2010 (2) TMI 793 - AT - Income Tax

The AO had restricted the claim for deduction u/s 80HHC and the same was allowed after reducing the deduction u/s 80IB. - Held that - The restriction contained in s. 80-IA and 80-IB not to all the repeated deductions is applicable to same profit that there has to be identity of profits on which deduction under more than one provision under Ch. VI-A is claimed by the assessee; that the provisions are applicable where on the profit of the undertaking or enterprise the deduction was claimed u/s 80IA or 80IB and then on the same profit of the undertaking deduction other provisions like 80HHC was claimed; that in such cases restriction contained in the above provisions would apply; decided against Assessee.

Summary

Issues:
1. Claim of deduction under sections 80HHC and 80-IB of the Income Tax Act.
2. Allocation of expenses on research and development activities.

Analysis:

Issue 1: Claim of deduction under sections 80HHC and 80-IB:
The appellant, a company with multiple units, claimed deductions under sections 80HHC and 80-IB for each unit. The Assessing Officer (AO) restricted the deduction under section 80HHC, which was later allowed after reducing the deduction under section 80-IB. The CIT(A) upheld the AO's decision based on a previous ruling by the ITAT, Chennai Special Bench. The appellant's appeal to the ITAT, Bangalore was dismissed following findings of other Tribunals. The appellant filed a Misc. Petition citing a decision by the Delhi Special Bench supporting their contentions. The ITAT, Bangalore admitted the petition for adjudication, but after considering arguments, rejected the claim, stating that the earlier decision did not suffer from any infirmity.

Issue 2: Allocation of expenses on research and development activities:
The appellant raised concerns regarding the allocation of research and development expenses to a specific unit. Citing a case involving Bush Boake Allen, the appellant argued that expenses were allocated without proper consideration of whether the research conducted at one unit benefited the product manufactured at another unit. The ITAT, Bangalore analyzed the ruling of the Madras High Court in the Bush Boake Allen case and concluded that the allocation of expenses should be based on the actual benefit to the unit where research was conducted. The ITAT upheld the CIT(A)'s direction to apportion expenses based on turnover, rejecting the appellant's claim for modification.

In conclusion, the ITAT, Bangalore dismissed the Misc. petition of the appellant, upholding the earlier decisions regarding deductions under sections 80HHC and 80-IB, as well as the allocation of research and development expenses. The judgment was pronounced on 16.2.2010.