2015 (6) TMI 1044 - HC - Income Tax

Revenue's Appeal Dismissed for AY 2005-06 due to Tribunal's Consistent Stance on Legal Issues

Commissioner of Income-Tax Versus Schmetz India P. Ltd.

The Revenue's appeal challenging the Income-tax Appellate Tribunal's order for the assessment year 2005-06 was dismissed. The Tribunal's decision was ... Computation of deduction u/s 10A - Tribunal came to the conclusion that there was nothing on record to show that the profits arrived at by the assessee in respect of the section 10A unit carrying on the business of manufacturing industrial sewing machine needles was not in the normal course of its business and that the abnormally high profit was due to extraordinary arrangement between the assessee and the German company entered into only with a view to boost the profits of the assessee and therefore allowing deduction of ₹ 20,53,26,910 ? - Tribunal held that there was no material available with the Assessing Officer to estimate the profits of the section 10A unit eligible for deduction invoking the provisions of section 80-IA(10) read with section 10A(7) of the Act Held that:- The impugned order of the Tribunal has followed it's own order in respect of the same assessee for assessment year 2004-05 and the decision of this court in CIT v. Schmetz India P. Ltd. [2012 (9) TMI 407 - BOMBAY HIGH COURT ] wherein held Section 10A is a provision which is in the nature of a deduction and not an exemption - the deduction under Section 10A has to be given effect to at the stage of computing the profits and gains of business - Section 80B(5) defines for the purposes of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter – against revenue, thus upholding the above order of the Tribunal for the assessment year 2004-05 - Decided against revenue Issues:Appeal by Revenue challenging Tribunal's order for assessment year 2005-06.Analysis:The appeal was filed by the Revenue under section 260A of the Income-tax Act, 1961, challenging the order of the Income-tax Appellate Tribunal (the Tribunal) for the assessment year 2005-06. The Revenue's counsel raised two questions of law for consideration. The first question pertained to the justification of the Tribunal's conclusion regarding the profits of the assessee, specifically in relation to an extraordinary arrangement with a German company. The second question focused on whether the Tribunal's decision on estimating profits for deduction under relevant sections of the Act was based on a proper appraisal of the available material. The impugned order of the Tribunal was found to have followed its previous order for the same assessee in the assessment year 2004-05 and a decision of the court, which upheld the Tribunal's order for that year. Consequently, it was agreed that the proposed questions did not raise any substantial question of law.The Tribunal's decision in the present case was influenced by its previous order for the same assessee in the preceding assessment year and a court decision confirming the Tribunal's stance. The questions raised by the Revenue were deemed not to present substantial legal issues. As a result, the appeal was dismissed, and no costs were awarded. The judgment highlighted the importance of consistency in decisions and the impact of previous rulings on subsequent cases involving the same parties. The legal principles governing the assessment of profits and deductions under the Income-tax Act were central to the Tribunal's decision, emphasizing the need for a proper and reasonable appraisal of the available evidence in such matters.