DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5(1)(2), BANGALORE vs. M/S PAGE INDUSTRIES LIMITED, BANGALORE

This appeal by the revenue is against the order dated 10.1.2018 of the CIT(Appeals)-V, Bengaluru relating to assessment year 2014-15 on the following grounds of appeal:-

The ld. DR, however, placed reliance on a contrary decision rendered by the Hon’ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation, 366 ITR 170 (Guj).

The decision of the Hon’ble High Court of Karnataka which is the jurisdictional High Court is to be followed by the Tribunal. Consequently, we find no merit in the relevant ground No.1 of appeal of the revenue.

As far as ground No. 2 is concerned, it pertains to deduction u/s. 80JJAA of the Act which has been wrongly referred to as 115JJAA of the Act in ground No.2 raised by the revenue. As far as this ground is concerned, the facts are that the assessee company had claimed deduction at 30% u/s.80JJAA amounting to Rs.8,81,46,102/- in respect of additional wages paid for employment of new workmen during the previous year 2013- 14 relevant to AY 2014-15 and had also claimed deduction @ 30% in respect of additional wages paid for earlier previous years 2012-2013 of Rs.1,63,67,148/- and 2013-2014 of Rs.1,56,86,134/- totaling to Rs.3,20,53,282/-. The AO referred to the provisions of the section 80JJAA and observed that the deduction is available on the additional wages paid to the new regular workmen employed in the previous year for the three assessment years including the assessment year relevant to the previous year in which such employment is provided and found that the deduction claimed in respect of the additional wages paid for the earlier previous years, if allowed, would amount to allowing weighted deduction which is not suggestive in the provisions and therefore, disallowed the excess deduction claimed of Rs.3,20,53,282/-.

The assessee before the CIT(Appeals) submitted that the deduction for the wages were paid to the new employees for assessment year 2012- 13 and 2013-14 also. However, the same has been disallowed by the AO on the ground that the assessee having claimed the deduction u/s.80JJAA in the respective years, the claim made thereof in subsequent years would amount to weighted deduction. It was submitted that the relevant portion of the section which needs to be understood is "be allowed the deduction of an amount equal to 30% of additional wages paid to new regular workmen employed by the assessee in the previous year for 3 assessment years including the assessment year relevant to the previous year in which such employment is provided”. The words used are an amount equivalent to 30% of the wages paid in the previous year which can be claimed for 3 years including the first previous year. Further it was submitted that there was no weighted deduction and the claim was made rightly u/s 80JJAA. Reliance was placed on the order of the Tribunal in the assessee’s own case for the AY 2004-05 wherein the orders of Tribunal in assessee’s own case for AY 2010-11 and 2007-08 to 2009-10 was followed.

The CIT(Appeals) allowed the appeal of assessee holding as follows:-

Before us, copies of Tribunal orders referred to by the CIT(A) were filed. We find that in AY 2007-08 identical issue came up for consideration before the Tribunal in and the Tribunal in its order dated 24.7.2015 allowed similar claim of the Assessee. The tribunal vide Paragraph-8 of the aforesaid order held that once a new workmen is employed in a previous year and works for 300 days in that year the additional wages paid to him is to be allowed as deduction at 30% of the additional wages paid to him in that year should be allowed as deduction for three Assessment years and that he need not be in employment for the subsequent period for claiming deduction u/s.80JJAA of the Act. It was held that once the deduction is allowed in the first year then, 30% of such additional wages is allowable as deduction in each of the subsequent two years. However in Assessee’s own case for AY 2005-06 & 2006-07, in ITA No.151 & 152/Bang/2016 order dated 16.12.2016 the Tribunal remanded identical issue to the AO for fresh consideration. Similar order was passed in AY 2010-11 in IT(TP) A.No.163/Bang/2015 order dated 24.6.2016. Since in the later orders on identical issue, the Tribunal has remanded to the AO for fresh consideration of the issue, we deem it fit to restore this issue to the AO for fresh consideration in accordance with law. Consequently, Gr.No.2 is treated as allowed for statistical purpose.

In the result, the appeal by the revenue is partly allowed for statistical purpose.