Tribunal overturns Commissioner's order, Assessing Officer's decision deemed prejudicial. High Court rules in favor of assessee.

The Tribunal quashed the Commissioner's order under Section 263, finding it erroneous to invoke the powers under the Act. The Assessing Officer's allowance of claim under Section 35(2AB) was deemed prejudicial to revenue due to incorrect apportionment, leading to excess deduction under Section 10B. The Tribunal set aside the CIT's order, ruling the requested inquiries unnecessary, and allowed the appeal of the assessee. The High Court decided against the revenue and in favor of the assessee, dismissing the appeal for lack of merit.

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Issues:
1. Whether the Tribunal was justified in quashing the order of the Commissioner under Section 263 of the Income Tax ActRs.
2. Whether the Assessing Officer's allowance of claim under Section 35(2AB) of the Act was erroneous and prejudicial to the interest of revenueRs.
3. Whether the CIT rightly held that the eligible deduction under Section 10B of the Act was allowed in excess by the Assessing OfficerRs.
4. Whether the Tribunal correctly set aside the order passed by the CITRs.

Analysis:

Issue 1: Tribunal's Decision on Commissioner's Order under Section 263
The Tribunal quashed the Commissioner's order under Section 263, stating that the Assessing Officer's view was one of the possible views. The Tribunal found that the Commissioner erred in invoking the powers under Section 263 of the Act.

Issue 2: Error in Allowing Claim under Section 35(2AB)
The Assessing Authority allowed the deduction under Section 35(2AB) for the Assessment Year 2008-09. The Commissioner found this order to be erroneous and prejudicial to the revenue as the expenditure on scientific research claimed and allowed as deduction was not apportioned correctly, leading to excess deduction under Section 10B of the Act.

Issue 3: Excess Deduction under Section 10B
The Commissioner held that the eligible deduction under Section 10B of the Act was allowed in excess by the Assessing Officer due to the incorrect apportionment of the expenditure on scientific research claimed under Section 35(2AB).

Issue 4: Tribunal's Decision on CIT's Order
The Tribunal set aside the CIT's order and concluded that the enquiries requested by the CIT were unnecessary. It was found that the R & D activities at the Export Oriented Units (EOUs) were different, and there was no need to apportion the R & D expenses of the two EOUs. The Tribunal quashed the order under Section 263 and allowed the appeal of the assessee.

In conclusion, the High Court answered the substantial question of law against the revenue and in favor of the assessee. The appeal was dismissed as it was found to have no merit.

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