2008 (10) TMI 645 - HC - Income Tax

Summary

Issues involved: Deduction under Section 80-IB claimed by the assessee, allocation of expenses between Parwanoo and non-Parwanoo units.

Deduction under Section 80-IB:
The appeal challenged the order of the Income Tax Appellate Tribunal regarding the deduction under Section 80-IB claimed by the assessee for the assessment year 2001-02. The Tribunal found in favor of the assessee, noting that the Assessing Officer failed to provide evidence of any expenditure being charged in another unit. Separate books of accounts were maintained by the assessee for the Parwanoo and non-Parwanoo units, with identifiable and directly debited expenses. Common expenditures were apportioned based on turnover ratio, a method accepted by the Commissioner of Income Tax (Appeals) after detailed examination. The Tribunal emphasized that no expenditure had been improperly charged between the two units to inflate profits, leading to a higher deduction under Section 80-IB.

Allocation of expenses between units:
The issue before the Tribunal involved the allocation of expenses between the Parwanoo and non-Parwanoo units of the assessee. Both the Commissioner of Income Tax (Appeals) and the Tribunal ruled in favor of the assessee, based on factual findings. The Tribunal highlighted that separate books of accounts were maintained for each unit, ensuring the direct debiting of expenses to the respective units. Common expenditures were divided based on turnover ratio, a method endorsed by the Commissioner of Income Tax (Appeals) after thorough examination. It was noted that no improper allocation of expenses was identified by the department, preventing any artificial inflation of profits in the Parwanoo unit for a higher deduction under Section 80-IB.

Conclusion:
The High Court dismissed the appeal, stating that the findings of the Commissioner of Income Tax (Appeals) and the Tribunal were purely factual, with no substantial question of law warranting consideration.