2005 (5) TMI 654 - AT - Income Tax

Summary

Issues:
1. Disallowance of depreciation claimed on imported moulds.
2. Disallowance of deduction under section 80-IA of the Act.

Issue 1: Disallowance of depreciation claimed on imported moulds:
The appellant claimed depreciation on imported moulds, stating they were received and used during the relevant assessment year. The Assessing Officer rejected the claim, citing lack of evidence of use before 31-3-1999. The CIT(A) upheld this decision. The appellant argued that the moulds were immediately used for production and goods were sold, supporting this with invoices. The ITAT found that the lower authorities did not provide clear findings on the use of moulds. The ITAT directed the Assessing Officer to verify if goods were sold using the moulds; if confirmed, depreciation claim should be allowed.

Issue 2: Disallowance of deduction under section 80-IA of the Act:
The appellant claimed a deduction under section 80-IA for profits of Unit II. The Assessing Officer reduced the deduction, apportioning expenses between Unit I and Unit II based on turnover. The CIT(A) supported this decision. The ITAT noted that all direct and indirect expenses must be considered before arriving at the deduction under section 80-IA. The dispute centered on the allocation of expenses to determine the profit of Unit II. The ITAT remanded the matter to the Assessing Officer to verify expenses related to Unit II, allowing the appellant to support its claim. The Assessing Officer was instructed to allow the deduction under section 80-IA in accordance with the law.

In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, directing the Assessing Officer to re-examine both the disallowance of depreciation on imported moulds and the deduction under section 80-IA, ensuring proper verification and compliance with legal provisions.