2017 (8) TMI 1069 - HC - Income Tax

High Court affirms Tribunal's decision on Section 80HH deduction for 1995-1996

Commissioner of Income Tax 8, Mumbai Versus M/s. Procter & Gamble India Limited

The High Court upheld the Tribunal's decision regarding the deduction under Section 80HH for the assessment year 1995-1996. The Court found that the ... Claim of deduction under Section 80HH - exercise of powers under Section 254(2) by tribunal - Held that:- As could be noticed from the specific findings of the AO in respect of the subsequent assessment year the assessee appears to have not maintained separate books of account in respect of its Medak unit. Had there been separate books of account a specific contention would have been raised in this year also either before the AO or before the CIT(A) or in the grounds of appeal before the Tribunal. Thus, it has to be assumed that the assessee has not maintained separate accounts for its Medak unit but the fact remains that by the powers vested under Section 254(2) the Tribunal cannot look into some other circumstances to reconsider the matter or to review the matter. So long as the overall judgment of the Tribunal is based on proper logic, even if there is an error of judgment that by itself cannot give rise to exercise of powers under Section 254(2) of the Act. We find to be in consonance with the language of Section 80HH of the Income Tax Act, which enables claiming deduction in respect of profits and gains from newly established industrial undertaking or hotel business in backward areas, that no substantial question of law arises for determination and consideration in this Appeal. Such findings of fact, cannot be termed as perverse or vitiated by any error of law apparent on the face of record. Issues:Challenge to order of Income Tax Appellate Tribunal regarding deduction under Section 80HH for the assessment year 1995-1996.Analysis:The High Court was presented with an appeal challenging the order of the Income Tax Appellate Tribunal regarding the claim of deduction under Section 80HH for the assessment year 1995-1996. The Tribunal had initially considered the claim under two heads, addressing the addition made in business income under Section 43B and the allocation of interest expenditure to the Medak unit. The Tribunal found that only interest payable on the bank overdraft should be allocated to the Medak unit. However, the revenue was specifically aggrieved by the allocation of research and development expenses related to the Medak unit. The Tribunal allowed the assessee's claim based on the lack of evidence of actual research and development expenditure incurred by the Medak unit, as per the judgment of the Madras High Court. The revenue filed a Misc. Application under Section 254(2) of the Income Tax Act, disputing the Tribunal's decision on the research and development expenses.The revenue contended that the Tribunal's decision was based on the erroneous assumption that the assessee maintained separate books of account for the Medak unit, which was not the case. The Tribunal, in its order on the Misc. Application, noted that no material was furnished to prove the maintenance of separate books of account for the Medak unit. It was observed that the Tribunal cannot reconsider a matter based on circumstances not presented before the lower authorities. The Tribunal's decision was based on the lack of evidence of research and development expenditure for the Medak unit and the incorrect allocation based on turnover. The Tribunal's overall judgment was considered logical, even if there was an error of judgment, as per the precedent set by the Bombay High Court. The High Court found that the Tribunal's findings were in line with Section 80HH of the Income Tax Act, and no substantial question of law arose for consideration. The proposed questions in the appeal were deemed insubstantial, leading to the dismissal of the appeal without costs.In conclusion, the High Court upheld the Tribunal's decision regarding the deduction under Section 80HH, emphasizing the lack of evidence for research and development expenses incurred by the Medak unit. The Court found no legal errors in the Tribunal's reasoning, leading to the dismissal of the appeal.