2019 (11) TMI 328 - AT - Income Tax

Allowance of deduction u/s 10B - non reduction therefrom the deduction claimed u/s 35(2AB) - HELD THAT - As rightly observed by the Commissioner (Appeal), the doubt raised by the Assessing Officer was on account of factual misconception that the EOU was approved on 26.02.2010. On the contrary, the material on record clearly demonstrates that the EOU was approved on 27.02.2007 and the approval was ratified by the Board of Approval on 14th January, 2011. Thus the doubt raised by the AO also stands clarified. In so far as the objection raised by the Revenue relating to non reduction of expenses claimed under section 35 (2AB) of the Act, it is observed, in paragraph 5.4.11 of his order learned Commissioner (Appeal) has recorded a factual finding that after verifying the details furnished by the assessee it was found that expenses claimed under section 35(2AB) were reduced while computing deduction 10B thereby, requiring no further adjustment. DR has not brought any material on record to controvert the aforesaid factual finding In view of the above said we do not find any reason to interfere with the decision of Commissioner (Appeals) on this issue. The ground raised being devoid of merit is dismissed. Addition made to closing inventory - HELD THAT - Since, assessee s claim of write off has been fully allowed in A.Y. 2009 10, the relief granted in the impugned assessment year has to be withdrawn. Learned Departmental Representative agreed with the aforesaid submission of learned Authorised Representative. Having considered rival submissions, we find that assessee s claim of write off of inventories amounting to ₹ 14,40,81,661/ stands allowed fully in A.Y. 2009 10 by the decision of the Tribunal, as referred to above. Thus, the additional relief granted to the assessee in the impugned assessment year has to be withdrawn. Therefore, the decision of learned Commissioner (Appeals) on the issue is reversed. Ground raised is allowed.

Summary

Issues:
1. Challenge to allowance of deduction under section 10B of the Act and non-reduction of deduction claimed under section 35(2AB) of the Act.
2. Challenge to the decision directing the Assessing Officer to allow deduction representing the addition made to closing inventory.

Analysis:

Issue 1: Challenge to deduction under section 10B and non-reduction under section 35(2AB):
The Revenue challenged the allowance of the assessee's claim of deduction under section 10B of the Act and the non-reduction of the deduction claimed under section 35(2AB) of the Act. The Assessing Officer disallowed the claim of deduction under section 10B after observing that the unit in question was formed after splitting up of an old business, which is not allowed under section 10B unless specific circumstances apply. However, the learned Commissioner (Appeals) found that the unit was not formed by splitting up an existing business, making the assessee eligible for the deduction under section 10B. Additionally, the Commissioner found that the expenses claimed under section 35(2AB) were already reduced while computing the deduction under section 10B, and no further adjustment was necessary. The Tribunal upheld the Commissioner's decision, emphasizing that the Mangalore unit was not formed by splitting up an existing business and that the export turnover achieved by the assessee was in compliance with the provisions. Therefore, the challenge to the deduction under section 10B and the non-reduction under section 35(2AB) was dismissed.

Issue 2: Deduction representing addition made to closing inventory:
The Revenue challenged the decision of the Commissioner directing the Assessing Officer to allow a deduction representing the addition made to closing inventory. The Tribunal noted that in a previous assessment year, the Tribunal had allowed the assessee's claim of write-off on the entire amount of inventories. As a result, the additional relief granted to the assessee in the impugned assessment year had to be withdrawn. Therefore, the decision of the Commissioner was reversed, and the ground raised by the Revenue was allowed.

Conclusion:
The appeal was partly allowed, with the Tribunal upholding the deduction under section 10B, dismissing the challenge to the non-reduction under section 35(2AB), and reversing the decision regarding the deduction representing the addition made to closing inventory. The general grounds raised did not require adjudication.

This detailed analysis covers the issues raised in the legal judgment comprehensively, providing a thorough understanding of the facts, arguments, and decisions made by the authorities involved.