2012 (5) TMI 793 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80IA/80IB.
2. Addition on account of duty drawback.
3. Addition on account of prior period expenses.
4. Disallowance of weighted deduction u/s 35(2AB).

Summary:

1. Deduction u/s 80IA/80IB:
The issue of eligibility for deduction u/s 80IA/80IB has been consistently decided in favor of the assessee by the ITAT for A.Y. 1998-99 to 2004-05. The ITAT held that the eligibility for deduction should be determined in the initial assessment year, and once the conditions are fulfilled, the deduction is allowable for the entire tax holiday period of ten years. The CIT(A) followed these precedents and allowed the deduction. The revenue's appeal on this issue was dismissed, and the ITAT upheld the CIT(A)'s order.

2. Addition on account of duty drawback:
The AO added Rs. 7,54,058/- as income accrued from excise duty rebate on exports, arguing that the benefit accrued the moment the exports were effected. The CIT(A) deleted the addition, holding that the income could only be said to have accrued when the claim was approved by the authorities. The ITAT upheld the CIT(A)'s decision, applying the ratio of the Supreme Court decisions in Poona Electric Supply Co. Ltd. and E.D. Sassoon & Co. Ltd.

3. Addition on account of prior period expenses:
The AO disallowed prior period expenses, arguing that the liability did not crystallize in the relevant year. The CIT(A) allowed part of the expenses, disallowing only Rs. 2,10,806/- for want of details. The ITAT found no infirmity in the CIT(A)'s order and dismissed both the revenue's and the assessee's appeals on this issue.

4. Disallowance of weighted deduction u/s 35(2AB):
The AO restricted the deduction u/s 35(2AB) to the period from 21-9-2004 to 31-3-2005, while the assessee claimed it for the entire period from 1-4-2004 to 31-3-2005. The CIT(A) allowed the deduction for the entire period, following the Gujarat High Court judgment in CIT Vs. Claris Life Sciences, which held that once the R&D facility is approved, the entire expenditure incurred for its establishment is allowable. The ITAT upheld the CIT(A)'s decision.

Conclusion:
The revenue's appeal was dismissed, and the assessee's appeal was partly allowed. The ITAT upheld the CIT(A)'s decisions on all issues, allowing the deductions and deletions as claimed by the assessee.