Separate books and remand evidence supported section 80IC relief, while section 43B disallowance failed for paid liabilities.

Separate books for eligible and non-eligible units, supported by Form 10CCB and remand-stage materials, justified deduction under section 80IC for the Dehradun unit where no defect, profit diversion, or inflation of expenses was shown, and the Rule 46A objection failed because the first appellate authority had called for remand. Miscellaneous expenses were allowed only to the extent supported by the record, with the unexplained balance disallowed. Customs duty and entry tax were not hit by section 43B because the payments were made during the year and no liability remained outstanding at year-end, so the appellate relief was sustained.

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Issues: (i) Whether the assessee was entitled to deduction under section 80IC on the profits of the Dehradun unit and whether admission of supporting material before the first appellate authority violated Rule 46A of the Income-tax Rules, 1962; (ii) Whether the disallowance of miscellaneous expenses and the disallowance of customs duty and entry tax under section 43B were sustainable.

Issue (i): Whether the assessee was entitled to deduction under section 80IC on the profits of the Dehradun unit and whether admission of supporting material before the first appellate authority violated Rule 46A of the Income-tax Rules, 1962.

Analysis: The assessee maintained separate books for the different units and produced the Form 10CCB and related statements during remand proceedings. No defect was found in the books of account, and no material was brought to show inflation of expenses or diversion of profits from non-eligible units to the eligible unit. The profit level of the Dehradun unit was supported by the nature of operations, new machinery, and excise-related factors. The first appellate authority had also called for a remand report, so the objection based on Rule 46A did not survive.

Conclusion: The deduction under section 80IC was correctly allowed and the Revenue's challenge failed.

Issue (ii): Whether the disallowance of miscellaneous expenses and the disallowance of customs duty and entry tax under section 43B were sustainable.

Analysis: In respect of miscellaneous expenses, the appellate authority accepted the claim only to the extent supported by the record and sustained disallowance of the unexplained component. In respect of customs duty and entry tax, the payments were found to have been made during the year and no outstanding liability remained at year-end, so section 43B did not warrant disallowance.

Conclusion: The appellate authority's relief on miscellaneous expenses and customs duty and entry tax was upheld.

Final Conclusion: The Revenue's appeal was not allowed and the relief granted by the first appellate authority was sustained in full.

Ratio Decidendi: Where the assessee maintains separate books for eligible and non-eligible units, supports the claim with remand-stage evidence, and the Revenue fails to show any defect, profit diversion, or outstanding statutory liability, the deduction and related appellate relief cannot be disturbed.

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