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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI G.S. PANNU & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The above titled appeals have been preferred by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals)[hereinafter referred to as the CIT(A)] of even date 22.02.2010. Since the facts and issues involved in the above appeals are identical in nature, hence the same are taken together for disposal by this common order. Facts for the convenience are taken from for A.Y. 2004-05.
The assessee has taken the following grounds of appeal:
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in disallowing deduction u/s. 80IB of Income Tax Act, 1961 amounting Rs.12,57,731/-.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in treating the revised return of income filed by the assessee as non-est return and thereby disallowing deduction u/s. 80IB.
The appellant crave leave to, add to, alter or amend the above grounds of appeal or to add a new ground of appeal at any time before hearing of the appeal.”
3. The brief facts of the case are that the assessee has been dealing in container lashing and strappings and has a factory at Amli (Silvassa). The assessee had initially claimed exemption under section 10A and showed nil income. However, the assessee realised the error in claiming the deduction under section 10A instead of section 80IB of the Income Tax Act. The assessee therefore filed a revised return making the claim under section 80IB. However, the claim of the assessee was rejected on the grounds that the revised return was not filed on time and further that the assessee did not satisfy the condition of employing 10 or more workers if the assessee is manufacturing with the aid of power or 20 or more employees without power. The assessee unsuccessfully contested the matter before the Ld. CIT(A). Now the assessee is in appeal before us.
The Ld. A.R. of the assessee has submitted that the assessee has inadvertently mentioned the claim under section 10A instead of section 80IB. However, when during the assessment proceedings, it come to the notice of the assessee that there was an error in mentioning the right section under which the claim was to be made, the assessee immediately filed a revised return and claimed the deduction under the correct section. The Ld. A.R. has further contended that it is the duty of the Income Tax Authorities to determine the correct income of the assessee and collect tax only on the income which is liable to be taxed as per the provisions of the statute. The assessee, though, claimed the deduction under wrong section but the right claim was made by the assessee before the finalisation of the assessment proceedings. He, in this respect, has relied upon thefollowing decisions: 1. CIT vs. Prabhu Steel Industries Pvt. Ltd. (1988) 171 ITR 530 (Bom.) 2. DCIT vs. Lab India Instruments Pvt. Ltd. (2005) 277 ITR 39
The Ld. A.R. has further submitted that though the Assessing Officer (hereinafter referred to as the AO) had not considered the claim of the assessee because the revised return was not filed within the time stipulated under section 139 of the Act, the assessee is still entitled to make a claim before the appellate authorities. A claim otherwise allowable to the assessee cannot be denied because of an error in making the claim in the return of income. He, in this respect, has relied upon the following authorities: 1. Jute Corpn. of India vs. CIT (1990) 53 Taxman 85 (SC) 2. CIT vs. M/s. Pruthvi Stock Brokers and Shareholders Pvt. Ltd. (ITA No.3908 of 2010 (Bom. HC) 6. So far as the issue relating to the employment of 10 or more than 10 workers is considered, the Ld. A.R. of the assessee has submitted that the assessee during the year had employed more than 10 workers at the factory premises. He has in this respect relied upon the muster role of the factory. The AO, however, has denied the claim on the ground that out of the workers employed shown to be employed at the factory premises, 4 workers were found to be deployed at the Gurgaon branch for two months during the financial year 2003-04. Similar presumption was drawn by the AO in relation to financial year 2002-03. The Ld. A.R. however, has submitted that it was fully proved from the muster role and the details of wages paid that the assessee during the manufacturing process at the factory premises had employed more than 10 workers, however, due to some extra needs the workers sometimes had been called at the branch office for dealing with and helping the customers for guiding them regarding the use of product i.e. cargo belt manufactured by the assessee. The ld. A.R. in this respect has relied upon the provisions of the section 80IB as well as on the following decisions: 1. Harit Synthetic Fabrics(P) Ltd. (1986) 26 Taxman 540 (Bom.) 2. ACIT vs. M/s. Richa Chadha 96 ITD 325 (Mumbai-Tri.)
The Ld. A.R. has further brought our attention to the orders of the Tribunal for A.Y. 2006-07 and A.Y. 2008-09 to show that the assessee’s claim of deduction under section 80IB has been held to be allowable by the Tribunal in the subsequent years. On the other hand, the Ld. D.R. has relied upon the findings of the lower authorities.
We have considered the rival contentions. So far as the error in writing the correction section while making the claim in the return of income is concerned, the assessee during the assessment proceedings itself had made the submissions before the AO that there was an inadvertent error in making the claim under section 10A instead of under section 80IB. The assessee submitted to the AO that this claim be considered under section 80IB. He also filed a revised return in this respect. However, the AO rejected the claim of the assessee. It has been time and again held that the taxing authorities should tax the real income of the assessee and if a claim is allowable to an assessee under the relevant provisions they should themselves consider the same and give appropriate relief. They are not supposed to penalise the assessee for their inadvertent errors. A duty is also cast upon the AO not only to disallow the claim which as per the provisions of law is not tenable but also to allow the claim to which the assessee is entitled as per provisions of the law and which has been brought to the knowledge of the AO during the assessment proceedings. Even a duty has been also cast upon the first appellate authority i.e. CIT(A) whose powers are coterminous with that of the AO to consider the claim put forward by the assessee and decide the same as per provisions of law. The case laws relied upon by the assessee are squarely applicable on the facts and circumstances of the case of the assessee.
So far as the employment of 10 or more than 10 persons during the year is concerned, the assessee has explained that more than 10 persons had been employed in the manufacturing activity. As per the case laws cited by the assessee, it is not necessary that the assessee must employee 10 or more than 10 employees during the entire financial year. If the assessee employs 10 or more than 10 employees for substantial part of working period of factory carrying on manufacturing process then, in that event it shall be presumed that the assessee has complied with the provisions of section 80IB(2)(iv). The above stated case laws are squarely applicable to the case of the assessee.
In view of the above, we find merit in the appeal of the assessee and the same is hereby allowed. The AO is directed to allow the deduction to the assessee for the assessment years under appeal under section 80IB.
In the result, both the appeals of the assessee are hereby allowed.
Order pronounced in the open court on 21.10.2015.