INCOME TAX ACT, 1961

Section 80-IB/80-IC

Deduction under section 80-IB/80-IC - Allowability - Assessment year being subsequent year - Deduction rejected, without withdrawing deduction for initial year

AO noted that the Uttranchal Unit was dealing in a finished product named Ujala Supreme. The AO proceeded to deny the deduction under section 80-IC on the ground that the activity in Uttranchal Unit did not amount to 'manufacture' or 'production' of any article or thing, a necessary requirement for the claim of deduction. Secondly, the AO denied the claim also on the ground that the finished product of the assessee was an article of thing which was specified in Schedule XIII of the Act and therefore, not eligible for the claim of deduction. Thus , deduction claimed under section 80-IC was denied. For the reasons ascribed by him to deny the deduction under section 80-IC, the AO denied the claim under section 80-IB also, CIT(A) however, allowed assessee's claim for deduction under section 80-IC as well as under section 80-IB.Held: Pertinently, the reliefs under sections 80-IB and 80-IC were available for ten consecutive years starting from the initial assessment year when the relevant undertaking of the assessee commences manufacture or production. Therefore, factually speaking, the instant assessment year is not the initial year of the claim, either for section 80-IB or for section 80-IC. Once deduction was granted in the initial assessment year, the same would continue for the period of ten consecutive years unless the relief for initial assessment year was also withdrawn. There was absence of the Revenue to establish that for the subsequent assessment years in dispute, the facts were different from the facts on which the claim for deduction in the initial year was allowed. Mere initiation of proceedings under section 148 to reopen the assessment of the past year cannot be understood to mean that the 'claim is withdrawn'. Therefore, the AO could not have rejected the claim for deduction under section 80-IB as well as section 80-IC in the subject assessment order because the relief allowed in the initial assessment year was not withdrawn at the time of such rejection in the instant year.

Followed:Vireet Investment (P.) Ltd., (2017) 82 Taxmann.com 415 (Del-Trib.) (SB) : 2017 TaxPub(DT) 1760 (Del-Trib). Relied:CIT v. Paul Brothers (1995) 216 ITR 548 (Bom) : 1995 TaxPub(DT) 140 (Bom-HC).