1993 (3) TMI 142 - AT - Income Tax

Summary

Issues Involved:
1. Relief u/s 80-I of the Act.
2. Applicability of section 80-I(8).
3. Applicability of section 80-I(6).
4. Reduction of claim u/s 32AB.

Summary:

Relief u/s 80-I of the Act:
The assessee, a limited company with multiple units, claimed a deduction u/s 80-I amounting to Rs. 1,96,26,951 for four units. The Assessing Officer (AO) re-cast the profit and loss accounts of these units, invoking section 80-I(8) and made adjustments based on production tonnage, reducing the claim to Rs. 25,39,750.

Applicability of section 80-I(8):
The AO noted that expenses were disproportionately debited to SMS-I, suggesting an attempt to inflate profits of other units for higher deductions. However, the CIT(A) impliedly accepted that section 80-I(8) was not applicable, as the transfer prices of ingots were at market value. The Tribunal upheld this view, stating that section 80-I(8) could only be invoked if goods were transferred at less than market price, which was not the case here.

Applicability of section 80-I(6):
The CIT(A) held that section 80-I(6) was applicable, allowing adjustments in expenses. The Tribunal disagreed, stating that section 80-I(6) does not authorize reallocation of expenses when the assessee maintains regular books of account and production records. The Tribunal concluded that the reallocation of expenses by the revenue authorities was unwarranted.

Reduction of claim u/s 32AB:
The CIT(A) partially accepted the assessee's plea regarding the reduction of claim u/s 32AB. The Tribunal found merit in the assessee's argument that section 32AB and section 80-I operate in different fields. Since the claim u/s 32AB was made for units not claiming deduction u/s 80-I, the Tribunal held that the reduction of the claim u/s 32AB for computing relief u/s 80-I was not justified. The revenue's ground on this point was rejected.

Conclusion:
The Tribunal allowed the assessee's claim u/s 80-I without adjustments for reallocation of expenses, except for specific concessions made by the assessee regarding certain expenses like insurance. The Tribunal also upheld the assessee's claim that section 32AB should not reduce the profits for computing relief u/s 80-I.