2012 (11) TMI 1306 - HC - Income Tax

Tribunal Orders Detailed Assessment for Proper Expense Allocation under Section 80IA

M/s. Millipore India Pvt Ltd. Versus The Assistant Commissioner of Income-Tax Circle 12 (1), Bangalore, And Vice Versa

The Tribunal upheld the order for detailed assessment to allocate expenses accurately between trading and manufacturing activities. The Assessing Officer ... - Issues involved:Interpretation of provisions of Section 80IA of Income Tax Act, 1961 for the assessment year 2000-01.Summary:Issue 1: Amendment in Section 80-IA- The Finance Act, 1995, and Finance (No.2) Act, 1996, introduced amendments to Section 80-IA, extending tax benefits to scientific and industrial research and development.- The amendments aimed to broaden the scope of eligible businesses for tax deductions under Section 80-IA.Issue 2: Conditions for applicability of Section 80IA- Section 80IA applies to industrial undertakings meeting specific conditions, including not being formed by splitting up existing businesses and engaging in manufacturing or operating specified facilities.- The Finance Act, 1994, extended concessions to large-scale industries in backward areas, allowing for deductions from taxable profits.Issue 3: Assessment of Deductions- The case involved an assessee manufacturing water filters using imported and indigenous parts, claiming deductions for income from spare parts sales.- Disputes arose regarding the allocation of expenses and the bifurcation of income from trading and manufacturing activities for assessing deductions under Section 80IA.Issue 4: Disallowance of Deductions- The Assessing Officer disallowed deductions for the assessment year 1999-2000 and sought to reassess previous years due to discrepancies in accounting practices.- The Commissioner of Income Tax (Appeals) and the Appellate Tribunal reviewed the case, focusing on the accurate allocation of expenses and income for determining allowable deductions.Issue 5: Reopening of Assessment- The contention was raised regarding the permissibility of reopening assessments based on a change of opinion.- The Income Tax Department argued that the assessee's failure to maintain separate accounts for trading and manufacturing activities justified the reassessment.Conclusion:- The Tribunal upheld the order for detailed assessment to allocate expenses accurately between trading and manufacturing activities.- The Assessing Officer was directed to consider observations made and ensure proper assessment and grant of deductions in accordance with Section 80IA of the Act.