| The Tax Publishers2019 TaxPub(DT) 7622 (Bom-HC) : (2020) 420 ITR 0001 : (2020) 315 CTR 0402 INCOME TAX ACT, 1961
Section 80-IB(4)
Where assessment year 2002-03 was the initial assessment year, as contemplated under clause (c) of sub-section 4 of section 80-IB because assessee failed to file any evidence in support to its claim that in the assessment year. 2002-03 there was trial run or testing period and manufacuring activity were begun only in assessment eyar 2003-04 hence, Tribunal rightly held that assessee was entitled to deduction of 30% of profit only and not 100% of profits.
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Deduction unders ection 80-IB(4) - Allowability - Trial run vis-a-vis beginning of manufacturing activity - 100% deduction claimed by assessee taking initial year of assessment year 2003-04
Assessee was a Public Limited Company engaged in the business of manufacturing and trading of optical fiber cable and accessories and other telecommunication equipment. On 14-11-2007, the Appellant filed return of income for the assessment year (AY) 2007-08 declaring the income of Rs. Nil, after claiming deduction under section 80-IB. Upon consideration of the assessee's reply to notice the AO allowed deduction of only 30% of the profit under section 80-IB as against 100% claimed by the appellant. The CIT(A) allowed assessee's appeal. The Tribunal however, allowed revenue's appeal holding that in assessment year 2002-03 manufacturing activity was begun and it could not be said that in that assessment year there was one testing or trial run and not manufacturing activity. Held: The ITAT had noted that absolutely there was no evidence produced on record that the processes undertaken in assessment year 2002-03 were in the nature of testing or trial production. No contemporaneous report of such trial production or testing were produced by the Appellant. No reports of production staff for testing were ever produced. All this material was more than sufficient to sustain the findings of fact recorded by the assessing officer and ITAT. In fact, the material on record suggests that prior to the amendment by Finance Act, 2002 in section 80-IB(4), the Appellant had declared the date that the Appellant's industrial undertakings began manufacture was 26-3-2002. However, after the amendment of extended date for beginning of manufacture upto 31-3-2004, the appellant sought to contend that the manufacture began for the first time at its industrial undertakings only on 1-2-2003. In any case even if the returns filed by the appelalnt or declarations made by the appelllant were to be excluded from consideration, rest of the material on record also does not support the appelalnt's contention that the processes undertaken during the assessment eyar 2002-03 were in the nature of testing or trial run is only involvement, there was no element of manufacture. In any case, taking into consideration the findings of fact recorded by the AO and the ITAT that the manufacturing in the present case actually commenced in the assessment year 2002-03 and not in the assessment year 2003-04. It is pertinent to note that the findings of fact is not at all vitiated by any perversity and therefore, it cannot be said that the ITAT was not justified in holding that the assessment year 2002-03 is the final assessment year as contemplated under clause (c) of sub-section 14 (Sic-4) of section 80-IB. Accordingly, the substantial question of law is required to be answered against the appellant and in favour of the revenue.
Distinguished:Commissioner of Income Tax, Poona v. Hindustan Antibiotics Ltd. (1974) 93 ITR 548 (Bom) : 1974 TaxPub(DT) 0251 (Bom-HC); CIT v. Himalayan Magnesite Ltd., (2005) 276 ITR 56 (All) : 2005 TaxPub(DT) 1120 (All-HC); Commissioner of Income Tax v. Emptee Poly-Yarn (P.) Ltd., (2010) 320 ITR 665 (SC) : 2010 TaxPub(DT) 1353 (SC)
REFERRED : Income Tax Officer, Udaipur v. Arihant Tiles and Marbles (P) Ltd., (2010) 320 ITR 79 (SC) : 2010 TaxPub(DT) 1098 (SC)
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