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Case Law Details

Case Name : N Core Cables Vs ACIT (ITAT Surat)
Appeal Number : ITA No. 322/SRT/2018
Date of Judgement/Order : 04/08/2022
Related Assessment Year : 2004-05
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N Core Cables Vs ACIT  (ITAT Surat)

Held that Section 80IB deduction allowable to the industrial undertaking manufacturing at third party premises using their machinery under the supervision and control of an assessee amounts to manufacturing by the industrial undertaking.

Facts- AO observed that assessee has started its business activity from the accounting period relevant to AY 2004-­05. As such, the year under consideration is the first year of business activity of the assessee. The AO observed from the ROI, the assessee has claimed depreciation on fixed assets. Ongoing through the case records of the assessee, it was noted by AO that assesses is not utilizing the power in its unit, therefore, during the assessment proceedings, a show-cause letter was issued on 03.11.2006 stating as to why the claim made u/s 80-IB of the Act should not be disallowed under the Provisions of section 80-IB(2)(IV) of the Act and why same should not be taxed?

AO has gone through the submission of the assessee and observed that assessee is not doing any manufacturing activity and it is doing job work from M/s Nangalwaia Chemical Industries, which is the sister concern of the assessee. AO observed that Mr Naresh Agarwal is the common partner in both the firms namely M/s Nangalwala Chemical Industries as well as in M/s N-Core Cables. Therefore, AO noted that it was in the knowledge of Mr. Naresh Agarwal that the manufacturing activity for the assessee undertaking is done by M/s Nangalwala Chemical Industries and assessee undertaking is not doing any manufacturing activity as manufacturing activity was carried out under the supervision of Mr. Naresh Agarwal. In view of the above, activity of the unit of the assessee was not considered as a manufacturing activity by assessing officer therefore, AO disallowed the claim of deduction u/s 80IB of the Act to the tune of Rs.8,00,308/-.

CIT(A) confirmed the action of AO. Being aggrieved, assessee preferred the present appeal.

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