The Delhi High Court has determined that engaging in the printing and binding of books qualifies as a manufacturing activity eligible for deduction under section 80IC of the Income Tax Act, 1961.
The appellant/revenue is challenging the order dated 08.07.2019 issued by the Income Tax Appellate Tribunal. The appellant/revenue contends that the ITAT was unjustified in neglecting the fact that the Assessee did not manufacture any new product after receiving materials from the holding company, thereby rendering the assessee ineligible for deduction under section 80IC of the Income Tax Act, 1961.
The respondent/assessee, Nirja Publishers & Printers Pvt Ltd, as correctly affirmed by the Tribunal, was not obliged to withhold tax at the source under Section 194H of the Income Tax Act, 1961. Consequently, the Tribunal’s conclusion, in alignment with the CIT(A)’s perspective, asserts that the disallowance under Section 40(a)(ia) of the Act cannot be upheld.
The Assessing Officer, treating the trade discount as commission, concluded that since the tax was not deducted at source under Section 194H of the Act, the amount claimed as a trade discount must be added, invoking Section 40(a)(ia) of the Act.
Mr. Ruchir Bhatia, senior standing counsel representing the appellant/revenue, affirmed that the Assessing Officer (AO) had initially allowed the deduction. However, Mr. Bhatia argued that new facts emerged in the subsequent Assessment Year (AY), i.e., AY 2011-12.
A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia observed, “Since the facts have changed, the AO’s stance that deduction should be denied under Section 80IC of the Act seems untenable.” During the assessment proceedings, the AO noted that the respondent/assessee had claimed deductions under Section 80IC of the Act amounting to Rs. 7,88,63,013/- for Assessment Year 2011-12 and Rs. 10,40,36,033/- for Assessment Year 2012-13.
Concerning the deduction under Section 80IC of the Act for Assessment Year 2012-13, the AO reiterated the reasoning from the previous year (Assessment Year 2011-12) and concluded that the respondent/assessee had not conducted any printing or binding of books in the eligible undertaking at Rudrapur. Therefore, the deduction of Rs. 10,36,64,265/- claimed by the respondent/assessee in this regard was deemed disallowable.
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Contrarily, as argued by the respondent/assessee, and as upheld in the contested orders, the process of printing and binding of books is indeed carried out in the eligible undertaking of the respondent/assessee at Rudrapur.
The legitimacy of the appellant’s deduction under Section 80-IC for the publishing activity conducted from the eligible undertaking’s premises was noted. This determination is grounded in factual substantiation supported by pertinent evidence, and the Assessing Officer, as per the remand report, has not contested or refuted these facts. Consequently, the appellant’s claim for deduction under Section 80-IC is deemed entirely permissible.
In the aforesaid view, the Court maintained the order of ITAT and dismissed the appeal.
| Case Title | The Pr. Commissioner of Income Tax Vs Nirja Publishers & Printers Pvt. Ltd. |
| Citation | ITA 1021/2019 & 157/2023 |
| Date | 10.01.2024 |
| Appellant By | Mr Aseem Chawla, Ms Pratishtha Chaudhay, Mr Aditya Gupta |
| Respondent By | Ms Sujatha Shirolkar |
| Delhi High Court | Read Order |