2020 (8) TMI 106 - AT - Income Tax

Successful appeal restores Section 80IC deduction, reallocates expenses, and considers pandemic impact.

The appellant successfully appealed against the restriction imposed on its Section 80IC deduction claim for the assessment year 2012-13. The deduction ... Deduction u/s 80IC - reallocating office expenditure qua its three units - HELD THAT:- We no merit in Revenue's foregoing stand. Case records indicate that both the lower authorities had made a similar estimation of allocation of expenses leading to disallowance qua the very eligible unit at Rudrapur in AY 2010-11 without rejecting the assessee's books of account. This tribunal's order in assessee's appeal [2019 (5) TMI 101 - ITAT KOLKATA] in the said earlier assessment year holds that such a record is not open to the department in absence of rejection of books of account. The very factual position continues in the impugned assessment year as well wherein the lower authorities, have not rejected the assessee's books. We thus adopt judicial constituency and direct the Assessing Officer to delete the impugned disallowance arising from re-allocation of assessee's head of expenditure. - Decided in favour of assessee. Issues:1. Appeal against order restricting Section 80IC deduction claim.2. Allocation of office expenditure among three units.3. Disallowance of expenses based on revenue generation.4. Exclusion of time period due to COVID-19 pandemic.Analysis:1. The appellant's appeal for the assessment year 2012-13 challenges the restriction imposed by the lower authorities on its Section 80IC deduction claim. The deduction was reduced from Rs. 27,24,02,458 to Rs. 27,16,80,866, with an office expenditure reallocation of Rs. 7,21,592 across the three units.2. The appellant, engaged in manufacturing industrial tractors, automobile gears, and shafts across units in Rudrapur, Faridabad, and Kolkata, had allocated administrative expenses of Rs. 7,80,012, Rs. 46,80,075, and Rs. 23,40,037, respectively. The Assessing Officer recalculated the allocation percentages to 8.95%, 53.7%, and 37.34% for the units, a decision upheld by the CIT(A).3. The Departmental Representative argued that the Rudrapur unit's expenses were disproportionately high compared to its revenue generation. However, the tribunal found no merit in this argument, citing a previous assessment year's order that disallowed expenses without rejecting the appellant's books of account. As the books were not rejected in the current year, the tribunal directed the Assessing Officer to delete the disallowed amount of Rs. 7,21,592.4. The judgment acknowledged the delay in pronouncing the order but excluded the time period due to the COVID-19 pandemic, following a precedent set by the Mumbai Tribunal in a similar case. Consequently, the appellant's appeal was allowed, and the order was pronounced on 29.06.2020.