2016 (5) TMI 460 - AT - Income Tax

Allowability of deduction / exemption u/s 10A - Held that - In the matters relating to the claim of deduction / exemptions, it is the requirement of that the initial year should be the year of scrutiny of the claims relating to the set-off of the new unit or splitting up of the existing units and other conditions specified in the said section 10A or similar provisions. AO is prevented from getting into these years in subsequent years such as AY 2006-07 and others. We have also considered the fact that the AY 2005-06 was not reopened for the reassessment or u/s 148 or revision u/s 263 of the Act etc as the case may be. Therefore,we find the argument of the Ld Counsel should be considered and the relevant grounds should be allowed in favour of the assessee. As decided in case of Paul Brothers 1992 (10) TMI 5 - BOMBAY High Court unless deductions allowed for the assessment year were withdrawn, they could not be denied for subsequent years - Decided against revenue

Summary

Issues involved:
- Allowability of deduction/exemption u/s 10A of the Income Tax Act
- Allocation of common head expenses between eligible and non-eligible units
- Applicability of provisions of sub-section (6) of section 115JB of the Act

Analysis:

1. Allowability of deduction/exemption u/s 10A:
- Seven appeals were considered, with five by the Revenue and two by the assessee, all related to the allowability of deduction/exemption u/s 10A.
- The issue was whether the assessee was eligible for exemption u/s 10A for establishing a new unit or splitting an existing unit.
- The assessee relied on a High Court judgment in a previous assessment year where the claim was accepted, arguing for consistency.
- The Tribunal upheld the order of the CIT (A) based on the principle that deductions allowed in the initial assessment year cannot be denied in subsequent years, dismissing the Revenue's appeals for AYs 2006-07 and 2007-08.

2. Allocation of common head expenses:
- The dispute involved the allocation of common expenses between eligible and non-eligible units based on turnover.
- The assessee's method was consistent in previous and subsequent years, but the AO adopted a different basis.
- The Tribunal directed the CIT (A) to pass a speaking order considering the principles of consistency, allowing Ground no.1 for statistical purposes.

3. Applicability of provisions of sub-section (6) of section 115JB:
- The issue revolved around the effect of sub-section (6) of section 115JB on amendments to the Act.
- The Tribunal reversed the order of the CIT (A) and allowed the assessee's appeal for AY 2008-09 based on established precedents.
- In subsequent years, the Tribunal dismissed the Revenue's appeals based on similar grounds and judgments.

In conclusion, the Tribunal's judgment focused on the consistent application of tax laws, adherence to legal precedents, and the correct interpretation of provisions related to deductions, exemptions, and allocation of expenses. The decisions were based on established legal principles and relevant case laws, ensuring fair treatment for both the Revenue and the assessee.