1996. The assessee company was engaged in the manufacture and sale of Rear Axles and kingpins for Ambassador cars, Mahindra Jeeps and Tractors etc. The assessee claimed deduction under Section 80-I of the Act in respect of profits earned in Plant II of the company. Its industrial undertaking named as Plant II was transferred from Talbros Automotive Components Limited (TACL), pursuant to the order of the Delhi High Court. On the said plant, deduction under Section 80-I of the Act was claimed by TACL upto Assessment year 1995-96. Since the deduction was attached to the industrial undertaking and not to the assessee, it was claimed in respect of the said plant. However, the Assessing Officer did not allow the deduction under Section 80-I of the Act at ` 33,33,704/- as the requisite conditions for the claim of deduction under section 80-I of the Act were not fulfilled. Assessment under section 143(3) of the Act was completed by the Assessing officer on 16.12.1988, Annexure A.1 at ` 93,03,380/- after disallowing the claim of the assessee and making certain other additions. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax 2 Singh Gurbax 2014.05.27 11:50 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.497 of 2006 (Appeals) [CIT(A)]. Vide order dated 21.4.1999, Annexure A.II, the CIT(A) partly allowed the appeal, deleting the additions made by the Assessing officer and allowing deduction under Section 80-I of the Act. Not satisfied with the order, the revenue filed appeal before the Tribunal. Vide order dated 18.11.2005, Annexure A.III, the Tribunal dismissed the appeal of the revenue. Hence the present appeal by the revenue. 3. We have heard learned counsel for the parties and perused the record. 4. Learned counsel for the respondent-assessee states that the issue involved stands concluded against the revenue and in favour of the assessee in view of the judgment of this Court in Commissioner of Income Tax v. Mega Packages, (2011) 203 Taxman 236 (P&H), wherein it was held as under:- “Benefit being admissible to an undertaking, the same could not be denied to the assessee for the remaining period only on the ground that sub section (12) of section 80-IA embraces only cases of amalgamation or demerger of Indian Company and, therefore, such benefit would not be available in case of change from proprietorship to partnership firm. Adverting to the alternate reason adopted by the AO to deny the benefit of section 80-IC of the Act for the remaining period, suffice it to notice that the formation of the partnership from proprietorship business could not be held to be as a result of splitting or reconstruction of a business already in existence which could justify denying benefit by virtue of section 80-IC (4) (i). The interpretation placed by the tribunal on the provisions of section 80-IC(4) (i) being in consonance with law, no fault arises in the view taken by the Tribunal. No ground to interfere with the order of the Tribunal has been made out.” 3 Singh Gurbax 2014.05.27 11:50 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.497 of 2006 Learned counsel for the appellant-revenue was unable to dispute the applicability of the said judgment to the facts of the present case. 5. In view of the above, the substantial questions of law are answered against the revenue and in favour of the assessee. Consequently, finding no merit in the appeal, the same stands dismissed. (Ajay Kumar Mittal) Judge March 31, 2014 (Jaspal Singh) ‘gs’ Judge 4 Singh Gurbax 2014.05.27 11:50 I attest to the accuracy and integrity of this document High Court Chandigarh "