Deduction u/s 80IC stands allowed on the basis of consistency.

ITO Vs Indica Industries Pvt. Ltd. (ITAT Delhi)

Unless and until the position in initial year is disturbed, it is not possible to take a different view for the subsequent assessment years .

It can be seen from the impugned order that ld. CIT(A) noted that assessment year 2014-15 is not the initial year to claim the deduction u/s. 80IC of the Act in respect of the manufacturing unit-III at Kotdwar. Learned CIT(A) noted that the learned Assessing Officer denied the claim of deduction of the assessee on the ground that similar claim of deduction u/s. 80IC was denied to the assessee company for the assessment years 2011-12 to 2013-14 and no new material was brought on record for this particular year. Ld. CIT(A) recorded that in appeal, such a claim was allowed for the assessment years 2010-11 to 2013-14 after considering the contention of the assessee in the light of the facts of the case. Since there has not been any change in the facts and circumstances of the case during the assessment year 2014-15 from those involved for assessment years 2010-11 to 2013-14, while following the view taken in earlier years, ld. CIT(A) allowed such a claim for this year also. It is pertinent to note that the view taken by the first appellate authority in assessee’s own cases for the assessment years 2010-11 to 2013-14 remains undisturbed as on the date.

In these circumstances, we find it difficult to say that the impugned order suffers any illegality or irregularity, inasmuch as the assessment year 2014-15 is not the initial year whereas the initial year happens to be the assessment year 2010-11 and from assessment year 2010-11 to 2013-14, claim of the assessee for deduction u/s. 80IC stands allowed. Unless and until the position in initial year is disturbed, it is not possible to take a different view for the subsequent assessment years. On this ground, we uphold the findings of the ld. CIT(A) and dismiss ground No. 1 of the Revenue’s appeal.

FULL TEXT OF THE ORDER OF ITAT DELHI

Aggrieved by the order dated 27/03/2018 passed by the learned Commissioner of Income Tax (Appeals)-4, New Delhi (“Ld. CIT(A)”) in the case of Indica Industries Pvt. Ltd. (“the assessee”) for the assessment year 2014-14, the Revenue filed this appeal.

2. Brief facts of the case are that the assessee is engaged in the business of manufacture and sale of Automotive components, Medical products, Thirmal and Acoustic Insulation, Perlite Filterais, Perlite concrete blocks etc. in its various units. For the assessment year 2014-15, they have filed their return of income on 26.12.2014 declaring an income of Rs.21,90,46,670/-. Assessment u/s. 143(3) of the Income-tax Act (“the Act”) was complete at an income of Rs.23,63,26,440/- after disallowing deduction/s. 80IC of the Act for Kotdwar unit to the extent of Rs.1,35,19,592/- and disallowance of expenses u/s. 14A read with Rule 8D of the Income-tax Rules to the tune of Rs.37,60,178/-.

3. In appeal, ld. CIT(A) deleted both the additions after considering the contentions raised by the assessee. Revenue is, therefore, aggrieved of the impugned order and filed this appeal, challenging the deletion of both the additions.

4. Coming to the first addition, made on disallowance of the claim of deduction u/s. 80IC in respect of Kotdwar Unit-III, it is recorded by the Assessing Officer that the assessee company had formed that unit after splitting up the existing unit at Noida. Assessee company is engaged in the manufacturing of same products, which was manufactured at Noida Unit and the customers to whom the supplies are made are essentially the same as for Noida Unit and the same expertise and technology is utilized in Unit-III of Kotdwar as developed in the main unit at Noida. Assessing Officer, therefore, concluded that Unit-III at Kotdwar was merely an expansion or split up of the main unit at Noida and on that premise, he disallowed deduction u/s. 80IC of the Act to the tune of Rs.1,35,19,592/-. Assessing Officer further noted that similar claim was made by assessee in respect of such unit-III of Kotdwar for the assessment years 2011-12, 2012-13 and 2013-14 which was denied and no new material was brought on record.

5. It can be seen from the impugned order that ld. CIT(A) noted that assessment year 2014-15 is not the initial year to claim the deduction u/s. 80IC of the Act in respect of the manufacturing unit-III at Kotdwar. Learned CIT(A) noted that the learned Assessing Officer denied the claim of deduction of the assessee on the ground that similar claim of deduction u/s. 80IC was denied to the assessee company for the assessment years 2011-12 to 2013-14 and no new material was brought on record for this particular year. Ld. CIT(A) recorded that in appeal, such a claim was allowed for the assessment years 2010-11 to 2013-14 after considering the contention of the assessee in the light of the facts of the case. Since there has not been any change in the facts and circumstances of the case during the assessment year 2014-15 from those involved for assessment years 2010-11 to 2013-14, while following the view taken in earlier years, ld. CIT(A) allowed such a claim for this year also. It is pertinent to note that the view taken by the first appellate authority in assessee’s own cases for the assessment years 2010-11 to 2013-14 remains undisturbed as on the date.

6. In these circumstances, we find it difficult to say that the impugned order suffers any illegality or irregularity, inasmuch as the assessment year 2014-15 is not the initial year whereas the initial year happens to be the assessment year 2010-11 and from assessment year 2010-11 to 2013-14, claim of the assessee for deduction u/s. 80IC stands allowed. Unless and until the position in initial year is disturbed, it is not possible to take a different view for the subsequent assessment years. On this ground, we uphold the findings of the ld. CIT(A) and dismiss ground No. 1 of the Revenue’s appeal.

7. Now coming to the disallowance u/s. 14 read with Rule 8D of the Rules, assessment order speaks that initially the assessee disallowed a sum of Rs.2,43,289/- and subsequently offered a further sum of Rs.5 lacs making the total Rs.7,43,289/-. Assessing Officer, however, computed the disallowance u/s. 8D(2)(iii) of the Rules to the tune of Rs.45,05,446/- and made an addition of Rs.37,60,178/-. It could be seen from the record that all through the assessee has been pleading that for the management of portfolio of investment, they have engaged renowned portfolio Managers, namely, ICICI Prudential Asset Management Company Ltd., who are taking care of all the administrative issues incurring the expenses necessary and the assessee made payment of Rs.2,15,556/- and by aggregating the total expense, the assessee suo moto disallowed a sum of Rs.2,43,289/-. In addition to this, saying that in order to buy peace, assessee offered a further sum of Rs.5 lacs to take care of any possible direct or indirect expenses attributable to exempt income.

8. Learned CIT(A) on examination of the facts, recorded a finding of fact that nowhere in the assessment order, ld. Assessing Officer demonstrated that the self disallowance made by assessee was incorrect or inadequate, but resorted to the mechanical application of section 14A read with Rule 8D. According to the ld. CIT(A), Assessing Officer had ignored the fact that the assessee had itself disallowed certain amount of expense attributable to earning of exempt income. While noticing various decisions in DCIT vs. Jindal Photo Ltd. (ITA No. 814/Del/2011, Maxopp Investment ld. & Ors. Vs. CIT, 347 ITR 272 (Del), DTC India Ltd. vs. DCIT, ITA No. 580 & 581/Del/2009, CIT vs. Taikisha Engg. India Ltd. (ITA No. 115/2011 order dated 25.11.2014 and Joint Investment Pvt. Ltd. vs. CIT, 59 taxmann.com 295(Del), ld. CIT(A) recorded a finding that without pointing out any discrepancy in the suo moto disallowance made by assessee, it is not justified for the Assessing Officer to make any disallowance u/s. 14A.

9. On a careful consideration of all these facts, we are of the considered opinion that the reasoning given by the CIT(A) to delete the addition made by invoking the provisions of section 14A by the Assessing Officer without pointing out any discrepancy in the suo moto disallowance made by the assessee, is impeccable and does not suffer any legal infirmity so as to make it necessary to enquire with such findings. We, therefore, uphold such a finding and dismiss the other grounds of appeal.

10. In the result, appeal of the Revenue is dismissed.

Order pronounced in the open court on 29^th day of July, 2021.