2017 (10) TMI 939 - HC - Income Tax

Addition in respect of deduction u/s. 80IC - profit expenditure relatable to the marketing division and the brand value owned by foreign collaboration should have been disallowed - Held that - CIT (Appeals) as well as the Tribunal both came to a concurrent conclusion that there was no separate marketing division and therefore, there was no transfer of goods from eligible to non-eligible undertaking. Thus, in absence of any separate marketing division, there could not be separation of profit and expenditure. It was also found that the brand was owned by the foreign collaboration and there cannot be any profit attributable to such brand. More importantly, the Tribunal noted that in the preceding assessment year 2007-08, the assessee had set up such a claim. The Assessing Officer had framed scrutiny assessment during which no disallowance was made. No attempt was made on part of the Revenue either to take such order in revision nor process of reopening of exemption was resorted to.

Summary

Issues:
- Appeal against the judgement of the Income Tax Appellate Tribunal regarding the deletion of addition in respect of deduction u/s. 80IC for A.Y. 2007-08 and 2008-09.

Analysis:
The primary issue in this case revolves around the assessee's claim of deduction under section 80IC of the Income Tax Act for its unit in Baddi, Himachal Pradesh. The Revenue disputed the entire claim, arguing that profit expenditure related to the marketing division and the brand value owned by foreign collaboration should have been disallowed. However, both the CIT (Appeals) and the Tribunal concurred that there was no separate marketing division, leading to the conclusion that there was no transfer of goods from eligible to non-eligible undertaking. Consequently, without a distinct marketing division, the separation of profit and expenditure was deemed infeasible. Additionally, it was established that the brand in question was owned by the foreign collaboration, eliminating the possibility of attributing any profit to said brand.

A crucial aspect highlighted by the Tribunal was the fact that in the previous assessment year 2007-08, the assessee had made a similar claim, which was accepted without any disallowance by the Assessing Officer during scrutiny assessment. Notably, the Revenue did not seek revision of this order or initiate the process of reopening the exemption in subsequent years. Given these circumstances, the Court found no justifiable reason to intervene in the matter, concluding that no question of law arose. Consequently, the tax appeal was dismissed by the Court.