Section 80-I deductions: inter-unit transfer adjustments rejected where no below-market pricing or outsider transaction was shown.

Inter-unit transfers between the assessee's combing and spinning units did not attract section 80-I(8) because the Tribunal found no material difference from market rate, apart from a negligible variation, and no basis to treat the transfers as below market price. Section 80-I(9) was also inapplicable because the transactions were between units of the same assessee, not dealings with an outsider. Those factual findings were not shown to be perverse, so the Assessing Officer's adjustments in computing the deduction were unjustified and the reference was answered in favour of the assessee.

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Issues: Whether section 80-I(8) and section 80-I(9) of the Income-tax Act, 1961 applied to the inter-unit transfers in the assessee's case, and whether the Assessing Officer was justified in making adjustments while computing deduction under section 80-I.

Analysis: The Tribunal's factual finding was that there was no material difference in the transfer rate between the combing unit and the spinning unit, except for a negligible variation, and that the transfers were not shown to have been made below market price in a manner attracting section 80-I(8). It also found that section 80-I(9) was inapplicable as the transactions were between units of the same assessee and not with an outsider. These findings were held not to be perverse, and the Revenue did not establish any error warranting interference.

Conclusion: The provisions of section 80-I(8) and section 80-I(9) were held inapplicable, and the adjustments made by the Assessing Officer were not justified; the reference was answered against the Revenue and in favour of the assessee.

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