Comments
New Delhi: The decision of the Administrative agency on whether an assessee has complied with licensing conditions it is not for the income tax authorities to substitute their own judgment in the matter so as to deny a tax benefit, the Bombay High Court has ruled.
The Court was ruling on tax dispute between the Income Tax Department and Jayant Agro Chemicals Ltd.
The ruling also reiterated the principle that that computation of value added in domestic manufacture for claiming benefits available to export-oriented units should not include any expenditure incurred locally.
The petitioner had established a 100 per cent export-oriented unit which was entitled to tax holiday under Section 10B for the relevant assessment year.
One of the terms of the licence issued by the Department of Industries permitting such setting up of the 100 per cent EOU was that the licensee should achieve an 82 per cent value addition. This was shown to the licencing authorities to have been achieved and they were satisfied.
The income-tax officer seeking to reopen assessment after beyond the permitted four years for the relevant assessment year on the ground that the petitioner had withheld the crucial information of non-achievement of requisite value addition contended that the value addition was just two per cent.
The divergence of views stemmed out of improper reading of the licencing conditions by the income-tax officer who mistakenly included all expenditures including those incurred in India, while computing the value addition, whereas the licencing authorities wanted value addition to be computed with reference to the cost of the imported items alone.
The income-tax officer went on to contend that since the requisite value addition was not accomplished, the unit was not an EOU qualifying for the tax holiday.
The Bombay High Court thus, has laid down a salutary principle that the income tax authorities should confine themselves to the issue of compliance with the income tax law.
Had the Department of Industries said that the licencing conditions were breached and hence, the unit was not an EOU, the income-tax officer had justification to reopen the assessment.
( The author is a New Delhi-based chartered accountant. )
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.