2004 (6) TMI 322 - AT - Income Tax

Tribunal rectifies order, allows petition on deduction sequencing; allocates expenses proportionately

Alstom Limited. Versus Deputy Commissioner Of Income-tax.

The Tribunal allowed the miscellaneous petition, rectifying the order by addressing the non-consideration of an additional ground raised by the assessee. ... - Issues Involved:1. Non-consideration of additional ground raised by the assessee.2. Computation of relief under Sections 80HH and 80-I without deducting benefit under Section 32AB.3. Allocation of common expenses to industrial undertakings for computing deductions under Sections 80HH and 80-I.Detailed Analysis:1. Non-consideration of Additional Ground Raised by the Assessee:The assessee filed a miscellaneous petition for the assessment year 1990-91, arguing that an additional ground raised was not considered by the Tribunal in its order dated 26th May 2003. The learned counsel for the petitioner/assessee, Mr. K. Ravi, contended that this oversight constituted an 'error apparent on the face of the record' and sought rectification under Section 254(2) of the IT Act. Upon review, the Tribunal found no material on record indicating that the additional ground was admitted. However, an acknowledgment from the Tribunal's Registry confirmed that the additional ground was filed on 9th Dec. 2002. The learned Departmental Representative, Mr. S. Ganapathy Iyer, could not recall if the additional ground was admitted. Given this, the Tribunal treated the additional ground as admitted and acknowledged its non-disposal as an error. Consequently, the Tribunal decided to dispose of the additional ground on merit.2. Computation of Relief under Sections 80HH and 80-I without Deducting Benefit under Section 32AB:The Tribunal issued a show-cause notice regarding the grant of deductions under Sections 80HH and 80-I before allowing deductions under Section 32AB. The learned counsel for the petitioner/assessee argued that Section 32AB should be deducted after granting deductions under Sections 80HH and 80-I, citing the judgment of the Orissa High Court in CIT vs. Tarun Udyog. However, the Tribunal referred to the Supreme Court's ruling in Motilal Pesticides India Ltd. and IPCA Laboratory Ltd., which mandated that deductions under Chapter VI-A should be computed based on net income, not gross income. The Tribunal concluded that deductions under Section 32AB must be allowed first, followed by deductions under Sections 80HH and 80-I, in compliance with the Supreme Court's directives.3. Allocation of Common Expenses to Industrial Undertakings for Computing Deductions under Sections 80HH and 80-I:The additional ground raised by the assessee pertained to the allocation of common expenses to industrial undertakings for computing deductions under Sections 80HH and 80-I. The assessee argued that the common expenses incurred at Madras for marketing products manufactured by various industrial units should not be allocated to each industrial undertaking. The Tribunal reviewed its earlier order dated 9th Feb. 1996, which had ruled in favor of the assessee, stating that common expenses should not be deducted from the profit of the respective industrial undertaking. However, the Tribunal also considered the Gujarat High Court's judgment in Alembic Chemical Works Ltd. vs. Dy. CIT and the Supreme Court's rulings, which emphasized that eligible profit for deductions must be computed in accordance with other provisions of the IT Act, including Section 80AB. The Tribunal concluded that common expenses must be proportionately allocated to each industrial undertaking to reflect the correct profit derived from the industrial unit, rejecting the assessee's contention.Conclusion:The Tribunal allowed the miscellaneous petition filed by the assessee, rectifying the order dated 26th May 2003. The Tribunal deleted the existing paragraph 7 and incorporated new paragraphs (7, 7A, 7B) to address the issues raised. The Tribunal emphasized that deductions under Section 32AB should be allowed before granting deductions under Sections 80HH and 80-I, and common expenses must be proportionately allocated to each industrial undertaking for computing eligible profit under Sections 80HH and 80-I. The Tribunal's decision was guided by the Supreme Court's judgments in Motilal Pesticides India Ltd., IPCA Laboratory Ltd., and Distributors (Baroda) (P) Ltd., as well as the Gujarat High Court's ruling in Alembic Chemical Works Ltd.