2018 (12) TMI 219 - HC - Income Tax

Deduction u/s 80-IB - no profit was earned by the assessee from its trading and manufacturing activity and the net profit was derived from other sources - Whether the Tribunal was justified in passing the order without even considering the contentions of the Revenue and without discussing the reasons assigned by the Assessing Officer? - Held that - The Tribunal came to the conclusion that the figures as assigned by the Assessing Officer at ₹ 3,50,17,424/- is to be accepted. This is sought to be supported by the assessee by relying on the order of the Assessing Officer, who himself came to the conclusion that profit at Pondicherry would be ₹ 3,50,17,424/-. Therefore, the entire income was confused as profit earned at Pondicherry Unit. Keeping the contentions in mind, we are of the view that the Tribunal should have considered the contentions as advanced before it. Tribunal being an appellate forum did not appropriately consider the reasons assigned by the AO. Non-consideration of all the contentions and without any discussion would render the order of the Tribunal to be interfered with. Therefore, it is only just and necessary that the impugned order of the Tribunal be set-aside, by remanding the matter to the Tribunal for a fresh consideration in accordance with law. Substantial question of law is answered by holding that the Tribunal was not justified in passing the order without considering the contentions advanced by the Revenue and without discussing the reasons as assigned by the AO. Therefore, the order of Tribunal is set-aside and the matter is remanded to the Tribunal for a fresh consideration.

Summary

Issues:
1. Interpretation of deduction under Section 80-IB of the Income Tax Act, 1961.
2. Consideration of substantial questions of law by the Tribunal.
3. Assessment of net profit and eligibility for deduction under Section 80-IB.

Analysis:

1. The assessee, a company engaged in computer hardware manufacturing and trading, claimed a deduction under Section 80-IB of the Income Tax Act for the assessment year 2000-01. The initial claim was &8377; 16,36,97,283, later reduced to &8377; 11,16,26,648. The Assessing Officer disallowed the deduction due to the absence of net profit from the relevant activities, a decision upheld by the Commissioner of Income Tax. However, the Tribunal reversed these decisions and directed the computation of the deduction. The Revenue appealed against this ruling.

2. The substantial questions of law considered were whether the assessee could claim the deduction under Section 80-IB despite no profit from the specific activities, reliance on an erroneous report under Section 44AB, and the basis of estimated profit for the deduction. The Tribunal's failure to address the Revenue's contentions and reasons provided by the Assessing Officer was a key concern raised during the appeal.

3. The Assessing Officer noted the lack of separate accounts for a specific unit and the absence of a coherent basis for income calculation. Despite a gross profit in trading/manufacturing, the net profit came from other sources, leading to the disallowance of the deduction. The Tribunal's acceptance of a specific profit figure without thorough consideration of all contentions and reasons led to the High Court setting aside the Tribunal's order for a fresh review.

In conclusion, the High Court found that the Tribunal's order lacked adequate consideration of the Revenue's arguments and the Assessing Officer's reasons, necessitating a remand for a fresh assessment. The judgment highlighted the importance of a comprehensive review of all contentions and reasons in tax deduction cases to ensure a fair and accurate decision-making process.