Case Law Details
Brief of the Case
In the case Manoj Garg Vs. ITO the Hon’ble Kolkata ITAT held that both Central Excise Refund and Sales Tax Remission are eligible deductions u/s 80IC and that the CIT was not justified in initiating proceedings u/s 263 of the Act in the instant case on the ground that the income by way of Central Excise Refund and Sales Tax remission were not eligible for deduction u/s. 80-IC of the Act. It also held that where two views were possible and the AO had taken one view with which the CIT did not agree, the assessment order could not be treated as an order prejudicial to the interest of Revenue and therefore the CIT could not take recourse to action u/s. 263 of the Act.
Facts of the Case
The assesse is an individual and derives income mainly from two sources viz., commission from dealing in paddy and proprietorship business ion manufacturing PVC pipes and related articles. The assessee filed his return of income showing taxable income at Rs.1,45,654/- after claiming deduction of Rs.53,55,332/- under Chapter VI-A of the Act for AY2009-10. After examining the books of accounts, the AO completed assessment u/s 143(3) of the Act on total income of Rs.1,45,654/-. After completion of the assessment, the CIT examined the assessment record and found that the entire business since from the manufacturing business was claimed as deduction by the assessee u/s. 80-IC of the Act. And details of business since as shown in Schedule-G of the account disclosed a total amount of Rs.35,38,534/ consisting of Central Excise refund of Rs.12,93,302/- and sales tax remission of Rs.22,45,232/-.
The CIT issued SCN dated 12.02.2013 and pointed out that the aforesaid two amounts should not be considered as profit derived from the manufacturing business and therefore the deduction u/s. 80-IC allowed by the AO in respect of these two items was wrongly allowed. Further, according to CIT, no certificates of the Auditors in Form No.10CCB was furnished along with the Tax Audit Report as per Rule 18BBB of the I.T. Rules for granting benefit u/s 80-IC of the Act. In view of these defect, he was of the view that the deduction u/s. 80-IC of the Act to the extent of Rs.35,38,534/- representing Central Excise refund and sales tax remission as stated above was wrongly allowed and therefore the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue.
Contention of the Assessee
The assessee argued that the CIT was not justified in assuming jurisdiction u/s. 263 of the Act without establishing that the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue. Regarding the allegation of non-submission of certificate of Small Scale Industries and Auditors Report in Form 10CCB, it was submitted by the AR that these certificates were filed at the assessment stage. Even otherwise, it has been held that the submissions of these certificates are not mandatory but only directory and hence it could be filed at the appellate stage also. Since copies of these certificates were again enclosed with the written submission of the AR filed before the CIT, the
allegation of non-submission of these certificates lost its importance.
the AR in his written submission submitted that in the case of CIT vs. Meghalaya Steels Ltd.(2011)332 ITR 91 (Guwahati) it was held that Central Excise Refund was eligible for deduction u/s. 80-IB/80-IC of the Act. He also contended that as per Co-ordinate Bench of this Tribunal of Kolkata decision Sales Tax Remission was also eligible for deduction u/s. 80-IC of the Act. The AR relied on ITAT Guwahati Bench in the case of Meghalaya Mineral Products vs. ACIT reported in 168 TTJ 143, wherein it is also held that Central Excise refund and VAT remission are both eligible for deduction u/s 80-IC of the Act.
In this connection attention is also invited to the Hon’ble Supreme Court decision in the case of Malabar Industrial Co. Ltd. 243 ITR 83 in which it has been held that where two views were possible and the AO had taken one view with which the CIT did not agree, the assessment order could not be treated as an order prejudicial to the interest of Revenue and therefore the CIT could not take recourse to action u/s. 263 of the Act. Since deduction of Central Excise refund and Sales Tax remission are both covered by the Tribunal decisions as stated above, the CIT was not justified in initiating proceedings u/s 263 of the Act in the instant case on the ground that the income by way of Central Excise Refund and Sales Tax Remission were not eligible for deduction u/s. 80-IC of the Act.
Contention of the Revenue
The Ld. DR of Department relied on the orders of the lower authorities.
Held by ITAT
ITAT held that the in the instant case, the AO in the course of the assessment proceedings applied his mind and made enquiry regarding the deduction u/s. 80IC of the Act as claimed by the assessee in his computation of income by calling for necessary documentary evidences.
Even on merits the issue is covered by the judgment of Hon’ble Guwahati High Court in the case of Meghalaya Steels Ltd., wherein it was held that Central Excise Refund was eligible for deduction u/s. 80 IB/80-IC of the Act. It further noticed that the Guwahati Bench of this Tribunal in the case of Meghalaya Mineral Products (supra), has also held that Central Excise refund and VAT remission are both eligible for deduction u/s 80-IC of the Act. Thus, the Hon’ble ITAT is of the view that the CIT was therefore not justified in holding that these two items were not eligible for deduction u/s. 80IC of the Act.
The Hon’ble ITAT also noted the judgment of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. in which it has been held that where two views were possible and the AO had taken one view with which the CIT did not agree, the assessment order could not be treated as an order prejudicial to the interest of Revenue and therefore the CIT could not take recourse to action u/s. 263 of the Act.
Case laws relied upon by the ITAT
- CIT vs. Meghalaya Steels Ltd.(2011) 332 ITR 91
- Meghalaya Mineral Products vs. ACIT 168 TTJ 143
- Malabar Industrial Co. Ltd. 243 ITR 83
