CPC denial of the claim of section 115BAB holding that no manufacturing activity has begun: ITAT Hyderabad allowed it
The key issue before ITAT Hyderabad in the case of GRANULES CZRO PVT LTD (ITA No 706/Hyd/2024) was as under:
The Appellant Company was incorporated on 16th Jan 2023 as a manufacturing company entitled to lower tax rate under section 115BAB of the Act. In absence of the start of manufacturing activity, the return of AY 2023-24 was filed claiming a substantive claim under section 115BAB(7) of the Act. The CPC while processing the return of AY 2023-24 denied the claim of section 115BAB holding that no manufacturing activity has begun
Tribunal’s Findings:
The Appellant Company faced a unique situation where they were legally required to file a return for AY 2023-24, i.e., year before the manufacturing deadline of March 31, 2024. The Tribunal acknowledged the impracticality of expecting manufacturing to begin immediately after the plant setup and recognized evidence of manufacturing activity before March 31, 2024.
The Tribunal suggested that if Appellant could demonstrate that manufacturing started before the prescribed deadline, it should be sufficient for compliance. While the appeal for the assessment year 2023-24 was dismissed on procedural aspects, the Tribunal advised the Assessing Officer to take a pragmatic approach in the next AY, considering evidence for the commencement of manufacturing and granting the concessional tax rate benefit accordingly.
The ruling calls for a fair application of the Act, emphasizing the importance of balancing procedural technicalities with substantive compliance. It establishes a precedent that the commencement of manufacturing after filing the return but before the statutory deadline should qualify for the tax benefit. The Tribunal’s directive to the Revenue aims to ensure a harmonious interpretation of the laws to avoid penalizing companies that meet the intended conditions of a concessional tax regime.
The copy of the order is as under:
