2007 (3) TMI 287 - AT - Income Tax

Allowability of deduction u/s 10B - Export sales - Not maintain separate books of accounts - Three units including Koregaon, Taloja and New Delhi - Unit at Koregaon is a 100 per cent export-oriented undertaking - carry forward of loss - business of processing and exporting meat - HELD THAT -Neither the findings of the CIT(A) could be controverted by the ld DR nor any other material was brought on record to establish otherwise. We have also taken into consideration the various decisions on which reliance was placed by the AR and found that though these decisions are not in respect of deduction u/s 10B, but they are in respect of deduction claimed u/s 80-I. However, in these cases also it was held that it is not necessary to maintain separate books of accounts but what is necessary is that necessary conditions for claiming the deduction have to be satisfied. In the present case, there is no dispute that the assessee has fulfilled all the conditions. We therefore are of the considered view that the AO was not justified in denying the claim of the assessee on account that no separate books of accounts have been maintained by the assessee but the CIT(A) was justified in allowing the claim of the assessee. Therefore, in view of the reasoning given by the CIT(A), we confirm his order for both the years. In the result, the appeals filed by the Department are dismissed.

Summary

Issues:
Appeals by Department against CIT(A) order for asst. yrs. 1998-99 and 1997-98 regarding exclusion of amount under s. 10B for Koregaon unit.

Analysis:
The Department objected to directing the AO to exclude Rs. 38,11,615 from total income for Koregaon unit under s. 10B, arguing that correct profits calculation is essential beyond basic conditions. The AO rejected the claim due to lack of separate books of accounts. Assessee's appeal to CIT(A) highlighted fulfillment of s. 10B(2) conditions by Koregaon unit without separate books, supported by certificate and submissions. CIT(A) allowed deduction for both years, leading to Department's appeal.

The CIT(A) concluded that the assessee is entitled to deduction under s. 10B after reviewing submissions and material. The Department appealed, emphasizing AO's order, while assessee's counsel relied on CIT(A)'s decision and s. 10B conditions satisfaction. The Tribunal found no flaws in CIT(A)'s findings for asst. yr. 1998-99, referencing specific permissions and conditions for 100% export-oriented units under s. 10B. The Tribunal upheld CIT(A)'s decision, noting that separate books of accounts weren't mandatory if conditions for deduction were met, citing relevant case law supporting the necessity of fulfilling conditions over maintaining separate accounts.

The Tribunal dismissed the Department's appeals, affirming CIT(A)'s order based on the correctness of the findings and the satisfaction of s. 10B conditions by the assessee. The decision was supported by legal interpretations and case law demonstrating that separate books of accounts weren't obligatory for claiming deductions under s. 10B if all conditions were fulfilled.