ITAT Delhi Upholds Tax Incentive For Big Babol, Mentos Maker Perfetti's Uttarakhand Unit

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the order allowing confectionery manufacturer Perfetti Van Melle India Pvt. Ltd. to claim tax deduction under Section 80-IC of the Income Tax Act on profits from its Rudrapur manufacturing unit in Uttarakhand.

Section 80-IC grants profit-linked tax incentives to manufacturing units located in notified industrial areas of certain states, including Uttarakhand, subject to specified conditions.

A bench of Judicial Member Anubhav Sharma and Accountant Member Manish Agarwal dismissed the Revenue's appeal and upheld the order of the Commissioner of Income Tax (Appeals) allowing the deduction.

Perfetti Van Melle manufactures confectionery products including Big Babol, Center Fresh, Center Fruit, Alpenliebe, Mentos and Happydent. Its factories are located in Manesar, Rudrapur and Chennai.

For Assessment Year 2010-11, the company claimed deduction under Section 80-IC on profits from its Rudrapur unit. The company initially claimed Rs 90.90 crore. The claim was restricted to Rs 80.77 crore since the deduction cannot exceed total income.

The Assessing Officer initially accepted the claim. The Principal Commissioner later invoked revision powers and directed reconsideration. In the fresh assessment, the AO disallowed the deduction. The officer held that chewing gum, bubble gum and candy were not listed in the Fourteenth Schedule of the Act.

The dispute centred on the interpretation of two schedules under the law. The Thirteenth Schedule contains a negative list of products that are not eligible for the deduction, while the Fourteenth Schedule specifies certain products eligible under another clause of Section 80-IC.

Rejecting the Revenue's interpretation, the tribunal said the relevant question was whether the assessee manufactured any item listed in the Thirteenth Schedule.

“We thus, find no force in the contention of ld. DR that as assessee is manufacturing any of the items mentioned in the 14th Schedule and has no item in the 13th Schedule, therefore, provision of Section 80-IC(2)(b) pertaining to 14th Schedule shall prevail. As a unit of assessee is located in notified area for the purpose of claiming deduction u/s 80IC then the relevant factors was to consider if assessee at all was manufacturing any of the item which fall under the 13th Schedule of the Act, which admittedly assessee is not manufacturing.”

The tribunal held that the Rudrapur unit was located in a notified area and that the company was not manufacturing any item listed in the Thirteenth Schedule. It therefore upheld the appellate authority's order and dismissed the Revenue's appeal.