The Delhi High Court has held that the deduction under Section 80IC of the Income Tax Act is allowable even without agreement with the government.

The bench of Justice Yashwant Varma and Justice Harish Vaidyanathan Shankar has observed that in the absence of Section 80IC requiring an agreement between the assessee and the Central/State Government or local authority or mandating such an agreement as being a mandatory precondition for claiming benefits, the Tribunal has clearly erred in reading such a requirement in respect of an assessee which may have been claiming benefits under Section 80IC.

The principal issue of contestation appears to be with respect to a purported failure on the part of the appellant to have complied with the stipulations prescribed by Rule 18BBB of the Income Tax Rules, 1961. 

More particularly, the department appears to have asserted that there was an evident failure on the part of the appellant to place on the record an agreement or approval that may have been granted to it by either a local or state authority. The prescription appears in Form 10CCB of the Income Tax Act, 1961.

The appellant/assessee is stated to have established a unit in the State of Himachal Pradesh and had thus sought deductions as contemplated under Section 80IC. The provision enables an assessee who may have earned gross total income from an undertaking or an enterprise from businesses specified in sub-section (2) to avail of such deductions from such profits and gains as prescribed in that provision.

The appellant had placed its case under Section 80IC(2)(b)(ii) by virtue of having established that unit in the State of Himachal Pradesh between the period 07 January 2003 and 01 April 2012. 

It is pertinent to note that Section 80IC(7) further provides that the stipulations contained in sub-section (5) and sub-sections (7) to (12) of Section 80IA shall, as far as applicable to eligible undertakings, also apply to those which claim benefits under Section 80IC.

The solitary question which arises is whether the audit report which would have to be submitted by an assessee claiming benefits under Section 80IC would also have to necessarily include an approval granted by the local or state authorities.

The court held that while framing that direction for remit 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.

Case Details

Case Title: M/S Legacy Foods Pvt. Ltd. Versus DCIT

Case No.: ITA 45/2023

Date: 07.02.2025

Counsel For Petitioner: Somil Agarwal

Counsel For Respondent: Abhishek Maratha

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