The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that deduction under Section 80IC of Income Tax Act 1961 should not be denied if assessee form a new firm in the same name at same premises.
Assesee Sharda Exports started business in 1983 from Meerut. This firm was dissolved in the financial year 2009-10. Afterwards, the assessee M/s Sharda Exports came into existence from 01.04.2009. Both the partners of the old firm and new firm are the same.
The assessee claimed deduction under Section 80IC of the Income Tax Act, from the assessment year 2010-11 onwards. AO denied the deduction on the ground that assessee went on changing the firm structure only to claim deduction under Section 80IC of the Income Tax Act and held that the assessee could not have had a turnover of Rs.75 Cr.
Aggrieved by the order assessee filed an appeal before the CIT(A) who deleted the addition made by the AO. Against the order, revenue filed an appeal before the tribunal.
H. K. Choudhary counsel for the revenue submitted that there is no substantial difference in new M/ s Sharda Exports in comparison to old M/s Sharda Exports.
Also the land and stock of the earlier firm has been duly transferred to the new firm and hence there was no change of business.
Further the counsel pointed out that the assessee was using the tool of forming a new firm in the same name at the same premises to claim deduction under section 80IC at 100% beyond the time limit permissible as per the law.
Rajkumar Gupta, counsel for the assessee submitted that the firm came into existence on 01 .01.2009 and it began to manufacture articles from 01.04.2009 and hence the assessment year 2010-11 is the initial assessment year for claiming of deduction under Section 80IC Income Tax Act at 100% which has been wrongly allowed by the AO at 25% treating it as 6th year of the old firm.
After verifying the document, the tribunal observed that there is no legal infirmity in conducting business by the firm consisting of family members as partners. The name of the old firm and the new firm being the same is not a determinative factor to hold that it is a case of the same firm.
The two member bench of B. R. R. Kumar, (Accountant Member) and Yogesh Kumar US, (Judicial Member) dismissed the appeal filed by the revenue.
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