The Delhi High Court has held that printing and binding of books amounts to manufacturing activity and deduction under section 80IC of the Income Tax Act, 1961.
The appellant/revenue seeks to assail the order dated 08.07.2019 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”]. The appellant/revenue alleged that ITAT was not justified in not considering the facts that no new product was manufactured by Assessee after the material was received from the holding company and as such assessee was not eligible for deduction under section 80IC of the Income Tax Act, 1961.
The respondent/assessee, Nirja Publishers & Printers Pvt Ltd as correctly ruled by the Tribunal, was not required to deduct tax at source under Section 194H of the Income Tax Act, 1961 [ “the Act”]. Therefore, the conclusion arrived at by the Tribunal, which is also the view taken by the CIT(A), is that the disallowance under Section 40(a)(ia) of the Act could not be sustained.
The AO, after treating the trade discount as commission, concluded that since tax had not been deducted at source under Section 194H of the Act, the amount claimed as trade discount had to be added by taking recourse to Section 40(a)(ia) of the Act.
Mr Ruchir Bhatia, senior standing counsel, who appeared on behalf of the appellant/revenue, affirmed the position that the AO had allowed the deduction. However, Mr Bhatia contends that new facts had been found in the succeeding AY i.e., AY 2011-12.
A division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia viewed that “Since the facts have changed, the AO’s view that deduction should be denied under Section 80IC of the Act, seems to be untenable.”
In the course of assessment proceedings, the Assessing Officer noticed that the respondent/assessee had claimed deductions under Section 80IC of the Act to the tune of Rs.7,88,63,013/- about Assessment Year 2011-12 and Rs.10,40,36,033/- about Assessment Year 201213.
As regards the deduction under Section 80IC of the Act claimed by the respondent/assessee for the Assessment Year 2012-13, the Assessing Officer reiterated the above-mentioned reasoning of the previous year i.e., Assessment Year 2011-12 and held that the respondent/assessee had not carried out any printing or binding of books in the eligible undertaking at Rudrapur, so the deduction of Rs.10,36,64,265/- claimed by the respondent/assessee in this regard was liable to be disallowed.
On the other hand, according to the respondent/assessee, as also held in the impugned orders, the process of printing and binding of books is certainly carried out in the eligible undertaking of the respondent/assessee at Rudrapur.
It was observed that the appellant’s claim of deduction u/s 80-IC in respect of publishing activity carried out from the premise of the eligible undertaking is found to be genuine, based on facts substantiated by relevant evidence, which have not been refuted by the AO in the remand report, the appellant’s claim for deduction u/s 80-IC is held as fully allowable.
In the above-said view, the Court upheld the order of ITAT and dismissed the appeal.
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