By TIOL News Service

NEW DELHI, JAN 23, 2015: THE issue before the Bench is - Whether LCD Monitor is an information and communication technology device and its manufacturer is eligible to claim Sec 80IC benefits. And the answer favours the assessee.

Facts of the case

The assessee is proprietor of entity carrying on the business in the name and style of M/s Concept Industries engaged in the manufacturing of electronic goods. It had claimed deduction u/s 80-IC. A notice u/s 143(2) was served on him. The assessment order was passed by the AO u/s 143(3), who had deleted the claim of deduction in the sum of Rs.71,99,594/- u/s 80IC on the ground that assessee was engaged in the business of manufacture of electronic goods in the industrial area. The AO recorded the view that no manufacturing activities were being carried out and in fact the business involved only trading under the brand name of the parent company "NACVOX". It was also found that there was no adequate plant or machinery or infrastructure to carry out the manufacturing activities. In his view, the LCD Monitor claimed to be manufactured by the assessee was not covered under Schedule XIV. It had further observed that the assessee had not employed adequate number of local workers as was requisite under the relevant permission by the local authorities.

On appeal, the CIT (A) did not accept the conclusion reached by the AO as to there being no manufacturing process undertaken on the ground that product was sold under the brand name of the parent company. It had observed that selling the product in the brand name was no bar to claim the benefit on account of manufacturing activity of assembling components. The adverse conclusions reached on the basis of work force employed, the wages paid, or the electricity expenditure incurred were also repelled as untenable. The CIT(A) concluded that the assessee had shown that he had been running a unit in a notified area which was periodically inspected by the various statutory authorities of the State Government, who had not pointed out any discrepancy. It also observed that the AO had checked the books of accounts but had not pointed out any defect or discrepancy therein. It was further observed that the assessee had filed the return u/s 139(1) within the specified time alongwith audit report in the appropriate form u/s 44AB. In the views of CIT(A), the assessment had been made merely on doubts or surmises, which was not permissible as no adverse material contrary to the claim of the assessee had been brought on record by the AO. Thus, the appeal was allowed and the assessment order was set aside. On further appeal, Tribunal concurred with the findings of CIT(A) that the assessee was eligible to claim deduction u/s 80-IC but the same had been wrongly denied by the A.O.

Held that,

++ we are not persuaded to accept the contentions raised by the Revenue in this third appeal which are nothing but reiteration of what have already been agitated and correctly rejected by the two appellate authorities below. Aside from the reasons cited by the ITAT affirming the conclusions reached by CIT (A), which we uphold, we must add that the plea that the LCD Monitor would not fall within the description of items at sl. No. 13 in part (c) of XIV Schedule is also not correct. The LCD Monitors do subscribe to the description of information and communication technology devices and, therefore, would attract, provided other statutory conditions are fulfilled, the benefit of exemption u/s 80-IC. We concur with the conclusion that A.O. had proceeded more on the basis of doubts entertained by him as to the genuineness of the claim rather than some concrete material. If he had any reasons to disbelieve the correctness of the claim about the manufacturing activity (on the basis of considerations such as wages paid, electricity bills generated, the nature of the plant and machinery etc.,), the least that could have been done by him was to have the manufacturing unit of the assessee inspected. For such purposes, he only had to take recourse to his statutory powers under the law. Without having undertaken any such exercise, as observed by the authorities below or rejecting the accuracy of the books of accounts, adverse conclusions on facts as reached could not have been drawn. In the facts and circumstances, we do not find any question of law arising for consideration. For the foregoing reasons, the appeal u/s 260A does not deserve to be entertained. It is, therefore, dismissed.

(See 2015-TIOL-189-HC-DEL-IT)