ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(4),MUMBAI, MUMBAI vs. JYOTHY LABS LIMITED, MUMBAI

After carefully considering the order of the authorities below, we find that the Co-ordinate Bench in & 3876/Mum/2018 for AY 2013-14 & 2014-15 has considered a similar quarrel and held as under:- “7.2 We have also perused the finding of ld. CIT(A) as elaborated supra where exhaustive discussion has been made on the process of manufacturing of Ujala Supreme. It is explained that the acid violet-49 is the main raw material actually purchased from outside market and then added with water in stipulated proportion and then filtered for impurities after stirring it electronically under strict as Quality Control by respective staff. Thereafter, the material are transferred to the HDPE container in the requisite quantity of 30 ml, 75 ml, 250 ml capacity along with dropper which will dispense requisite 4 drops for1 litre of water. It was also explained that production of the assessee was not listed in the Thirteenth schedule and the raw material is purchased from the outside market and assessee company is not producing the said Violet-49. It is also explained that scheme of classification under the VAT Act is different from the Income Tax Act and the classification under the VAT cannot be used for interpreting the provisions of Thirteenth Schedule under the Income Tax Act.

The point raised is that when the deductions under section 80IC as well as under section 80IB of the Act have been granted in the initial assessment years, the same could not be rejected for the subsequent assessment years unless the relief allowed for the initial year was withdrawn. It has been pointed out by the learned A.R. that the deductions under Section 80IB and 80IC of the Act are allowable to an assessee over a specified number of consecutive assessment years, and in the instant case, such claims have not been withdrawn in the initial assessment years, therefore the action of the Assessing Officer to deny the claim in the instant assessment year is untenable. In support, reliance has also been placed on the principle laid down by the Hon'ble High Court in the case of CIT vs. Paul Brothers (1995) 216 ITR 548 (Bom.), which has been subsequently reiterated and applied by the Hon'ble High Court in the case of Simple Food Products (P) Ltd. (supra).

The learned D.R. has not joined issue with the respondent-assessee on factual matrix, but pointed out that the Assessing Officer has denied the claim in the instant year on a justified basis. The learned D.R. has reiterated the stand of the Assessing Officer on the merit of the controversy, which we are not inclined to go into for the present, as we deal with the preliminary point brought out by the learned A.R. for the respondent assessee.

In order to appreciate the preliminary point raised by the respondent assessee, the following factual position is relevant. In so far as the assessee’s claim for deduction under section 80IC of the Act with respect to Uttranchal Unit is concerned, the first year of claim was Assessment Year 2009-10 and the instant year is the third year of claim. Similarly, the claim of deduction under section 80IB of the Act in respect of Wayanad Unit was made by the assessee for the first time in Assessment Year 2002- 03 and the instant year is the eighth year of claim. In respect of Himachal Unit, the first year of claim of deduction under section 80IB of the Act was Assessment Year 2003-04, and thus the instant year is the seventh year of claim. Pertinently, the reliefs under sections 80IB and 80IC of the Act are 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 80IB or for section 80IC of the Act. At the time of hearing, the learned A.R. furnished a copy of the assessment year passed under section 143(3) of the Act for A.Y. 2002-03 dated 24.12.2004, which is the first year of claim of deduction under section 80IB of the Act with regard to Wayanad Unit, whose date of commencement of production/manufacture is 23.05.2001. Similarly, the date of commencement of manufacture/production of Himachal Unit is 25.08.2002, and the initial assessment year being 2003- 04 for which also, a copy of the assessment order passed under section 143(3) of the Act dated 30.01.2006 has been furnished, wherein the relevant claim under section 80IB has been allowed. In so far as the claim under section 80IC for Uttranchal Unit is concerned, the date of commencement of manufacture/production is 06.05.2008, and therefore the initial assessment year of claim is Assessment Year 2009-10. For Assessment Year 2009-10 also, a copy of the assessment order passed under section 143(3) of the Act dated 23.03.2011 has been furnished wherein the claim under Section 80IC of the Act has been accepted. In Assessment Year 2010-11 also, vide order under section 143(3) of the Act dated 06.12.2012 aforesaid claims have been accepted. It has also been pointed out that when the two claims were denied in the instant assessment, the claims allowed in the respective initial assessment years were not withdrawn. In this background, the moot question is as to whether in the instant year, can the Assessing Officer deny the claim of deduction under section 80IB as well as under section 80IC of the Act I.T.A. No. 3884/Mum/2025 I.T.A. No. 3879/Mum/2025 I.T.A. No. 3880/Mum/2025 I.T.A. No. 3883/Mum/2025 I.T.A. No. 3881/Mum/2025 I.T.A. No. 3882/Mum/2025 & C.O. No. 177 to 184/Mum/2025 7 considering that the said claims were not withdrawn for respective initial assessment years.

In the context of the preliminary point raised by the respondent assessee, the judgment of the Hon'ble Bombay High Court in the case of Simple Food Products (P) Ltd. (supra) squarely covers the controversy. In the said case, the issue related to claim of deduction under Section 80IB of the Act in relation to Assessment Years 1999-2000 to 2005-06. In Assessment Year 1999-2000, the Assessing Officer disallowed the claim of deduction under Section 80IB of the Act for the first time even when in the initial Assessment Year of 1996-97 the deduction under Section 80IB of the Act stood allowed. The point raised by the assessee was that the claim of deduction in respect of Assessment Year 1999-2000 onwards could not be rejected as the deduction granted in Assessment Year 1996-97, i.e. the first year, had not been withdrawn. In this background, the following discussion in the judgment of the Hon'ble Bombay High Court is relevant:- “(j) According to us, the entire issue is no longer res-integra. The impugned order of the Tribunal has, after recording that the appellant – Assessee relies upon the decision of this Court in Paul Brothers (supra) has not dealt with the same. It gives no finding as to why and in what manner it would not apply to the present facts. Further, we find that distinction which has been made in the impugned order of the Tribunal with regard to Dinshaw Frozen Foods Ltd. (supra) viz. that the assessment in that case has been completed under Section 143(3) of the Act in initial year and it is only in such cases I.T.A. No. 3884/Mum/2025 I.T.A. No. 3879/Mum/2025 I.T.A. No. 3880/Mum/2025 I.T.A. No. 3883/Mum/2025 I.T.A. No. 3881/Mum/2025 I.T.A. No. 3882/Mum/2025 & C.O. No. 177 to 184/Mum/2025 8 that the Revenue be barred from denying the claim for deduction in the subsequent Assessment Years, unless the claim for deduction has been withdrawn in the initial year when deduction was claimed and allowed unlike an assessment which iscompleted under Section 143(1) of the Act. We have perused the decision of this Court in Dinshaw Frozen Food Ltd. Nagpur (supra) which in turn has followed the decision Paul Brothers (supra). We note that there is no finding in the two orders to the effect that the in the initial year the claim under Section 80IA/IB of the Act was granted by virtue of an order passed under Section 143(3) of the Act. Nothing has been brought on record to indicate that there has been some change in manufacturing process from that existing when the claim was allowed in the initial year i.e. Assessment Year 1996- 1997 and subject Assessments. The intent/object of the deduction under Section 80IA/IB of the Act is to encourage setting up of industries to manufacture goods which are not specified in the Eleventh Schedule to the Act. (k) The distinction sought to be made by Mr. Bhattad, learned counsel for the Revenue that the claim for deduction in Paul Brothers (supra) the deduction was an investment based deduction, while in the present case, we are concerned with the performance base deduction. This is in -fact, no distinction. In absence of the Revenue being able to establish that for the subject Assessment Years, the facts with regard to the performance were different from facts with regard to the performance in which the claim for deduction in initial year was allowed, the grant of deduction in the subsequent subject Assessment Year cannot be withheld. The other issue raised by Mr. Bhattad that merely because a claim was allowed in an earlier year would not prohibit the revenue from disallowing the claim in subsequent assessment years is no longer res-integra as this Court in Paul Brothers (supra) as it is categorically held that in absence of deduction granted in the initial Assessment Years being withdrawn, the relief for subsequent Assessment Years could not be withheld. The basis for the same is found in sub-clause (3) under Section 80IA/IB of the Act Which gives deduction for 10 consecutive years to the profit and gains of an Industrial undertaking from initial year of assessment when the deduction was allowed, subject to the condition laid down therein. It is not the Revenue's contention that the condition in clause (3) of Section 80IB of the Act has not been fulfilled. Therefore, once deduction is granted in the initial Assessment year, the same would continue for the period of 10 consecutive year unless the relief for initial year is also withdrawn at the time of withholding the relief under Section 80IA/IB of the Act."

The aforesaid discussion by the Hon'ble High Court clearly brings out that once deduction is granted in the initial assessment year, the same would continue for the period of ten consecutive years unless the relief for initial assessment year is also withdrawn. We are conscious of the fact that in I.T.A. No. 3885/Mum/2025 I.T.A. No. 3879/Mum/2025 I.T.A. No. 3880/Mum/2025 I.T.A. No. 3883/Mum/2025 I.T.A. No. 3881/Mum/2025 I.T.A. No. 3882/Mum/2025 & C.O. No. 177 to 184/Mum/2025 9 coming to such decision, the Hon'ble High Court aid notice the 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.

In the above background, we, therefore, find merit in the preliminary point made out by the respondent-assessee and the appeal of Revenue on this point deserves to be dismissed. Thus, in the final analysis, we uphold the ultimate conclusion of the CIT(A) to allow the benefit under Sections 80IB and 80IC of the Act to the assessee, albeit on a different ground."

At the very outset, we find that in AY 2016-17, 2018-19, 2020-21, 2021-22 and 2022-23, there is no exempt income. The undisputed fact is that the assessee did not earn any exempt income during the years under consideration. Therefore, provisions of Section 14A r.w.r 8D, do not apply as held by the Hon’ble Madras High Court in the case of CIT vs. Chettinad Logistics Pvt. Ltd. [2017] 248 Taxman 55, wherein the Hon’ble High Court has held that Section 14A of the Act cannot be invoked where no exempt income was earned by the assessee in the relevant assessment year. SLP was dismissed by the Hon’ble Supreme Court preferred against this order of the Hon’ble High Court in [2018] 257 Taxman 2 (SC). Further, the insertion to the explanation in Section I.T.A. No. 3885/Mum/2025 I.T.A. No. 3879/Mum/2025 I.T.A. No. 3880/Mum/2025 I.T.A. No. 3883/Mum/2025 I.T.A. No. 3881/Mum/2025 I.T.A. No. 3882/Mum/2025 & C.O. No. 177 to 184/Mum/2025 14 14A of the Act, is prospective as held by the Hon’ble Delhi High Court in the case of Era Infrastructure 141 taxmann.com 289.

In the result, the captioned appeals by the revenue are partly allowed.

Now, we will address the captioned cross-objections of the assessee for AY 2016-17 to 2023-24. At the very outset, the ld. Counsel I.T.A. No. 3885/Mum/2025 I.T.A. No. 3879/Mum/2025 I.T.A. No. 3880/Mum/2025 I.T.A. No. 3883/Mum/2025 I.T.A. No. 3881/Mum/2025 I.T.A. No. 3882/Mum/2025 & C.O. No. 177 to 184/Mum/2025 15 for the assessee fairly stated that the grounds challenging the reopening of the assessment and the validity of the resultant order are to be treated as infructuous and the same are accordingly dismissed.

Insofar as the issue relating to the ground of TDS credit is concerned, the assessee has filed a detailed chart showing the rectification application pending before the AO which have not been considered till date. Be that as it may, the AO is directed to grant the credit of TDS as per the provisions of law or in the alternative dispose of the rectification application as early as possible. Charging of interest u/s 234A, 234B and 243C of the Act is consequential.

Briefly stated, the underlying facts in the issue are that the assessee has sold two immovable properties in the state of West Bengal (i) situated at Panditia Road, Kolkata and (ii) situated at Siliguri. The property at Kolkata resulted into long term capital loss of Rs. 4,38,116/- whereas the property situated at Siliguri resulted into long term capital gain of Rs. 63,27,329/- and accordingly, net long term capital gain was shown at Rs. 58,89,213/-. However, taking the stamp duty value of the aforesaid properties, addition of Rs. 1,04,09,422/- was made which was confirmed by the ld. CIT(A). Before us, the ld. Counsel for the assessee strongly contended that the impugned sale was a distress sale and the market value was much lesser than the stamp duty value. It is the say I.T.A. No. 3885/Mum/2025 I.T.A. No. 3879/Mum/2025 I.T.A. No. 3880/Mum/2025 I.T.A. No. 3883/Mum/2025 I.T.A. No. 3881/Mum/2025 I.T.A. No. 3882/Mum/2025 & C.O. No. 177 to 184/Mum/2025 16 of the ld. Counsel for the assessee that the AO ought to have referred the matter to the DVO to decide clearly.

We find force in the contention of the ld. Counsel. In our considered opinion, when the assessee is contending that there was a distress sale, the authorities below ought to have referred the matter to the DVO to settle the dispute. We restore this issue to the file of the AO. The AO is directed to refer the matter to the DVO as per the relevant provisions of the law and the assessee is directed to put up his case of distress sale before the DVO. Ground No. 7 is allowed for statistical purposes.

Ground No. 9 relates to the disallowance on account of delay in deposit of employees share of contribution to provident fund (PF). This issue has now been settled by the Hon’ble Supreme Court in favour of the revenue and against the assessee in the case of Checkmate Services P. Ltd. & Ors. vs. CIT & Ors. (2022) 448 ITR 518 (SC). Respectfully following the same, Ground No. 9 is dismissed.

There is a grievance of not allowing the TDS credit and not allowing the set off of MAT credit available. These issues are restored to the files of the AO with a direction to allow the TDS credit after verification as per the provisions of law and allow the MAT credit available after verification and as per the relevant provisions of the law.

Similar grievance are also there in C.O. Nos. 183 & 184/Mum/2025 for AYs 2022-23 & 2023-24, vide Ground Nos. 5 & 6. We I.T.A. No. 3885/Mum/2025 I.T.A. No. 3879/Mum/2025 I.T.A. No. 3880/Mum/2025 I.T.A. No. 3883/Mum/2025 I.T.A. No. 3881/Mum/2025 I.T.A. No. 3882/Mum/2025 & C.O. No. 177 to 184/Mum/2025 17 accordingly set aside the issues to the file of the AO with a direction to allow the credit after verification as per the provisions of law.

In the result, the captioned appeals by the revenue are partly allowed and cross-objections are allowed in part for statistical purposes.