2015 (6) TMI 446 - AT - Income Tax

ITAT Mumbai affirms CIT(A) decision in favor of assessee, allows deduction under section 10B before setting off losses.

Deputy Commissioner of Income Tax Versus M/s Ganesh Polychem Ltd.

Deputy Commissioner of Income Tax Versus M/s Ganesh Polychem Ltd. - TMI Issues:1. Restriction of claim of resolution under section 10B by setting off loss of non-eligible undertaking against profits of eligible undertaking.2. Disallowance of deduction under section 10B due to not allowing reduction of expenditure on repairs and maintenance.Issue 1 - Restriction of Claim under Section 10B:The appeal by the Revenue challenged the order of the CIT(A) for the assessment year 2008-09. The main contention was the setting off of the loss of a non-eligible undertaking against the profits of an eligible undertaking before allowing exemption under section 10B of the Income Tax Act. The ITAT Mumbai, comprising R C Sharma, AM, and Vijay Pal Rao, JM, JJ, noted that this issue had been previously decided in favor of the assessee by the Tribunal and the Hon'ble Bombay High Court in earlier years. The Tribunal upheld the CIT(A)'s order directing the AO to allow deduction under section 10B before setting off brought forward business losses, citing judicial precedents. The Tribunal found no error or illegality in the CIT(A)'s decision based on previous rulings and dismissed the Revenue's appeal.Issue 2 - Disallowance of Deduction for Repairs and Maintenance:The second ground of appeal concerned disallowance of the deduction under section 10B due to the AO's refusal to reduce the expenditure on repairs and maintenance that had been debited to the profit and loss account. The assessee explained that a capital expenditure from the previous year was mistakenly considered as revenue in nature in the accounts for the year ending 31.03.07. The mistake was rectified in the subsequent year's accounts, and the expenditure was reduced while computing the income for the year under consideration. The CIT(A) accepted the assessee's explanation, leading to the disallowed deduction being allowed. The ITAT, after considering the arguments from both sides, found that the assessee rectified the error in the books of accounts for the relevant year and adjusted the income appropriately for the assessment year under consideration. The Tribunal concluded that failing to correct the income computation would result in double taxation, as the amount had already been adjusted in the profit and loss account. Therefore, the ITAT upheld the CIT(A)'s decision on this issue and dismissed the Revenue's appeal.In conclusion, the ITAT Mumbai upheld the CIT(A)'s decision on both issues, ruling in favor of the assessee and dismissing the Revenue's appeal in its entirety.