2019 (1) TMI 36 - AT - Income Tax

Eligibility for deduction u/s 10B - miscellaneous income and compensation was part of income for the purpose of computation of eligible profit - Held that - In view of the undisputed fact that the Revenue had accepted miscellaneous income and compensation as part of the eligible profits for the purpose of computation of claim u/s 10B of the Act coupled with the concurrence of both the parties for the issue being restored to the file of the AO for verification we restore the issue to the file of the AO with a direction to allow the claim of the assessee after due verification and also after duly appreciating the fact that similar income/s had been held to be includible in eligible profits in the preceding assessment years. Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues:
Assessment of deduction u/s 10B for Faridabad and Noida undertakings, Disallowance of excess deduction claimed by the assessee, Treatment of miscellaneous income and compensation as profits derived from the undertaking, Rectification application u/s 254(2) dismissal by the Tribunal, Writ petition before the High Court to decide the matter afresh, Restoration of the issue to the AO for verification.

Analysis:

Assessment of deduction u/s 10B for Faridabad and Noida undertakings:
The assessee, a limited company engaged in commercial printing and photo type setting, filed a return of income for Assessment Year 2007-08 claiming deduction u/s 10B of the Income Tax Act, 1961 for its Faridabad and Noida undertakings. The AO assessed the total income at a higher amount, disallowing certain income as profits derived from the undertakings. The CIT(A) partly allowed the appeal, holding certain income as derived from the undertaking. The ITAT, on appeal, further clarified the treatment of specific incomes as derived or not derived from the undertakings, leading to a series of legal proceedings.

Disallowance of excess deduction claimed by the assessee:
The AO disallowed a sum as excess deduction claimed by the assessee, leading to a dispute regarding the treatment of miscellaneous income and compensation as profits derived from the undertaking. The ITAT analyzed the nature of these incomes and their nexus with the profits of the assessee, ultimately directing the restoration of the issue to the AO for verification.

Treatment of miscellaneous income and compensation as profits derived from the undertaking:
The assessee argued that miscellaneous income and compensation should be treated as profits derived from the export, as all sales were export sales and these incomes had a direct nexus with the profits of the undertaking. The ITAT considered the treatment of these incomes in preceding assessment years and relied on relevant legal precedents to support the assessee's claim, ultimately deciding to restore the issue to the AO for verification.

Rectification application u/s 254(2) dismissal by the Tribunal:
The assessee filed a rectification application before the ITAT seeking corrections in the order, which was dismissed by the Tribunal. This led to a writ petition before the High Court, resulting in the matter being sent back to the ITAT for fresh consideration.

Restoration of the issue to the AO for verification:
After considering the arguments of both parties and the past treatment of miscellaneous income and compensation, the ITAT decided to restore the issue to the AO for verification. The parties agreed to this course of action, leading to the allowance of the appeal for statistical purposes.

In conclusion, the judgment involved a detailed analysis of the treatment of specific incomes for deduction u/s 10B, the disallowance of excess deduction, and the restoration of the issue to the AO for verification, emphasizing the importance of consistent treatment of incomes derived from the undertaking.