The Nagpur bench of the Bombay High Court in Simple Food Products Pvt. Ltd. Nagpur v. CIT, held that the Department cannot withdraw the relief for Industrial Undertakings under Section 80IB of the Income Tax Act when it has not withdrawn the relief/deduction for the initial year.
During the assessment year 1996-97, Assessee commenced manufacture/production as Milk as Small Scale Industry. Assesse claimed deduction under Section 80IB of the Income Tax Act in respect of profit and gains derived from the Industrial undertakings producing milk.
Though the claim was initially accepted, the department, on re-assessment, rejected assessee’s claim for deduction under Section 80IB of the Act from the year 1999-2000 on the ground that it does not carry out processing/ manufacturing activities but only does trading in milk.
Assesse failed to secure any relief from the first and second appellate authorities and approached the High Court.
A bench comprising Justices M. S Sanklecha and Manish Pitale noted that the object of the deduction under Section 80IA/IB of the Act is to encourage setting up of industries to manufacture goods which are not specified in the Eleventh Schedule to the Act.
Relying on the Court’s decision in Dinshaw Frozen Food Ltd and Paul Brothers, the bench allowed the plea of the assesse and held that in absence of relief/deduction for the initial year being withdrawn, the relief under Chapter VI-A of the Act (Section 80IA/80IB of the Act) cannot be withheld for the subsequent years.
“The manner in which the relief has been granted in the initial Assessment Year is not determinative for withholding the relief in the subsequent Assessment Years,” the bench said.
Read the full text of the Order below.
