2012 (8) TMI 358 - AT - Income Tax

Disallowance of claim u/s 80 IB - CIT(A) deleted the addition - Held that - The AO s action of allocating the profit in the ratio of sales turnover is not accepted as the two units i.e. Unit- III and Unit IV are separately registered with Excise Authorities, the books of accounts are separately maintained, two units are producing different items and Unit-IV is producing items in which the appellant has got monopoly, accordingly, it will be unfair to compute profits of Unit-IV in the same proportion as that of overall business for the purpose of section 80IB - the appellant has suomoto apportioned administrative expenses to Unit-IV and accordingly, further apportionment and disallowance of deduction u/s. 80IB is not required - sustain the apportionment worked out by the assessee - against revenue.

Summary

Issues:
- Disallowance of deduction u/s 80 IB of the IT Act for assessment year 2008-09.

Analysis:
1. The revenue appealed against the order of the CIT(A) regarding the disallowance of a deduction claimed under section 80 IB of the IT Act. The Tribunal noted that the revenue raised three grounds in its appeal, but only one ground survived for adjudication, which was the disallowance of the sum claimed as deduction u/s 80 IB.

2. The Tribunal referred to a previous decision in the assessee's case for AY 2006-07, where the CIT(A) had deleted an addition made by the AO concerning the claim of deduction u/s 80 IB. The Tribunal upheld the CIT(A)'s decision based on the revised working submitted by the assessee, which reallocated expenses between units III and IV, leading to a different profit allocation for the purpose of deduction u/s 80 IB.

3. The Tribunal observed that the facts for both assessment years were identical and undisputed by the revenue. The CIT(A) for the relevant assessment year 2008-09 held that the disallowance of deduction u/s 80 IB was based on the disallowance made in AY 2006-07. The CIT(A) emphasized that both units III and IV were separately registered, maintained separate accounts, produced different items, and Unit IV had a monopoly in certain products, justifying a different profit allocation for Unit IV.

4. The CIT(A) further analyzed the apportionment of administrative expenses between units III and IV for computing the deduction u/s 80 IB. The appellant had voluntarily apportioned certain expenses to Unit IV, reducing its profits accordingly. The CIT(A) found this apportionment reasonable and held that no further disallowance of deduction u/s 80 IB was necessary.

5. The Tribunal, considering the earlier decision for AY 2006-07 and the identical nature of the issues, upheld the apportionment worked out by the assessee for AY 2008-09. Consequently, the appeal of the revenue was dismissed, affirming the deletion of the disallowance of the deduction u/s 80 IB.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the disallowance of the deduction u/s 80 IB for the assessment year 2008-09 based on the reasoning that the profit allocation between units III and IV was justified due to their separate operations and the unique position of Unit IV in producing specific items.