High Court remands appeal for delay explanation to Tribunal, which allows deduction for Pune Unit.

The High Court remanded the matter back to the Tribunal for reconsideration of the delay in filing the appeal, emphasizing the need for a satisfactory explanation. The Tribunal, considering the fresh affidavit and circumstances, condoned the delay and admitted the appeal for adjudication. Regarding the deduction claimed under section 10B, the Tribunal directed the Assessing Officer to allow the deduction for the Pune Unit without adjusting the loss of the Nashik Unit, following precedent decisions in favor of unit-wise deductions. The appeal was allowed on both grounds.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of deduction claimed under section 10B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The assessee filed an appeal challenging the order dated 17th December 2009, passed by the Commissioner of Income Tax (Appeals) pertaining to the assessment year 2005-06. There was a delay of 748 days in filing the appeal. Initially, the Tribunal dismissed the appeal on 5th June 2015 without condoning the delay. The assessee challenged this decision before the Hon'ble Jurisdictional High Court, which remanded the matter back to the Tribunal for reconsideration with liberty to the assessee to file an additional affidavit explaining the delay.

The High Court observed that the delay was not satisfactorily explained in the initial affidavit and emphasized that the assessee must provide better particulars of the reasons for the delay. The High Court noted that the same issue had been decided in favor of the assessee for the preceding and succeeding assessment years, indicating the assessee's interest in pursuing the appeal for the present year as well.

In compliance with the High Court's directions, the assessee filed a fresh application and additional affidavit explaining the delay. The affidavit detailed that the delay occurred because the office administrator, Mr. Nandu Lohikpure, failed to bring the draft appeal memo to the management's notice and subsequently forgot about it. The oversight was discovered while preparing the appeal for the assessment year 2007-08. The affidavit also highlighted that the assessee had been diligent in filing appeals for other years within the prescribed time limits.

Considering the contents of the additional affidavit and the surrounding circumstances, the Tribunal found that the delay was due to a reasonable cause. Therefore, the Tribunal condoned the delay and admitted the appeal for adjudication on merit.

2. Disallowance of Deduction Claimed Under Section 10B of the Income Tax Act:

The dispute in the appeal concerned the disallowance of the deduction claimed under section 10B of the Income Tax Act. The assessee, engaged in the manufacture and export of knitted socks, had two units—one at Pune and another at Nashik. The assessee claimed a deduction under section 10B for the profit of the Pune Unit while setting off the net profit against the loss of the Nashik Unit.

The Assessing Officer aggregated the profit/loss of both units and computed the deduction under section 10B, resulting in a net loss. The Commissioner (Appeals) upheld this decision. The assessee contended that the issue had been decided in its favor for the assessment year 2004-05.

The Tribunal noted that the identical issue had been resolved in the assessee's favor in the assessment year 2004-05. The Tribunal's decision in ITA no.7076/Mum./2008, dated 10th June 2015, held that the deduction under section 10B should be allowed unit-wise and not after aggregating the profit/loss of both units. This decision was consistent with the view taken in the assessee's appeal for the assessment year 2007-08.

Respecting the precedent and finding no contrary decision, the Tribunal directed the Assessing Officer to allow the deduction under section 10B for the Pune Unit without adjusting the loss of the Nashik Unit.

Conclusion:

The Tribunal allowed the appeal, condoning the delay and directing the Assessing Officer to allow the deduction under section 10B for the Pune Unit without adjusting the loss of the Nashik Unit. The judgment emphasized the importance of reasonable cause for condonation of delay and upheld the principle of unit-wise deduction under section 10B.

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