2012 (5) TMI 721 - AT - Income Tax

Tribunal upholds deduction under section 80-IB for reasonable expense reallocation.

The Tribunal upheld the CIT(A)'s decision to allow a deduction of Rs. 25,35,658 under section 80-IB of the IT Act for the assessee. The Tribunal found the ... - Issues involved: Appeal by revenue against deletion of deduction u/s 80IB, Cross objection by assessee for restriction of deduction u/s 80-IB.Summary:1. The appeal was filed by the revenue against the order of CIT(A) deleting the addition of Rs. 25,13,417 made on account of disallowance of claim of deduction u/s 80IB of the IT Act. The grounds raised by the revenue were related to the error in law and facts by the CIT(A) in deleting the said addition. 2. In the cross objection filed by the assessee, it was contended that the CIT(A) erred in not allowing the entire deduction of Rs. 29,85,313 claimed by the assessee u/s 80-IB and restricting it to Rs. 25,36,658.3. The Assessing Officer observed discrepancies in the expenses allocation between Unit-III and Unit-IV, leading to the disallowance of deduction u/s 80IB. The CIT(A) allowed deduction to the extent of Rs. 25,35,658 based on revised working submitted by the assessee.4. The CIT(A) considered the revised working submitted by the assessee, which reallocated expenses between units, resulting in an increased profit for Unit III and decreased profit for Unit IV. The CIT(A) held that the profit of Unit IV is eligible for deduction u/s 80-IB, amounting to Rs. 25,35,658, based on the revised working submitted by the assessee.5. The Tribunal upheld the order of the CIT(A), stating that the allocation of expenses by the assessee was reasonable and that the Assessing Officer's method of computing profits for both units based on turnover ratio was not justified. The appeal of the revenue and cross objection by the assessee were dismissed.Judges: A. K. Garodia, Accountant Member and Kul Bharat, Judicial Member.