2010 (10) TMI 620 - AT - Income Tax

Deduction u/s 10A - assessee has sought a limited relief to the extent that the matter regarding eligibility for deduction under section 10 A should be considered afresh in the light of the fact that the deduction is unit specific, that the deduction in respect of the unit originally owned by AJPL was only availed for eight years before the assessee came to own it, and that the unit was purchased by the assessee as an independent unit - mere fact that all these facts were not placed before the lowers authorities earlier must not denude assessee of his claim for a rightful deduction, if admissible on merits - since the claim of deduction under section 80 HHC became relevant only upon rejection of deduction under section 10A by the Assessing Officer, there was no way the assessee could have raised this claim before the Assessing Officer and file the requisite certificate - issue of admissibility of deduction under section 10A is restored to the file of the Assessing Officer for fresh examination in the light of observations made above, and that (b)the adhock disallowances of expenses are deleted - Appeals are partly allowed

Summary

Issues:
Admissibility of deduction under section 10A, Adhoc disallowances of expenses, Grant of deduction under section 80 HHC.

Admissibility of deduction under section 10A:
The appeals involved the admissibility of deduction under section 10A for the assessment years 2001-02, 2002-03, and 2003-04. The Assessing Officer had disallowed the deduction under section 10A for the assessment year 2001-02, stating that the assessee had used old plant and machinery purchased from related entities. The CIT(A) upheld the disallowance partially but allowed the alternate claim under section 80 HHC. The ITAT remitted the matter to the Assessing Officer for fresh examination, considering the unit-specific nature of the deduction and the transfer of assets. The ITAT also deleted the adhoc disallowances made by the Assessing Officer, as they lacked cogent reasons. For the subsequent years, the ITAT followed the decision for the assessment year 2001-02, restoring the issue to the Assessing Officer for reevaluation.

Adhoc disallowances of expenses:
The ITAT found the adhoc disallowances of conveyance expenses, other expenses, and staff welfare expenses made by the Assessing Officer to be without proper justification and based on surmises. Therefore, the ITAT deleted these adhoc disallowances for all the assessment years under consideration, providing relief to the assessee.

Grant of deduction under section 80 HHC:
The ITAT upheld the CIT(A)'s decision to grant deduction under section 80 HHC, even though the claim was not raised before the Assessing Officer. The ITAT cited relevant legal precedents to establish that the CIT(A) had the power to examine the claim on merits, especially since the claim became relevant after the rejection of deduction under section 10A. Therefore, the ITAT found no issue with the grant of deduction under section 80 HHC and upheld the CIT(A)'s decision in this regard.

In conclusion, the ITAT partly allowed all the appeals of the assessee, while dismissing the appeal by the Assessing Officer. The ITAT remitted the issue of deduction under section 10A to the Assessing Officer for fresh examination, deleted the adhoc disallowances of expenses, and upheld the grant of deduction under section 80 HHC. The decisions for the assessment years 2001-02, 2002-03, and 2003-04 were consistent in terms of the approach taken by the ITAT to address the issues raised in the appeals.