Enterprise Manufacturing Specified Items In Designated States Can Seek Tax Deduction U/S 80IC Income Tax Act Without Agreement With Govt: Delhi HC

In doing so, a division bench of Justices Yashwant Varma and Harish Vaidyanathan Shankar distinguished the provision from Section 80IA, whereunder agreement with the Centre, State or local authority is a pre-condition for claiming deductions.

Sections 80I, 80IA, 80IB and 80IC are a family of provisions providing deductions in respect of profits and gains from industrial undertakings based on specified criteria.

In the case at hand, the Court was dealing with the appeal of M/S Legacy Foods operating in Solan district of Himachal Pradesh and manufacturing malt based food products like Horlicks, Boosts.

It had sought deductions as contemplated under Section 80IC but the same were denied citing non-compliance with Rule 18BBB of the Income Tax Rules, 1961 and the prescribed Form 10CCB.

Rule 18BBB prescribes the form of the Audit Report for claiming a deduction under Section 80-I or Section 80IA or Section 80I-B or Section 80-IC.

Sub-clause (4) thereof states that in the case of an enterprise carrying on the business of developing, operating and maintaining an infrastructure facility, the form (of Audit Report) shall be accompanied by a copy of the agreement of the enterprise with the Central Government or the State Government or the local authority for carrying on the business.

The Income Tax Appellate Tribunal had held that the appellant/assessee to claim deduction under Section 80IC, would have to demonstrate that the conditions set forth in Rule 18BBB(4) are fulfilled.

At the outset, the High Court observed that the Rule applies to enterprises in relation to infrastructure facilities, which are covered under Section 80IA of the Act. whereas, such requirement is absent Section 80IC.

It observed, “(Tribunal) clearly lost sight of the principal distinction between Sections 80IA and 80IC. As we view Section 80IC it becomes apparent that there is clearly no requirement of an entity which claims coverage under Section 80IC(2)(b)(ii) to have in place an agreement with either the Central or State Government or for that matter any local authority.”

Court pointed that Section 80IC(2)(a) does refer to the Central Government; however, the same is confined to the aspect of the manufactory having been set up pursuant to a scheme notified by that government.

“However, subclause (b) clearly avoids reference to any of those species of authorities. All that sub-clause (b) requires is for the undertaking to be engaged in the manufacture or production of any article or things specified in the Fourteenth Schedule and having commenced operations in the periods prescribed therein and in States of the Union mentioned therein...This must necessarily be contrasted with what obtains under Section 80IA(4)(i)(b) and where an agreement with the Central or State Government has been recognized as being a precondition for the purposes of claiming benefits under that provision itself,” Court said.

As such, it allowed the appeal and set aside the order of the Tribunal.

Appearance: Mr. Somil Agarwal and Mr. Dushyant Agarwal, Advs. for Appellant; Mr. Abhishek Maratha, SSC with Mr. Parth Samwal, Mr. Apoorv Agarwal, JSCs, Ms. Nupur Sharma, Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha, Ms. Muskaan Goel and Mr. Himanshu Gaur, Advs. for Revenue.

Case title: M/S Legacy Foods Pvt. Ltd. v. Deputy Commissioner Of Income Tax, & Anr.

Citation: 2025 LiveLaw (Del) 245

Case no.: ITA 45/2023

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