DCIT, CHENNAI vs. HIDESIGN INDIA PVT. LTD., CHENNAI

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

ITA No.3483/Mds/2016 :- 2 -:

2.0 All the grounds of the appeal are related to the disallowance of deduction u/s 80IC of Income Tax Act. In the Assessment the AO had disallowed the assessee’s claim u/s 80IC amounting to Rs.2,82,95,977/-.

3.0 The assessee is engaged in manufacturing of Leather goods and claimed deduction u/s 80IC of I.T Act for Units at Baddi, Himachal Pradesh. The assessee initially started the unit in the name Partnership firm M/S Hidesign and subsequently established the Baddi unit in M/s Hidesign India Private Ltd. The assessing officer during the assessment proceedings for the A.Y.2010-11 found certain discrepancies and inconsistencies in setting up of a new unit at Baddi such as the machineries were not put use in 80IC unit, the assessee has not carried out any manufacturing activity in 80IC unit but manufactured somewhere else and accounted the same in 80IC unit and the inconsistencies with regard to ESI, lease deed, and the plant and machinery etc. and accordingly disallowed the claim of the assessee u/s 80IC.

4.0 For the assessment year under consideration the AO has disallowed the deduction u/s 80IC basing on the observation of the A.O. in assessment order for the A.Y. 2011-12, which was discussed by the Ld.CIT(A) in para No.4 of the CIT(A) order which reads asunder:

(a) Similar deduction was disallowed for A.Y 2011-12, and as per the AO the same has a cascading effect. (b) For the AY 2011-12, the AO had disallowed the claim of deduction the followings reasons:

1. Lease deed executed by the appellant on 22.11.2008 is not attested by Notary Public

2. The plant and machinery were not new 3. ESI has not been paid to all employees 4. Coverage of Thada village under notification ITA No.3483/Mds/2016 :- 3 -:

5.0 Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) allowed the assessee’s appeal. In the order of the Ld.CIT(A) the Ld.CIT has stated that the assessee has produced the necessary evidence /notifications to be eligible for deduction u/s 80IC and accordingly allowed the assessee’s appeal. For the sake of convenience we extract the relevant paragraph of the CIT(A) order which reads as under:

6.0 Aggrieved by the order of the AO, the Revenue is in appeal before this Tribunal. Appearing for the revenue the Ld. D.R. argued that the assessing officer found inconsistencies with regard to lease of land purchase and use of plant and machinery which led to the disallowance of claim made u/s 80IC of the Act for the initial assessment year 2010-11.

The assessment year 2010-11 was the first year of setting up of 80IC Unit and unless it is established in the initial year of establishment that the assessee is eligible for deduction u/s 80IC, the deduction cannot be allowed in the subsequent year. The satisfaction of complying with the condition for allowing the deduction in the initial year is under scrutiny of the A.O., as the Hon’ble ITAT remitted the matter back to the file of the ITA No.3483/Mds/2016 :- 4 -:

A.O. The Ld. CIT(A) in the appellate order stated that the assessee has furnished the necessary evidences and notifications confirming to the various stipulations u/s 80IC of the Act. No such evidences were placed before the assessing officer. The Hon’ble ITAT remitted the matter back to the file of the assessing officer to decide the issue for de novo consideration in the first year of deduction 2010-11. The Ld. D.R. argued that the first year of deduction has not reached the finality since the assessing officer has not completed the verifications with regard to the eligibility of the deduction u/s 80IC. Therefore, the Ld. D.R. argued that the case should be remitted back to the file of the assessing officer to verify the satisfaction of the conditions for granting relief u/s 80IC.

7.0 We heard the rival submissions and perused the materials placed before us. On the same issue in the assessee’s own case for the AY 2010-11 the ITAT in dated 02/03/2016 remitted the matter back to the file of the AO for de novo consideration, with regard to granting relief u/s 80IC.

Since the facts of the case are same and the outcome of the assessment for the AY 2010-11 has a cascading effect on subsequent assessments including the assessment year 2012-13, both the parties (i.e. the Ld.AR and the Ld. DR) have agreed for remitting the matter back to the file of the AO to consider the issue afresh on merits.

8.0 Accordingly, we set aside the orders of the lower authorities and remit matter back to the file of the AO for de novo consideration of granting the deduction u/s 80IC of the Act.

ITA No.3483/Mds/2016 :- 5 -:

9.0 In the result, the appeal of the Revenue is allowed for statistical purposes.

Order pronounced in the Open Court on 26th May, 2017, at Chennai.