ITO, Haridwar V. M/s. Laxmi Electronics, Dehradun

ITA 1994/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1345 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT JAIN SENIOR
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1994/DEL./2015 (ASSESSMENT YEAR : 2009-10) ITO, WARD 2, VS. M/S. LAXMI ELECTRONICS, HARIDWAR. C/O SHRI N.R. GOEL, ADVOCATE, 32, E.C. ROAD, DEHRADUN. (PAN : AACFL6648R) (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. RAKESH GUPTA, ADVOCATE SHRI RACHIT RELAN, ADVOCATE SHRI PANKAJ JAIN, CA SHRI TARUN KUMAR, ADVOCATE REVENUE BY : SHRI AMIT JAIN, SENIOR DR DATE OF HEARING : 19.07.2018 DATE OF ORDER : 10.09.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, INCOME-TAX OFFICER, WARD 2, HARIDWA R (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILI NG THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 09.01.2015 PASSED BY LD. CIT (APPEALS), DEHRADUN QUA THE ASSES SMENT YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- ITA NO.1994/DEL./2015 2 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN ALLOWING THE DEDUCTION U/S 80IC ON ACCOUNT OF DISALLOWANCE OF INFLATED PURCHASES IN GROSS NEGLECT OF THE PROVISIONS OF SECTION80A( 5) OF THE INCOME TAX ACT, AS THERE IS NO CLAIM IN THE RETURN OF INCOME FOR TH E AMOUNT DIRECTED FOR ALLOWANCE OF DEDUCTION. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN ALLOWING THE DEDUCTION-U/S 80IC ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) AS ACCORDING TO THE PROVISIONS OF SECTION 80A(5) OF THE INCOME TAX ACT, WHERE ASSESSEE FAILS TO MAKE CLAIM IN THE RETURN OF INCOME FOR DEDUCTION U/S 80IC, NO DEDUCTION IS ALLOWABLE.. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER MADE DI SALLOWANCE OF THE CLAIM OF RS.73,91,587/- MADE UNDER SECTION 80IC OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) FOR THE REASON THAT THE PURCHASES WERE MADE BY THE ASSESSEE IN FARIDABAD WH EREAS HIS BUSINESS ACTIVITIES WERE CARRIED OUT AT HARIDWAR. AO ALSO MADE DISALLOWANCE OF RS.5,20,550/- ON ACCOUNT OF VIOLATI ON OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND ASSESSED THE TO TAL INCOME AT RS.2,57,71,167/-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF APPEAL BEF ORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION MADE BY THE AO BY ALLOWING THE BENEFIT U/S 80IC TO THE ASSESSEE ON THE ENTIRE ELIGIBLE INCOME BY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL. ITA NO.1994/DEL./2015 3 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, THE ASSESSEE UNIT IS ELIGIBLE FOR DEDUCTION U/S 80IC. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS ENTITLED FOR BENEFIT OF SECTION 80IC ON THE ENTIRE ELIGIBLE INCO ME. IT IS ALSO NOT IN DISPUTE THAT THE AO HAS GRANTED RELIEF TO THE AS SESSEE U/S 80IC QUA THE AMOUNT OF RS.73,91,587/- CLAIMED IN THE RET URN OF INCOME. 6. SO FAR AS QUESTION OF ALLOWING THE DEDUCTION U/S 80IC ON ACCOUNT OF DISALLOWANCE OF INFLATED PURCHASES BY LD . CIT (A) IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE PROFITS FOR THE PURPOSES OF SECTION 80IC WERE TO BE CALCULATED AS PER SECTION 28 TO 44BB OF THE ACT, THE PURCHASES WERE ALSO COVE RED UNDER THE ACT AND WHILE CALCULATING THE PROFITS OF ANY BUSINE SS, THE PURCHASES ARE ALSO DEDUCTIBLE EXPENDITURE. WHEN THE DISALLOW ANCES IN PURCHASES ULTIMATELY REDUCES THE PURCHASE AMOUNT AN D CONSEQUENTLY, INCREASES THE PROFIT WHICH WOULD BE A GAIN ELIGIBLE FOR EXEMPTION U/S 80IC OF THE ACT, IT WOULD NOT INC REASE THE INCOME OF THE ASSESSEE WHICH WOULD REMAIN THE SAME EVEN IF THE PURCHASES WERE DISALLOWED. ITA NO.1994/DEL./2015 4 7. THE CONTENTION OF THE REVENUE THAT WHEN THE ASSE SSEE HAS NOT MADE ANY CLAIM IN THE RETURN OF INCOME FOR THE AMOUNT CLAIMED AS DEDUCTION, THE DEDUCTION CANNOT BE ALLOWED IN VI EW OF THE PROVISIONS CONTAINED U/S 80A (5) OF THE ACT IS NOT SUSTAINABLE IN THE FACE OF THE FACT THAT THE ASSESSEE HAS CERTAINLY MA DE THE CLAIM IN THE RETURN AS THE AO HIMSELF SHOWN THE INCOME FROM BUSI NESS AT RS.3,36,83,304/- AND IN THESE CIRCUMSTANCES, THE DE DUCTION U/S 80IC IS ALLOWED ON PROFIT. SO, THE CONTENTION OF T HE REVENUE THAT THE ASSESSEE HAS NOT MADE THIS CLAIM IN THE RETURN IS WRONG AND INCORRECT. MOREOVER, WHEN THE ENTIRE PROFIT OF THE ASSESSEE IS EXEMPT U/S 80IC THEN THE ASSESSEE IS NOT SUPPOSED T O ENHANCE THE EXPENDITURE. SO, THE LD. CIT (A) HAS RIGHTLY DELET ED THE DEDUCTION U/S 80IC MADE BY THE AO ON ACCOUNT OF INFLATED PURC HASES. 8. SO FAR AS QUESTION OF MAKING DELETION OF ADDITIO N OF RS.5,20,550/- MADE BY AO U/S 40(A)(IA) IS CONCERNED , AGAIN WHEN THE ENTIRE PROFIT IS DEDUCTIBLE U/S 80IC, THE DISAL LOWANCE U/S 40(A)(IA) WOULD NOT MAKE ANY DIFFERENCE AS IT WOULD ULTIMATELY MAKE THE ASSESSEE ELIGIBLE FOR ITS ENTIRE PROFIT DE DUCTIBLE U/S 80IC. MOREOVER, REVENUE ITSELF VIDE CIRCULAR NO.37/2016 D ATED 02.11.2016 CLARIFIED THAT THE ULTIMATE PROFIT OF TH E ASSESSEE AFTER ADJUSTING DISALLOWANCE U/S 40(A)(IA) WOULD QUALIFY FOR DEDUCTION ITA NO.1994/DEL./2015 5 UNDER CHAPTER VI ON THE PROFITS SO ENHANCED BY DISA LLOWANCE. THE RELEVANT PARA 3 OF THE AFORESAID CIRCULAR IS EXTRAC TED AS UNDER :- 3. IN VIEW OF THE ABOVE, THE BOARD HAS ACCEPTED TH E SETTLED POSITION THAT THE DISALLOWANCE MADE UNDER SECTIONS 32, 40(A)(IA), 40A(3), 43B, ETC. OF THE AC T AND OTHER SPECIFIC DISALLOWANCES, RELATED TO THE BUSINE SS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION H AS BEEN CLAIMED, RESULT IN ENHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSINESS, AND THAT DEDUCTION UNDER CHA PTER VI-A IS ADMISSIBLE ON THE PROFITS SO ENHANCED BY TH E DISALLOWANCE. 9. SO, IN THESE CIRCUMSTANCES, WE FIND NO ILLEGALIT Y OR PERVERSITY IN THE DELETION OF ADDITION MADE BY THE LD. CIT (A) MADE U/S 40(A)(IA) BY THE AO. 10. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 10 TH DAY OF SEPTEMBER, 2018. SD/- SD/- (N.K. BILLAIYA) (KULDIP SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 10 TH DAY OF SEPTEMBER, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), DEHRADUN. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.