2010 (11) TMI 497 - AT - Income Tax

Deduction u/s 80IC - Held that- the appellants own case the issue has been decided in favour of the appellant by the Ld. ITAT for the earlier years and for the A.Y. 05- 06 following the decisions of Ld. ITAT have accepted the submission of the appellant - As there is no additional material on record brought by A.O. hence hereby order the A.O. to delete the addition ofRs.82, 11, 789/- which was not allowed by him as deduction u/s 80IC. - Decided in favour of assessee. Inflated expenses - Assessing Officer disallowed large part of expenses of Faridabad unit - However he has not pointed out as to which particular expenses he has disallowed. Ld. Commissioner of Income Tax (Appeals) also correct in holding that expenses can be disallowed if either it is bogus expense or if it was not incurred wholly and exclusively for the purpose of business - The Assessing Officer has not pointed out any of the above condition before making disallowance. He has simply applied the ratio of expenses of Kala Amb unit to Faridabad unit and worked out the excess - Here again the Assessing Officer did not even discussed as to why the expense ratio of Kala Amb unit was to be applied to Faridabad unit - Moreover tribunal in earlier year in assessee s own case have decided the issue of bifurcation of expenses in assessee s favour. Ld. Departmental Representative fairly conceded to this - Decided in favour of assessee.

Summary

Issues:
1. Reduction of deduction claimed by the assessee under section 80IC of the IT Act.
2. Addition of inflated expenses at Faridabad Unit by the Assessing Officer.

Analysis:

Issue 1: Reduction of deduction claimed by the assessee under section 80IC of the IT Act:
The appeal by the assessee challenged the reduction of the deduction claimed under section 80IC of the IT Act. The Ld. Commissioner of Income Tax (Appeals) had reduced the deduction claimed by the assessee, arguing that the net profit of the Kala Amb Unit could not exceed 8.78%. The assessee contended that the Ld. Commissioner had ignored previous ITAT orders in the assessee's favor on the same issue. The ITAT referred to previous decisions in the assessee's own case and concluded that the issue was covered in favor of the assessee. The ITAT set aside the orders of the lower authorities and decided the issue in favor of the assessee.

Issue 2: Addition of inflated expenses at Faridabad Unit by the Assessing Officer:
The revenue's appeal contested the deletion of an addition made by the Assessing Officer on account of inflated expenses at the Faridabad Unit. The Assessing Officer noted discrepancies in expenses between the Faridabad and Kala Amb Units, alleging that the Faridabad Unit had inflated expenses. The Ld. Commissioner of Income Tax (Appeals) found the Assessing Officer's disallowance of expenses at the Faridabad Unit arbitrary and unsupported. The Ld. Commissioner highlighted the lack of specific expenses identified for disallowance and the absence of justification for applying the Kala Amb unit's expense ratio to the Faridabad unit. The ITAT upheld the Ld. Commissioner's decision, emphasizing the need for proper reasons and basis for deviations from consistency in conclusions. The ITAT found the disallowance arbitrary and baseless, ultimately allowing the assessee's appeal and dismissing the revenue's appeal.

In conclusion, the ITAT upheld the assessee's appeal regarding the reduction of deduction claimed under section 80IC and dismissed the revenue's appeal concerning the addition of inflated expenses at the Faridabad Unit. The judgments were based on the consistency of decisions in the assessee's own case and the lack of proper justification for the actions taken by the Assessing Officer.