2015 (11) TMI 5 - AT - Income Tax

Reallocation of expenditure between 80IB and non 80IB units - CIT(Appeals) has not found any merit in such reallocation of expenditure between 80IB and non 80IB units on mere conjecture and rejected the reworking of the eligible 80IB deduction by the Assessing Officer - Held that - The Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer without any basis. The facts brought on record by the Assessing Officer suggest that the assessee lowered the profits of the units not enjoying deduction u/s.80IB, so as to reduce the liability of tax. It is appropriate to remit the issue back to the file of the Assessing Officer with a direction to examine the details furnished by the assessee with regard to all expenses including interest, finance charges, depreciation and other general administrative expenses on the basis of incremental inventory of work in progress from earlier assessment year to this assessment year, after giving due credit to the inflow of funds, if any in both units. The Assessing Officer shall independently examine the issue after proper enquiry. With these observations, we are remitting the issue back to the file of the Assessing Officer for fresh consideration. - Decided in favour of revenue for statistical purposes

Issues Involved:
1. Disallowance of claim under section 80IB(10) of the Income Tax Act.
2. Maintainability of appeal by the assessee.
3. Reallocation of expenditure between 80IB and non-80IB units.
4. Condonation of delay in filing Cross-objection.
5. Assessment of profits and deductions under section 80IB(10).

Analysis:

1. The Revenue appealed against the order of the Commissioner of Income-tax (Appeals) directing the Assessing Officer to allow the entire claim under section 80IB(10) that was initially disallowed. The Revenue argued that the reworking of expenditure between 80IB and non-80IB units was not justified. The assessee contended that the AO failed to appreciate certain facts, such as separate books being maintained, method of accounting, and the availability of funds. The Tribunal remitted the issue back to the Assessing Officer for proper examination.

2. The assessee raised objections regarding the maintainability of the appeal by the Revenue. The assessee cited legal principles emphasizing the discretionary power of the Commissioner and the duty to act fairly. The Tribunal observed that the appeal lacked a proper basis and directed the Assessing Officer to re-examine the details provided by the assessee for all expenses.

3. The reallocation of expenditure between 80IB and non-80IB units was a significant issue in the case. The Commissioner of Income Tax (Appeals) found the reworking of expenditure by the Assessing Officer unjustified. The AO had hand-picked certain heads of expenditure to support a theory of deliberate manipulation by the assessee. The Tribunal disagreed with this approach and emphasized the importance of maintaining separate accounts and conducting a fair assessment.

4. The Tribunal addressed the issue of condonation of delay in filing the Cross-objection. The assessee failed to provide a satisfactory explanation for the delay, leading to the dismissal of the Cross-objection due to negligence and inaction on the part of the assessee.

5. The Tribunal concluded by partly allowing the Revenue's appeal for statistical purposes and dismissing the Cross-objection of the assessee. The case highlighted the importance of proper assessment and examination of expenses for units entitled to deductions under section 80IB(10).

This detailed analysis covers the key issues raised in the legal judgment, providing a comprehensive overview of the arguments and decisions made by the Tribunal.

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