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2014 (10) TMI 544 - HC - Income TaxApplicability of section 80IA(10) Manufacture and sale of Lamination tordials cores and transformers - Assessee was of the view that unit is located in industrially backward area therefore the profits and gains of the unit are eligible for 100% deduction u/s 80IA Held that - As decided in CIT Vs. Delhi Press Patra Prakashan Ltd. 2013 (6) TMI 71 - DELHI HIGH COURT - the assessee was maintaining the separate accounts for each unit as mentioned by the Tribunal, so, the assessee is entitled for the benefit u/s 80 IA and specially when the necessary condition of Section-80 IA (10) has not been fulfilled by the AO to prove that the business between the eligible units and other units are so arranged that the business transaction between them produces more profit to the eligible business - The AO has not given any adverse finding on the basis of books of account produced by the assessee - The AO has also not pointed out any specific item of the eligible unit which is debited by the head office - assessee is entitled for benefit of Section-80 IA there was no reason to interfere with the order passed by the Tribunal Decided against revenue.
Issues:
Department's appeal against ITAT order for assessment years 1996-97 & 1997-98 - Applicability of sub section (10) of section 80-IA - Eligibility for 100% deduction under Section-80IA - Allowance of interest income - Justification of A.O. in restricting deduction amount - Separate accounts for eligible units - Benefit under Section-80 IA - Deductibility of interest received from trade debtors. Analysis: The High Court addressed the department's appeal against the ITAT order for assessment years 1996-97 & 1997-98. The primary issue revolved around the applicability of sub section (10) of section 80-IA. The assessee company had set up a new unit in an industrially backward area, claiming 100% deduction under Section-80IA. The A.O. allowed partial deduction, which was disputed by the department. The Tribunal, however, allowed the entire claim of the assessee, leading to the department's appeal. In defense of the A.O.'s decision, the department argued that the interest income should not be allowed under Section-80IA as it lacked a direct connection with the backwardness of the area. The department also contended that the A.O. justified restricting the deduction amount, citing the global method of computation under Section-80IA (10). The department emphasized the intermixing of expenses across units and the need to reasonably deem profits derived from business transactions. Conversely, the assessee's counsel justified the Tribunal's decision, highlighting that the Himachal unit's establishment was funded by the head office. The separate account books for eligible units were maintained, challenging the A.O.'s presumption-based case. The counsel argued against the applicability of Section-80IA (10) due to lack of evidence against the assessee, asserting that the A.O. wrongly applied the provision. The High Court analyzed precedents like CIT Vs. Delhi Press Patra Prakashan Ltd. and Arisudana Spining Mills Ltd. Vs. CIT to support the assessee's entitlement to Section-80IA benefits. Noting the separate accounts maintained by the assessee, the Court found no adverse findings or specific items debited by the head office, affirming the eligibility for Section-80IA benefits. Additionally, citing cases like CIT Vs. Advance Detergents Ltd. and Nirma Industries Ltd. Vs. Deputy Commissioner of Income Tax, the Court upheld the deductibility of interest received from trade debtors. In conclusion, the High Court dismissed the department's appeals, favoring the assessee on the substantial question of law. The Tribunal's order was sustained based on the totality of facts and circumstances, affirming the eligibility for Section-80IA benefits and the deductibility of interest income received from trade debtors.
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