Tribunal upholds CIT(A)'s allocation of expenses, increases deduction under section 80IB

The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order, which allocated common expenses between the EOU and non-EOU units in a fair manner. This allocation increased the deduction allowed under section 80IB. The Tribunal found the CIT(A)'s decision consistent with previous years and based on a thorough examination of facts.

---

---

Issues Involved:
1. Erroneous order by CIT(A).
2. Deletion of addition by AO disallowing deduction under section 80IB.
3. Ignorance of AO's application of section 80IB (13) read with 80IA (7).

Issue-wise Detailed Analysis:

1. Erroneous Order by CIT(A):

The revenue contended that the order of the learned CIT(A) was erroneous and contrary to facts and law. The Tribunal reviewed the orders of the authorities below and found that the CIT(A) had worked out the deduction available to the assessee under section 80IB at Rs. 18,05,92,287/-, thereby increasing the deduction allowed by the AO by Rs. 67,58,988/-. The CIT(A) had followed the method adopted by his predecessor in the appellant company's own case for assessment years 2005-06 and 2006-07, where the identical issue had arisen. The Tribunal upheld the CIT(A)'s order, noting that the allocation of common expenses was done in a fair and proper manner to compute the profit of the two units more authentically.

2. Deletion of Addition by AO Disallowing Deduction under Section 80IB:

The AO had allocated common expenses amounting to Rs. 1,44,07,911/- to the EOU unit, reducing its profit and consequently the deduction under section 80IB. On appeal, the CIT(A) allocated only Rs. 47,52,214/- of the common expenses to the EOU unit, thereby increasing the deduction allowed under section 80IB by Rs. 67,85,988/-. The Tribunal noted that the CIT(A) had followed the method adopted in previous assessment years and found no reason to interfere with the CIT(A)'s order, which was based on a detailed examination of facts and circumstances of the case.

3. Ignorance of AO's Application of Section 80IB (13) read with 80IA (7):

The revenue argued that the CIT(A) had ignored the AO's application of section 80IB (13) read with 80IA (7). The Tribunal noted that the issue of allocation of common expenses between non-EOU and EOU units had been considered by the Tribunal in the assessee's own case for the assessment year 2005-06, where it was decided that the disallowance of deduction under section 80IB made by the AO was to be reduced. The Tribunal upheld the CIT(A)'s order, which allocated common expenses between the two units in proportion to their respective revenues, following the method adopted in previous years.

In conclusion, the Tribunal dismissed the appeal filed by the revenue, upholding the order of the CIT(A) which allocated common expenses between the EOU and non-EOU units in a fair and proper manner, thereby increasing the deduction allowed under section 80IB. The Tribunal's decision was based on a detailed examination of facts and circumstances, and consistent with the method adopted in previous assessment years.

---