Case Law Details
Colorplus Realty Limited Vs Dy. CIT (ITAT Mumbai)
In the case of Colorplus Realty Limited vs. Dy. CIT, the Mumbai Income Tax Appellate Tribunal (ITAT) addressed the issue of deduction under section 80IB of the Income Tax Act for compensation received from an insurance company. Here’s a detailed analysis of the case:
Introduction: Colorplus Realty Limited contested the denial of deduction under section 80IB for compensation received from an insurance company for goods destroyed before sale. The dispute arose during assessment for the A.Y. 2001-02.
The assessee, engaged in garment manufacturing, received compensation for destroyed stocks from Oriental Insurance Company and franchisees. Initially, the claim was disallowed by the Assessing Officer (A.O.). The CIT(A) deleted the disallowance, but it was reinstated by the Tribunal. In the subsequent proceedings, the A.O. disallowed the claim again, which the CIT(A) upheld. The dispute revolved around whether the compensation was attributable to the industrial undertaking.
The appellant argued that the compensation should be credited to material consumed rather than the profit and loss (P&L) account. They relied on a Gujarat High Court decision which held such compensation eligible for deduction under section 80IA. The Revenue contended that the compensation didn’t pertain to the business’s profits and gains.
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