2015 (2) TMI 329 - HC - Income Tax

Computation of deduction u/s 10B - Tribunal dismissed the appeal filed by the Revenue holding that it was only an apprehension of the Assessing Officer that the assessee had shifted profits for the purpose of claiming deduction under Section 10B and upheld the order of the CIT (Appeals) with regard to the deletion of disallowance made under Section 40(a)(i) on the commission paid to overseas agents while computing deduction allowable under Section 10B - Held that - Tribunal had accepted the plea of the assessee that in granite dimensional blocks trade, price may vary depending upon size of the block and uniformity in colour, defects etc., as granite is a natural product and if there is any mole, crack or difference in colour, the same could not be exported and hence there are lot of wastages. The Tribunal while allowing the appeal of the assessee held that the sale of dimensional granite blocks to the assessee by the three companies was 131.37 CBM, whereas the sale of dimensional granite blocks by the three companies to the third parties at 8 to 17 CBM. Hence, the huge volume purchased by the assessee could have tilted the sale price in favour of the assessee. The Tribunal was of the view that based on the conjectures and surmises, the Assessing Officer made comparison of the sale price and reduced the profit while computing deduction under Section 10B of the Income Tax Act. We find that on fact the Tribunal had clearly come to the right conclusion that there is no reason to accept the findings of the Assessing Officer, which is bereft of details and based on incomplete investigation. - No substantial question of law arises for consideration - Decided against revenue

Summary

Issues:
1. Disallowance under Section 10B of the Income Tax Act
2. Conclusion based on statement of assessee vs. material evidence
3. Shifting of profits to eligible undertaking
4. Detailed analysis of sale prices and under billing

Analysis:

1. The case involved a dispute regarding the disallowance made under Section 10B of the Income Tax Act by the Assessing Officer. The Tribunal had to determine whether the disallowance was justified based on the facts and circumstances of the case. The Assessing Officer observed discrepancies in the sale value of granite blocks purchased by the assessee from related parties compared to unrelated parties, leading to the disallowance.

2. The Tribunal analyzed the evidence presented and concluded that the Assessing Officer's comparison was not conclusive. The Tribunal considered the dimensions and variations in granite blocks trade, noting that price differences could be attributed to factors like block size, color uniformity, and defects. The Tribunal questioned the Assessing Officer's methodology and reasoning, highlighting the lack of thorough investigation and fair comparison.

3. Another issue raised was the alleged shifting of profits to an eligible undertaking by the assessee. The Assessing Officer claimed that profits were shifted from a related party to inflate profits eligible for deduction under Section 10B. However, the Tribunal found the Assessing Officer's conclusions lacking in detail and based on incomplete investigation, ultimately ruling in favor of the assessee.

4. The Tribunal's decision emphasized the importance of a comprehensive analysis and detailed investigation in such matters. It rejected the Revenue's appeal, stating that no substantial question of law arose for consideration. The Tribunal's judgment highlighted the need for a factual basis and thorough examination to support any disallowances or conclusions regarding profit shifting under tax laws.

In conclusion, the Tribunal's decision in this case underscored the significance of a robust investigation and factual analysis in tax assessments, particularly concerning disallowances and profit shifting allegations. The judgment serves as a reminder of the importance of evidence-based decision-making in tax disputes.