2011 (4) TMI 1342 - AT - Income Tax

Summary

Issues Involved: Appeal and Cross Objection filed by Revenue and assessee against CIT(Appeals) order for assessment year 2005-06.

Revenue's Appeal:
The Revenue contested the eligibility of the assessee for claiming deduction u/s 80-IA of the Income-tax Act, 1961. The dispute arose from the rejection of the assessee's claim by the Assessing Officer due to unabsorbed depreciation from earlier years. The CIT(Appeals) ruled in favor of the assessee, citing the option to claim deduction for ten consecutive years from the commencement of power generation. The Revenue challenged this decision, arguing for the set off of notional depreciation before calculating relief u/s 80-IA. However, the Tribunal upheld the CIT(Appeals) decision based on the precedent set by the jurisdictional High Court, stating that notional unabsorbed depreciation cannot be carried forward for the initial assessment year under Section 80-IA.

Cross Objection by Assessee:
The Cross Objection raised by the assessee concerned the allocation of common expenses to the Pondicherry unit for the purpose of deduction u/s 80-IA. The Assessing Officer allocated certain expenses to the Pondicherry unit, which the assessee disputed, claiming that similar expenses were incurred even before the unit's commencement. The CIT(Appeals) upheld the AO's allocation, stating that there should be no incremental bifurcation of expenses. The assessee argued that the Head Office expenses for the old and new units could not be proportionally distributed, but the Tribunal found the AO's allocation based on total turnover to be reasonable. Consequently, the Cross Objection was dismissed.

In conclusion, both the Revenue's appeal and the Cross Objection of the assessee were dismissed by the Tribunal, affirming the decisions of the CIT(Appeals) on both issues.